2013 (2) TMI 256 - HC - Companies Law

Winding up petition - Petitioner gave the Respondent property on rent to which he defaulted to pay rent from 1st May 2010 and finally some cheques were received in January, 2011 which did not clear the arrears - apart from not making payment of arrears the Respondent also did not hand over vacant possession of the rented premises to the Petitioner on 31st May, 2012 - Respondent claimed that possession of the rented premises was handed over to it only in December 2010 & that it had been wrongly made to pay rent from 1st May 2010 - Held that - In response to query whether there is any document to show that in fact possession of the vacant premises was handed over on 1st May, 2010 and not December, 2010 as contended by the Respondent in its reply dated 9th July, 2012 to the Petitioner s legal notice petitioners advocate submitted that correspondence exchanged between the parties and the payments made by the Respondent of service tax in December 2011 itself acknowledged that rent became payable from May 2010. His submission was that if in fact possession had not been handed over in May 2010 itself the Respondent ought to have raised such an objection when called upon to pay the service tax. He submitted that service tax for the period from May 2010 was paid without demur by the Respondent and this itself demonstrated the defence now taken was sham. In the absence of any document showing that in fact possession of the premises were handed over to the Respondent in May, 2010 and in light of the stand taken by the Respondent that possession was handed over to it only in December 2010, the said issue raises a disputed question of fact which cannot be decided without evidence led by the parties. In the circumstances this Court is unable to come to the conclusion at this stage that the defence of the Respondent is sham, false or mala fide. If indeed there is an arbitration agreement between the parties there is no reason as to why it cannot avail of that remedy and must necessarily seek the remedy of winding up. The Court recalls the observation in NEPC India Ltd. v. Indian Airlines Ltd. (2002 (8) TMI 783 - HIGH COURT OF DELHI) to the effect that the machinery of winding up should not be allowed to be utilised merely as a means of realizing its debts. Accordingly, this Court declines to entertain the present petition and dismisses it as such. However, open to the Petitioner to seek other appropriate remedies that may be available to it in accordance with law.

Summary

Issues:
- Petition for winding up under Section 433 of the Companies Act 1956.
- Dispute over non-payment of rent and service tax.
- Termination of tenancy and failure to hand over vacant possession.
- Claim of false defense by the Respondent.
- Availability of alternative remedy through arbitration clause.
- Disputed possession date of the rented premises.

Analysis:
1. The Petitioner sought winding up of the Respondent under Section 433 of the Companies Act 1956 due to non-payment of rent and service tax, as per an agreement dated 26th April, 2010. The Respondent allegedly defaulted in rent payments, leading to arrears amounting to Rs.72,25,000 by September 2011, with partial payments made subsequently. The Petitioner demanded outstanding rent and service tax, leading to a dispute over possession date and non-clearance of arrears.

2. The Respondent terminated the tenancy on 1st March, 2012, and failed to hand over vacant possession on the specified date. Disputes arose regarding possession date, with the Respondent claiming possession only from December 2010, contrary to the Petitioner's assertion of possession from May 2010. Despite claims of oral acknowledgment of dues by the Respondent, non-payment persisted, leading to the winding-up petition.

3. The Court addressed the availability of an alternative remedy through arbitration, citing precedents where a genuine defense warranted arbitration over winding up. The absence of conclusive evidence on possession date raised a disputed factual issue, leading the Court to conclude that the defense was not evidently false or mala fide. The Court emphasized the need to avoid utilizing winding up as a mere debt recovery tool.

4. Referring to prior judgments, the Court highlighted the importance of bona fide defenses in determining the appropriateness of winding up petitions. While acknowledging the Petitioner's grievances, the Court declined to entertain the petition, suggesting the pursuit of other available legal remedies. The decision underscored the significance of genuine disputes and the proper use of legal mechanisms for dispute resolution.

5. In summary, the judgment dismissed the winding-up petition, emphasizing the need for evidence-backed claims and the consideration of alternative dispute resolution mechanisms like arbitration when genuine defenses exist. The Court's decision prioritized fair adjudication of disputes and cautioned against misuse of winding-up proceedings for debt recovery purposes.