1996 (11) TMI 390 - HC - Companies Law

Summary

Issues:
Winding up petition based on debt dispute.

Analysis:
The petition was filed seeking winding up of the respondent-company due to an alleged debt of Rs. 1,27,339.79 arising from the supply of white duplex board. The petitioner claimed that the respondent failed to pay the amount despite receiving the goods and issuing a statutory notice under section 434 of the Companies Act. The respondent contended that the goods were defective and therefore, it was not liable to pay the amount. The respondent also disputed placing any order with the petitioner for the stocks and mentioned the absence of samples sent along with the material. The petitioner relied on the assurance given by its representative, Mr. Gangooli, to clear the freight bill for Rs. 7,500. Both parties presented their evidence through witnesses and documents.

The respondent sent a letter to the petitioner on November 10, 1992, rejecting the goods due to quality issues, which the petitioner claimed not to have received. However, the respondent reiterated its denial of liability in subsequent communications. The respondent argued that the goods were substandard and not as per specifications, justifying its refusal to pay the amount. The respondent's counsel contended that the dispute over the liability was raised promptly, and therefore, the petitioner's recourse to winding up proceedings was unwarranted. The petitioner cited a previous case to support its claim that the debt dispute was not bona fide, emphasizing the respondent's financial capacity based on excise duty payments made in previous years.

The court dismissed the company petition, ruling that the liability was genuinely disputed by the respondent. The judge noted that the respondent had raised objections regarding the quality of the goods early on and had consistently denied liability. The court emphasized that the petitioner could pursue alternative avenues to recover the alleged amount instead of seeking winding up of the company. The judge highlighted the importance of considering the conduct of the parties, the nature of the dispute, and the circumstances surrounding the debt dispute in determining the legitimacy of the claim. The court's decision was based on the finding that there was a genuine dispute regarding the debt, and therefore, winding up was not deemed appropriate in this case.