2001 (10) TMI 1068 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the company petition for want of valid notice under section 434(1)(a) of the Companies Act, 1956.
2. Adequacy of the petition's particulars regarding the company's inability to pay debts as prescribed by the Companies (Court) Rules, 1959.

Issue-wise Detailed Analysis:

1. Validity of the Company Petition for Want of Valid Notice:

The petitioner argued that the respondent-company, a manufacturer of fasteners, failed to pay for corrugated boxes supplied under specific invoices, leading to a winding-up petition under section 433(e) of the Companies Act, 1956. The petitioner sent a statutory notice to the respondent's administrative office, which was acknowledged but not responded to by the respondent. The respondent contended that the petition was not maintainable due to non-service of notice at its registered office, citing precedents from Bombay High Court and Madras High Court.

The court noted that the statutory notice had been served at the respondent's administrative office and not the registered office. However, it was held that the notice was sufficient as it was served on the company and acknowledged. The court referred to the Karnataka High Court's view that service at the administrative office is acceptable. The court concluded that the respondent had been adequately notified, fulfilling the requirements of section 434(1)(a).

2. Adequacy of the Petition's Particulars Regarding the Company's Inability to Pay Debts:

The respondent disputed the quality of the supplied boxes and claimed damages, arguing that the liability was in dispute and the petition should be dismissed. The petitioner produced documents showing delivery and acknowledgment of the boxes by the respondent. The court found no evidence from the respondent to support claims of defective boxes or disputes over quality.

The court emphasized that for a winding-up petition under section 433(e), the petitioner must plead the company's inability to pay its debts, which was absent in this case. The petition only indicated the respondent's neglect to pay, not an inability. The court highlighted that the presumption of inability to pay debts under section 434(1)(a) is rebuttable and must be strictly construed. The respondent's financial stability, ongoing business, and employment of 300 workers were noted, indicating it was not commercially insolvent.

Conclusion:

The court held that the notice served at the administrative office was valid, but the petition lacked the necessary plea of the respondent's inability to pay its debts. The court declined to order the winding-up, emphasizing that winding-up should not be used as a debt recovery method or to pressure the company. The petition was dismissed for want of minimum particulars, but the petitioner was allowed to file a fresh petition complying with the requirements. The connected Company Application No. 2508 of 2000 was also dismissed, with parties bearing their respective costs.