1996 (3) TMI 455 - HC - Companies Law

Summary

Issues Involved:
1. Whether the respondent-company is liable to pay the amount due to the petitioner.
2. Whether the amount paid by the petitioner was for the purchase of shares or an interest-free loan.
3. Whether the petition under sections 433 and 434 of the Companies Act is maintainable.
4. Whether the defense raised by the respondent is bona fide and substantial.
5. Whether the respondent-company is unable to pay its debts and thus liable to be wound up.

Detailed Analysis:

1. Liability of the Respondent-Company:
The petitioner claimed that the respondent-company failed to pay the amount due for the purchase of shares, thus becoming a debtor. The petitioner paid Rs. 50 lakhs for two lakh equity shares, but only received one lakh shares of Oswal Agro Mills Ltd. and one lakh shares of Bindal Agro Ltd., which were not agreed upon. The petitioner demanded the return of the money with interest at 24% per annum. The respondent admitted receiving Rs. 55 lakhs but claimed it was an interest-free loan repayable after ten years.

2. Nature of the Payment:
The petitioner asserted that the amount was paid for the purchase of shares, while the respondent contended it was an interest-free loan to cultivate business relations. There was no written agreement for either the loan or the sale of shares. The court noted the absence of any document evidencing the interest-free loan and found it implausible that such a large amount would be loaned interest-free for ten years without documentation.

3. Maintainability of the Petition:
The court examined whether the petition under sections 433 and 434 of the Companies Act was appropriate. Section 433 allows for winding up if a company is unable to pay its debts, and section 434 introduces a fiction of "deemed inability" when a company fails to pay a debt exceeding Rs. 500 within three weeks of a demand notice. The court found that the respondent did not reply to the notice dated April 19, 1994, indicating an admission of the debt.

4. Bona Fide and Substantial Defense:
The respondent argued that the debt was disputed and the petition was a pressure tactic. The court found no evidence supporting the claim of an interest-free loan and noted that the respondent failed to provide any prima facie proof of its defense. The court concluded that the defense was not bona fide and lacked substance.

5. Inability to Pay Debts:
The court determined that the respondent-company was unable to pay its debts as it failed to pay the admitted amount of Rs. 55 lakhs despite the demand notice. The court rejected the respondent's claim that the amount was not due until after ten years, finding it unsupported by any documentation. The court held that the respondent-company's defense was an afterthought and aimed at avoiding liability.

Conclusion:
The court admitted the petition for winding up the respondent-company, ordering the notice of the winding-up order to be advertised. The case was scheduled for further proceedings on April 18, 1996.