2006 (9) TMI 299 - HC - Companies Law

Summary

Issues Involved:
1. Compliance with Section 434(1)(a) of the Companies Act, 1956.
2. Determination of the respondent's inability to pay its debts.
3. Commercial insolvency of the respondent.

Summary:

1. Compliance with Section 434(1)(a) of the Companies Act, 1956:
The petitioner served a notice dated January 31, 2000, to the respondent's factory address, not the registered office. Section 434(1)(a) mandates that such notice must be delivered to the company's registered office. The respondent argued this provision is mandatory and cannot be waived, even if the respondent replied to the notice. The court referred to several precedents, including *N. L. Mehta Cinema Enterprises P. Ltd. v. Pravinchandra P. Mehta* and *State Black Sea Shipping Co. v. Viraj Overseas P. Ltd.*, which supported the view that compliance with Section 434(1)(a) is mandatory and cannot be waived. Consequently, the petition was dismissed as not maintainable due to non-compliance with this statutory requirement.

2. Determination of the respondent's inability to pay its debts:
The petitioner claimed an outstanding amount of Rs. 1,72,406, which the respondent disputed, acknowledging only Rs. 46,171. The court noted that the petitioner failed to provide prima facie evidence supporting the claimed amount. The TDS certificate presented by the petitioner did not correlate with the claimed amount. The court emphasized that the dispute over the amount due involved complicated questions that required detailed investigation, suitable for a civil court rather than summary proceedings in a winding-up petition. The court cited *Amalgamated Commercial Traders P. Ltd. v. A. C.K. Krishnaswami* and *Kanmdenu Enterprises v. Vivek Textile Mills P. Ltd.*, underscoring that winding-up petitions are not appropriate for resolving bona fide disputed debts.

3. Commercial insolvency of the respondent:
The respondent argued it was a going concern with substantial profits and was not commercially insolvent. The petitioner failed to provide evidence to the contrary. The court noted that the respondent had been deregistered by the BIFR after demonstrating a positive financial position. Therefore, the court concluded that the petitioner was not entitled to a winding-up order u/s 433(e) of the Act.

Conclusion:
The petition was dismissed due to non-compliance with Section 434(1)(a) and the existence of bona fide disputes regarding the debt amount. The petitioner was directed to withdraw the deposited sum of Rs. 46,171 with interest, and costs of Rs. 2,500 were awarded to the respondent.