2006 (7) TMI 335 - HC - Companies Law

Summary

Issues Involved:
1. Application for winding up under sections 433, 434, and 439 of the Companies Act, 1956.
2. Alleged dues and payment disputes between the petitioning-creditor and the respondent company.
3. Counter-claims by the respondent company.
4. Bona fide nature of the disputes raised by the respondent company.
5. Principles governing the exercise of discretion by the Company Court in winding up petitions.

Issue-wise Detailed Analysis:

1. Application for Winding Up:
The appellant filed an application under sections 433, 434, and 439 of the Companies Act, 1956, seeking an order for winding up of the respondent company, National Engineering Industries Limited. The application was based on the allegation that the respondent company owed the appellant a sum of Rs. 3,63,42,795.07, including accrued interest, for goods supplied for the modernization of the Rourkela Steel Plant.

2. Alleged Dues and Payment Disputes:
The appellant claimed that despite repeated requests, the respondent company failed to pay the balance amount due. The appellant alleged that there was a specific admission by the respondent company to pay the dues but they failed to honor the same. The appellant highlighted a meeting where the company committed to pay Rs. 95 lakhs but ultimately paid only Rs. 40 lakhs.

3. Counter-claims by the Respondent Company:
The respondent company contested the application, asserting that no amount was due and payable to the appellant. Instead, they claimed a sum of Rs. 53,88,316 from the appellant as liquidated damages for delay and non-fulfillment of performance guarantees. The respondent also raised issues regarding defective supplies and further deductions made by the Rourkela Steel Plant.

4. Bona Fide Nature of Disputes:
The Company Court, in its impugned order, concluded that due to the allegations and counter-allegations, it could not determine that the disputes raised by the respondent company were not bona fide. Consequently, the application for winding up was dismissed. The appellant argued that the findings were based on no material and that the defense raised by the respondent was a cooked-up defense to avoid winding up.

5. Principles Governing Discretion in Winding Up Petitions:
The judgment emphasized that a petition for winding up should not be entertained unless the court concludes that the company is admittedly a debtor and unable to pay the admitted amount. It was noted that when there are claims and counter-claims, the Company Court should direct the parties to resolve their disputes in an ordinary forum unless the defense is apparently frivolous. The judgment cited the Supreme Court's decision in Pradeshiya Industrial & Investment Corpn. of Uttar Pradesh v. North India Petrochemicals Ltd., which exhaustively dealt with the scope of a petition for winding up.

Conclusion:
The High Court upheld the decision of the Company Court, finding no grounds to interfere with the discretion exercised by the trial judge. The court concluded that the disputes raised by the respondent company were bona fide and required detailed evidence, which could not be resolved in a summary manner. The appeal was dismissed, and it was reiterated that the jurisdiction of the Company Court should not be invoked for winding up as a tool of oppression against the respondent company.

Cited Decisions:
The judgment discussed several cited decisions, including John Herbert & Co. Ltd. v. Pranay Kumar Dutta, Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd., and SRC Steel (P.) Ltd. v. Bharat Industrial Corpn. Ltd. The court found that these decisions did not support the appellant's case and instead reinforced the principles applied by the Company Court in dismissing the winding up application.

Final Order:
The appeal was dismissed with no order as to costs, affirming the decision of the Company Court.