1997 (3) TMI 458 - HC - Companies Law

Summary

Issues:
- Winding up petition filed by petitioner against respondent company for failure to pay debt.
- Dispute regarding appropriation of deposited amount by petitioner.
- Respondent's argument of disputed debt and pending civil suit.
- Jurisdiction of court under section 433 of Companies Act.

Analysis:
The petitioner, a company, filed a winding up petition against the respondent company for failure to pay a debt. The petitioner claimed that the respondent company failed to pay the principal amount and interest on a deposit, leading to the petition for winding up. The respondent company made partial payments during the proceedings, but a dispute arose regarding the appropriation of the amount paid. The petitioner argued for interest payment till the date of actual payment and the right to adjust the amount towards interest first. However, the respondent contended that the deposit terms ended on a specific date, and the payment made was explicitly towards the principal amount, citing Contract Act sections 59 and 60. The respondent also raised the issue of the debt being disputed and subject to a pending civil suit, questioning the maintainability of the winding up petition under section 433 of the Act.

The court considered the arguments presented by both parties. It acknowledged the existence of a civil suit between the parties regarding the disputed debt and the appropriation of the deposited amount. The court emphasized that for the jurisdiction under section 433 of the Companies Act to apply, a prima facie debt must be established, which should not be bona fide disputed. As the debt in question was disputed and subject to a civil suit, the court deemed it appropriate for the civil court to decide on the matter. The court refrained from expressing an opinion on the disputed issues, considering the pending civil suit as the proper forum for resolution. Additionally, the court noted that the respondent company had paid the admitted amount and demonstrated its financial stability, being a running concern with assets and employees. As the respondent had paid the admitted amount and the rest was under dispute in a civil suit, the court dismissed the winding up petition, stating that the respondent was not unable to pay its debts, and the purpose of winding up was not to settle money disputes but to address insolvency issues. The court ordered each party to bear their own costs in the case.