2018 (8) TMI 1537 - HC - Companies Law

Winding up of respondent company under Section 433 (e) on the ground of inability to pay the debt - proof of bonafide debt - Held that - As pointed out that since it is a BOT project with a concession period of 25 years, therefore, the entire cost of the project has been borne by the company which is to be recovered through toll collection during the concession period. Alongwith IA No. 3356/18, the respondent has filed the solvency certificate issued by State Bank of India and certificate of Chartered Accountant Krishnamurthy Jain and Suryawanshi showing its healthy financial state as also the CARE rating wherein the respondent has been rated A stable and also enclosed the tax payer counterfoil showing that respondent is paying the huge amount towards income tax. These documents clearly reveal that substrata of the company has not been eroded. That apart undisputedly respondent is a running company having more than 200 employees. It is settled position in law that winding up proceeding cannot be used as a tool to recover the bona-fidely disputed debts as a substitute for recovery suit. The aforesaid analysis of facts clearly reveal that in the present case not only alleged debt is bona-fidely disputed by respondent but financial condition of the company and other circumstances noted above do not make out a case for winding up the company under Section 433(e) of the Act. Hence the company petition is dismissed.

Summary

Issues:
1. Transfer of matter to NCLT based on notification dated 7/12/2016.
2. Petition under Section 439 of Companies Act, 1956 seeking winding up of respondent company under Section 433(e) on the ground of inability to pay debt.
3. Disputed outstanding amount of debt and neglect to pay.
4. Bonafide dispute regarding the debt and defense taken by respondent.
5. Legal principles regarding winding up petitions for disputed debts.
6. Examination of facts and legal position in the present case.

Issue 1: Transfer of matter to NCLT
The High Court rejected the objection raised by the Registry for transferring the matter to NCLT based on a notification dated 7/12/2016. The respondent confirmed that the company petition notice was served before the cut-off date of 15/12/2016, allowing the court to hear the case instead of transferring it to NCLT.

Issue 2: Petition for Winding Up
The petitioner sought winding up of the respondent company under Section 433(e) of the Companies Act, 1956, citing an outstanding debt of ?42,41,993. The petitioner alleged that despite repeated requests and a statutory notice, the respondent failed to pay the amount, leading to the filing of the winding-up petition.

Issue 3: Disputed Outstanding Debt
The respondent disputed the alleged outstanding amount, claiming it was a disputed sum and contending that the petitioner did not adhere to the agreement's terms and conditions. The court examined the details of the debt, including invoices, payments made, and the respondent's defense against the claim.

Issue 4: Bonafide Dispute and Defense
Both parties presented their arguments regarding the disputed debt. The petitioner asserted that the debt was not paid despite a statutory notice, while the respondent argued that the debt was bonafide disputed and highlighted the commercial solvency of the company. Legal principles regarding substantial disputes and winding up petitions for disputed debts were discussed.

Issue 5: Legal Principles
The court referenced legal precedents, including the Supreme Court judgments in cases like IBA Health (India) Pvt. Ltd. vs. Info-Drive Systems SDN. BHD., emphasizing that winding up petitions should not be used to enforce payment of bona fide disputed debts. The court highlighted the need for a genuine dispute and the duty to examine whether a debt is substantially disputed before entertaining a winding-up petition.

Issue 6: Examination of Facts
After analyzing the facts and legal position, the court concluded that the debt was bona fide disputed by the respondent. The financial stability of the company, its profitability in the relevant financial year, and other supporting documents indicated that the circumstances did not warrant a winding-up order under Section 433(e) of the Companies Act, 1956. Consequently, the company petition was dismissed.