2004 (8) TMI 418 - HC - Companies Law

Summary

Issues Involved:
1. Liability for payment of dues.
2. Counter-claim based on arbitration award.
3. Bona fide dispute and winding up petition.

Issue-wise Detailed Analysis:

1. Liability for Payment of Dues:
The petitioner, a private limited company, supplied SBR Latex Encord 104 and VP Latex Encord 106 to the respondent, a public limited company. The petitioner raised invoices with a 90-day credit term, which the respondent failed to honor. As of 30-6-2002, the respondent owed Rs. 32,68,640 plus overdue interest of Rs. 11,91,326. Despite reminders and a statutory notice under sections 433 and 434 of the Companies Act, the respondent did not clear the dues, leading the petitioner to seek a winding up order.

2. Counter-claim Based on Arbitration Award:
The respondent did not deny the supply of material or the liability of Rs. 30,62,670 but raised a counter-claim based on an arbitration award. The award, resulting from a writ petition in the Allahabad High Court, determined that the petitioner owed the respondent Rs. 38,52,956 plus 18% interest p.a. The petitioner's SLP against this award is pending before the Supreme Court, which declined to stay the award. The respondent argued that adjusting this amount nullifies the petitioner's claim.

3. Bona Fide Dispute and Winding Up Petition:
The primary question was whether the respondent's counter-claim constituted a bona fide dispute, thereby negating the petitioner's claim for winding up. The court referred to previous judgments (Wimco Ltd. v. Sidvink Properties (P.) Ltd. and J.N. Roy Chowdhury Traders (P.) Ltd. v. Jainti Enterprises) which established that a bona fide counter-claim could form a legitimate basis for disputing debt. The court found that the respondent's counter-claim, based on an arbitration award, was prima facie genuine and not frivolous. The court noted that the pending SLP did not undermine the legitimacy of the counter-claim.

Conclusion:
The court concluded that the respondent's counter-claim, supported by an arbitration award, constituted a bona fide dispute. Consequently, the winding up petition was deemed misconceived and dismissed. The court emphasized that winding up proceedings should not be used as an alternative to debt realization when a bona fide dispute exists. No orders as to costs were made.