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Issues Involved:
1. Whether the company is unable to pay its debts under Section 433(e) of the Companies Act, 1956. 2. Whether the debt claimed by the petitioners is bona fide disputed by the company. 3. Whether the company is commercially insolvent. 4. Whether the company should be wound up based on its financial status and the disputed liability. Detailed Analysis: 1. Inability to Pay Debts Under Section 433(e): The petitions were filed under Sections 433, 434, and 439 of the Companies Act, 1956, alleging that Trend Designs Ltd. is indebted to the petitioners for sums of Rs. 2,68,466.70 and Rs. 10,14,628.20, respectively, for computerised embroidery work. The petitioners claimed that the company failed to pay the amounts despite several demands and a lawyer's notice under Section 434(1) of the Act. The company disputed the liability, claiming financial soundness and a counter-claim for losses due to delayed supplies by the petitioners. 2. Bona Fide Dispute of Debt: The court examined whether the debt was bona fide disputed. The company contended that the petitioners' delay in supplying materials caused significant losses, including Rs. 35 lakhs due to the need to send goods by air. The company also claimed that 7,722 pieces of goods were still pending delivery. The court noted that the company had raised a genuine and bona fide dispute regarding the liability, supported by prima facie proof. 3. Commercial Insolvency: The court considered the financial position of the company, referencing the balance sheets and profit and loss accounts for the years ending March 31, 1995, and March 31, 1996. The documents showed a net profit of Rs. 1,79,73,658.50 and Rs. 37,34,341.36, respectively, and substantial net current assets. The court concluded that the company was not commercially insolvent and had the financial capability to meet its liabilities. 4. Decision on Winding Up: The court referred to precedents, including Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd., which established that a company should not be wound up if the debt is bona fide disputed and the defense is substantial. The court found that the company's defense was in good faith, substantial, and likely to succeed in law. The court also noted that the company had not admitted its liability and had raised a bona fide dispute. Conclusion: The court concluded that the company was not unable to pay its debts as it was financially sound and the liability was disputed bona fide. Therefore, the prayer for winding up the company was rejected. However, the court directed the company to provide a bank guarantee for the amounts claimed by the petitioners within four weeks, allowing the petitioners to enforce the guarantee if they substantiate their claims in appropriate proceedings. The company petitions were disposed of accordingly.
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