2002 (9) TMI 762 - HC - Companies Law

Issues Involved:
1. Whether the respondent company should be wound up due to its inability to pay its debts.
2. Whether the petitioner's claim is valid and undisputed.
3. Whether the existence of a civil suit (C.S. No. 334 of 1996) affects the maintainability of the winding-up petition.
4. Whether the respondent acted as an agent and the implications under section 230 of the Contract Act.
5. Whether the petition is an abuse of process.

Detailed Analysis:

1. Whether the respondent company should be wound up due to its inability to pay its debts:
The petitioner filed the Company Petition under sections 433(e) and (f), read with sections 434 and 439(1)(b) of the Companies Act, 1956, claiming that the respondent company is unable to pay its debts and should be wound up. The petitioner argued that the respondent admitted part of its liability (Rs. 60,58,282.95) and failed to honor the bills of exchange, rendering it commercially insolvent. The petitioner's statutory notice under section 434 of the Companies Act, 1956, was ignored by the respondent, who denied liability in their reply dated 10-1-1997.

2. Whether the petitioner's claim is valid and undisputed:
The respondent disputed the petitioner's claims, arguing that they are not a creditor within the meaning of the Companies Act, 1956, and that there is no debt due and payable. The respondent contended that the company petition is an abuse of process and that the petitioner should seek remedy through the civil suit already filed. The respondent also claimed that they acted as an agent for Grundig Electronics India Private Limited, who were the actual beneficiaries of the petitioner's services.

3. Whether the existence of a civil suit (C.S. No. 334 of 1996) affects the maintainability of the winding-up petition:
The petitioner had already filed a civil suit (C.S. No. 334 of 1996) against Grundig International Marketing and Sales, Grundig Electronics India Private Limited, and Solidaire India Limited for recovery of the amount due. The court noted that the suit involves triable issues and a bona fide dispute regarding the claim. The court emphasized that the machinery for winding up should not be used as a means for realizing a debt and that the proper remedy for the petitioner is to establish their claim in the civil suit.

4. Whether the respondent acted as an agent and the implications under section 230 of the Contract Act:
The respondent argued that they acted only as an agent for Grundig Electronics India Private Limited, and as per section 230 of the Contract Act, the principal alone is liable. The court noted that the petitioner has included both the principal and the agent as parties in the civil suit, and thus, the petitioner must establish their claim in that suit.

5. Whether the petition is an abuse of process:
The court found that the petitioner had already resorted to a civil suit for recovery of the debt and that there is a bona fide dispute about the existence of the debt. The court held that the winding-up petition is not maintainable as it is being used as a means to realize the debt, which should be resolved through the civil suit.

Conclusion:
The court dismissed the Company Petition, concluding that there is a bona fide dispute regarding the claim, and the petitioner should pursue their remedy in the civil suit (C.S. No. 334 of 1996). The court emphasized that the machinery for winding up should not be used as an alternative to the ordinary procedure for debt realization, and there are triable issues that need to be resolved in the civil suit. The court also noted that the respondent's role as an agent and the implications under section 230 of the Contract Act further support the need for the petitioner to establish their claim in the civil suit.

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