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Issues Involved:
1. Inability to pay debts. 2. Disputed debt and counter-claim. 3. Financial status and viability of the respondent company. 4. Procedural aspects of winding up petition. Summary: 1. Inability to pay debts: The Tata Iron and Steel Co. Ltd. filed Company Petition No. 134 of 1999 for winding up of Micro Forge (India) Ltd. u/s 433(e) of the Companies Act, 1956, due to the latter's inability to pay debts arising from the breach of the agreement for the sale of 1500 metric tons of non-alloy steel billets. The petition was admitted, and the publication of the advertisement was directed, but the request for the appointment of a provisional liquidator was rejected. 2. Disputed debt and counter-claim: Micro Forge Co. contended that the contract was changed from High Seas sale to Ex-Kandla sale, and thus, they paid customs duty and clearing charges on behalf of Tata company. They also raised a counter-claim for the non-supply of goods, which allegedly caused them a loss of Rs. 64 lakhs. The company argued that it is a profit-making entity with substantial shareholders and employees, disputing the debt and raising a set-off claim. 3. Financial status and viability of the respondent company: The financial documents of Micro Forge Co. for the last three years showed good profitability, turnover, reserves, and surpluses. The court noted that winding up would result in the loss of employment for 105 employees and affect the larger interest of society. The court emphasized that winding up is a measure of last resort and should not be used as a means to recover disputed debts. 4. Procedural aspects of winding up petition: The court highlighted that winding up petitions are not a legitimate means of enforcing the payment of a bona fide disputed debt. The petition should not be aimed at pressurizing the company or abusing the court's process. The court found that there were many disputed questions of fact, including the nature of the contract (High Seas sale or Ex-Kandla sale) and the liability for customs duty, which should be resolved in a civil court. Conclusion: The court quashed the order of admission for the winding up petition and resultant directions, dismissing O.J. Appeal No. 1 of 2000 and allowing O.J. Appeal No. 5 of 2000. The interim order restraining the respondent-company from disposing of its assets was extended for ten weeks to enable the petitioning-company to avail further remedy.
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