2016 (7) TMI 342 - HC - Companies Law

Winding up petition - non payment of dues - Held that - In light of the fact that the dispute exists regarding the amount claimed by way of a statutory notice even for winding up, in opinion of this Court, a dispute exists between the parties and therefore, it cannot be said that the respondent has neglected to pay. Considering the statutory notice and the reply given by the respondent-Company and so also, the other correspondence between the parties, it appears that the debt is not an admitted debt and bonafide disputes have been raised by the respondent-Company and therefore, the case would not fall under Section 433(e) or 434 of the Act. It is not even urged by the learned advocate for the petitioner that the respondent-Company is not a going concern and therefore, it cannot be said that the respondent-Company has lost its financial substratum. The jurisdiction under Sections 433 and 434 of the Companies Act, 1956 cannot be permitted to be used as a substitute for deciding the bonafide dispute which can only be done by way of filing an appropriate Civil Suit before the competent Court. The petition is liable to be dismissed in limine and is hereby dismissed.

Issues Involved:
1. Petition for winding up under Sections 433 and 434 of the Companies Act, 1956.
2. Dispute over the amount claimed by the petitioner.
3. Respondent's counterclaim of excess payment.
4. Legal principles regarding bona fide disputes over debt.
5. Jurisdiction and discretion of the court in winding-up petitions.

Issue-wise Detailed Analysis:

1. Petition for Winding Up:
The petitioner filed a petition under Sections 433 and 434 of the Companies Act, 1956, seeking the winding up of the respondent company. The petitioner claimed that the respondent company, engaged in real estate and infrastructure development, had subcontracted work to the petitioner and subsequently deducted an amount from the petitioner's bills, which the petitioner alleged was illegal and arbitrary.

2. Dispute Over the Amount Claimed:
The petitioner raised a demand for ?18,63,271/- through a statutory notice dated 17.2.2016, claiming it as an excess deduction of security bills. The respondent, in its reply, denied the claim and asserted that an excess amount of ?73.38 lacs had been paid to the petitioner. The court noted that the petitioner did not provide a reply to the respondent's counterclaim.

3. Respondent's Counterclaim of Excess Payment:
The respondent provided a detailed breakdown of payments made, asserting that they had overpaid the petitioner by ?73.36 lacs. They highlighted issues such as the petitioner abandoning the work, misuse of materials, and the need for rectification of faulty work, which justified their deductions and counterclaims.

4. Legal Principles Regarding Bona Fide Disputes Over Debt:
The court referred to several legal precedents to establish that a winding-up petition cannot be used to enforce payment of a disputed debt. It cited cases such as Tata Iron and Steel Co., Vijayalakshmi Art Productions, and Madhusudan Gordhandas & Co., emphasizing that if a debt is bona fide disputed and the defense is substantial, the court will not order winding up. The court also highlighted that winding-up proceedings should not be used as a means of pressuring a company to pay a disputed debt.

5. Jurisdiction and Discretion of the Court in Winding-Up Petitions:
The court underscored that the jurisdiction under Sections 433 and 434 of the Companies Act, 1956, should not be used to resolve bona fide disputes, which are better suited for adjudication through a civil suit. The court emphasized the importance of considering the financial status of the respondent company and whether it is a going concern. It was noted that the petitioner did not argue that the respondent company had lost its financial substratum.

Conclusion:
The court concluded that the amount claimed by the petitioner was highly disputed and not an admitted debt. Given the bona fide disputes raised by the respondent, the case did not fall under Section 433(e) or 434 of the Companies Act, 1956. The court dismissed the petition in limine, stating that the appropriate forum for resolving such disputes would be a civil court.

← Previous Next →