2010 (2) TMI 586 - HC - Companies Law

Winding up petition - Held that - In the background of the dispute raised, which does not lack bona fides, it is not possible for this Court to accept the plea of learned counsel appearing for the petitioner that the refusal to pay as per the memorandum of understanding is unexceptionable and lacked in bona fides. The letter of the respondent dated nil asking the petitioner not to present the cheque, by itself, cannot be taken as one indicative of a defence not substantial and of an inability to make a payment and, hence, the company had to be wound up. The petitioner had admittedly gone before the civil court as regards the claim arising under the memorandum of understanding. In the circumstances, with the petitioner approaching the civil court for relief, have no hesitation in rejecting the plea of the petitioner that the company petition for winding up has to be ordered. The company petition is dismissed. It is open to the petitioner to exhaust the remedy available to them in a normal way other than taking recourse to winding up proceedings.

Summary

Issues:
Winding up petition under sections 433(e) and (f) of the Companies Act, 1956 based on a memorandum of understanding for payment of Rs. 16 lakhs.

Analysis:

1. Background and Disputes:
The petitioner, a director of the respondent-company, along with others, entered into a memorandum of understanding due to disputes among shareholders. The agreement involved transferring shares and settling liabilities, including a payment of Rs. 16 lakhs to the petitioner.

2. Contentions and Notices:
The petitioner claimed non-payment of the agreed sum despite assurances and issued statutory notices for payment. The respondent refuted the allegations, citing incomplete obligations on the petitioner's part and requested share transfer to another individual.

3. Counter-affidavit and Defence:
The respondent contended that the petitioner had not transferred shares as agreed and questioned the necessity of payment based on loans. The respondent highlighted discrepancies in loan claims and challenged the petitioner's entitlement to the sum.

4. Legal Arguments:
The petitioner argued for winding up based on admitted liabilities and cited legal precedents emphasizing admitted debts as grounds for winding up. The respondent defended against winding up, pointing to disputes over obligations and lack of bona fides in the claim.

5. Judicial Analysis and Dismissal:
The Court reviewed the memorandum of understanding and the parties' obligations. Despite the petitioner's reliance on legal precedents, the Court found the respondent's defence substantial and not lacking in bona fides. The Court dismissed the winding up petition, suggesting alternative remedies for the petitioner.

6. Conclusion:
The Court dismissed the winding up petition, emphasizing the need for clear evidence of inability to pay admitted liabilities for such orders. The judgment highlighted the importance of resolving disputes through normal legal channels rather than winding up proceedings.