2017 (8) TMI 252 - HC - Companies Law

Outstanding dues - winding up - Held that - The facts reveal the respondent is raising this frivolous issue after a period of 2 years of supply of material only to wriggle out of its liability to pay the balance due to the petitioner and hence has neglected to pay without any cogent, substantial or genuine cause. It is no defence to say that the respondent has ability to pay but has choosen not to pay or that it had a lesser liability to pay. In view of the above, this petition is admitted. Citation be published in the Statesman (English edition) and Jansatta (Hindi edition) in accordance with Company (Court) Rules, 1959. However, publication of the citation and appointment of the provisional liquidator is deferred and one opportunity is given to the respondent company to pay the amount found already due and payable to the petitioner with interest at the rate of 8% per annum with effect from 14.08.2016 when the statutory notice was served on the respondent company. The amount be paid within one month failing which the petitioner shall be entitled to publish the citation and apply for appointment of the Provisional Liquidator.

Summary

Issues:
1. Outstanding payment dispute between the petitioner and respondent regarding supply of materials.
2. Disputed debt claim by respondent based on alleged short supply of goods.
3. Legal implications of warranty clause on the disputed debt claim.
4. Applicability of Sales of Goods Act sections on acceptance of goods.
5. Precedents related to disputed debts in company petitions.

Analysis:

Issue 1: Outstanding Payment Dispute
The petitioner supplied materials to the respondent as per purchase orders, with outstanding payment of &8377;27,67,897. The respondent made part payments but alleged incomplete supply. A cheque for part payment was dishonored, leading to a statutory notice for the balance payment. The respondent disputed the outstanding amount, claiming credit for short supplies worth &8377;20,33,046, reducing the payable amount to &8377;7,34,851. The petitioner argued that the respondent's claims were belated and unsubstantiated, with no correspondence regarding short supplies for over two years.

Issue 2: Disputed Debt Claim
The respondent contended that the disputed debt made the petition non-maintainable. The petitioner challenged this, citing previous judgments emphasizing that a contrived dispute cannot be used to avoid a genuine claim. The court referred to cases where disputes were seen as mere ruses to evade payment, indicating the respondent's inability to pay the debt owed. The court highlighted that raising frivolous issues after a significant delay to avoid payment is not a valid defense.

Issue 3: Warranty Clause Implications
The respondent relied on a warranty clause to justify issuing debit notes for short supplies in 2016, despite the last supply being in 2013. The court rejected this argument, stating that the warranty clause pertained to quality, not short supply. Even if short supply was covered, the respondent's delay in raising objections beyond the warranty period rendered the claim invalid.

Issue 4: Sales of Goods Act Sections
The court invoked Sections 41 and 42 of the Sales of Goods Act, emphasizing that a purchaser must inspect goods and raise objections within a reasonable time. Failure to do so implies acceptance of goods. The court cited precedents where delayed complaints about goods' quality were deemed fatal to the defense, highlighting the importance of timely objections.

Issue 5: Precedents on Disputed Debts
Various judgments were referenced to establish the maintainability of company petitions in case of disputed debts. The court differentiated between genuine disputes on the debt amount and contrived disputes to avoid payment. Precedents emphasized that undisputed debts should not be evaded based on the company's ability to pay or delayed objections without genuine cause.

In conclusion, the court admitted the petition, allowing the respondent time to pay the due amount with interest. Failure to comply would lead to publication of citation and appointment of a provisional liquidator. The court's decision was based on the lack of substantial defense by the respondent and the frivolous nature of the disputed debt claim.