2008 (7) TMI 585 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - The Court is of the view that the claim made by the petitioner company in the present winding up petition cannot be said to be an undisputed or admitted claim. It is part of family arrangement and it was the subject matter of arbitration and arbitrator s award is pending before the Bombay High Court. In this view of the matter, merely on the basis of the petitioner s claim, the Court cannot admit the present petition and pass the order regarding advertisement. The claim is required to be proved before the competent forum. Petition dismissed.

Summary

Issues Involved:
1. Petition for winding up under Sections 433 and 434 of the Companies Act, 1956.
2. Commercial solvency of the respondent company.
3. Disputed debt and bona fide defense.
4. Family settlement and arbitration proceedings.
5. Counterclaims by the respondent company.

Detailed Analysis:

1. Petition for Winding Up:
The petitioner-company filed a petition under Sections 433 and 434 of the Companies Act, 1956, seeking the winding up of the respondent company due to its failure to discharge liabilities despite statutory notice. The petitioner claimed an outstanding amount of Rs. 1,27,53,012, including interest, for the supply of aluminum products.

2. Commercial Solvency of the Respondent Company:
The respondent company argued that the petition was not maintainable as it was commercially solvent and a going concern. The company's turnover for the year ending 31-3-2006 was Rs. 98.65 crores, with significant assets, reserves, and a workforce of 319 employees. The respondent emphasized its financial stability, including the payment of substantial excise duty and other government dues.

3. Disputed Debt and Bona Fide Defense:
The respondent contended that the debt claimed by the petitioner was seriously disputed, and hence, non-payment could not be termed as 'neglect to pay' under Section 434(1)(a) of the Companies Act, 1956. The respondent highlighted the ongoing arbitration proceedings and the family settlement, arguing that the petitioner's claim was part of a larger unresolved dispute among family members.

4. Family Settlement and Arbitration Proceedings:
The petitioner and respondent companies were part of the Pankaj Group, controlled by five brothers who had a family settlement effective from 1-4-2003. The settlement involved dividing group companies and assets, with unresolved issues referred to arbitration. An interim award was given on 2-7-2005, and a final award on 25-1-2008, which was challenged in the Bombay High Court. The court noted that the claims were part of the family settlement and arbitration proceedings, making the winding-up petition inappropriate.

5. Counterclaims by the Respondent Company:
The respondent company asserted counterclaims amounting to Rs. 78,66,463 against the petitioner and sought the recovery of fixed deposit receipts worth Rs. 1 crore, provided as collateral security. The court found that these counterclaims and the unresolved arbitration issues indicated a bona fide defense, further complicating the petitioner's claim.

Conclusion:
The court concluded that the petitioner's claim was not undisputed or admitted and was part of the family settlement and arbitration proceedings pending before the Bombay High Court. The court emphasized that the respondent's defense was bona fide and commercially solvent, making the winding-up petition inappropriate. Consequently, the petition was dismissed without costs, and the notice was discharged.