2007 (11) TMI 407 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - The learned Company Judge should have either accepted the compromise making it as a part of the final order (decree) or could have refused to accept the said compromise with a reasonable ground for not accepting the same and in such case only he could have proceeded on merits to decide whether winding up was necessary or not. In this connection we may state that this court has noted the oral submissions made by the parties that number of winding up proceedings have been preferred against the company and in many of them such compromise petitions have been filed. For the said reason we are not deliberated on the question whether the winding up is necessary or not, which required determination by the learned Company Judge. In fine, the appeal is allowed and the matter is remanded to the learned Single Judge for fresh determination taking into consideration the compromise petition filed by the parties and then to dispose of the matter in accordance with law.

Issues:
1. Petition filed under sections 433(e) and (f) and 434 of the Companies Act, 1956 to wind up the respondent-company.
2. Dispute over outstanding debt of Rs. 71,17,688.49 owed by the respondent to the petitioner.
3. Allegation of harassment by the respondent and the claim being unjust and dishonest.
4. Counter-claim by the respondent stating the petition is an abuse of process of law and the company is commercially solvent.
5. Failure to send statutory notice to the registered office of the respondent.
6. Disagreement on the maintainability of the company petition due to a running account between the parties.
7. Dispute over the balance amount owed and the respondent's contention on excise duty exemption.
8. Failure of the respondent to discharge admitted debt with interest.
9. Request for an interim injunction against the respondent.

Analysis:
1. The appellant filed a petition under sections 433(e) and (f) and 434 of the Companies Act, 1956 seeking to wind up the respondent-company due to an outstanding debt of Rs. 71,17,688.49. The appellant alleged repeated delays in payment despite reminders and dishonoured cheques. The respondent countered, claiming the petition was harassment and the amount claimed was unjust. The respondent argued commercial solvency, highlighting assets exceeding liabilities and the running account nature of transactions.

2. The respondent disputed the maintainability of the company petition, citing failure to send statutory notice to the registered office and differences in account balances. The respondent also contested the excise duty exemption on the supplied materials and highlighted payments made post the alleged debt acknowledgment date. The respondent emphasized the existence of assets worth over Rs. 22 lakhs and the absence of a proper statutory notice as per the law.

3. The appellant denied the respondent's counter-claims and sought relief under the company petition. The Single Judge dismissed the petition, prompting the appellant to appeal. The appeal argued for consideration of a compromise entered into between the parties, emphasizing the agreed repayment terms and interest obligations in case of default. The appeal referenced Supreme Court decisions on honoring compromises and the need for proper issue determination.

4. The appeal highlighted the importance of considering the compromise petition and criticized the failure to address this aspect in the initial judgment. Citing Supreme Court precedents, the appeal stressed the significance of honoring compromises voluntarily entered into by parties. The judgment allowed the appeal, remanding the matter for fresh determination, emphasizing the need to consider the compromise petition and make a decision in accordance with the law.

This detailed analysis covers the key issues and arguments presented in the legal judgment, providing a comprehensive understanding of the case and the subsequent appeal decision.

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