2012 (4) TMI 108 - HC - Companies Law

Application for the winding up - a joint venture agreement - one company pulled out of it agreeing to sell to the company some assets - consideration to be paid in 15 installments - petitioning creditor files appeal for the principal due and an interest claim on outstanding amount - petitioning creditor submits that the claim is admitted by the company by placing an email - Company contented after importation equipments by the petitioning creditor were sold to the company but the ownership of these equipments remained with them - Company alleged that absence of the papers they were not required to pay the balance amount - Held that - the company has been unable to disclose any bona fide defense to the claim of the petitioning creditor - defense by the company to pay the balance money on not providing the papers came only after the letter of demand was written by the petitioner creditor- by the time they sent their second email on 26th March, 2009 the required documents were received by the company else they would not have admitted their liability, so unconditionally - relegate the petitioning creditor to a suit to recover the claimed sum, but, upon the company furnishing security - directing the company to furnish within four weeks from date a bank guarantee in favour of the petitioning creditor by a nationalized bank for a sum of Rs. 2,92,01,970.41/- and to keep it renewed until contrary orders are passed by any court. The petitioning creditor will file a suit claiming the sum claimed in the winding up application within four weeks of furnishing of the above security - winding up application is disposed of

Issues Involved:
1. Winding up application for non-payment of dues.
2. Admission of liability by the company.
3. Substantial defense raised by the company.
4. Legal precedents and principles applicable.
5. Directions and relief provided by the court.

Detailed Analysis:

1. Winding Up Application for Non-Payment of Dues:
The petitioning creditor, a Malaysian company, sought the winding up of Tantia Constructions Ltd. due to non-payment of dues amounting to Rs. 2,92,01,973.41/-. The dues stemmed from an agreement dated 15th December, 2007, under which the petitioning creditor sold plant, machinery, and vehicles to the company for Rs. 2,75,73,614.41/-. The company paid only Rs. 48,00,000/- out of the total consideration.

2. Admission of Liability by the Company:
The petitioning creditor presented emails dated 29th July, 2008, and 29th March, 2009, from the company admitting their inability to pay due to financial difficulties but expressing intent to clear dues. The court noted that these emails constituted an unconditional admission of liability, with no mention of any dispute regarding the payment obligations.

3. Substantial Defense Raised by the Company:
The company's counsel argued that the petitioning creditor failed to provide necessary documents (invoices, no due certificates, release of charge) as required by Clause 4.1 of the agreement. The company claimed that ownership of certain imported equipment could not be transferred immediately due to legal restrictions, and thus, payments were withheld until proper documentation was provided. However, the court observed that this defense was raised only after the demand letter dated 13th November, 2010, and was not mentioned in earlier communications.

4. Legal Precedents and Principles Applicable:
The court referred to several legal precedents:
- Pradeshiya Industrial & Investment Corpn. of U.P. v. North India Petrochemicals Ltd.: Emphasized the consideration of a company's solvency and the existence of a bona fide dispute before passing a winding-up order.
- IBA Health (India) (P.) Ltd. v. Info-Drive Systems Sdn. Bhd.: Stated that solvency is not a defense to avoid winding up if the debt is undisputed and the company's dispute is illusory or not bona fide.
- Mechalec Engineers & Mfrs. v. Basic Equipment Corpn.: Provided guidelines on granting leave to defend in summary suits, which the court applied to determine the conditions under which the company might be allowed to defend against the winding-up application.

5. Directions and Relief Provided by the Court:
The court concluded that the company failed to disclose a bona fide defense. However, exercising discretion, the court allowed the company an opportunity to prove its defense by furnishing a bank guarantee of Rs. 2,92,01,970.41/- within four weeks. The petitioning creditor was directed to file a suit to recover the claimed amount within four weeks of the security being furnished. If the company failed to provide the security, the petitioning creditor could apply for the admission of the winding-up application without needing to establish a further prima facie case. If the petitioning creditor did not file the suit within the stipulated time, the company need not renew the bank guarantee. The winding-up application was disposed of with no order as to costs.

Conclusion:
The court balanced the interests of both parties by providing the company an opportunity to defend its case while ensuring that the petitioning creditor's claims were secured. The judgment emphasized the importance of bona fide disputes and the application of legal principles in winding-up proceedings.

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