2011 (12) TMI 272 - HC - Companies Law

Petition for winding up of a company - 12 months salary in lieu of notice of termination and also severance benefit of 12 months salary and other service benefits - Held That - If there is a breach of agreement, it is for the petitioner to approach the Civil Court to establish his right. Party to the dispute should not be allowed to use the threat, of winding up petition as a means of enforcing the company to pay the bona fide disputed debt.The petitioner has to approach the appropriate forum to settle his disputes regarding breach of contract. Reliance placed on Madhusudan Gordhandas & Co. (Supreme Court)

Issues Involved:
1. Whether the petitioner is entitled to winding up of the respondent company under Sections 433(e) and (f) and Section 434(1)(a) of the Companies Act, 1956 due to non-payment of dues.
2. Whether the petitioner complied with the statutory notice requirements under Section 434(1)(a) of the Companies Act.
3. Whether the petitioner is entitled to the claimed amount of Rs. 13,93,93,333.33 as termination benefits.
4. Whether the petitioner can use the winding-up petition to recover disputed debts.

Detailed Analysis:

1. Entitlement to Winding Up Due to Non-Payment of Dues:
The petitioner sought winding up of the respondent company for non-payment of dues as per the employment contract. The petitioner claimed that he was entitled to 12 months' salary in lieu of notice, 12 months' salary as severance benefit, and other benefits totaling Rs. 13,93,93,333.33. The respondent contended that the petitioner was only entitled to 12 months' salary as severance benefit and had already paid Rs. 1,94,77,301/- after deducting Rs. 35,62,699/- for non-submission of bills. The court held that the interpretation of the employment contract and the entitlement to additional benefits were disputed questions that should be decided by an appropriate forum, not the Company Court. The court cited the Supreme Court's ruling in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (I) Ltd. [1972] 42 Comp. Cas. 125 (SC), which stated that if the debt is bona fide disputed, the court will not wind up the company.

2. Compliance with Statutory Notice Requirements:
The respondent argued that the petitioner did not comply with the statutory notice requirements as the notice was sent to an incorrect address. The court did not specifically address this issue in detail, focusing instead on the bona fide dispute over the debt.

3. Entitlement to Claimed Termination Benefits:
The petitioner claimed various benefits under the employment contract, including 12 months' salary in lieu of notice, severance benefits, bonus, and other allowances. The respondent disputed these claims, stating that only 12 months' salary as severance benefit was due. The court found that the dispute over the interpretation of the employment contract and the petitioner's entitlement to additional benefits should be resolved in a civil court. The court referenced IBA Health (I) (P.) Ltd. v. Info Drive System SDN. BHD. [2010] 104 SCL 367, which held that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the winding-up petition and leave the creditor to establish his claim in an action.

4. Use of Winding-Up Petition to Recover Disputed Debts:
The court emphasized that the winding-up petition should not be used as a means to recover disputed debts. It cited the Supreme Court's ruling in IBA Health (I) (P.) Ltd., which stated that the Company Court should not be used as a debt collecting agency or a means of bringing improper pressure on the company to pay a bona fide disputed debt. The court concluded that there was a bona fide dispute regarding the petitioner's claim, and therefore, the petitioner could not use the winding-up petition as a threat to recover the disputed amount.

Conclusion:
The court dismissed the company petition, stating that the petitioner had not made out a case for admitting the petition and ordering the winding up of the respondent company. The petitioner was advised to approach the appropriate forum to settle the disputes regarding the breach of contract.

← Previous Next →