1997 (11) TMI 468 - HC - Companies Law

Summary

Issues:
Petition for compulsorily winding up under sections 439(1)(b) and 433(e) read with section 434(1)(a) of the Companies Act, 1956. Determination of liability to pay interest on goods supplied and whether failure to pay interest warrants winding up.

Analysis:
The petitioner-company supplied goods on credit to the respondent-company between 1990 and 1993, amounting to Rs. 9,02,322. Despite notices and statutory demands, a balance of Rs. 7,02,322 remained unpaid. The respondent-company attributed non-payment to power supply restrictions and labor strikes but paid the outstanding amount during the proceedings. The main issue was whether the respondent was liable to pay interest on the debt owed to the petitioner.

The petitioner contended that interest at 21% per annum was due, relying on clauses in invoices. However, the respondent argued for interest at 18% per annum, citing financial difficulties and an agreement for installment payments. The court examined precedents like Stephen Chemical Ltd. v. Innosearch Ltd. and Rashid Leathers (P.) Ltd. v. Super Fine Shin Traders to determine the liability for interest. The court emphasized that winding up requires a definite, ascertained debt, with failure to pay, and not a bona fide dispute. It noted that interest claims in winding up proceedings are distinct from civil suits for recovery.

The court referenced Multimetals Ltd. v. Suryatronics Pvt. Ltd. and highlighted that interest can only be awarded by a civil court, not automatically in winding up proceedings. Without a written agreement for interest, the respondent's partial payment and installment plan indicated acknowledgment of the debt but not the interest claim. The court emphasized that the creditor cannot unilaterally claim interest without a court order, as it remains unascertained until determined by the court.

In conclusion, the court dismissed the petition for winding up, as the respondent's commercial insolvency was not proven. It reiterated that winding up requires a clear debt and failure to pay, not a disputed claim for interest. The court directed each party to bear their own costs, emphasizing the distinction between winding up proceedings and civil suits for interest claims.