2003 (7) TMI 572 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - suit for recovery - admissions in respect of the liability of the respondent to repay the debt - HELD THAT - The respondent signed the balance confirmation admitting its liability to repay the debt of the petitioner and even cheques have been issued acknowledging the aforesaid liability, which when presented to the bank were dishonoured. This conduct on the part of the respondent proves and establishes that the respondent is indebted to the petitioner and that it is unable to pay its debts. Merely because a compensation application is pending for consideration or a summary suit filed by the petitioner is pending for consideration would be no ground to allege in the present petition that there is a bona fide dispute raised by the respondent in the present case. Even assuming that a case of bona fide dispute is raised by the respondent before the MRTP Commission, the total claim of the respondent against the petitioner in the said proceeding as spelt out from the prayer clause of the petition filed before the MRTP is only Rs. 30 lakhs whereas the admitted liability of the respondent is to the tune of Rs. 1.24 crores. The dispute that is sought to be raised before the MRTP Commission by the respondent does not appear to be bona fide as the same was an afterthought and is initiated by the respondent only after the petitioner has taken resort to the provisions of sections 433, 434 and 439 of the Companies Act. I am prima facie satisfied that such a plea is raised before the MRTP Commission in order to cause delay in payment of the admitted dues which cannot be said to be a bona fide dispute. It is also to be noted that at this stage the Company Court is only to be prima facie satisfied that the respondent is indebted to the petitioner and that it is unable to pay its debts. Indebtedness of the respondent to the petitioner is an admitted fact and that it is unable to pay its debt is also proved from the evidence on the record as the cheques issued by it were dishonoured by the bank when presented for encashment. The counsel appearing for the respondent sought to submit that the remedy of winding up is a discretionary remedy of the Court which is to be exercised very cautiously. There can be no denial of the aforesaid position in law but where it is found that a party has sought to raise a dispute to defeat the bona fide claim of a party, the Court cannot and should not postpone the adjudication of the right of a party if on the basis of the evidence on record the Court is prima facie satisfied that a case for admission is made out. The Court should not postpone such adjudication on the ground that the respondent is thriving to exist and that it should be given an opportunity to revive itself. Accordingly, I am of the considered opinion that the present petition is required to be admitted to hearing which I hereby do. Citation shall also be published in a daily issue of Statesman (English) and Jansatta (Hindi) for 16-10-2003. The Official Liquidator attached to this Court is appointed as the Provisional Liquidator, who is directed to take over the assets and the records of the respondent company. It is also made clear that the observations made herein are meant only for the purpose of deciding whether or not the present case could be admitted for hearing and the opinions recorded are prima facie in nature. Renotify on 16th October, 2003.

Summary

Issues Involved:
1. Maintainability of the company petition due to non-service of statutory notice.
2. Existence of a bona fide dispute due to a counterclaim and pending summary suit.

Summary:

Issue 1: Maintainability of the Company Petition
The petitioner filed a company petition for winding up the respondent company on grounds of commercial insolvency and inability to pay debts. The respondent argued that the statutory notice u/s 433 of the Companies Act was not served as required by sections 433 and 434. The court found that the petitioner sent statutory notices to the respondent's registered office as per official records. The respondent changed its registered office address but informed the Registrar of Companies only after the notices were sent. The court held that the petitioner complied with the legal requirements by sending notices to the registered office address on record, making the proceedings maintainable.

Issue 2: Existence of a Bona Fide Dispute
The respondent claimed a counterclaim before the MRTP Commission and a pending summary suit, arguing that these constituted a bona fide dispute. The court noted that the respondent had confirmed the balance due on 17-3-2000 and 24-10-2001, and issued cheques that were dishonored. The MRTP complaint was not pursued diligently, and the compensation application was filed only after the winding-up notice. The court found no bona fide dispute as the respondent's actions appeared to be an afterthought to delay payment. The court was prima facie satisfied that the respondent was indebted and unable to pay its debts, justifying the admission of the winding-up petition.

Conclusion:
The court admitted the petition for hearing, directed publication of the citation, and appointed the Official Liquidator as the Provisional Liquidator to take over the respondent company's assets and records. The observations were made for the purpose of deciding the admission of the case and were prima facie in nature. The matter was renotified for 16th October 2003.