2009 (8) TMI 707 - HC - Companies Law

Winding up - whether the respondent-company has to be wound up in view of the alleged liability on the respondent as a guarantor as shown in the guarantee letter dated 25-7-1997 and also an agreement dated 1-4-1997? - Held that - It is well-settled proposition of law that when the respondent who was sought to be wound up was able to show that there was a bona fide dispute with regard to the liability in question, the winding up proceeding is not the proper remedy to resolve the dispute. Apart from that, the appellant was unable to show that there was a debt due and payable by the respondent-company. It is true that two documents were produced before the Court; but the execution, validity and genuineness of the documents have been questioned by the respondent. In such circumstances, it would not be fit or proper to place reliance on those documents to fasten any liability on the respondent or to hold that there was a debt due and payable by the respondent. Hence, the learned Single Judge has taken a correct view that the remedy for the appellant is not to approach the Company Court for winding up, and, hence, the impugned order is sustained. Appeal dismissed.

Summary

Issues Involved:
1. Whether the respondent-company should be wound up under sections 433(e) and 433(c) of the Companies Act.
2. The genuineness and enforceability of the guarantee deed and agreement executed by the respondent.
3. The existence of a bona fide dispute regarding the liability of the respondent.

Issue-wise Detailed Analysis:

1. Whether the respondent-company should be wound up under sections 433(e) and 433(c) of the Companies Act:

The appellant filed a petition for winding up the respondent-company, alleging non-payment of dues and commercial insolvency. The learned Single Judge dismissed the petition, concluding that the appropriate remedy was not to seek winding up through the Company Court. The appellant challenged this dismissal, arguing that the respondent-company was liable for the debts due to the guarantee provided.

2. The genuineness and enforceability of the guarantee deed and agreement executed by the respondent:

The appellant claimed that the respondent-company stood as a guarantor for M/s. Vibrant Investment and Properties Limited (VIPL) and executed a guarantee deed on 25-7-1997. The respondent contested this, stating that the guarantee deed and agreement were fabricated and ante-dated by Mr. Ramakrishna, who was the Managing Director of both VIPL and the respondent-company. The respondent argued that these documents were not genuine and were created to impose liability on the respondent.

The Court scrutinized the documents and found several inconsistencies:
- Key documents such as letters dated 29-2-1996, 25-3-1996, and 25-7-1996 were not produced.
- The work order dated 2-8-1996 did not reference a third-party guarantee.
- The revised proposal from VIPL dated 21-3-1997 and the letter of intent dated 25-3-1997 also did not mention a third-party guarantee.
- The agreement dated 1-4-1997 referenced a subsequent work order dated 2-4-1997, raising doubts about its authenticity.

The Court noted that the balance sheets for 1997-98 and 1998-99, which the appellant cited as admissions of the guarantee, were signed in June 1999, after Mr. Ramakrishna was no longer a director. These balance sheets mentioned the guarantee for the satisfactory performance of the pavers but did not reference the repayment of the advance.

3. The existence of a bona fide dispute regarding the liability of the respondent:

The respondent demonstrated a bona fide dispute concerning the genuineness of the guarantee deed and agreement. The Court emphasized that in cases where there is a bona fide dispute about the liability, winding up proceedings are not the appropriate remedy. The appellant failed to show a clear debt due and payable by the respondent. The Court concluded that the documents presented by the appellant could not be relied upon to establish the respondent's liability.

Conclusion:

The Court upheld the learned Single Judge's decision, finding that the appellant's remedy was not through winding up proceedings but elsewhere. The original side appeal was dismissed, and the parties were directed to bear their costs.