2015 (7) TMI 378 - HC - Companies Law

Winding up petition - outstanding dues to the petitioner - only reason for the petitioner stopping and withdrawing the men and machinery from the work site was non-payment of bills by the respondent. - Held that - the debt claimed by the petitioner is an undisputed debt and the denial of debt by the respondent can be characterised as a moonshine or a cloak, spurious, speculative, illusory or misconceived. This point is accordingly answered against the respondent. The petitioner is not a privy, to the alleged understanding between the respondent and the State Government. There is no whisper in the contract that the respondent is a mere name lender or a facilitator for the Government to get the work executed. The respondent alone being the party to the contract between itself and the petitioner, it cannot escape from the consequences of default in payments. If the respondent is unable to persuade its purported mentor, namely, the State Government concerned, it is bound to suffer the peril of the consequence of non-payment of the admitted debt. This point is accordingly answered against the respondent.

Summary

Issues Involved:
1. Whether the debt is a bona fide disputed debt?
2. Whether the respondent is not liable for the consequences under the Act for non-payment of the debt being a purported nodal agency of the State Government?
3. Whether the professed ground of public interest should deter the court from admitting the petition for winding up?

Detailed Analysis:

1. Bona Fide Disputed Debt:
The court examined the exchange of correspondence between the parties, which showed that the debt claimed by the petitioner was not disputed before the initiation of the legal proceedings. The petitioner had supplied pipes and executed civil work, for which bills were raised and partially paid by the respondent. The respondent's Chief Engineer and Vice Chairman had admitted the outstanding debt in their communications. The court found that the respondent's denial of debt in the counter-affidavit was unconvincing and contradicted by earlier admissions. The court concluded that the debt was undisputed and the respondent's denial was a "moonshine or a cloak, spurious, speculative, illusory or misconceived."

2. Liability of the Respondent:
The respondent argued that it was only a facilitator for the State Government and should not be liable for the debt. However, the court noted that the contract was between the petitioner and the respondent, with no mention of the State Government being a party. The respondent could not escape liability by claiming to be a mere facilitator. The court held that the respondent was liable for the debt as per the contract.

3. Public Interest:
The respondent contended that winding up the company would affect public interest as it was a government undertaking. The court acknowledged this argument but emphasized that the primary consideration at the admission stage was whether there was an undisputed debt. The court noted that solvency alone was not a sufficient defense against winding up if the debt was undisputed. The court decided that the public interest argument would be considered at a later stage, post-admission.

Conclusion:
The court admitted the company petition but provided a conditional dismissal. If the respondent deposited the sum of Rs. 8,18,36,584 within two months, the petition would be dismissed. If not, the petitioner was directed to publish advertisements in specified newspapers, and the case would be posted for further proceedings.

Summary:
The High Court of Andhra Pradesh addressed the petitioner's request to wind up the respondent company for non-payment of debt. The court found that the debt was undisputed, the respondent was liable under the contract, and public interest considerations would be evaluated post-admission. The court admitted the petition but allowed for conditional dismissal if the respondent deposited the owed amount within two months.