2016 (7) TMI 1349 - HC - Indian Laws

Winding up petition under Sections 433(e) and 439 - bonafide dispute - respondent-company has failed to pay the said admitted liability - Held that - Prima facie there is a bona fide dispute between these two parties about the claim made by the petitioner s Counsel for the alleged service rendered to the respondent-company under the service contract. This Court is of the considered opinion that if the liability of the creditor is bona fide disputed by the respondent-company which is sought to be wound up under the provisions of Section 433(e) read with Section 439 of the Act the winding up petition is a ill suited remedy and it cannot substitute a regular trial or suit. Questions of facts about the execution of the contract and implementation thereof do arise in such cases and winding up petition cannot be converted into a trial of such claims and rival claims between the parties. Only the civil suit between the parties can be said to be a proper remedy where the relevant evidence can be led by the parties and the facts alleged can be proved by them. If the parties have any alternative disputed resolution forum agreed between them like arbitration or otherwise they can definitely resolve such dispute also between them through such alternative dispute redressal mechanism. This winding up petition is not found to be maintainable and the same is liable to be dismissed.

Summary

Issues:
Petition for winding up under Sections 433(e) and 439 of the Companies Act, 1956 based on failure to pay admitted liability.

Analysis:
The petitioner, M/s. Rapid Radio Solutions Private Limited, filed a winding up petition against the respondent, M/s. Ecole Solutions Private Limited, claiming non-payment of admitted liability amounting to ?3,30,957. The petitioner served a notice under Section 434 of the Companies Act on the respondent, who allegedly failed to pay the said amount. The petitioner sought winding up of the respondent company based on this claim. However, the respondent disputed the liability and claimed that the petitioner owed them ?3,65,779 for undelivered services, leading to additional expenses incurred to fulfill obligations to a consumer. The respondent sent a detailed reply to the notice, highlighting the alleged breaches by the petitioner in fulfilling the agreement terms. The respondent threatened legal action if the amount was not returned within 15 days with interest at 18% per annum.

The Court noted a bona fide dispute between the parties regarding the claims made by both sides under the service contract. It emphasized that a winding up petition is not a suitable remedy when the liability is genuinely disputed. The Court stated that a winding up petition cannot substitute a regular trial or suit to resolve factual disputes related to contract execution and implementation. It highlighted that a civil suit is the appropriate forum for parties to present evidence and prove their claims. Additionally, if parties have agreed on an alternative dispute resolution mechanism like arbitration, they should utilize it to resolve disputes. Therefore, the Court concluded that the winding up petition was not maintainable in this case and dismissed it, stating that it cannot be converted into a trial for resolving claims and counterclaims.