1998 (1) TMI 401 - HC - Companies Law

Issues Involved:
1. Petition for winding-up under section 439(b) of the Companies Act, 1956.
2. Allegation of non-payment of debt by the respondent-company.
3. Dispute over the quality of goods supplied.
4. Examination of legal principles regarding winding-up petitions.
5. Determination of bona fide disputes.
6. Technical objection regarding the address of the registered office.

Issue-wise Detailed Analysis:

1. Petition for winding-up under section 439(b) of the Companies Act, 1956:
This petition for winding-up is filed by the creditor under section 439(b) of the Companies Act, 1956 ('the Act') on the ground that the company is unable to pay its debts, as set out under section 433(e) read with section 434 of the Act.

2. Allegation of non-payment of debt by the respondent-company:
The petitioner supplied tin plates valuing Rs. 33,09,673 to the respondent-company on a credit basis in 1994. Despite the supply, the respondent-company failed to make the payment within the agreed seven-day period, leading to the petitioner's entitlement to interest at 24% per annum. The respondent-company admitted to receiving the goods but disputed the payment terms and the quality of goods.

3. Dispute over the quality of goods supplied:
The respondent-company claimed that the goods were not of proper quality and could not be used. This defense was first raised in their reply to the petitioner's legal notice, dated 4-8-1995, and reiterated in subsequent communications. However, the petitioner argued that the goods were used for commercial purposes and no complaints were made about their quality until the legal notice was issued.

4. Examination of legal principles regarding winding-up petitions:
Section 433 states the circumstances under which a company may be wound-up by the Court, including the inability to pay debts. Section 434 details the conditions when a company is deemed unable to pay its debts, such as neglecting to pay a sum exceeding Rs. 500 for three weeks after receiving a notice by registered post from the creditor.

5. Determination of bona fide disputes:
The Court emphasized that a winding-up petition should not be used as a means to recover debts that are bona fide disputed by the company. A bona fide dispute must be based on substantial grounds. The Court follows a summary procedure and does not investigate facts and evidence in depth. The defense must be in good faith, likely to succeed in law, and supported by prima facie proof of the facts.

6. Technical objection regarding the address of the registered office:
The respondent-company raised a technical objection about the non-maintainability of the winding-up petition due to the wrong address of the registered office of the petitioner-company. This objection was rejected as the petitioner-company corrected the mistake in the rejoinder by providing the correct address of its registered office.

Conclusion:
The Court found that the defense for non-payment of debt taken by the respondent-company was frivolous and without genuine or concrete basis. The respondent-company's inconsistent stand and lack of concrete material to support its claims indicated that the defense was not bona fide. The petitioner's claim was deemed bona fide, and the Court was prima facie satisfied that the company was unable to pay its debt. Consequently, the petition was admitted, and the Official Liquidator was appointed as the provisional liquidator of the respondent-company to take custody and control of the company's properties and documents. The petition was set for hearing on 26-2-1998, with instructions for advertisement in specified newspapers.

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