2001 (3) TMI 922 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the winding-up petition.
2. Existence of a debt.
3. Nature of damages and their classification as debt.
4. Prima facie findings required for admitting a winding-up petition.
5. Summary of relevant legal precedents.

Summary:

1. Maintainability of the winding-up petition:
The respondent filed a petition u/s 433(e) and (f) of the Companies Act, 1956, seeking an order to wind up the appellant-company. The company court admitted the petition, prompting the company to appeal u/s 483 of the Act, arguing that the amount claimed is not a 'debt' and thus the petition is not maintainable.

2. Existence of a debt:
The company participated in export auctions, failed to make payment and take delivery of coffee, leading the Board to resell the coffee and claim losses. The company had furnished bank guarantees, which the Board enforced, leaving a balance of Rs. 48,96,805.03. The Board issued a notice demanding payment and filed a winding-up petition when the company failed to pay.

3. Nature of damages and their classification as debt:
The company denied liability, arguing the coffee was of inferior quality and that the Board did not mitigate losses. The company court held that the amounts claimed by the Board were ascertainable and thus a debt. The appeal contended that damages are not a debt unless adjudicated by a competent court.

4. Prima facie findings required for admitting a winding-up petition:
The court must find that the petitioner is a creditor to whom the company owes an ascertained sum, the debt is within limitation, and the company's defense is not bona fide. The court held that the Board's claim was a seriously disputed claim for damages, not a debt.

5. Summary of relevant legal precedents:
- Cotton Corpn. of India Ltd. v. United Industrial Bank Ltd.: A winding-up petition is not for debt recovery; if the debt is bona fide disputed, the court is reluctant to admit the petition.
- Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla: Admission of a petition can cause immense injury if dismissed later.
- Pradeshiya Industrial & Investment Corpn. of U.P. v. North India Petro Chemicals Ltd.: Admission without advertisement can still have serious consequences.
- Iron & Hardware (India) Co. v. Firm Shamlal & Bros.: Damages do not constitute a debt until adjudicated by a court.
- Union of India v. Raman Iron Foundry: A claim for damages becomes a debt only after a court awards it.

Conclusion:
The court held that the Board's claim was for damages, not a debt, and thus the winding-up petition was not maintainable. The appeal was allowed, and the order admitting the winding-up petition was set aside, resulting in the dismissal of Company Petition No. 96 of 1992.