2010 (1) TMI 563 - HC - Companies Law

Winding up of the respondent company seeked on the ground that the company has indebted to the petitioner and is not in a position to pay the petitioner s debts Held that - Merely on the basis of a photostat copy of the settlement deed, it cannot be said that the debts are admitted debts more particularly when it was specifically stated by the respondent that all the dues have already been paid to the petitioner. The respondent has stated that no court case under section 138 of the Negotiable Instrument Act as alleged by the petitioner was ever filed against it. In the circumstances it was for the petitioner to have filed reliable material to prove his case for winding up the respondent company under 433(e) of the Act. It is now well settled that if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. In the present case the debt is hot free from doubt or controversy. It is not admitted but has been disputed. When the alleged debt of the petitioner is disputed, denied, or doubted it will not be appropriate for this court to allow the petition for winding up of the respondent company. Thus no case is made out to order winding up of the company

Summary

Issues:
Petition for winding up under sections 433 and 434 of the Companies Act based on non-payment of debts. Dispute over outstanding dues and settlement agreement between the petitioner and respondent company.

Analysis:
The petitioner, engaged in the business of manufacturing gas stoves, filed a petition seeking winding up of the respondent company due to non-payment of debts. The petitioner maintained accounts with the respondent and its sister concern, alleging dishonored cheques and subsequent legal action under the Negotiable Instruments Act. A settlement deed was executed, but the respondent failed to adhere to the payment schedule, prompting a statutory notice for outstanding dues. The respondent disputed the liability, claiming full payment of dues through cash or demand drafts post-June 2003. The respondent challenged the petition's legitimacy, citing lack of evidence and disputing the settlement deed's authenticity. The petitioner, in response, denied receiving full payment and argued against the necessity of filing an account statement due to the settlement deed's submission.

The court noted the absence of concrete evidence supporting the petitioner's claims of dishonored cheques and outstanding dues. Despite the settlement deed, the petitioner failed to provide authenticated documents or evidence of the alleged debts. The respondent contended that all dues were settled, denying the existence of court cases under the Negotiable Instruments Act. The court emphasized that a bona fide disputed debt with a substantial defense precludes a winding-up order, especially when the debt is disputed, denied, or doubted. As the alleged debt was not free from controversy and lacked conclusive proof, the court concluded that the petition lacked merit. Consequently, the court dismissed the petition for winding up the respondent company, citing insufficient evidence and a disputed debt as grounds for denial.