2005 (4) TMI 297 - HC - Companies Law

Summary

Issues Involved:
1. Winding Up Petition: Whether the respondent-company is unable to pay its debts, justifying an order of winding up.
2. Existence of Debt: Whether there is a subsisting and determined liability by the respondent-company to the petitioner-firm.
3. Limitation: Whether the claims made by the petitioner are barred by the statute of limitations.
4. Reconciliation of Accounts: Whether the accounts between the parties were reconciled as stipulated in their agreements.
5. Interest Claims: Whether the petitioner is entitled to claim interest on the outstanding amounts.

Issue-wise Detailed Analysis:

1. Winding Up Petition:
The petitioner sought an order of winding up of the respondent-company under sections 433(e), 434(1)(a), and 439(1)(b) of the Companies Act, 1956, claiming that the respondent-company was unable to pay its debts. The petitioner argued that the respondent had defaulted on payments for cotton bales supplied, and despite multiple agreements and demands, the dues remained unpaid.

2. Existence of Debt:
The petitioner claimed an outstanding balance of Rs. 5,89,157 from transactions during 1997-98, which was acknowledged in an agreement dated 16-12-1997 (Exhibit A12). Subsequent agreements (Exhibits A54 and A59) also referenced outstanding amounts, but reconciliation of accounts was stipulated and not completed. The respondent disputed the liability, arguing that the claims were settled or barred by limitation and that no determined liability existed due to the lack of reconciliation.

3. Limitation:
The respondent contended that the claims were barred by limitation, as the transactions dated back to 1997-98. The petitioner argued that the running account between the parties extended up to 31-5-2002, thus keeping the claims within the limitation period. However, the court noted that no material evidence was presented to show a continuous running account up to the claimed date, and even if the last entry was on 23-3-2002, the petition was barred by limitation as three years had elapsed.

4. Reconciliation of Accounts:
The agreements between the parties, particularly Exhibits A54 and A59, required reconciliation of accounts to determine the exact liability. The petitioner admitted that no such reconciliation was conducted. The court emphasized that without reconciliation, the debts could not be considered ascertained or determined, making it challenging to establish a clear liability.

5. Interest Claims:
The petitioner claimed interest at 24% per annum on the outstanding amounts. However, the court noted that the invoices did not contain an interest clause, and the agreements did not provide for interest payments. The court referenced the decision in Multimetals Ltd. v. Suryatronics (P.) Ltd., stating that interest claims in winding-up proceedings are not akin to those in civil suits for recovery of money.

Conclusion:
The court dismissed the petition, concluding that there was no ascertained or determined debt due to the lack of reconciliation of accounts and that the claims were barred by limitation. The court reiterated that winding-up petitions should not be used as a means to enforce disputed debts and that the petitioner failed to establish a clear, undisputed liability.