2003 (3) TMI 544 - HC - Companies Law

Summary

Issues involved:
Winding up petition under section 433(e) of the Companies Act, confirmation of outstanding payment, dispute over debt liability, violation of agreement terms, inability to pay debts as per section 434 of the Act.

Winding up petition under section 433(e) of the Companies Act:
The petitioner sought winding up of the respondent company due to an outstanding payment of Rs. 8,59,41,364.78. The petitioner had provided working capital of Rs. 9 crores to the respondent, which was to be repaid through production and selling commissions. A notice under section 434 of the Companies Act was sent in 1997 after the debt was confirmed but not repaid. Subsequently, the BIFR recommended winding up, leading to the revival of the petition in 2002.

Confirmation of outstanding payment and dispute over debt liability:
The respondent company contended that the debt was disputed, citing various reasons such as TISCO's conduct, contract termination, and discrepancies in payment adjustments. The respondent claimed that TISCO owed them money as well. However, the court noted that the respondent's replies did not dispute the debt but rather sought time for payment due to financial constraints. The court also highlighted letters acknowledging the debt and the respondent's commitment to settle the dues, indicating an acknowledgment of liability.

Violation of agreement terms and inability to pay debts as per section 434 of the Act:
The main dispute centered around the liability for sale commission claimed by the petitioner, which the respondent argued was not payable as per the agreements. The court analyzed the provisions of section 434(1)(a) of the Act, emphasizing the statutory notice served and the respondent's failure to dispute the debt. The court found that the respondent's postulations of violations by the petitioner were afterthoughts and lacked evidence. The court dismissed the respondent's arguments, ruling that the respondent failed to rebut the presumption of inability to pay debts, leading to the winding up order.

In conclusion, the court granted the winding up petition, appointing the Official Liquidator as the Provisional Liquidator of the respondent company. The court directed the Provisional Liquidator to take possession of all assets and books of account. The judgment highlighted the importance of honoring financial obligations and the legal consequences of failing to repay debts as per the Companies Act.