1992 (11) TMI 244 - HC - Companies Law

Summary

Issues Involved:
1. Whether the company is unable to pay its debts.
2. Whether the petitioner is entitled to interest on the outstanding amount.
3. Validity of the notice of demand served on the company.

Summary:

1. Company's Inability to Pay Debts:
The petitioner sought the winding up of Polar Forging and Tools Ltd. on the grounds of the company's inability to pay its debts. The petitioner supplied furniture to the company and submitted bills totaling Rs. 5,25,707.60, of which Rs. 4,05,000 was paid, leaving Rs. 1,20,707.60 outstanding. Despite demands, the company failed to pay the remaining amount within the stipulated time, indicating its inability to pay its debts.

2. Entitlement to Interest:
The petitioner claimed interest at 18% per annum on the outstanding amount from February 1, 1990. The company acknowledged the debt but contested the interest claim, arguing there was no contract for interest payment. The court held that in the absence of a specific contract, the company court could determine the interest rate based on the Sale of Goods Act, 1930. The court concluded that the creditor is entitled to interest and that the company court can adjudicate this in winding up proceedings to avoid multiplicity of litigation.

3. Validity of Notice of Demand:
The company challenged the validity of the notice of demand, arguing it did not specify the consequences of non-payment. The court held that u/s 434(1)(a) of the Companies Act, 1956, the notice need not specify the consequences of non-payment. The letters sent by the petitioner constituted a valid demand as they requested payment and indicated overdue interest charges. The court disagreed with the opinions of the Allahabad and Kerala High Courts, which required an indication of winding up proceedings in the notice.

Conclusion:
The court determined that the company is liable to pay interest at 12% per annum on Rs. 1,15,000 from March 1, 1990, until payment. The company must pay the interest by November 20, 1992, failing which the petition for winding up will be admitted, and the petitioner will proceed with publication for the hearing on February 26, 1993.