2007 (2) TMI 688 - HC - Companies Law

Summary

Issues Involved:
1. Whether the respondent company neglected to pay the debt as per the decree.
2. Whether the debt is bona fide disputed.
3. Applicability of limitation period for filing winding-up petition.
4. Discretion of the court in ordering winding-up.

Summary:

1. Neglect to Pay Debt:
The petitioner firm, M/s Karpara Project Engineering, filed a company petition u/s 434 of the Companies Act, 1956, against Ballarpur Industries Ltd. for non-payment of dues amounting to Rs. 41,50,192/- with interest. The petitioner had obtained a decree from the Madras High Court for Rs. 92,89,721.59/- with interest at 18% per annum from 17-7-2001 till realization. Despite repeated notices, the respondent company failed to pay the amount, leading to the filing of the winding-up petition.

2. Bona Fide Dispute:
The respondent company admitted the decree but claimed it was ex parte and disputed the amount, stating they had filed appeals against the decree. They argued that the debt was not due as their advocate could not attend the case due to a paralytic stroke, resulting in the ex parte decree. The petitioner countered that no stay was granted in the appeal, and the Madras High Court refused to set aside the ex parte decree. The court found that the respondent's defense was not bona fide and lacked substance, emphasizing that the debt due under the decree could not be disputed.

3. Limitation Period:
The respondent argued that the winding-up petition was filed beyond the limitation period prescribed by Article 137 of the Limitation Act. The court rejected this argument, stating that the money decree could be executed within 12 years, making the limitation of 3 years irrelevant.

4. Court's Discretion:
The court referred to various judgments, including those of the Hon'ble Supreme Court, to explain that a winding-up petition is not a legitimate means to enforce payment of a bona fide disputed debt. However, in this case, the court found that the respondent's defense was not bona fide, and the deeming fiction u/s 434(1)(a) applied. The court emphasized that commercial solvency was not relevant when there was neglect to pay a debt due under a decree.

Conclusion:
The petition was admitted, and the petitioner was permitted to issue a public notice inviting interested parties to participate in further hearings. The court stayed the order for four weeks to allow the respondent to take appropriate steps.