2012 (8) TMI 725 - HC - Companies Law

Winding up petition - petitioner contending non-payment of debt whereas respondent company contended that petitioner had supplied defective products and even after repeated requests by the respondent, the petitioner failed to rectify the same - respondent reworked on the defective produced with HAL due to which it incurred huge expenditure - delay in delivery of products to the end-customers resulted in loss of business opportunities - Held that - Notwithstanding the fact that the products were delivered but the same being defective, no claim could be made by the petitioner towards the defective goods. The defect was sought to be rectified by giving it to another agency. Handing over for reworking to another agency was only due to the fact that the products received by the respondent was defective. Therefore, it cannot be held that there is a debt and that has been admitted or the respondent is liable to pay the debts. The dispute raised is bona fide and not a moonshine. There is enough material to show that the goods were defective. The petitioner having accepted the same has also replied stating that it would rectify the defects. Hence the defence is substantiated by the admission of the petitioner. No claim could be made for defective goods. No amount can be held to be due on account of the defective goods. Petition dismissed.

Issues:
1. Petition seeking winding up of respondent-company under Sections 433 and 434 of the Companies Act, 1956.
2. Dispute over outstanding payment for IT products and services provided by petitioner to respondent.
3. Allegations of defective products supplied by petitioner and consequent loss incurred by respondent.
4. Claim by petitioner for payment based on invoices and correspondence.
5. Defense by respondent denying liability for outstanding amount due to alleged defects in products supplied.
6. Examination of evidence and arguments presented by both parties.

Analysis:
1. The petitioner filed a petition seeking the winding up of the respondent-company under Sections 433 and 434 of the Companies Act, 1956, due to non-payment of outstanding dues for IT products and services provided. The petitioner had executed the work as per the agreement, invoiced the respondent, and sent a legal notice after non-payment.

2. The respondent denied the allegations, claiming that the products supplied by the petitioner were defective, resulting in considerable loss. The respondent contended that they had informed the petitioner about the defects and had to rework the products, incurring significant expenses. The respondent also alleged a delay in product delivery leading to loss of business opportunities.

3. The petitioner relied on invoices and correspondence to support their claim for payment, while the respondent presented evidence of defective products and additional expenses incurred for rectification. The respondent argued that the petitioner failed to rectify the defects despite repeated requests, leading to rework by the respondent and subsequent loss.

4. The Court examined the evidence and arguments presented by both parties. It noted that the respondent had raised concerns about defective products early on and had to approach another agency for reworking due to the defects. The Court found that the petitioner had not adequately addressed the defects, leading to the respondent's additional expenses and loss of business opportunities.

5. Ultimately, the Court held that the petitioner had failed to establish a case for winding up the respondent-company. The Court found the respondent's defense regarding defective products and consequent loss to be substantiated by evidence. The Court dismissed the petition, stating that no debt was due on account of the defective goods and that the petition lacked merit.

6. The judgment emphasized the bona fide nature of the dispute, highlighting the material evidence of defective products and the respondent's efforts to rectify the issues. The Court concluded that there were no grounds to entertain the petition, as the respondent's defense was supported by the admission and actions of the petitioner regarding the defective goods.

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