2007 (10) TMI 398 - HC - Companies Law

Summary

Issues involved: Invocation of sections 433 and 434 of the Companies Act, 1956 for non-payment, dishonored cheques under section 138 of the Negotiable Instruments Act, 1881, execution of demand promissory note, resistance by respondent-company, and grant of winding up petition.

Companies Act Invocation: The petitioner, a Government of India Enterprise, invoked sections 433 and 434 of the Companies Act, 1956 due to the respondent-company's failure to pay Rs. 3,68,29,634.91 despite statutory notice, leading to a winding up petition dated August 2, 2001.

Raw Material Assistant Scheme: An agreement was entered into on November 9, 1992, where the respondent-company availed financial assistance from the petitioner. Two cheques issued in 1998 were dishonored, and a demand promissory note for Rs. 2,83,70,700.91 was executed on March 31, 1999.

Winding Up Notice: The petitioner invoked the demand promissory note on July 3, 2001, and the respondent-company failed to make the payment within 21 days. The respondent's reply on July 4, 2001, denied the payment without any explanation, leading to the present winding up petition.

Resistance and Admittance: The respondent-company resisted the petition in a reply dated March 28, 2002, but the petitioner reiterated their stand in a rejoinder dated April 4, 2002. The respondent's failure to make payments despite signed demand promissory notes and no change in circumstances led to the admission of the petition.

Judgment: The court found the respondent's defense to be unsubstantiated and not bona fide, especially considering the long-standing request for payment since 1992. The court granted the prayer clauses for winding up, with a two-month window for settlement by the respondent-company, failing which the order would take effect immediately.