2001 (1) TMI 869 - HC - Companies Law

Winding up Circumstances in which a company may be would up Company when deemed unable to pay its debts

Summary

Issues:
1. Whether the company acknowledged its liability to the petitioner on April 17, 1997.
2. Whether the alleged letter of acknowledgment by the company's Assistant Vice-President is authentic.
3. Whether the company had a bona fide defense against the winding-up petition.
4. Whether the petitioner should be granted the remedy of winding up the company.

Analysis:
1. The petition for winding up was based on money advanced by the petitioners to the company under a bill rediscounting facility. The company issued post-dated cheques that were dishonored, leading to a dispute over the acknowledgment of liability on April 17, 1997. The company denied confirming the amount due, raising issues of limitation for the claim.

2. The authenticity of the letter dated April 17, 1997, purportedly issued by the Assistant Vice-President, was disputed by the company. The company argued that the said employee had left in April 1997 and lacked authority to issue such acknowledgments. The absence of a reference number on the letter further raised doubts about its validity.

3. The court noted the prolixity of pleadings and the subsequent submission of additional documents by the petitioner to support their claim. However, the company contested the authenticity of these documents, emphasizing that only directors were authorized to acknowledge liabilities. The company maintained a bona fide defense against the winding-up petition.

4. The court concluded that the dispute over the authenticity of the acknowledgment letter and the employee's authority to issue it required adjudication in a separate suit filed by the petitioner in the Delhi High Court. Given the genuine defense presented by the company, the court rejected the winding-up petition, directing the petitioner to pursue remedies through the pending lawsuit.

In summary, the judgment focused on the disputed acknowledgment of liability by the company, the authenticity of the letter, the company's bona fide defense, and the appropriateness of granting the winding-up remedy. The court emphasized the need for a separate suit to resolve the authenticity issues, ultimately rejecting the winding-up petition due to the company's genuine defense and the pending legal proceedings.