2018 (2) TMI 1332 - HC - Companies Law

Winding up petition - proof of outstanding dues - neglection to pay the balance due - Held that - A bare reading of the aforesaid Warranty Clause clearly demonstrates that the same was applicable only for any manufacturing defect, bad workmanship or quality for a period of 15 months from the date of supply or 12 months from the date of commission, whichever was earlier. The Warranty Clause does not in any manner cover the short supply. The Warranty Clause would not explain issuance of debit notes dated 31.3.2016 after the supplies were made between August, 2012 and October, 2013. Appellant has failed to place on record or refer to any correspondence after 17.08.2012/31.07.2013 or within 15 months after any alleged short supply. Issue of debit notes was a mere deception and cover up. Reasonable time is a question of fact, as per Section 63 of the Act, and cannot be as long as claimed by the appellant, and as rightly held by the learned Single Judge. In view of the aforesaid discussion and the fact that the appellant has raised the plea of debit notes after about 2 years clearly proves that the debit notes raised are false and sham. Aforesaid defence regarding debit notes has been raised by the appellant in the Court to deny its liability regarding the balance due to the respondent. Hence, we fully agree with the findings of the learned Single Judge that the appellant has neglected to pay the balance due to the respondent without any cogent, substantial or genuine cause. Therefore, it cannot be said that the appellant has the ability to pay but has chosen not to pay or that it has a lesser liability to pay. As the appellant, at the end, submitted that the appellant is ready to comply with the directions of the learned Single Judge to pay to the respondent company the amount and has already handed over a cheque of ₹ 7,97,182/- to the respondent, in compliance of the order of this Court, as is evident from the order sheet dated 15.9.2017. Hence, the citation may not be published and direction for appointment of the provisional liquidator may be cancelled. The respondent may withdraw the amount as stated hereinabove by the learned counsel for the appellant.

Summary

Issues involved:
1. Appeal under Section 483 of the Companies Act, 1956 against the winding-up petition.
2. Dispute over outstanding balance for supplied materials.
3. Interpretation of Warranty Clause in purchase order.
4. Validity of debit notes issued for short supply.
5. Compliance with the impugned order for payment.

Detailed Analysis:
1. The appeal sought to set aside the order admitting the winding-up petition under Section 483 of the Companies Act, 1956. The appellant disputed the outstanding balance claimed by the respondent for materials supplied. The prayer was for the dismissal of the company petition.

2. The respondent alleged that the appellant had not fully paid for materials supplied as per purchase orders. The appellant acknowledged part payments but disputed the outstanding amount, citing debit notes for short supply. The respondent claimed the balance along with interest, leading to the winding-up petition.

3. The Warranty Clause in the purchase order was crucial in the dispute. It provided warranty for manufacturing defects but did not cover short supply. The appellant's reliance on the Warranty Clause for issuing belated debit notes was deemed untenable.

4. Debit notes issued by the appellant were scrutinized for validity. The Court emphasized the importance of timely and genuine issuance of credit and debit notes in commercial transactions. The appellant's defense based on the Warranty Clause was rejected as an afterthought.

5. The Court referred to Sections 41 and 42 of the Sale of Goods Act, 1930, regarding the buyer's right to inspect goods and raise objections within a reasonable time. The appellant's delayed plea of debit notes after about 2.5 years was considered false and a tactic to avoid payment.

6. The Court upheld the impugned order dated 4.8.2017, finding no flaw in the decision. The appellant was directed to comply with the payment as per the order. The appellant's compliance with the payment directions was noted, leading to the disposal of the appeal with each party bearing its own costs.