2010 (8) TMI 168 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - The petitioning creditor is relegated to a suit in respect of the cause of action in this winding up application subject to the following conditions The respondent-company will furnish a bank guarantee in favour of the petitioning creditor for a sum of ₹ 10,00,000 within two weeks from the date of issuance of a copy of this order. The company will keep such bank guarantee renewed from time to time, subject to the orders of the civil court where the petitioning creditor is to file a suit in respect of the cause of action. The petitioning creditor will file a suit in respect of the above cause of action within a period of four weeks from the date of issuance of a copy of this order. The period during which this winding up application is pending will be excluded for the purpose of calculation of the period of limitation, under article 14 of the Limitation Act. If no bank guarantee is furnished as aforesaid, then the petitioner will be at liberty to apply before the court for immediate admission of the winding up petition and for issuance of advertisement. If the suit is not filed by the petitioning creditor, the company will be under no obligation to keep the bank guarantee alive.

Issues:
1. Dispute over short delivery of goods and refund claim.
2. Whether the court can adjudge debt owing by the company to the petitioning creditor on a summary basis.
3. Company's defense and potential winding up application.

Analysis:
1. The dispute in the case revolves around the alleged short delivery of goods worth Rs. 13,48,845, leading to a refund claim by the petitioning creditor, along with additional damages claimed. The company acknowledged the short delivery in a letter but claimed adjustment against goods supplied to another entity, which was disputed by the petitioning creditor.

2. The court examined whether it could determine the debt owed by the company to the petitioning creditor summarily. The company's acknowledgment of short delivery and full payment by the petitioning creditor established the debt owed. However, the company raised defenses involving other entities and transactions, leading to further investigation.

3. The court considered the company's defense and the principles guiding winding up applications. It referenced legal precedents requiring a substantial or bona fide defense for dismissal of winding up applications. The court also discussed the discretion to relegate the petitioning creditor to a suit subject to the company furnishing security, based on the merits of the defense presented.

4. The court analyzed the company's defense in light of legal principles governing summary judgments and leave to defend. It concluded that the company's defense did not meet the criteria for a good defense or a triable issue, falling under categories where the petitioning creditor could be granted leave to sign judgment or the company be required to furnish security.

5. Ultimately, the court exercised discretion under specific legal provisions to relegate the petitioning creditor to file a suit, subject to conditions including the furnishing of a bank guarantee by the company and a timeline for filing the suit. The court outlined detailed conditions and procedures to be followed by both parties until the resolution of the dispute through the suit.

6. The judgment emphasized the need for legal principles and discretion in handling winding up applications, ensuring fairness to both parties and adherence to established legal standards. It provided a structured approach for resolving the dispute while safeguarding the interests of the petitioning creditor and the company involved.

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