2009 (12) TMI 524 - HC - Companies Law

Winding up - Circumstances in which a company may be wound up - Held that - In the present petition, the petitioner has made incorrect claims against the respondent company, who has, in turn, not challenged them so far. The amount claimed by the petitioner may be disputed, and thus does not amount to a debt for the purposes of winding up proceedings, as the term has been interpreted by the Supreme Court and various High Courts. The petition and the application are not maintainable in this Court at this stage and are, therefore, dismissed, without prejudice to the right of the petitioner to recover the amount it claims as due in a civil court.

Summary

Issues Involved:
1. Petition for winding up under sections 433 and 434 of the Companies Act, 1956.
2. Appointment of a provisional liquidator under section 450 of the Companies Act, 1956.
3. Determination of unpaid debt and its nature (principal amount or damages).
4. Bona fide dispute regarding the amount claimed.
5. Mitigation of damages by the petitioner.
6. Applicability of the Sale of Goods Act, 1940.

Issue-wise Detailed Analysis:

1. Petition for Winding Up under Sections 433 and 434 of the Companies Act, 1956:
The petitioner, a company incorporated in the UK, filed a petition for winding up the respondent company, M/s. Blue Engineering Pvt. Ltd., under sections 433 and 434 of the Companies Act, 1956. The petition was based on unpaid invoices for non-ferrous scrap supplied under various contracts. The claim amounted to USD 477,606.35, reflecting the price differential between the contracted price and the resale price to a third party.

2. Appointment of a Provisional Liquidator under Section 450 of the Companies Act, 1956:
Along with the winding-up petition, the petitioner sought the appointment of a provisional liquidator to manage the respondent company's affairs during the pendency of the petition. This application was made under section 450 of the Companies Act, 1956.

3. Determination of Unpaid Debt and Its Nature (Principal Amount or Damages):
The court examined whether the claimed amount constituted an unpaid debt or damages. It was noted that if the amount was for damages due to breach of contract, the liability to pay would only arise after judicial determination. The court emphasized that the Company Court's jurisdiction is limited to cases where damages are quantifiable without trial, such as liquidated damages or admitted liability.

4. Bona Fide Dispute Regarding the Amount Claimed:
The petitioner argued that there was no bona fide dispute regarding the respondent's liability. However, the court highlighted that the existence of a bona fide dispute over the principal amount would render the winding-up petition non-maintainable. The court referred to several precedents, including the Supreme Court's judgment in Mediquip Systems (P.) Ltd. v. Proxima Medical System GmBH, which emphasized that a debt under section 433(e) must be a determined or definite sum of money payable immediately or at a future date.

5. Mitigation of Damages by the Petitioner:
The petitioner sold the goods to a third party to mitigate its losses. The court noted that the petitioner was obligated to take reasonable steps to mitigate the loss and obtain the best possible price for the goods. The onus of proving that reasonable steps were taken lay with the petitioner. The court referred to McGregor on Damages and other precedents to explain the principles of mitigation.

6. Applicability of the Sale of Goods Act, 1940:
The court raised the question of whether the Sale of Goods Act, 1940, applied to the contracts in question. If applicable, the petitioner would need to comply with section 54(2) of the Act, which requires notice of resale to the buyer to claim the price differential. The court found no indication in the petition or its annexures that the Sale of Goods Act did not apply. Therefore, the petitioner's statutory right to resale would arise only if notice of resale was served on the respondent, which was not done in this case.

Conclusion:
The court concluded that the petitioner's claims were incorrect and disputed, and thus did not amount to a 'debt' under section 433(e) of the Companies Act, 1956. The petition and application for winding up and appointment of a provisional liquidator were dismissed. The petitioner was advised to pursue the recovery of the claimed amount in a civil court.