1993 (10) TMI 291 - HC - Companies Law

Issues Involved:
1. Inability to pay debt.
2. Dispute over the type of sales tax form required (Form H vs. Form C).
3. Bona fide dispute regarding the debt.
4. Procedural aspects of winding up petition.

Detailed Analysis:

1. Inability to Pay Debt:
The petitioner, Unitron Limited, sought the winding up of Unicorp Industries Ltd. on the grounds of its inability to pay the debt owed. The respondent had placed a purchase order for goods totaling Rs. 3,70,000, with the stipulation that sales tax would be paid against Form H, indicating the goods were intended for export. The petitioner supplied the goods and later requested Form H for tax purposes. The respondent failed to provide Form H, leading to the petitioner paying the sales tax and subsequently demanding reimbursement from the respondent. The respondent's failure to pay led to the petitioner serving a statutory notice under section 434 of the Companies Act, demanding Rs. 31,031.71 for the sales tax paid.

2. Dispute Over the Type of Sales Tax Form Required (Form H vs. Form C):
The respondent initially agreed to provide Form H but later claimed that the goods were for local market use and thus only Form C could be issued. The respondent argued that issuing Form H would have been illegal as the goods were not exported. The petitioner refuted this, stating that the purchase order explicitly mentioned Form H, and the goods were supplied under this condition. The respondent's inconsistent offers of Form H, then Form C, and later Form ST-35, were highlighted as contradictory and unsupported by any documentation.

3. Bona Fide Dispute Regarding the Debt:
In a winding up petition, the court examines if the respondent's defense is raised in good faith, likely to succeed on a point of law, and supported by prima facie proof. The respondent claimed a genuine dispute over the debt, asserting that the petitioner was aware the goods were for the local market, not for export. However, the court found the respondent's defense to be an afterthought and not bona fide. The respondent's failure to consistently communicate or document the alleged mistake regarding Form H, and the changing stance on the type of form to be provided, undermined the credibility of their defense. The court noted that the respondent did not provide any prima facie evidence to support their claim that the goods were used domestically.

4. Procedural Aspects of Winding Up Petition:
The court emphasized that a winding up petition is not a legitimate means to enforce payment of a debt that is bona fide disputed. The court must first determine if the dispute is genuine or a mere pretext for the company's inability to pay. The respondent's defense was found to lack prima facie substance and was deemed a neglect of debt payment. The court admitted the petition for hearing, allowing for the publication of the citation in newspapers but delayed the publication for two months to give the respondent an opportunity to settle the debt.

Conclusion:
The court concluded that the respondent had not set up a bona fide dispute and had failed to provide consistent and credible evidence to support their claims. The petition for winding up was admitted, with a two-month period given to the respondent to pay the debt before the citation would be published.

← Previous Next →