2004 (2) TMI 360 - HC - Companies Law

Issues Involved:
1. Winding up of the company under sections 433 and 434 of the Companies Act.
2. Company's financial and commercial insolvency.
3. Dispute over the amount due for sugarcane supplied.
4. Interest payable on the due amount.
5. Counter-claim by the company for rental charges.
6. Validity of equitable set-off.
7. Appropriate rate of interest.
8. Exclusion of time under section 14 of the Limitation Act.

Detailed Analysis:

1. Winding up of the company under sections 433 and 434 of the Companies Act:
The Maharashtra State Farming Corporation Ltd. (the Corporation) filed two company petitions for winding up of Belapur Sugar & Allied Industries Ltd. (the company) under sections 433 and 434 of the Companies Act, claiming the company was financially and commercially insolvent and unable to discharge its debts.

2. Company's financial and commercial insolvency:
The Corporation alleged that the company was indebted to it for sums of Rs. 72,79,900.78 and Rs. 23,45,299.11, along with interest at 18% per annum, for sugarcane supplied in the seasons 1985-86 and 1986-87. The company contested the petitions, disputing the interest and claiming a counter-claim for rental charges.

3. Dispute over the amount due for sugarcane supplied:
The company did not dispute the supply of sugarcane but contested the amount due, particularly Rs. 11,32,974.97 for the 1985-86 season, claiming it had already paid Rs. 17,63,015. The learned Company Judge found a genuine dispute regarding this amount but no valid defense against the claims of Rs. 59,57,905.90 and Rs. 22,35,251.28 for sugarcane supplied in 1985-86 and 1986-87.

4. Interest payable on the due amount:
The Corporation sought interest at 18% per annum, while the learned Company Judge awarded 9% per annum, reasoning that a winding-up petition is not a recovery proceeding.

5. Counter-claim by the company for rental charges:
The company claimed rental charges for lands and buildings used by the Corporation since 1964. The learned Company Judge found some plausible defense for the counter-claim for three years prior to the filing of the petitions but did not accept it as a valid defense for the entire period claimed.

6. Validity of equitable set-off:
The court held that the company's claim for rent did not arise out of the same transaction as the Corporation's claim for sugarcane payment, thus not meeting the conditions for equitable set-off. The plea of equitable set-off was not considered a bona fide defense to constitute a reasonable excuse for non-payment.

7. Appropriate rate of interest:
The court found the direction to deposit the amount with interest at 9% per annum appropriate, as the winding-up petition is not intended for debt recovery.

8. Exclusion of time under section 14 of the Limitation Act:
The court acknowledged that the Corporation had pursued the winding-up petitions and appeals diligently and bona fide, and thus, the time taken in these proceedings should be excluded under section 14 of the Limitation Act. The Corporation was granted two months to file a suit for recovery of the due amount, with the time taken in the winding-up proceedings excluded from the limitation period.

Conclusion:
The court disposed of the appeals, granting the Corporation two months to file a suit for recovery of the due amount, excluding the time taken in the winding-up proceedings under section 14 of the Limitation Act. The company was also allowed to pursue any legally available remedies for its claims against the Corporation. The Government guarantee furnished by the Corporation was to remain operative for two months and then stand discharged unless otherwise ordered. The company petitions were disposed of with no costs.

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