2015 (3) TMI 1153 - HC - Companies Law

Winding up petition - unable to pay the admitted debt - period of limitation - Held that - The present petition deserves to be dismissed only on the ground that debt sought to be enforced is time barred besides not being admitted. The undisputed case of the petitioner company is that transaction took place way back in the year 1998. The debit note was issued by the respondent company on account of supply of raw material for manufacture of drugs on job work basis. It is claimed by the petitioner company that the raw material supplied was spurious, hence, the amount should not have been debited in the account of the petitioner company. The petitioner company has not produced on record any copy of the account to show as to what was the final balance in the account of the petitioner company. Even if there was any such dispute, the same could be raised within the period of limitation when the debit note was issued by the respondent company or at the most when the account was settled with the respondent company. As is claimed, the petitioner company filed application before the BIFR, which was registered as case No. 348/1998. It was declared sick vide order dated 14.5.1999. Pendency of an application filed by the petitioner company before the BIFR does not mean that it could not proceed against its debtors in the Court of law within the period of limitation to enforce any debt. To cover the period of limitation, reference is sought to be made to the order dated 25.3.2009 passed by the BIFR wherein it was mentioned that the company shall take action for recovery of ₹ 1,72,00,000/- from the respondent company. Complete copy of the order has not been placed on record. If the petitioner company had to recover any amount from the respondent company, it was required to initiate appropriate proceedings within the period of limitation. However, the case set up by the respondent company is that debit note was issued on 31.3.1999 for ₹ 1,72,88,254/- for the raw material supplied by the respondent company. The same cannot be said to be the amount to be recovered from the respondent company as the raw material was admittedly supplied. It is not even the pleaded case of the petitioner company that either raw material was returned back or the drugs manufactured therefrom were supplied to the respondent company.

Summary

Issues:
1. Winding up petition filed for non-payment of admitted debt.
2. Dispute over quality of raw material supplied by respondent company.
3. Claim of time-barred debt by respondent company.
4. Interpretation of BIFR order regarding recovery of dues.

Analysis:
1. The petitioner filed a winding up petition against the respondent company for non-payment of an admitted debt related to a purchase agreement for drugs. The petitioner claimed that raw material supplied by the respondent was found to be spurious, leading to a dispute over the amount debited in the petitioner's account. The respondent company, in response, claimed that the petition was belated, filed 13 years after the transaction in question in 1998.

2. The petitioner argued that the raw material quality was the responsibility of the respondent company, and the spurious material issue was communicated promptly. The respondent company, however, contended that the debt was time-barred and could not be used to force winding up. The court noted that the petitioner failed to provide evidence of the final account balance or return of the supplied material, making the claim for recovery of the amount debited questionable.

3. The court dismissed the petition primarily on the grounds of the time-barred debt and lack of evidence supporting the petitioner's claim. The BIFR order mentioned in the case did not extend the limitation period for debt recovery. The court emphasized that the petitioner should have initiated legal proceedings within the limitation period if there was a genuine dispute over the debited amount.

4. The court highlighted that the BIFR order's observation regarding debt recovery did not alter the limitation period for initiating legal action. The respondent company's issuance of a debit note for the raw material supplied was not sufficient grounds for the petitioner's claim, especially without evidence of return or supply of manufactured drugs. Consequently, the court dismissed the winding up petition due to the time-barred debt and lack of substantiated claims by the petitioner.