2000 (12) TMI 817 - HC - Companies Law

Summary

Issues Involved:
1. Whether the respondent-company should be wound up u/s 433(e) and (f) of the Companies Act, 1956 for inability to pay its debts.
2. Whether the respondent is liable to pay interest on the outstanding amount.
3. Whether non-payment of interest constitutes inability to pay debts u/s 433(e) of the Companies Act, 1956.

Summary:

Issue 1: Winding Up u/s 433(e) and (f)
The petitioner filed for winding up of the respondent-company u/s 433(e) and (f) of the Companies Act, 1956, claiming the respondent was unable to pay its debts amounting to Rs. 1,24,42,460.00 for supplies and Rs. 37,77,159.00 as interest. The respondent subsequently paid the entire principal amount, but disputed the interest claim.

Issue 2: Liability to Pay Interest
The petitioner contended that the respondent was liable to pay interest at 24% p.a. from the expiry of 45 days from the date of invoices, citing section 3 of the Interest Act, 1978, and section 61(2)(a) of the Sale of Goods Act, 1930. The respondent argued that their purchase orders did not provide for interest and that there was no contract or agreement to pay interest. The court noted that interest cannot be awarded merely on the basis of a term in a bill or invoice unless supported by an agreement or promise to pay interest.

Issue 3: Non-Payment of Interest as Inability to Pay Debts
The court examined precedents where non-payment of interest was considered as inability to pay debts. However, it concluded that a winding-up petition is not an alternative forum for enforcing recovery of a debt, especially when there is a bona fide dispute. The court emphasized that the term 'debt' refers to an ascertained and definite amount due and does not include claims for compensation or damages requiring assessment by a court. The court held that interest under section 61(2)(a) of the Sale of Goods Act and section 3 of the Interest Act is by way of damages and not a debt.

Conclusion:
The court found that there was no contract or agreement for payment of interest, and the respondent had denied liability to pay interest. Given the bona fide dispute regarding interest and the respondent's payment of the entire principal amount, the court dismissed the petition for winding up, concluding that there was no inability to pay any debt.