2007 (5) TMI 329 - HC - Companies Law

Summary

Issues Involved:
1. Petitioner's claim for winding up the company due to non-payment of dues.
2. Company's defense against the petitioner's claim.
3. Petitioner's evidence of the company's acknowledgment of debt.
4. Dispute over the quantum of debt and the need for reconciliation of accounts.
5. Legal principles governing the winding up petition.

Summary:

1. Petitioner's Claim for Winding Up:
The petitioner pressed for the company to be wound up for its refusal to pay dues amounting to Rs. 1,23,94,435 for goods sold and delivered. The petitioner claimed that the company had admitted and confirmed a sum of Rs. 1,38,93,948 as due and payable as of September 15, 2003.

2. Company's Defense:
The company, in its detailed ten-page reply dated 8-2-2006, contended that the transactions were based on 13 high seas sale agreements involving leather chemicals. The company alleged that the goods were to be stored at the petitioner's godown and inspected before delivery, which did not happen. The company claimed it issued post-dated cheques and signed a balance confirmation in good faith, based on the petitioner's representations. The company also faced summons and show-cause notices u/s 108 and 124 of the Customs Act, 1962, due to alleged diversion of goods by the petitioner, resulting in financial liabilities for the company.

3. Petitioner's Evidence of Acknowledgment:
The petitioner submitted that the company had confirmed a sum of Rs. 1,38,93,948 as due on 31-3-2003, supported by a writing bearing the company's stamp and officer's signature. The petitioner also referred to cheques totaling Rs. 57,66,209 issued by the company, suggesting an unequivocal admission of liability.

4. Dispute Over Quantum of Debt:
The petitioner referred to letters dated 8-5-2004, 31-5-2004, and the company's response on 3-6-2004, which acknowledged the petitioner's demand and suggested a need for account reconciliation. The court noted that the defense was labored and the company's letter of 3-6-2004 conveyed a sense of indebtedness. However, the petitioner's acceptance of the need for reconciliation indicated that the claim was not free from doubt. The court emphasized that both the factum and quantum of indebtedness must be conclusively demonstrated for a winding up petition to proceed.

5. Legal Principles Governing the Winding Up Petition:
The court highlighted the importance of establishing the quantum of debt before admitting a winding up petition. The judgments in SRC Steel (P.) Ltd. v. Bharat Industrial Corpn. Ltd. and Mannesmann Rexroth (India) Ltd. v. National Engg. Industries Ltd. were cited, emphasizing that a creditor must demonstrate the company's inability to discharge its debts by proving the quantum thereof. The court concluded that despite the debtor-creditor relationship being established, the quantum of debt was not indisputable.

Conclusion:
The petitioner's claim was relegated to a suit, and the winding up petition was permanently stayed. There was no order as to costs.