2015 (6) TMI 1278 - HC - Companies Law

Winding up of company - Section 433(e) and 434 read with Section 439 of the Companies Act 1956 - HELD THAT - This Court is of the opinion that the defence taken by the respondent cannot be said to be moonshine sham or bogus defence and the dispute can be said to be a bona fide and reasonable dispute. Reliance is placed by the petitioner with regard to the communication by way of e mail dated 10.10.2013. However petitioner has not explained about the dispute raised by the respondent by communication dated 04.12.2013 i.e. prior to issuance of first notice as well as the statutory notice. It is the case of the petitioner that the vouchers and the receipts produced by the respondent with regard to the cash payment are concocted and forged documents. However from the record it emerges that the Director of the petitioner has signed those documents. If the petitioner has any grievance and dispute with regard to the said documents it is always open for the petitioner to file appropriate proceedings with regard to the said so called forged documents. In the present case before the notice of demand was given by the petitioner on 27th January 2014 the respondent company has already raised the dispute by a communication dated 04.12.2013 and disputed about the poor quality of work. In the case of Tata Iron Steel Company Ltd. 2000 (3) TMI 920 - HIGH COURT OF GUJARAT the Division Bench of this Court held that winding -up is a remedy of last resort and not to be utilised as a pressurizing tactic to obtain payment of dues and the Court laid down general principles in this regard. In the said case the Court found that the company was financially sound and there were disputed aspects about is liability to pay to the petitioner and therefore dismissed the petition. Considering the facts of case on hand and the correspondence between the parties the affidavits and counter affidavits it appears that debt is not admitted; there are bona fide disputes raised by the respondent company and the said disputes are right from very beginning more particularly even prior to the statutory notice. A Civil Suit is also pending for recovery of amounts filed by the respondent company might be after filing of the present petition the petition for winding up of the respondent company is not required to be admitted and entertained. There is no determined or a definite sum of money payable by the respondent company to the petitioner as the same are disputed - this Court is not expressing any opinion on merits with regard to the dispute as to entitlement or claim by either party as the same is required to be adjudicated upon by a competent Civil Court more particularly when the suit filed by the respondent is already pending before the Ahmedabad Civil Court. This Company Petition fails and is accordingly dismissed.

Summary

Issues Involved:

1. Whether the respondent company is liable to be wound up under Sections 433(e) and 434 read with Section 439 of the Companies Act, 1956 due to its inability to pay debts.
2. Whether there exists a bona fide and reasonable dispute regarding the alleged outstanding debt.
3. Whether the petition is maintainable given the procedural objections raised by the respondent.

Issue-wise Detailed Analysis:

1. Liability to be Wound Up Under Sections 433(e) and 434:

The petitioner sought the winding up of the respondent company, alleging non-payment of a debt amounting to Rs. 46,47,913/-. The petitioner argued that the respondent admitted this debt in an email dated 10th October 2013, wherein the respondent acknowledged a balance of Rs. 41,47,913/- and taxes of Rs. 17 lakh. The petitioner contended that despite this admission, the respondent failed to pay the outstanding amount, thereby justifying a winding-up order under the provisions of the Companies Act. The petitioner emphasized the statutory notice issued on 27th March 2014, which was not complied with by the respondent, thus fulfilling the conditions under Section 434 for deeming the company unable to pay its debts.

2. Existence of Bona Fide and Reasonable Dispute:

The respondent disputed the claim, asserting that it had paid Rs. 2,35,00,000/- in cash and Rs. 92 lakh by RTGS, totaling Rs. 3,27,00,000/-. The respondent produced vouchers and receipts to support the cash payments, which the petitioner contested as forged. Additionally, the respondent highlighted defects in the work performed by the petitioner, as communicated in a letter dated 4th December 2013, prior to the statutory notice. The respondent argued that this communication indicated a genuine dispute over the quality of work and the corresponding payments, negating the petitioner's claim of an undisputed debt. The court found that the dispute over the quality of work and the alleged cash payments constituted a bona fide and substantial dispute, which precluded the winding-up order.

3. Procedural Objections and Maintainability:

The respondent raised procedural objections, claiming the petition was not filed in accordance with Rule 21 of the Company Court Rules and Form No. 3. The court noted that while procedural defects could be cured, the primary consideration was the existence of a bona fide dispute. Given the substantial dispute over the alleged debt, the procedural objections were not decisive in determining the petition's outcome.

Conclusion:

The court concluded that the petitioner's claim was substantially disputed by the respondent, both in terms of the alleged cash payments and the quality of work performed. The existence of a bona fide dispute, coupled with the respondent's financial solvency and ongoing operations, led the court to dismiss the petition for winding up. The court emphasized that winding-up proceedings should not be used as a means to enforce payment of a disputed debt, especially when the dispute is genuine and substantial. Consequently, the petition was dismissed without prejudice to the parties' rights to seek resolution of their claims in appropriate civil proceedings.