1995 (3) TMI 414 - HC - Companies Law

Summary

Issues Involved:

1. Bona fide dispute regarding liability.
2. Execution and delivery of advertising work.
3. Limitation period for filing the petition.
4. Admissibility and acknowledgment of debt.
5. Payment of interest and minimum billing guarantee.
6. Applicability of winding up provisions under the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Bona fide Dispute Regarding Liability:
The appellant contended that there existed a bona fide dispute about the liability to pay the amount claimed by the respondent. It was argued that the respondent had not executed the work for which the bills were raised and failed to supply the necessary advertising materials. The appellant also alleged that their representative, A.K. Mukherjee, had colluded with the respondent. The court observed that a winding-up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. The court cited the Supreme Court's approval of Buckley on the Companies Acts, emphasizing that petitions founded on disputed debts should be dismissed if the debt is bona fide disputed on substantial grounds.

2. Execution and Delivery of Advertising Work:
The respondent claimed to have executed various advertising works and submitted 15 bills totaling Rs. 1,24,952.34. The appellant made a part payment of Rs. 34,000 but disputed the remaining balance. The court noted that the appellant insisted on being shown the material on which expenditure had been made and communicated this to the respondent. The court found that the appellant never admitted liability to pay the disputed amount and insisted on being furnished with material to verify the expenditure.

3. Limitation Period for Filing the Petition:
The appellant argued that the claim related to the period February to June 1984, and the petition filed on September 1, 1988, was barred by the limitation period prescribed for the recovery of the amount. The court acknowledged that the petition was initially filed on February 4, 1987, with a defective affidavit, and the correct affidavit was filed on September 1, 1988. The court noted that the learned single judge allowed the correct affidavit to be filed and ordered that the petition be deemed to have been filed on September 1, 1988.

4. Admissibility and Acknowledgment of Debt:
The respondent argued that the outstanding balance of Rs. 90,952.34 was confirmed by the appellant's representative during meetings on August 28, 1986, and September 4, 1986. The appellant disputed the correctness of the minutes of these meetings, which were unilaterally recorded by the respondent. The court examined a memo dated August 28, 1986, from the appellant to the respondent, which confirmed the receipt of bills but did not acknowledge the balance as due. The court concluded that the memo did not amount to acknowledging that a sum of Rs. 90,000 odd was due from the appellant to the respondent.

5. Payment of Interest and Minimum Billing Guarantee:
The respondent claimed Rs. 52,500 under the minimum billing guarantee clause of the agreement and 18% interest on the outstanding amount. The appellant denied liability for this claim, arguing that the respondent breached the conditions of the agreement. The learned single judge left the respondent to its remedy by a regular suit for the claim of Rs. 52,500 but held the appellant liable to pay Rs. 90,000 odd with 9% interest per annum from January 31, 1985, to March 17, 1989. The court found that the appellant was entitled to be satisfied about the actual expenditure before acknowledging liability.

6. Applicability of Winding Up Provisions under the Companies Act, 1956:
The court examined the applicability of sections 433 and 434 of the Companies Act, 1956. Section 433(e) allows for winding up if a company is "unable to pay its debts." The court emphasized that "unable to pay" indicates insolvency or financial incapacity, not merely refusal or neglect to pay. The court found no material on record to show that the appellant-company was unable to pay the debt in dispute. The court concluded that the summary jurisdiction of the company court cannot be invoked to compel payment of a disputed debt.

Conclusion:
The court allowed the appeal, setting aside the order of the learned single judge, and left the respondent to its remedy by a regular suit. The court emphasized that the appellant was entitled to be satisfied about the actual expenditure incurred and that several triable issues, including the limitation period, could not be brushed aside. The parties were directed to bear their own costs.