2007 (9) TMI 417 - HC - Companies Law

Winding up - direction of advertisement - Held that - In the peculiar facts and circumstances of the present case, we find that the learned Single Judge, after taking into account the relevant facts and circumstances, has admitted the company petition and has directed for issuance of the advertisement. Such an order is essentially discretionary in nature and in the absence of strong enough reason, we are not inclined to differ from such conclusion. However, we feel, interest of justice would be served, while upholding the order of the learned Single Judge, by directing that the advertisement may be published after 90 days.

Issues Involved:
1. Admission of the company petition for winding up.
2. Bona fide dispute regarding the debt.
3. Prima facie case for the company's inability to pay its debts.
4. Discretionary nature of the court's order to admit the petition and direct advertisement.

Detailed Analysis:

1. Admission of the Company Petition for Winding Up:
The appeal challenges the order dated 21-12-2001, admitting the company petition filed under section 439, read with sections 433(e) and 434 of the Companies Act, 1956, for winding up the appellant-company and directing the advertisement of such petition. The respondent, an international aviation consultancy firm, filed the petition due to unpaid consultancy fees.

2. Bona Fide Dispute Regarding the Debt:
The appellant-company argued that there was a bona fide dispute regarding the debt claimed by the petitioner. The company denied owing any amount, stating that the petitioner did not render any services as claimed. The company also contended that the consultancy fees were not finalized as alleged and that the petitioner failed to settle disputes with AFT and United Airlines, thus not entitling them to any payment.

3. Prima Facie Case for the Company's Inability to Pay Its Debts:
The learned Single Judge posed the question of whether the petitioner made a prima facie case that the respondent is unable to pay its debts. The Judge concluded that the company had failed to clear the dues of the petitioner, thus making out a prima facie case for admitting the company petition and ordering the advertisement.

4. Discretionary Nature of the Court's Order:
The appellant's counsel argued that the petition for winding up should only be admitted if there is a prima facie case of debt due from the company and neglect to clear such debt, and where there is a bona fide dispute, such proceedings should not be initiated merely to recover the money. The respondent's counsel maintained that the company had failed to pay the dues despite several opportunities, justifying the admission of the petition and the advertisement.

Court's Observations and Conclusion:

Bona Fide Dispute:
The court referred to the Supreme Court decision in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd., which established that if the debt is bona fide disputed and the defense is substantial, the court will not wind up the company. The court noted that the appellant-company raised a bona fide dispute regarding the payability of the amount claimed by the petitioner. However, the court found that the company's defense lacked substance and was not supported by prima facie proof.

Prima Facie Case:
The court examined the correspondence between the parties and found that the petitioner was engaged as a consultant, and the terms of engagement were reflected in the letters dated 12-4-1993 and 13-4-1993, and confirmed on 3-5-1993. The court noted that the company did not provide any correspondence contradicting these terms and failed to raise any protest regarding the petitioner's claims. The court concluded that the company raised a so-called dispute without prima facie material, indicating that the debt was not bona fide disputed.

Discretionary Nature of the Order:
The court emphasized that the order to admit the petition and direct advertisement is discretionary. The court found no strong reason to differ from the learned Single Judge's conclusion. However, the court directed that the advertisement be published after 90 days to serve the interest of justice.

Final Judgment:
The appeal was dismissed, upholding the learned Single Judge's order to admit the company petition and direct the advertisement, with the modification that the advertisement be published after 90 days.

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