2005 (10) TMI 284 - HC - Companies Law

Summary

Issues:
Creditors winding-up petition for non-payment of amount due for supplies, calculation and payment of interest, absence of agreed rate of interest, interpretation of legal precedents regarding payment of interest in winding-up petitions, disagreement with the view of another High Court, determination of reasonable interest rate, dismissal of the winding-up petition with liberty to file a civil suit for interest claim.

Analysis:
The judgment pertains to a creditors winding-up petition filed for non-payment of a specified amount due for the supply of tin containers, including interest. The respondent-company made full payment of the principal amount during the pendency of the petition, leaving only the disputed interest amount. However, the respondent denied liability for the interest and the rate of interest claimed by the petitioner. The absence of any agreement, contract, custom, or law establishing the rate of interest for delayed payments was highlighted.

The petitioner relied on a Division Bench judgment of the Punjab and Haryana High Court to support their claim for interest payment. The judgment distinguished previous cases and emphasized that in the absence of an agreement for interest payment, a winding-up order should not be issued. However, the judge disagreed with this view, stating that the payment of interest is a matter of agreement between the parties and should be determined based on the principles of Section 34 of the Code of Civil Procedure.

The judge emphasized that a winding-up petition should not be used to decide disputed questions such as the rate of interest, as the conditions precedent under the Companies Act must be met for a company to be wound up. Therefore, the court dismissed the company petition, granting the petitioner the liberty to file a civil suit to claim any reasonable interest due from the respondent-company. The judgment underscores the importance of establishing a reasonable interest rate through a civil suit rather than in a winding-up petition.

In conclusion, the judgment clarifies the limitations of a winding-up petition in determining disputed issues like interest rates and highlights the need for parties to resolve such matters through civil suits. The dismissal of the petition with the option to pursue a civil suit reflects the court's commitment to upholding legal principles and ensuring fair resolution of financial disputes.