2001 (10) TMI 1092 - HC - Companies Law

Summary

Issues Involved:
1. Validity of the letters dated 29-6-1999 and 10-8-1999 sent under certificate of posting.
2. Bona fide nature of the company's defense regarding the quality of supplied materials.
3. Whether the defense based on the poor quality of supply is a bona fide defense.

Detailed Analysis:

Issue 1: Validity of the Letters Sent Under Certificate of Posting
The court examined the validity of the letters dated 29-6-1999 and 10-8-1999, which the company claimed to have sent under certificate of posting to complain about the quality of the supplied chemicals. The court referenced several judgments to assess the presumption of delivery for letters sent under certificate of posting. In Ramashankar Prosad v. Sindri Iron Foundry (P.) Ltd., the court noted that certificates of posting can be obtained without actually posting the letters. Similarly, in Mst. L.M.S. Ummu Saleema v. B.B. Gujaral, the Supreme Court held that the presumption of delivery is permissible but not inevitable. The court also referenced Malleswara Finance & Investments Co. (P.) Ltd. v. CLB and Bhankerpur Simbhaoli Beverages (P.) Ltd. v. Sarabhijit Singh, which emphasized the need for primary evidence such as dispatch registers to substantiate the claim of posting.

In this case, the company failed to produce dispatch registers or any primary evidence to support the claim that the letters were posted. The certificates of posting were not annexed to any affidavits, and the company did not refer to the letter dated 29-6-1999 in its subsequent correspondence. Consequently, the court found the company's claim regarding the letters highly suspicious and concluded that the defense based on these letters was not bona fide.

Issue 2: Bona Fide Nature of the Company's Defense
The court examined whether the company's defense regarding the quality of the supplied chemicals was bona fide. The petitioning creditor argued that the dispute over quality was raised only after a debit note for interest was issued. The company's conduct, including making payments for the chemicals even after allegedly complaining about their quality, was deemed unusual. The court referenced Welsh Brick Industries Ltd., In re and Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd., which established that a bona fide dispute must be raised in good faith and have some substance.

The court found that the company's defense was not raised in good faith, as it continued to accept and pay for the chemicals even after the alleged complaints. The defense was deemed an afterthought, raised only in response to the debit note for interest. Thus, the court concluded that the defense was not bona fide.

Issue 3: Defense Based on Poor Quality of Supply
The court evaluated whether the defense based on the poor quality of supply was bona fide. The company argued that the chemicals' quality could only be judged after processing and receiving complaints from customers. However, the court noted that the company had not raised any complaints at the time of delivery or when the bills were presented. The court referenced T.P. Sahu & Sons (P.) Ltd. and Chem-Crown India Ltd. v. Sports Equipment (P.) Ltd., where similar defenses were rejected because the complaints were raised only after the goods were used by the customers.

The court found that the company's complaints about the quality of the chemicals were not raised in a timely manner and appeared to be an attempt to avoid payment. The defense was not considered bona fide, as it was raised only after the petitioning creditor issued a debit note for interest.

Conclusion:
The court admitted the winding-up petition and directed that the petition be advertised unless the company paid the outstanding amount along with interest within six weeks. The court found that the company's defenses were not bona fide and that the letters allegedly sent under certificate of posting were not credible. The court emphasized the importance of timely and genuine disputes in winding-up proceedings and rejected the company's attempts to avoid payment based on afterthought defenses.