2019 (1) TMI 1317 - HC - Companies Law

Winding up petition - existence of disputed debt - Held that - In this case there exists no substantial dispute about existence of debt and liability. In a case of this nature, where debt is not disputed, the Court shall pass a winding-up order. Even if exact amount of debt is disputed, a winding-up order needs to be passed. Where there exists no dispute that the respondent-company has passed the creditor a debt which entitle him for a winding-up order, appropriate order can be passed. The respondent-company after having issued the confirmation slip and filling up the statutory forms, cannot take a defence that the amount is disputed. Hence, this Court is unable to hold that defence of respondent-company is in good faith. Therefore order that the respondent-company be wound up.

Issues Involved:
1. Whether the respondent-company is unable to pay its debts.
2. Whether the debt claimed by the petitioner is undisputed.
3. Whether there exists a bona fide dispute regarding the debt.
4. Whether the winding-up petition is maintainable.

Detailed Analysis:

Issue 1: Whether the respondent-company is unable to pay its debts.

The petitioner-company argued that the respondent-company is unable to pay its debts, citing the statutory obligation for companies to file and submit audited annual accounts and returns. The last audited balance sheet of the respondent-company, dated 31-03-2010, indicated an accumulated loss of ?6,28,73,714/-. The petitioner contended that the respondent-company has become unviable and is unable to pay its debts. The respondent-company acknowledged the debt of ?3 crores 90 lacs as of 31-03-2016 but failed to make any repayment despite reminders and a statutory legal notice.

Issue 2: Whether the debt claimed by the petitioner is undisputed.

The petitioner-company provided financial assistance to the respondent-company through multiple agreements and secured the financial facility by mortgaging the respondent's assets. The respondent-company confirmed the outstanding credit balance of ?3 crores 90 lacs as of 31-03-2016. The statutory certificates issued by the Ministry of Corporate Affairs, based on the respondent's information, reflected the admitted debt amount. The court held that the debt of ?3 crores 90 lacs is not disputed, as evidenced by the statutory certificates and the respondent's confirmation slip.

Issue 3: Whether there exists a bona fide dispute regarding the debt.

The respondent-company argued that the debt is disputed based on certain clauses of the agreement dated 09-09-2011, which outlined obligations and rights of both parties. The respondent claimed that the petitioner was required to participate in buying and selling operations, and profits were to be shared and adjusted towards the loan. The respondent also cited ledger accounts showing income from the petitioner-company. However, the court found that the agreement was for a limited period, and after its expiration, the respondent itself quantified the debt and furnished information to the ROC, leading to the issuance of statutory certificates. The court concluded that there is no bona fide dispute about the debt, as the respondent's defense lacked good faith and substantial grounds.

Issue 4: Whether the winding-up petition is maintainable.

The petitioner-company argued that where the debt is undisputed, the court must make a winding-up order without inquiring about the exact quantification of the debt. The court referred to precedents, including Madhusudan Gordhandas & Co. vs. Madhu Woolen Industries Pvt. Ltd. and Vijay Industries vs. Natl. Technologies Ltd., which established that in cases of undisputed debt, a winding-up order should be passed. The respondent's reliance on judgments suggesting the existence of a bona fide dispute was deemed irrelevant, as the court found no substantial dispute about the debt. The court held that the petition for winding-up is maintainable and ordered the respondent-company to be wound up.

Conclusion:

The court ordered the winding-up of the respondent-company, directing the official liquidator to take custody of the company's property and effects, and to proceed with the winding-up process as per the provisions of the Companies Act, 1956. The petitioner was instructed to advertise the winding-up order in specified newspapers, and the case was listed for further proceedings after eight weeks to enable the official liquidator to submit a report.

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