2009 (9) TMI 578 - HC - Companies Law

Winding up petition - Held that - The respondent statedly is the largest cement company in the world with a capacity of 3 million tonnes per annum. In addition, it is earning foreign exchange of about ₹ 200 crores. The respondent pays about ₹ 100 crores to the exchequer towards duties and taxes. It employed thousands of persons, directly and indirectly. It has full-fledged infrastructure like a power plant, jetty, desalination plant and road network. Therefore, it would certainly be unjust to order winding up of the company on an allegation that the respondent is unable to pay amount of about ₹ 2 crores, as decreed by the Civil Court, which is an appeal and which is bona fide disputed. Thus this court is not inclined to admit and order publication of petition

Issues Involved:
1. Whether the pending appeal bars the winding up petition under section 433(e) of the Companies Act, 1956.
2. Whether the company petition should be rejected for non-compliance with rule 95 of the Companies (Court) Rules, 1959 and section 434(1)(c) of the Companies Act, 1956.
3. Whether the petitioner has made out a prima facie case for winding up and whether the respondent's defense that the debt is bona fide disputed has any substance.

Issue-wise Detailed Analysis:

1. Pending Appeal and Winding Up Petition:
The court examined whether the pending appeal against the decree bars the winding up petition under section 433(e) of the Companies Act, 1956. The court referenced section 443(2), which allows the court to refuse a winding up order if another remedy is available and the petitioner is acting unreasonably. The court cited several precedents, including *Atul Durg House Ltd., In re* and *Maharashtra Apex Corpn. Ltd. v. Spartex Ceramics India Ltd.*, which emphasize that winding up proceedings should not be used as a means to enforce a debt when an alternative remedy is available. The court concluded that since the decree was under appeal and had been suspended, the debt was not enforceable, thus barring the winding up petition.

2. Non-compliance with Rule 95 and Section 434(1)(c):
The court analyzed the compliance with rule 95 of the Companies (Court) Rules, 1959, which requires the petition to be in specific forms (Forms No. 45, 46, or 47) and contain essential pleadings, including that the company failed to pay the debt and is insolvent. The court noted that the petition lacked these essential pleadings and did not provide an opportunity to the respondent to address its assets and liabilities. The court cited *Kanchanaganga Chemical Industries v. Mysore Chipboards Ltd.*, which highlighted the necessity of disclosing material facts about the company's financial position. The court held that the petitioner did not comply with the requirements of rule 95 and section 434(1)(c).

3. Prima Facie Case for Winding Up and Bona Fide Dispute:
The court considered whether the petitioner made out a prima facie case for winding up and whether the respondent's defense that the debt is bona fide disputed had substance. The court reiterated that winding up proceedings should not be used to compel payment of a disputed debt. The court referenced *Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd.*, which established that the court should be cautious in ordering winding up if the debt is bona fide disputed. The court found that the respondent's defense was bona fide and had substance, as the dispute over the debt was genuine and not an afterthought. The court also noted the respondent's significant financial standing and contributions to the economy, which would make winding up unjust.

Conclusion:
The court dismissed the winding up petition, concluding that the pending appeal barred the petition, the petitioner failed to comply with rule 95 and section 434(1)(c), and the respondent's defense was bona fide and substantial. The court emphasized that winding up should not be used as a means to enforce a disputed debt, especially when the company is financially sound and contributes significantly to the economy.

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