2009 (5) TMI 552 - HC - Companies Law

Winding up - whether company has been unable to pay the admitted debt due to the petitioner and even otherwise it shall only be just and equitable to wind up the company for having suspended its work for more than one year? - Held that - There is certainly a valid basis to dispute the claim of the petitioner. It is too well established that a resort to action for winding up is not a substitute remedy for recovering moneys. The commercial insolvency must be established on an undisputed liability and it is not possible to lay anchor to the petitioner s claim on a strong legal basis. The petition is therefore dismissed leaving it open to resort to action for recovery of money alleged to be due to it through a regular civil suit.

Issues Involved:
1. Appointment and role of the petitioner as a dealer.
2. Collection and remittance of security deposits.
3. Dispute over the identity and representation of the petitioner.
4. Respondent's liability to return security deposits.
5. Respondent's business status and its impact on the winding-up petition.
6. Legal standing and rights of the petitioner to claim the amounts.

Issue-wise Detailed Analysis:

1. Appointment and Role of the Petitioner as a Dealer:
The petitioner was appointed as a dealer by the respondent-company for distributing liquified petroleum gas (LPG) to customers. The dealership terms included canvassing for connections and delivering equipment against security deposits. The petitioner collected and remitted security deposits to the respondent-company. The dealership agreement and transactions were evidenced through annexures PI, P3-P27, and P28.

2. Collection and Remittance of Security Deposits:
The petitioner collected security deposits from customers and remitted them to the respondent-company through demand drafts and cash. The total amount collected was Rs. 9,30,795. The petitioner claimed a balance of Rs. 71,195 remained due from the respondent. Additionally, the petitioner sought interest on the security deposits due to the respondent's discontinuation of supply, claiming a total of Rs. 13,00,307.

3. Dispute Over the Identity and Representation of the Petitioner:
The respondent contended that the dealership agreement was with Ramesh Chand Soni, not Madan Lal, who filed the petition. The respondent argued that Madan Lal was a stranger to the contract and not competent to maintain the petition. The petitioner clarified that M/s. Brothers Gas Agency was initially a partnership, later becoming a sole proprietorship of Madan Lal. The partnership dissolution and subsequent ownership by Madan Lal were evidenced by annexures P39 and P40.

4. Respondent's Liability to Return Security Deposits:
The respondent denied the petitioner's claims, arguing that the security deposits belonged to individual consumers and not the petitioner. The respondent also claimed that the petitioner was not entitled to interest on the security deposits. The petitioner argued that the respondent's cessation of operations entitled them to recover the amounts and that they were liable to customers for the security deposits.

5. Respondent's Business Status and Its Impact on the Winding-Up Petition:
The respondent provided sales tax assessments for years after 1997 to show continued business operations. The petitioner argued that the respondent's business status at the time of filing the petition was relevant. The court noted that the winding-up petition must be based on the respondent's inability to pay debts and not merely on the cessation of operations.

6. Legal Standing and Rights of the Petitioner to Claim the Amounts:
The court examined whether the petitioner had a prima facie proof of the respondent's indebtedness and whether there was a bona fide dispute. The court concluded that the petitioner, as an agent, could not personally enforce the contract unless they had been damnified by customer demands and had made payments to customers. The court found a valid basis to dispute the petitioner's claim, emphasizing that winding-up is not a substitute for recovering money through a civil suit.

Conclusion:
The petition for winding up the respondent-company was dismissed. The court left it open for the petitioner to pursue recovery of the alleged due amounts through a regular civil suit, emphasizing that commercial insolvency must be established on an undisputed liability.

← Previous Next →