2009 (4) TMI 458 - HC - Companies Law

Winding up petition - whether liability said to be admitted liability is not the admitted liability of the respondent-company? Held that - It is evident that the defence as set out in the counter affidavit is not in good faith and has got no substance. No material has been placed on record in support of the defence as set out in the counter affidavit to show that any bona fide dispute has been raised by the respondent-company. Repeated opportunities, as detailed above, was granted to the respondent-company to pay the debt. More than six months have passed but the respondent-company has not been able to clear its admitted liability. Looked from any angle and taking the case of the respondent-company on its face value with regard to the payments made by it from time to time including the payments made during the course of pendency of the present proceedings before this court, under the orders of this court, it is evident that the respondent-company has not been able to discharge its admitted liability which as it stands today, comes to ₹ 31,05,717 minus ₹ 14,67,728 (paid during pendency of the present proceedings) ₹ 16,37,989. In any view of the matter, there is no doubt that the respondent-company owes the petitioner-company of the debt entitling it to a winding up order.

Issues Involved:
1. Petition for winding up under sections 433(e) and (f) read with sections 434/439 of the Companies Act, 1956.
2. Allegation of non-payment of dues by the respondent-company.
3. Defense by the respondent-company claiming inferior quality of goods and overpricing.
4. Admitted liability and payments made during the proceedings.
5. Legal principles and precedents applicable to the case.

Detailed Analysis:

1. Petition for Winding Up:
The petitioner-company filed a petition for winding up of the respondent-company under sections 433(e) and (f) read with sections 434/439 of the Companies Act, 1956. The petitioner alleged that the respondent-company failed to pay an outstanding balance of Rs. 32,19,118 as of 31-3-2008, despite repeated demands and a notice dated 25-3-2008.

2. Allegation of Non-Payment of Dues:
The petitioner-company claimed that it had been maintaining proper books of account and that the respondent-company had an outstanding balance of Rs. 32,19,118. Despite repeated demands, the respondent-company did not clear the dues, leading to the issuance of a winding-up notice.

3. Defense by the Respondent-Company:
The respondent-company, in its counter affidavit, argued that the goods supplied by the petitioner were of inferior quality and that the petitioner had been informed of the rejection of these goods. The respondent also claimed that the petitioner was charging higher rates than the prevailing market rates and had requested the petitioner to issue fresh credit notes, which the petitioner allegedly did not do.

4. Admitted Liability and Payments Made:
The petitioner-company, in its rejoinder affidavit, denied the respondent's claims and reiterated the outstanding amount. It was highlighted that the respondent had unilaterally debited certain amounts from the petitioner's account, but even after such debits, a balance of Rs. 31,05,717 remained due. The court noted that the respondent-company had admitted a liability of Rs. 31,05,717 and had made partial payments during the proceedings, totaling Rs. 14,67,728, leaving an outstanding amount of Rs. 16,37,989.

5. Legal Principles and Precedents:
The court referred to several precedents to determine the validity of the winding-up petition:
- In *Madhusudan Gordhandas & Co. v. Madhu Woolen Industries (P.) Ltd.*, the Supreme Court held that where the debt is undisputed, the court will not act on a defense that the company chooses not to pay a particular debt. The defense must be in good faith, substantial, likely to succeed in law, and supported by prima facie proof.
- In *Advent Corpn. (P.) Ltd.*, it was held that at the admission stage, the court must consider whether the petition justifies further investigation or if it constitutes an abuse of process.
- In *NEPA Ltd. v. Jnanamandal Ltd.*, the court reiterated the three tests from *Madhusudan Gordhandas & Co.* to assess the validity of the defense.

Applying these principles, the court found that the respondent's defense was not in good faith and lacked substance, as no material evidence was provided to support the claims of inferior quality and overpricing. The court concluded that the respondent-company had failed to discharge its admitted liability despite repeated opportunities.

Conclusion:
The court directed the petitioner to advertise the winding-up petition in two daily newspapers within four weeks, as per rule 24 of the Companies (Court) Rules, 1959, and listed the petition for further hearing on 8-7-2009. The respondent-company's failure to clear its admitted liability led to the court's decision to proceed with the winding-up petition.

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