2018 (9) TMI 1455 - HC - Companies Law

Winding up petition - inability to pay debts - company has not paid the professional fee of the appellant the charges for use of the navigation machine and other dues inspite of statutory notice - Held that - The Company Court can refuse a petition for winding up of the Company when the claim of the appellant is bonafide disputed by the Company and that the principles on which the court acts are; first that the defence of the Company is in good faith and one of the substance secondly the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. In the present case the account/ledger has been disputed by the respondent company. The stand of the respondent company is that no such amount is due and claim is false. In absence of any material the learned Company Judge has rightly held that there is no document admitting the liability on record. On due consideration of the reasoning assigned we are of the view that the learned Company Judge has considered all the grounds which has been advanced by the learned counsel for the parties and came to the conclusion that the liability has been disputed by the respondent company and therefore it is not proper to invoke the provisions of Section 433 (e) and (f) of the Act. We are completely agreed with the view taken by the learned Company Judge. No case to interfere with the well-reasoned order passed by the learned Company Judge as prayed is made out

Summary

Issues:
- Appeal against rejection of winding up application under Companies Act, 1956
- Dispute over unpaid professional fee and charges
- Bonafide dispute regarding liability and debt
- Interpretation of Section 433(e) and (f) of the Companies Act
- Consideration of evidence and documents
- Application of legal principles from previous judgments

Analysis:

The appellant filed an appeal against the rejection of their winding-up application under Section 433 of the Companies Act, 1956, based on unpaid professional fees and charges owed by the respondent company. The appellant, a doctor with shares in the company, claimed significant amounts as unpaid fees and charges, leading to the application for winding up. However, the respondent disputed the amounts claimed, stating no liability was admitted, and the company was operational, challenging the grounds for winding up under Section 433(e). The court noted the importance of bonafide disputes and the need for substantial evidence to establish debt under the Act.

The court considered various legal precedents, including judgments from the Supreme Court, emphasizing that a company court can refuse a winding-up petition if the debt is bonafide disputed and the defense is substantial. The court highlighted that the mere existence of trading losses does not necessarily warrant winding up unless there is no reasonable prospect of future profitability. The interpretation of the expression "unable to pay its debts" under Section 433(e) was discussed, emphasizing a commercial sense and caution against using winding up as a means to recover disputed debts.

In this case, the court found that the liability claimed by the appellant was bonafide disputed by the respondent, with no conclusive evidence supporting the debt. The disputed ledger account and lack of admitted liability documents led the court to conclude that the provisions of Section 433(e) and (f) were not applicable in this scenario. The court upheld the decision of the Company Judge, dismissing the appeal as lacking merit and declining to interfere with the well-reasoned order.

Ultimately, the court's decision was based on the lack of sufficient evidence to establish the debt claimed by the appellant, emphasizing the need for undisputed documents and clear proof of liability to warrant invoking the winding-up provisions under the Companies Act. The legal principles from previous judgments guided the court in determining the outcome of the appeal, highlighting the importance of bonafide disputes and substantial evidence in such cases.