2010 (8) TMI 167 - HC - Companies Law

Summary

Issues:
- Winding up petition under section 433(e) of the Companies Act, 1956.
- Dispute over payment for supplied material.
- Commercial insolvency of the respondent company.

Analysis:

1. Winding up petition under section 433(e) of the Companies Act, 1956:
The petitioner, a private limited company, filed a petition seeking winding up of the respondent company under section 433(e) of the Companies Act, 1956. The petitioner alleged that the respondent owed a sum of Rs. 4,21,894 for material supplied. Despite repeated requests and statutory notices, the respondent failed to comply with the demand, leading to the filing of the petition.

2. Dispute over payment for supplied material:
The respondent company, in its defense, contended that the material supplied by the petitioner was sub-standard, resulting in extra costs incurred by the respondent. The respondent claimed compensation for the additional expenses and acknowledged receiving material worth Rs. 2,50,000 under a consignment. The respondent disputed the claim made by the petitioner, leading to a legal dispute over the payment due.

3. Commercial insolvency of the respondent company:
The court referred to the Supreme Court's ruling in Pradeshiya Industrial & Investment Corpn. of U.P. v. North India Petrochemicals Ltd., emphasizing that for a winding-up order under section 433(e), the company must be unable to pay its debts in a commercial sense. In the present case, the court found no evidence or plea indicating the respondent's inability to pay the debt to the petitioner. As the claim was disputed, and there was no prima facie evidence of the debt, the court concluded that the respondent was not plainly and commercially insolvent. Therefore, the court dismissed the petition, stating it was not a fit case for winding up under section 433(e) of the Companies Act.

In conclusion, the court dismissed the winding-up petition filed by the petitioner against the respondent company, citing lack of evidence of the respondent's inability to pay the debt and the disputed nature of the claim. The judgment highlighted the importance of demonstrating commercial insolvency for a successful winding-up order under section 433(e) of the Companies Act, 1956.