1997 (10) TMI 353 - HC - Companies Law

Summary

Issues:
Winding up petition under sections 433(e), 434, and 439 of the Companies Act, 1956 due to non-payment by respondent-company despite issuance of cheques by the petitioner.

Analysis:
The petitioner, a public limited company engaged in iron and steel production, filed a winding-up petition against the respondent-company for non-payment of dues amounting to Rs. 74,94,262.37. The petitioner alleged that despite several dishonoured cheques and requests for demand drafts, the respondent failed to settle the outstanding amount, leading to financial crisis. Interest at 24% per annum was also claimed. The respondent, on the other hand, contended that losses were incurred due to substandard raw material supplied by the petitioner, creating a genuine dispute. The respondent argued that the petition was not maintainable as there was an ongoing litigation regarding the quality of supplies. Both parties presented detailed accounts and correspondence to support their claims.

During the proceedings, it was revealed that the respondent had issued cheques that were subsequently cancelled due to alleged defective supplies. The respondent claimed a debit balance of Rs. 3,29,184.86, seeking reimbursement from the petitioner. The respondent asserted that the cheques were issued in advance against pending orders, which were not fulfilled due to substandard material. The respondent also highlighted various documents, including inspection reports and settlement agreements, to support their defense.

After thorough examination of the evidence and arguments presented by both parties, the court found that the respondent failed to demonstrate a bona fide dispute regarding the debt. The court noted that the respondent's defense appeared to be an afterthought and lacked substance. It was observed that the respondent had accepted deliveries, used the goods, and acknowledged the liability through cheque issuance. The court emphasized that a winding-up petition cannot be used to enforce a debt in the presence of a genuine dispute. The court exercised summary jurisdiction and directed the respondent to settle the principal amount with interest by a specified date, failing which the petition would be advertised for further action.

In conclusion, the court upheld the petitioner's claim for winding up the respondent-company due to its failure to pay the outstanding debt. The judgment emphasized the importance of assessing the bona fides of the defense raised by the respondent and highlighted the limitations of the company court's summary jurisdiction in such matters.