2001 (7) TMI 1164 - HC - Companies Law

Summary

Issues Involved:
1. Petition for winding up u/s 433 and 434 read with section 439 of the Companies Act, 1956.
2. Dispute over the debt amount and its bona fide nature.
3. Pendency of arbitration proceedings.
4. Adequacy of security provided by the respondent-company.
5. Legitimacy of using winding up petition as a means to enforce debt payment.

Summary:

1. Petition for Winding Up:
The petitioners sought an order u/s 433 and 434 read with section 439 of the Companies Act, 1956, to wind up the respondent-company for failing to pay a debt of Rs. 1,77,43,273, including interest, and further interest at 36% per annum from January 22, 2000.

2. Dispute Over Debt Amount:
The respondent-company disputed the liability, claiming the debt was incorrect, inflated, arbitrary, and without justification. The petitioners argued that the debt exceeded Rs. 500, which the respondent-company was unable to pay, and cited several judgments to support their claim.

3. Pendency of Arbitration Proceedings:
The respondent-company highlighted that arbitration proceedings had already commenced, questioning the arbitrator's impartiality. They argued that the winding up petition should not be admitted during the pendency of arbitration proceedings.

4. Adequacy of Security:
The respondent-company contended that the petitioners were fully secured through personal guarantees and an equitable mortgage. They argued that the petitioners had no reason to seek winding up as they were fully secured.

5. Legitimacy of Winding Up Petition:
The court found that the petitioners were using the winding up petition as a pressure tactic for debt recovery. The court noted significant discrepancies in the debt amounts claimed in different proceedings, indicating that the debt had not been crystallized. The court emphasized that a winding up petition is not a legitimate means to enforce payment of a bona fide disputed debt.

Conclusion:
The court dismissed the petition, stating that the petitioners should resort to civil remedies and not use the extreme remedy of winding up for a disputed debt. The court awarded costs of Rs. 5,000 to the respondent-company.