2014 (7) TMI 774 - HC - Companies Law

Winding up petition - unable to pay debts - dispute with regard to the application and the allotment of shares - Held that - In a petition seeking winding up of a company for its inability to pay its debt, what is to be seen is whether there is a debt and whether a plausible defence is raised by the respondent for the non payment of the debt and to the winding up petition. In case a plausible defence is raised which is neither sham nor moonshine, the company is not to be wound up in exercise of powers under section 433 and 434 of the Companies Act, 1956. The disputes raised in the present petition and by way of defence would be required to be settled before a civil court. Since the petitioner has already filed a suit of recovery of the same amount and the disputes and the rival contentions raised by the parties are being adjudicated upon in the civil court, the present petition would not be maintainable. - present petition not maintainable.

Summary

Issues:
Petition for winding up against respondent company based on unpaid loan amount and interest. Dispute over loan versus share application money. Examination of documents related to share allotment and premium payment. Dispute over call money payment for allotted shares. Consideration of plausible defense against winding up petition. Dispute over application and allotment of shares in accordance with statutory provisions. Suit for recovery already pending in civil court. Summary procedure for winding up versus detailed trial.

Analysis:
The petitioner filed a winding-up petition against the respondent company, claiming an unpaid loan amount and interest. The petitioner alleged providing a loan of Rs. 97,50,000, with a specific interest amount mentioned in the TDS Certificate. The respondent contended that the amount paid was towards share application money, with shares to be allotted in a specific ratio. Documents presented included profit and loss accounts, balance sheets, board resolutions, and ROC records showing share allotment at a premium during the financial year. The respondent claimed notices were issued for call money payment on allotted shares, which the petitioner allegedly failed to pay.

The court emphasized the need to determine whether a debt exists and if a plausible defense has been raised against the winding-up petition. It was highlighted that disputed questions of fact requiring deeper examination should be addressed in a civil court. The petitioner argued discrepancies in share application and allotment, alleging non-compliance with statutory provisions and accounting standards. Additionally, the petitioner had already initiated a recovery suit in a civil court, indicating ongoing adjudication of disputes related to the amount in question.

Ultimately, the court dismissed the winding-up petition, citing the need for a detailed examination of the disputes raised, which would be more suitable for a civil court trial. The court clarified that it refrained from expressing an opinion on the merits of the claims or defenses, emphasizing that the civil court would independently adjudicate the disputes without influence from the current order. The decision highlighted the unsuitability of summary winding-up procedures in the given circumstances, especially when plausible defenses were raised by the respondent.