2008 (12) TMI 774 - HC - Companies Law

Summary

Issues Involved:
1. Whether the appellant has been able to establish a debt as recoverable u/s 433(e) of the Companies Act against the 2nd respondent.
2. Whether the said debt is bona fide disputed by the 2nd respondent.
3. Whether the 1st respondent, as a holding company of the 2nd respondent, is liable for the debts of the 2nd respondent and if so, whether the 1st respondent is also liable to be wound-up.

Summary:

Issue 1: Establishing Debt u/s 433(e)
The appellant, a small-scale industry, alleged that the 2nd respondent-company owed them Rs. 3,80,951/- for job work performed. Despite multiple correspondences and legal notices, the 2nd respondent disputed the debt, claiming delays and wastage issues. The appellant's claim was for an unascertained and un-adjudicated amount, not admitted by the 2nd respondent. The court found that the appellant did not establish a clear debt recoverable u/s 433(e) of the Companies Act.

Issue 2: Bona Fide Dispute
The court noted that the 2nd respondent had bona fide disputed the debt, offering Rs. 2.24 lakhs as full and final settlement, which the appellant refused. The appellant's insistence on additional claims and interest indicated that the dispute was genuine. The court emphasized that the process of the company court cannot be used to pressurize a company when there is a bona fide dispute regarding the debt.

Issue 3: Liability of the Holding Company
The appellant argued that the 1st respondent, as the holding company, should be liable for the debts of the 2nd respondent. However, the court found that the 1st respondent had transferred its shares and ceased to be the holding company as of 30-09-2004. The court held that the 1st respondent, as a separate legal entity, could not be held liable for the day-to-day transactions of the 2nd respondent. The court cited the Supreme Court decision in Punjab State Industrial Development Corporation Ltd. v. Pnfc Karamchari Sangh, which established that liabilities of a subsidiary cannot be passed on to the holding company.

Conclusion:
The appeal was dismissed as the appellant failed to establish a recoverable debt u/s 433(e), the debt was bona fide disputed by the 2nd respondent, and the 1st respondent was not liable for the debts of the 2nd respondent.