2004 (10) TMI 340 - HC - Companies Law

Issues Involved:
1. Petition for winding up of the respondent company.
2. Alleged debt owed by the respondent company to the petitioner.
3. Dispute regarding the quality of goods supplied.
4. Reconciliation of accounts.
5. Admissibility of the petition due to authorization issues.
6. Payment of admitted liability by the respondent.
7. Pending civil suit for recovery of the balance amount.
8. Discretionary jurisdiction of the court in passing a winding-up order.

Detailed Analysis:

1. Petition for Winding Up of the Respondent Company:
The petitioner sought the winding up of the respondent company under sections 433(e), 434, and 439 of the Companies Act, 1956, claiming itself to be a creditor and alleging that the respondent company was unable to pay its debts.

2. Alleged Debt Owed by the Respondent Company:
The petitioner supplied Steel Wire Rods to the respondent company, which allegedly failed to make payments despite several demands. The respondent acknowledged the liability in letters dated 30th October 1998 and 19th December 1998, with a stated payable amount of Rs. 33,43,134.

3. Dispute Regarding the Quality of Goods Supplied:
The respondent contended that the goods supplied were defective and not as per specifications, leading to rejections and financial losses. This formed a significant part of the defense against the winding-up petition.

4. Reconciliation of Accounts:
The respondent highlighted the need for reconciliation of accounts due to disputes over the quality of goods and excess rates charged. The petitioner was accused of not responding to requests for reconciliation.

5. Admissibility of the Petition Due to Authorization Issues:
The respondent challenged the legal authorization of Mr. K.C. Khajanchi to sign and file the petition. Initially, the petition was dismissed on this ground, but the Division Bench later allowed the petitioner to rectify this procedural defect.

6. Payment of Admitted Liability by the Respondent:
During the proceedings, the respondent admitted and paid a liability of Rs. 16 lakhs. This payment was made in installments and acknowledged by the court.

7. Pending Civil Suit for Recovery of the Balance Amount:
The petitioner filed a civil suit for the recovery of the remaining amount, which was pending adjudication. The court noted that the disputes regarding the quality of goods and reconciliation of accounts should be settled in the civil suit.

8. Discretionary Jurisdiction of the Court in Passing a Winding-Up Order:
The court emphasized that the winding-up proceedings are not recovery proceedings. It considered various factors, such as the respondent's acknowledgment of partial liability, the pending civil suit, and the respondent's financial viability and ongoing business operations. The court concluded that it was not justified to pass a winding-up order under section 433(e) of the Act.

Conclusion:
The petition for winding up was dismissed. The court noted that the petitioner had alternative remedies available, such as pursuing the civil suit and seeking a decree based on the admissions in the respondent's letters. The court exercised its discretion, considering the respondent's financial health and the public interest, and determined that a winding-up order was not appropriate in this case.

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