2018 (3) TMI 1069 - HC - Companies Law

Winding up petition - eligible debt - Held that - Admittedly, the debt is bonafide disputed. Though the learned counsel for the petitioner submits that the defence is not a substantial one that cannot be countenanced for the reason that the dispute has arisen in relation to the agreement dated 21.01.2011. Series of transactions have taken place. The purchase orders, invoices placed by the petitioner though relates to a restricted period, it cannot be held to be an independent transaction other than the transactions relating to the agreement. Admittedly the contract dated 21.01.2011 contains an Arbitration Clause. Once an Arbitration Clause is provided under the agreement executed between the parties, Arbitration remedy available under the contract has to be invoked rather than pressurizing the respondent to make the payment of dues as claimed, by filing company petition for winding up of the company. It is settled law that the company cannot be wind up when there is bonafide dispute as enunciated by the Hon ble Apex Court in the case of MADHUSUDAN GORDHANDAS & CO. 1971 (10) TMI 49 - SUPREME COURT OF INDIA . In such circumstances, no ground made out by the petitioner to wind up the company which is functioning and the defence is a substantial one.

Summary

Issues:
Petition for winding up of a company under Sections 433(e), 433(f), and 434(1)(a) of the Companies Act, 1956.

Analysis:

1. Background and Allegations:
The petitioner filed a petition seeking winding up of the respondent company due to unpaid dues amounting to ?11,73,340/- and penal interest of ?3,56,594/-. The respondent company failed to pay despite receiving goods and reminders, leading to a legal notice demanding ?15,29,934/-, which was ignored by the respondent.

2. Respondent's Defense:
The respondent disputed the claim, stating that the petitioner supplied unordered, slow-moving, and outdated products, leading to canceled orders. They highlighted non-utilized stock worth ?12,98,718.24/- and claimed repeated requests to take back unsold stock. The respondent denied any outstanding dues and responded to the legal notice, asserting no liability.

3. Petitioner's Arguments:
The petitioner argued that the respondent admitted dues of ?7,92,850/- as per a confirmation of account balance. They contended that the disputed invoices were not related to the respondent's defense and emphasized the admitted dues as grounds for winding up the company.

4. Arbitration Clause and Dispute Resolution:
The respondent referred to the agreement's clause allowing repurchase of inventory upon termination and highlighted the arbitration provision for dispute resolution. They argued that the dispute arose from the agreement and should be resolved through arbitration, not winding up proceedings.

5. Court's Decision:
Citing the Supreme Court precedent, the court emphasized that a bonafide disputed debt with a substantial defense precludes winding up. As the dispute stemmed from the agreement and involved complex factual questions, the court dismissed the petition, stating that arbitration should be pursued for resolution instead of winding up the functioning company.