2007 (5) TMI 340 - HC - Companies Law

Summary

Issues Involved:
1. Factum and Quantum of Indebtedness
2. Commission and Counter-Claim
3. Applicability of Sections 433, 434, and 439 of the Companies Act
4. Prima Facie View of Quantum of Indebtedness
5. Statutory Notice and Limitation
6. Admission and Security for Debt

Summary:

1. Factum and Quantum of Indebtedness:
The company does not dispute the factum of indebtedness but contests the quantum to resist the creditor's petition for winding up. The company suggests that accounts need to be taken in a regular action, and winding-up proceedings should await such action.

2. Commission and Counter-Claim:
The manufacturer seeks to realize the price of cars sold to its distributor, who argues that the claim must wait until the company is credited for the commission due. The company raises the issue of commission without quantifying it, suggesting that a counter-claim is enough to resist a winding-up petition.

3. Applicability of Sections 433, 434, and 439 of the Companies Act:
The company refers to an old English judgment to argue that these provisions are meant to wind up insolvent companies and not to take accounts between solvent parties as in a regular civil suit. The company relies on the principle established in Brighton Club & Norfolk Hotel Co. Ltd., In re 55 ER 873, and a more recent pronouncement in Mediquip Systems (P.) Ltd. v. Proxima Medical System GmbH [2005] 59 SCL 255 (SC).

4. Prima Facie View of Quantum of Indebtedness:
The statutory notice for a principal claim of Rs. 2,32,90,136.63 was met with a denial. The petitioner refers to various letters and meetings to establish the amount due. The company acknowledges a net debt of over Rs. 60 lakhs but disputes the total claim, suggesting further adjustments.

5. Statutory Notice and Limitation:
The company's response to the statutory notice includes a robust denial and suggests that the major portion of the claim is barred by limitation. However, the petitioner provides evidence of ongoing discussions and acknowledgments of debt, which reset the limitation period u/s 18 of the Limitation Act, 1963.

6. Admission and Security for Debt:
The company is required to secure a sum of Rs. 1.5 crore in addition to paying Rs. 60 lakhs to avoid the petitioner from inviting other creditors. The petition is admitted for Rs. 2.10 crores with interest. If the company pays Rs. 60 lakhs with interest and furnishes cash security of Rs. 1.5 crore within the specified time, the petition will be stayed. Otherwise, the petition will be advertised, and the company may seek discharge of the security if the petitioner fails to file a suit within the indicated time.