1995 (12) TMI 310 - HC - Companies Law

Issues Involved:
1. Whether the petition for winding up the respondent-company is maintainable under sections 439(1)(b), 433(e), and 434(1)(a) of the Companies Act, 1956.
2. Whether the debt claimed by the petitioners is bona fide disputed by the respondent.
3. Whether the respondent's defense is substantial and likely to succeed in law.
4. Whether the respondent-company has the financial capability to pay the claimed debt.

Issue-wise Detailed Analysis:

1. Maintainability of the Petition for Winding Up:
The petitioners sought the winding up of the respondent-company under sections 439(1)(b), 433(e), and 434(1)(a) of the Companies Act, 1956. They claimed that the respondent-company owed them Rs. 9,58,966 for advertising services rendered. The respondent disputed the amount and contended that the bills needed reconciliation. The court examined whether the petitioners' claim for winding up was justified based on the alleged outstanding debt.

2. Bona Fide Dispute of Debt:
The court considered the Supreme Court's ruling in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd., which established that if the debt is bona fide disputed and the defense is substantial, the court will not wind up the company. The respondent argued that the petitioners raised bills for unauthorized work and inflated claims. The court found that the respondent had consistently disputed the debt since October 22, 1994, and in response to the statutory notice under section 434 of the Act. The court noted that the debt claimed by the petitioners was not definite, ascertained, or undisputed.

3. Substantial Defense Likely to Succeed in Law:
The court reiterated the principles from Madhusudan Gordhandas and Co., emphasizing that the company's defense must be in good faith, substantial, and likely to succeed in law. The respondent provided detailed reasons for disputing specific bills, such as unauthorized advertisements and incorrect rates. The court found that the respondent's defense was bona fide and substantial, supported by prima facie evidence, including the balance-sheet and statements of account.

4. Financial Capability of the Respondent-Company:
The respondent demonstrated its financial capability by producing its balance-sheet as of March 31, 1995, showing a general reserve of Rs. 2,45,661 and a surplus in the profit and loss account of Rs. 11,05,097. The respondent also paid the admitted liabilities of Rs. 2,90,518 to the first petitioner and Rs. 28,362.55 to the second petitioner in court. The court concluded that the respondent had sufficient and adequate funds to settle the disputed claims.

Conclusion:
The court held that the respondent's defense was bona fide and substantial, and the debt claimed by the petitioners was not definite or undisputed. Consequently, the court dismissed the petition for winding up with costs, allowing the petitioners to establish their claim in an appropriate forum if so advised.

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