2002 (8) TMI 783 - HC - Companies Law

Summary

Issues Involved:
1. Bona fide dispute and substantial defense.
2. Misuse of winding-up provisions.
3. Admission of debt and counter-claims.
4. Material suppression of facts.
5. Discretionary jurisdiction u/s 433/434 of the Companies Act.

Summary:

1. Bona fide dispute and substantial defense:
The Court emphasized that if there is a bona fide dispute and the defense is substantial, the company should not be wound up. The Respondent argued that there was a bona fide dispute over the dues, which precluded the winding-up order. The Court noted that the Respondent's defense was substantial and in good faith, but the admitted debt of Rs. 54.18 lakhs with interest at 24% per annum weakened the defense.

2. Misuse of winding-up provisions:
The Respondent claimed that the petition was a misuse of the winding-up provisions of the Companies Act. The Court reiterated that winding-up should not be used merely as a means of debt realization and should be rejected if the defense is substantial and in good faith.

3. Admission of debt and counter-claims:
The Respondent admitted the Petitioner's claim of Rs. 54.18 lakhs but contended that it had counter-claims for Ground Handling Services and Engineering Repair Services. The Court found that the Respondent had not initiated any legal proceedings for its counter-claims and that these claims were not ascertained, thus weakening the Respondent's position.

4. Material suppression of facts:
The Respondent accused the Petitioner of material suppression of facts. The Court found no merit in this accusation, noting that the Petitioner had disclosed the Respondent's claims in the petition.

5. Discretionary jurisdiction u/s 433/434 of the Companies Act:
The Court exercised its discretionary jurisdiction u/s 433/434 of the Companies Act, noting that the Respondent's admitted debt of Rs. 54.18 lakhs with interest at 24% per annum justified the winding-up petition. However, considering the rival claims, the Court reduced the interest rate to 9% per annum and directed the Respondent to deposit Rs. 40 lakhs with the Registrar of the Court within four weeks.

Order:
The winding-up petition was admitted, and the Respondent-Company was directed to deposit Rs. 40 lakhs with the Registrar of the Court within four weeks. Failure to do so would result in publication of citation in specified newspapers, returnable on 7th November, 2002. The petition was renotified for 7th November, 2002.