2015 (4) TMI 728 - HC - Companies Law

Default in repayment of outstanding amount - Winding up petition - authenticity of the e-mails - Held that - The contemporaneous correspondence annexed to the affidavit-in-opposition are in dispute. Such dispute could not be effectively dealt with by the company in their subsequent pleadings. The learned advocate while giving reply to the statutory notice of admission did not make a mention of the e-mails. Even if we accept the authenticity of the e-mails, it would not specifically raise any constructive defence that could resist successfully a winding up petition. Even if we give some credence to the same, we cannot lose sight of the unequivocal admission in the affidavit-in-opposition coupled with the Statement of Account referred to above. It is true, the company secured the claim that they did to have an effective hearing of the appeal. If we look to Section 434 of the said Act of 1996, we would find, the Company could resist the winding up petition offering security at the stage of giving reply to the statutory notice of demand, instead they denied the claim. They could also offer security on the first returnable date. They did not opt. After completion of the pleading, in course of hearing when they could not successfully resist the winding up petition, offering security would rather strengthen the presumption that they were neglecting to pay the debt. A company might be in a precarious condition to pay off its creditor s dues, that would be a failure . A high mighty, if willfully neglects to pay an admitted debt, that would certainly come within the mischief of neglected within the meaning of Section 434 (1)(a). Hence, we do not give much importance on such issue. - Decided against the appellant.

Summary

Issues:
1. Outstanding payment dispute related to supply of goods.
2. Company's defense against winding up petition.
3. Admissibility of correspondence and e-mails as evidence.
4. Company's failure to secure claim and its impact on the case.
5. Applicability of interest rate on the outstanding amount.

Issue 1: Outstanding Payment Dispute
The judgment revolves around a dispute concerning an outstanding payment of Rs. 8,22,729.34 for the supply of goods. The company initially paid Rs. 10 lac towards the claim but later faced issues with a dishonored cheque. The respondent issued a demand notice, which the company disputed, alleging sub-standard goods and a promise of replacement with "standard quality" goods. Despite the company's contentions, the court found no bona fide defense and admitted the winding up petition for the outstanding sum along with interest at 12% per annum.

Issue 2: Company's Defense
The company contested the winding up petition by filing an affidavit-in-opposition, annexing various correspondence to support its defense. However, the respondent claimed these documents were fake and manufactured. The court noted the existence of e-mails disclosed in a supplementary affidavit but found them insufficient to establish a valid defense. The Single Judge concluded that the company lacked a bona fide defense, leading to the admission of the winding up petition.

Issue 3: Admissibility of Evidence
The judgment analyzed the admissibility of correspondence and e-mails as evidence. The company argued that the e-mails echoed the content of the disputed correspondence, citing relevant court decisions. However, the respondent emphasized the company's admission of the outstanding amount in both the statement of account and the affidavit-in-opposition. The court found the correspondence in dispute and the e-mails insufficient to counter the admitted claim.

Issue 4: Failure to Secure Claim
The company's failure to secure the claim at an earlier stage was highlighted. While the company offered to secure the claim before both the Single Judge and the Division Bench, only the latter allowed it. The judgment emphasized that offering security after being unable to resist the winding up petition could strengthen the presumption of neglecting to pay the debt, falling under the statutory definition of "neglected."

Issue 5: Applicability of Interest Rate
Regarding the interest rate on the outstanding amount, the court reduced the rate from 12% to 8% per annum, considering the prevailing lending rate. The company was directed to pay the interest amount within two weeks. Additionally, a stay of operation of the judgment was granted for two months.

In conclusion, the appeal was dismissed, and the company was directed to pay the outstanding amount with reduced interest to the respondent. The judgment emphasized the importance of timely payment and securing claims to avoid adverse legal consequences in such disputes.