2013 (8) TMI 429 - HC - Companies Law

Petition for winding up - The appellant appointed the respondent as its dealer to deal with computer and other related products belonging to the appellant - There was outstanding as claimed by the appellant - Held that - an application for winding up could only be resisted by raising a bona fide dispute. - To resist a winding up the defence of the company must be a bona fide one and on a prima facie view sustainable. The e-mails exchanged between the parties would foreclose the scope of the company to dispute any part of the claim. - Subsequent plea on damage could not be said to be a bona fide one. Whether a dispute is bona fide or not could be derived from the contemporaneous conduct of the parties. In one of the e-mails the company would suggest they would make final payment on adjustment. However such adjustment should certainly relate to a sum less than the claim of the petitioning creditor. In course of hearing we made repeated query as to what sum was in contemplation of the company to be adjusted against the dues of the petitioning creditor. We did not get any reply. The respondent company was directed to secure the claim of the appellant by offering cash security or any other co-lateral security to the satisfaction of the Registrar Original Side -Such security must be furnished within a period of four weeks from date - In default the winding up petition would stand admitted for the sum together with interest at the rate of 9% per annum on and from the date of receipt of statutory notice of demand until payment and the petition for winding up would stand revived and appellant would be entitled to approach the learned Company Judge for appropriate direction for advertisement as well as fixation of returnable date - Otherwise the petition for winding up would remand permanently stayed. Claim being Time Barred - Merely because the debtor was a corporate entity the creditor cannot enforce hid debt as a matter of a right in a winding up proceeding - It can only ask for winding up of the debtor and he becomes successful if the defence taken by the company according to the Court prima facie not sustainable the plea of time barred claim could not be accepted The law of limitation is enacted to prevent any stale claim to be raised as and when a litigant would desire that would create a tremendous uncertainty to a right and liability preventing any controversy to reach finality- The appeal succeeds in part and is allowed.

Summary

Issues Involved:
1. Interpretation of the law of winding up.
2. Determination of debt and the company's ability to pay.
3. Bona fide dispute and defense.
4. Limitation period and electronic communications.
5. Admission and security for winding up petition.

Issue-wise Detailed Analysis:

1. Interpretation of the law of winding up:
The court emphasized that the law should be interpreted to extend benefits to those entitled without stretching it beyond its capacity. The interpretation should align with the true spirit and mindset of the legislature. The court noted the evolution of commercial laws and the need for a liberal approach to avoid hindering foreign investment.

2. Determination of debt and the company's ability to pay:
The appellant claimed an outstanding amount of Rs.4,10,03,260.98 from the respondent. The court referred to previous judgments, stating that a creditor can maintain a winding up petition if the company fails to pay a debt exceeding Rs.500. The company must prove its inability to pay or that it is just and equitable to wind up. The court highlighted the importance of a specific and definite debt amount for winding up petitions.

3. Bona fide dispute and defense:
The court examined the respondent's defense, which included claims of loss due to the appellant's business policies and a counter-claim of Rs.795.74 lacs. The court found the counter-claim vague and noted that the defense must be bona fide and substantial to resist winding up. The court referred to previous cases, emphasizing that a bona fide dispute on facts or law is necessary to resist winding up.

4. Limitation period and electronic communications:
The respondent argued that the claim was barred by the law of limitation, as the purchase orders were from 2008 and the petition was filed in 2012. The court rejected this argument, stating that the parties had a running and continuous account, and the emails exchanged in 2009 acknowledged the debt. The court noted that the authenticity of the emails was not questioned, and the absence of digital signatures did not invalidate them.

5. Admission and security for winding up petition:
The court found that the respondent's defense was not substantial enough to resist the winding up petition. The court directed the respondent to secure the appellant's claim by offering cash or collateral security within four weeks. If the security was not furnished, the winding up petition would be admitted for the claimed amount with interest. The court provided the appellant the liberty to file a civil suit for the claim and benefit from Section 14 of the Limitation Act.

Conclusion:
The appeal was allowed in part, directing the respondent to secure the appellant's claim. The winding up petition would be admitted if the security was not furnished, and the appellant could file a civil suit for the claim. The court emphasized the need for a bona fide and substantial defense to resist winding up and the importance of acknowledging debts in continuous business relationships. The appeal was disposed of without any order as to costs.