2004 (7) TMI 379 - HC - Companies Law

Company when deemed unable to pay its debts - Whether the winding up petition is maintainable or the appropriate course for the petitioner was to file a suit for recovery of the amount - HELD THAT -The facts narrated would show that the transaction in question is of the year 1990. The order was placed on January 11, 1990, and was also executed in part in 1990 and in early 1991. The three letters by which agency commission was demanded are dated July 13, November 9, 1990, and April 19, 1991. HPCL, however, did not make the payment as it fell handicapped in doing so because of some purported guidelines of the Government. However, even when the petitioner had come to know of this, it did not take any legal action but indulged in correspondence only. This petition was filed in the year 1997. It clearly shows that either the petitioner had reconciled to the position and abandoned the claim or slept over the matter depicting lackadaisical attitude. It may be mentioned here that even the seller in Germany had written in one of the letters that if the commission is not paid to the petitioner by the buyer, seller may have to pay the same to the agent. It is not known as to what happened between the seller and its agent, i.e. , the petitioner in this behalf because of which the petitioner took an unduly long period in filing the present petition. This petition is, therefore, time barred and is liable to be dismissed on this ground. The respondent-company has stated that it had a gross profit before tax in excess of Rs. 86 crores ; reserves to the tune of Rs. 578.52 crores ; annual turnover of Rs. 6224.00 crores and was on going solvent company with a number of work force. In a petition filed u/s 433(e) of the Act, not only is it required to be proved that there must be a debt, but one has also to come to a finding that the respondent-company must be unable to pay the said debt. Even if these two conditions are satisfied, still it is not necessary that the winding up order has to be passed as an order under clause (e) of section 433 is discretionary. The respondent-company disputed its liability to pay the debt on the ground that it was payable by HPCL. HPCL is disputing on the ground that the payment of such agency commission is not permissible by a Government of India undertaking having regard to the Government guidelines in this behalf. In these circumstances, the proper course for the petitioner was to file a civil suit as it is trite law that machinery for winding up will not be allowed to be utilised merely as a means of realising its debts due from a company. This petition being bereft of any merit, is hereby dismissed.

Summary

Issues Involved:
1. Whether the claim of the petitioner is time-barred?
2. Whether the winding-up petition is maintainable or the appropriate course for the petitioner was to file a suit for recovery of the amount?

Summary:

Issue 1: Whether the claim of the petitioner is time-barred?

The respondent-company and HPCL contended that the claim is time-barred, as the purchase order dated January 11, 1990, and subsequent supplies were completed by September 12, 1990. The agency commission should have been paid within ninety days, making the claim enforceable within three years, but the petition was filed on May 21, 1997. The petitioner argued that the claim was acknowledged from time to time, extending the limitation period u/s 18 of the Limitation Act, citing a letter dated July 18, 1994, as the last acknowledgment. However, the court found that the letter did not constitute an acknowledgment of debt by the respondent-company, as it did not admit the jural relationship of debtor and creditor, but rather indicated that HPCL was responsible for the payment. Therefore, the petition was deemed time-barred.

Issue 2: Whether the winding-up petition is maintainable or the appropriate course for the petitioner was to file a suit for recovery of the amount?

The court held that the winding-up petition was not maintainable against the respondent-company, a profit-making and solvent entity with substantial financial resources. The respondent-company disputed its liability, and HPCL cited government guidelines prohibiting such payments. It was emphasized that winding-up petitions should not be used merely as a means of debt recovery when the debt is bona fide disputed. The appropriate course for the petitioner was to file a civil suit. Consequently, the petition was dismissed.