2016 (6) TMI 538 - HC - Companies Law

Winding up petition petition - non existence of bonafide disputed debt - Held that - Considering the the record of the petition, including the statutory notice and the reply given to the earlier notice by the respondent Company, affidavits, counteraffidavits it appears that the debt is not an admitted debt and bonafide disputes are raised by the respondent Company and on the basis of the aforesaid, it cannot be said that nonpayment of bonafide disputed debt would amount to neglect to pay so as to make liable under sections 433 and 434(1)(a) of the Act and thus, the present case would not fall under sections 433 and 434 of the Act eligible for winding up. It further transpires from the record of the petition that the respondent Company is a going concern and it cannot be said that the respondent Company has lost its financial substratum.

Issues Involved:
1. Petition for winding up under Sections 433, 434, and 439 of the Companies Act, 1956.
2. Dispute over the payment for supplied goods.
3. Allegation of non-payment and dishonored cheques.
4. Quality of goods supplied.
5. Commercial solvency of the respondent company.
6. Bona fide dispute over the debt.
7. Appropriate forum for resolving the dispute.
8. Abuse of the process of the court.

Analysis of the Judgment:

1. Petition for Winding Up:
The petitioner sought the winding up of the respondent company under Sections 433, 434, and 439 of the Companies Act, 1956, due to non-payment of dues amounting to ?10,09,403, despite repeated requests and statutory notices.

2. Dispute Over Payment for Supplied Goods:
The petitioner claimed that the respondent company placed orders for kraft paper and failed to pay the full amount due. The respondent company disputed this, alleging that some consignments were humid and unusable, which the petitioner failed to replace.

3. Allegation of Non-payment and Dishonored Cheques:
The petitioner stated that two post-dated cheques issued by the respondent were dishonored. The respondent contended that these cheques were given as security and not meant for immediate payment.

4. Quality of Goods Supplied:
The respondent company argued that the supplied goods were substandard and humid, which was communicated to the petitioner. This quality issue was raised as a defense against the payment claims.

5. Commercial Solvency of the Respondent Company:
The respondent company asserted its commercial solvency, maintaining that it is a running concern with employees and ongoing business operations. The court noted that the respondent company is commercially viable and has not lost its financial substratum.

6. Bona Fide Dispute Over the Debt:
The court emphasized that the debt claimed by the petitioner is disputed in good faith. The respondent company provided substantial grounds for the dispute, including the quality of goods and prior payments made.

7. Appropriate Forum for Resolving the Dispute:
The court highlighted that the Company Court is not the appropriate forum for resolving disputed questions of fact. Such disputes should be adjudicated by a competent civil court, as the Company Court cannot decide on the merits of the quality of goods supplied.

8. Abuse of the Process of the Court:
The court referred to several precedents, including the case of Tata Iron & Steel Company Ltd. vs. Micro Forge (India) Ltd., to underline that a winding-up petition should not be used as a means to enforce payment of a disputed debt. The court concluded that the petition for winding up was an abuse of the process, as it was based on a bona fide disputed debt.

Conclusion:
The court dismissed the petition for winding up, noting that the debt was disputed bona fide and the respondent company was commercially solvent. The court advised that the appropriate remedy for the petitioner lies in pursuing the claim through a civil court rather than a winding-up petition. The petition was deemed not maintainable under Sections 433 and 434 of the Companies Act, 1956, and the notice was discharged with parties bearing their own costs.

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