2007 (6) TMI 287 - HC - Companies Law

Summary

Issues Involved:
1. Whether the respondent company is liable to be wound up u/s 433(e) of the Companies Act, 1956.
2. Whether the deductions made by the respondent are bona fide.
3. Whether the winding-up petition is a legitimate means to recover a debt.

Summary:

1. Liability for Winding Up u/s 433(e):
The petitioner, a sub-contractor, sought the winding up of the respondent company u/s 433(e) of the Companies Act, 1956, alleging an outstanding debt of Rs. 41,48,696.25, later restricted to Rs. 20,68,015.70. The petitioner completed only 12,158 sq. meters of work against the allotted 26,145 sq. meters, with the balance work completed by another contractor, indicating issues with the petitioner's performance.

2. Bona Fide Deductions:
The respondent deducted Rs. 10,32,023 for consumables and Rs. 10,58,696.95 for damages due to breach of agreement, workmanship issues, and delays. The court found these deductions prima facie bona fide, supported by correspondence indicating serious disputes about the quality and timeliness of the petitioner's work. The petitioner failed to provide necessary certificates or evidence to counter these claims, necessitating detailed investigation inappropriate for summary proceedings.

3. Legitimacy of Winding-Up Petition:
The court emphasized that a winding-up petition is not a legitimate means to recover a disputed debt. The statutory notice must conform to mandatory requirements, and the inability to pay debts must be substantiated. The petitioner's claim was disputed by the respondent well before the statutory notice, indicating a bona fide dispute. The court referenced precedents affirming that winding-up petitions should not be used to exert pressure for debt recovery and are inappropriate where disputes require detailed investigation.

Conclusion:
The petition was dismissed with costs of Rs. 5,000, allowing the petitioner to withdraw the deposited sum of Rs. 25,671 with accrued interest. The court reiterated that the appropriate forum for resolving such disputes is the Civil Court, not summary proceedings like a winding-up petition.