2014 (1) TMI 1820 - HC - Companies Law

Winding up petition - Held that - The claim of the respondent that the material supplied by the petitioner other than the material supplied under bill No. 057 dated 08.10.2011, on account of defects therein, had caused huge loss to the respondent, the responsibility for which should be taken by the petitioner, is clearly an afterthought. The contention of the respondent that the legal notice issued by the petitioner was a counter blast to the legal notice sent by the respondent on 07.03.2012 seeking recovery of ₹ 20,00,000/- from the petitioner is not acceptable, since even according to the respondent, the notice dated 07.03.2012 could not be served on the petitioner and was returned with the noting no such person at this address . It has been admitted so in para 8 of the counter filed by the respondent. If the notice dated 07.03.2012 was not served on the petitioner I do not see how the steps taken by the petitioner commencing with the legal notice dated 21.05.2012 can be a counter blast to the same. In the course of the arguments as requested the learned counsel for the respondent to produce the copies, if any, of other debit notes said to have been sent by the respondent to the petitioner to substantiate its claim that the material supplied under disputed bills were actually returned to the petitioner. Till the close of the hearing, the respondent who was present in Court through its authorised representative, could not produce any of the debit notes though it was asserted that the respondent did send those debit notes. Therefore, it seems to be a case where the defence put up by the respondent is not bona fide, is mere moon-shine. Except one debit note and return of the goods to the petitioner, for which credit was given by the petitioner, no other goods were returned. The other goods supplied by the petitioner were used by the respondent for manufacture of cables. There is no evidence adduced by the respondent to prove that the alleged defects in the cables manufactured by it were on account of defective materials supplied by the petitioner, particularly when admittedly the respondent was getting material also from other suppliers. It seems to me that the respondent raised the bogey of loss recoverable from the petitioner only to ward off the claim of the petitioner with regard to the balance amount outstanding in the ledger account. The defences raised by the respondent do not have any substance. Accordingly admit the winding-up petition.

Summary

Issues Involved:
1. Petition for winding up under section 433(e) of the Companies Act, 1956.
2. Alleged non-payment of outstanding balance by the respondent.
3. Quality dispute regarding the supplied material.
4. Counterclaims and defenses raised by the respondent.

Issue-wise Detailed Analysis:

1. Petition for winding up under section 433(e) of the Companies Act, 1956:
The petitioner, M/s. Rama Peer Trader, filed a petition seeking the winding up of M/s. Scot Innovation Wires and Cables Pvt. Ltd. under section 433(e) of the Companies Act, 1956. The petitioner claimed that the respondent-company was unable to pay its debts, as evidenced by the outstanding balance in the ledger account maintained by the petitioner.

2. Alleged non-payment of outstanding balance by the respondent:
The petitioner supplied renewable plastic granules to the respondent from July 2011, and maintained a ledger account recording sales and payments. As of February 1, 2012, the total material supplied was worth Rs. 85,28,000/-, with payments received amounting to Rs. 42,24,207/-, leaving a debit balance of Rs. 43,03,793/-. The last payment by the respondent was Rs. 3,00,000/- on January 16, 2012. Despite repeated requests and a legal notice issued on May 21, 2012, the respondent failed to settle the outstanding amount.

3. Quality dispute regarding the supplied material:
The respondent contended that the material supplied by the petitioner was defective, causing the manufactured cables to be rejected by their customers, resulting in a claimed loss of Rs. 20 lakhs. The respondent provided letters and memos indicating the poor quality of the material, including a letter from Areva dated December 14, 2011, which canceled orders due to defects in the cables.

4. Counterclaims and defenses raised by the respondent:
The respondent argued that the winding-up petition was a counter-blast to their notice dated March 7, 2012, seeking recovery of Rs. 20 lakhs from the petitioner. They claimed that the material supplied was defective and that they had notified the petitioner about the quality issues. However, the petitioner disputed these claims, stating that the respondent had not raised objections upon receiving the material and had made payments without protest until January 16, 2012.

Judgment Analysis:
The court found no merit in the respondent's submissions. The statutory demand notice under Section 434(1)(a) was served at the respondent's registered office, and the debt was not denied. The court noted that the respondent failed to provide evidence of returning defective goods, except for one instance on October 19, 2011, for which credit was given in the ledger account. The respondent's internal memos and letters did not prove the defects in the material supplied by the petitioner. The court considered the respondent's claim of loss as an afterthought and found the defense to be not bona fide and mere moon-shine.

The court admitted the winding-up petition and listed the case for further proceedings on February 12, 2014.