1998 (10) TMI 394 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the petition based on running account.
2. Validity of the affidavit filed in support of the winding-up petition.
3. Allegations of irregular and defective supply of materials.
4. Admission of liability by the respondent-company.

Summary:

1. Maintainability of the Petition Based on Running Account:
The respondent argued that the petition is based on a running account and thus not maintainable. They cited the petitioner's suit before the Civil Judge, Howrah, where it was stated that the account was "open, current continuous and running." However, the petitioner contended that payments were made against individual invoices, not a running account. The court found substance in the petitioner's argument, noting that the suit was based on non-payment of specific invoices. The court concluded that the petition is maintainable, as the respondent had admitted liability in various communications.

2. Validity of the Affidavit Filed in Support of the Winding-Up Petition:
The respondent challenged the affidavit's validity, claiming it did not comply with Rule 21 of the Companies (Court) Rules, 1959, and Form No. 3. The court acknowledged that the affidavit was defective as it was not properly verified and did not disclose the affiant's authority. However, the court held that a defective affidavit is a procedural irregularity that can be rectified. Citing precedents, the court allowed the petitioner to file a fresh affidavit within two weeks.

3. Allegations of Irregular and Defective Supply of Materials:
The respondent claimed that the supply of materials was irregular and defective, causing them losses. However, the court found no evidence supporting these allegations. The respondent had not lodged any complaints about the supply before the demand notice and had even placed further orders. The court deemed the respondent's defense as an afterthought and not bona fide.

4. Admission of Liability by the Respondent-Company:
The court noted that the respondent had admitted its liability in several letters, citing financial difficulties as the reason for non-payment. These admissions undermined the respondent's defense of irregular and defective supply. The court concluded that the respondent's inability to pay its debts was evident, attracting the provisions of section 433 of the Companies Act, 1956.

Conclusion:
The court found no merit in the objections raised by the respondent-company and admitted the winding-up petition. The petitioner was given an opportunity to file a proper affidavit in compliance with the rules.