1998 (4) TMI 477 - HC - Companies Law

Summary

Issues Involved:
1. Defective Affidavit Supporting the Petition
2. Bona Fide Dispute Over Claimed Amount
3. Alternative Remedy through Arbitration
4. Commercial Insolvency and Public Interest

Detailed Analysis:

1. Defective Affidavit Supporting the Petition:
The respondent argued that the affidavit in support of the petition was defective as it did not comply with the requirements of rules 18 and 21 of the Company (Court) Rules, 1959. Specifically, the affidavit did not state that the person affirming it was a Principal Officer of the company, and it did not refer to 'this' particular petition. The court examined the affidavit and found that the first affidavit disclosed the deponent's high position in the company and made statements on oath regarding the petition's contents. The court cited the Supreme Court's guidance in Malhotra Steel Syndicate v. Punjab Chemi-Plants Ltd., emphasizing that even if there were slight defects or irregularities, the petitioner should have been given an opportunity to rectify them. Consequently, the court did not reject the petition on this ground.

2. Bona Fide Dispute Over Claimed Amount:
The petitioner claimed an amount of Rs. 93,28,324.55 based on a reconciliation statement provided by the respondent. The respondent contended that this amount was principally a retention amount under the contract and that the generator supplied did not meet the expected performance standards. The court noted that the respondent had raised a bona fide dispute regarding the amount claimed by the petitioner, including issues of performance and counterclaims for losses due to unsatisfactory performance. The court cited the Supreme Court's ruling in Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami, which held that a winding-up petition is not a legitimate means of enforcing payment of a debt that is bona fide disputed by the company.

3. Alternative Remedy through Arbitration:
The petitioner had invoked the arbitration clause in the agreement and obtained an injunction from the Delhi High Court against the respondent's attempt to encash a performance guarantee. The court emphasized that the existence of an arbitration clause and the petitioner's own actions to seek arbitration indicated that there was an agreed alternative remedy available. The court cited the Supreme Court's decision in Pradeshiya Industrial & Investment Corporation of UP v. North India Petrochemicals Ltd., which held that a claim subject to arbitration proceedings lacks 'definiteness' and should not be entertained in a winding-up petition.

4. Commercial Insolvency and Public Interest:
The petitioner also contended that the respondent company had become commercially insolvent and that winding it up was in the public interest. The court examined the respondent's Annual Report for 1995-96 and found that the company was a strong and sound concern. The court concluded that the petitioner had not substantiated the claim of commercial insolvency or demonstrated that winding up the company was in the public interest.

Conclusion:
The court rejected the petition, concluding that:
- The affidavit supporting the petition, even if initially defective, was rectified and did not warrant rejection of the petition.
- There was a bona fide dispute regarding the claimed amount, making the winding-up petition inappropriate.
- The petitioner had an agreed alternative remedy through arbitration, which had already been invoked.
- The claim of commercial insolvency was unsubstantiated, and the company was not shown to be insolvent or in need of winding up in the public interest.

Orders:
The petition was rejected, and the related applications for interim orders and directions to file attested copies of accounts were also not entertained. The parties were ordered to bear their own costs.