2015 (6) TMI 331 - HC - Companies Law

Default in payment of bills - Maintainability of Winding up application - Three different lines of defence taken by company - Held that - We thus conclude, the petition by a creditor would be maintainable on both counts. Once the creditor established his right to claim the amount more than ₹ 500/- the onus would shift on the company to rebut such claim by raising bona fide dispute. Once the bona fide dispute is raised it would weaken the chance to have admission of the winding up petition, otherwise admission is an obvious consequence. In our view, the learned Judge was right in not going into the merits of the matter at the post admission stage. We have discussed the law on the subject as the same was raised by Mr. Sen. The facts would however, not in any way change the situation even if we hold otherwise.It is settled proposition of law; a claim, if bona fide disputed, would successfully resist a winding up proceeding. Three different lines of defence indicated above, would run contrary to each other, they would however, draw a common interference, those were cooked up only to stall the process of winding up. - Decided against the appellant.

Issues Involved:
1. Non-payment of transporter's bills.
2. Admission of winding up petition.
3. Application for recall of the winding up order.
4. Dispute on merits at the post-admission stage.
5. Legal principles on winding up proceedings and creditor's rights.

Detailed Analysis:

Non-payment of Transporter's Bills:
The primary issue was the non-payment of four bills by the Company to the transporter, aggregating to Rs. 88,500. The transporter issued a statutory notice of demand, which the Company neither paid nor replied to, leading to the initiation of winding up proceedings.

Admission of Winding Up Petition:
The Company contested the winding up petition, arguing that the bills were not received and the statutory notice was not served on the registered office. The learned Judge rejected these contentions, noting that the change of registered office was unknown to the transporter and that no contemporaneous objection was raised by the Company in the correspondence. The Judge admitted the winding up petition, directing the Company to pay Rs. 88,500 with 8% interest per annum, payable in four equal monthly installments. The Company failed to pay and sought to recall the order.

Application for Recall of the Winding Up Order:
In the recall application, the Company introduced a new plea, claiming that three out of the four bills had already been paid and provided details of payments. They also denied liability for the fourth bill as it was raised on Radha Strips. The Company relied on a no due certificate issued by the transporter. The learned Judge dismissed the recall application, and the Division Bench upheld this decision, stating that the order of admission was passed after considering rival contentions, leaving no scope for recall.

Dispute on Merits at the Post-Admission Stage:
The Company raised a plea that the learned Company Judge should have considered disputes on merit even at the post-admission stage. The creditor's counsel argued that it was too late to raise such disputes. The Court held that once the creditor established his right to claim an amount exceeding Rs. 500, the onus shifted to the Company to rebut the claim by raising a bona fide dispute. The Court emphasized that the adjudication at the pre-admission stage is final unless challenged higher up, and the Company could not raise new disputes at the post-admission stage.

Legal Principles on Winding Up Proceedings and Creditor's Rights:
The Court discussed the legal principles governing winding up proceedings, highlighting that a creditor has a statutory right to seek winding up of a company on grounds of insolvency. The Court referred to several precedents, noting that a creditor's petition is maintainable if the company fails to pay or dispute the debt. The Court distinguished between civil suits for debt recovery and winding up proceedings, emphasizing that the latter is based on the presumption of insolvency if the statutory notice is not attended to as prescribed by law. The Court concluded that the learned Judge was correct in not re-examining the merits of the claim at the post-admission stage, as the adjudication at the pre-admission stage was final and binding.

Conclusion:
The appeals were dismissed, affirming the orders at both the pre-admission and post-advertisement stages. The Company was granted liberty to approach the learned Company Judge for a stay of the winding up proceeding under Section 466, contingent on transferring the deposited sum along with interest to the respondents. The Court emphasized the importance of finality in legal adjudications and the consequences of a company's inability or neglect to pay its debts.

← Previous Next →