2012 (6) TMI 52 - HC - Companies Law

Winding up - company unable to pay its debts non-payment of debt on the ground of oversupply - respondent company admitted that the petitioner supplied various quantities of engineering items, spare parts of heavy equipments and industrial machinery, but denied having placed any orders - stand is also taken that the goods supplied were not utilised by the respondent as they were not as per the requirements of the respondent - petitioner in support of the petition placed reliance on the various invoices showing the despatch of materials, and the letter dated 16.2.2009 addressed to the respondent company wherein the managing director-cum-chairman of the respondent company confirmed the payments due to the petitioner Held that - it is proved that the debt owed to the petitioner is admitted and the respondent company is unable to pay the debt. The dispute raised by the respondent company cannot be said to be bona fide dispute, but merely an attempt to deny the admitted liability, on a false plea, which is not supported by any document. On the other hand, documentary evidence on record shows that the liability is admitted liability. Petition allowed. Winding up petition admitted - provisional liquidator appointed.

Issues Involved:
1. Petition for winding up under section 433(e), (f), 434(1)(a), and 439 of the Companies Act, 1956.
2. Non-payment of dues by the respondent company.
3. Dispute over the quality and quantity of supplied goods.
4. Admission of liability by the respondent company.
5. Financial status and substratum of the respondent company.
6. Bona fide dispute and its impact on winding up proceedings.

Issue-wise Detailed Analysis:

1. Petition for Winding Up:
The petitioner, Hoe Leong Corporation Ltd., filed a petition under sections 433(e), (f), 434(1)(a), and 439 of the Companies Act, 1956, seeking the winding up of Vaishnovi Infrastructure Engineering (P) Ltd. due to its inability to pay debts.

2. Non-payment of Dues:
The petitioner claimed that it supplied various engineering components and materials to the respondent company, which failed to make payments despite several invoices raised between August 2007 and September 2009. The respondent company acknowledged the debt but cited difficulties in making payments.

3. Dispute Over Quality and Quantity of Supplied Goods:
The respondent company disputed the amount due, alleging that some materials supplied were defective and some were in excess without any order. Despite this, the respondent company confirmed the dues and provided a repayment schedule, which it later failed to adhere to.

4. Admission of Liability by the Respondent Company:
The respondent's chairman confirmed a sum of USD 9,26,150.26 as due and payable to the petitioner. A fresh repayment schedule was furnished, but the respondent company did not follow through, raising further disputes about oversupply and defective goods.

5. Financial Status and Substratum of the Respondent Company:
The respondent company argued that it was a profit-making entity employing over 1,100 employees and that its substratum was not lost. However, the court found that the inability to pay admitted liabilities indicated financial instability.

6. Bona Fide Dispute and Its Impact on Winding Up Proceedings:
The court referred to the Supreme Court judgment in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P.) Ltd., which established that a bona fide disputed debt and substantial defense could prevent a winding-up order. However, the court found that the respondent's defenses were not bona fide but rather attempts to evade payment of admitted liabilities.

Judgment:
The court concluded that the respondent company failed to pay its admitted debts and raised false disputes to avoid liability. Despite being a profit-making company, its inability to discharge admitted liabilities warranted the winding-up order. The court ordered the petition to be advertised and appointed the official liquidator to take charge of the respondent company's assets. The ex-directors were directed to file their statement of affairs, and the petitioner was instructed to deposit initial expenses for the liquidation process.

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