1998 (11) TMI 491 - HC - Companies Law

Summary

Issues involved:
Proceeding u/s 433 of the Companies Act, 1956 for winding up the respondent-company due to outstanding debt and alleged commercial insolvency.

Summary:
The petitioners claimed an outstanding amount from the respondent-company, leading to a dispute on the company's solvency. The petitioners argued that the respondent's failure to respond to the statutory notice indicated commercial insolvency. The respondents defended by stating the borrowed amount was not repayable by the company. The court refrained from commenting on the ongoing civil court dispute to avoid prejudice.

First Issue - Undisputed Liability:
Petitioners argued that the respondents failed to demonstrate debt discharge, indicating insolvency u/s 433. Respondents contended that the petition was not maintainable as the liability was disputed in the civil court, thus not undisputed. The court emphasized the need to independently evaluate the defense's credibility and found the liability seriously disputed, preventing further winding up proceedings.

Second Issue - Enforceable Debt Existence:
Respondents argued that the debt was time-barred by 1995, rendering the petition baseless. Petitioners maintained the debt was alive due to pending legal proceedings. The court clarified that the debt's existence at a specific time should be determined by the ability to initiate recovery proceedings then. As the debt was not enforceable in 1995, the petition was dismissed.

The court dismissed the petition, emphasizing that the civil proceedings should proceed independently. No costs were awarded in this matter.