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Issues:
- Petition filed under section 433(e) of the Companies Act to wind up the respondent-company. - Dispute regarding the indebtedness of the respondent-company to the petitioner exceeding Rs. 500 under section 434 of the Companies Act. - Jurisdictional dispute arising from contracts between the parties and ongoing legal proceedings in the High Court of Calcutta. Analysis: The petitioner, Rajasthan Spinning and Weaving Mills Ltd., filed a petition under section 433(e) of the Companies Act seeking to wind up the respondent-company, Textool Company Ltd., Coimbatore. The petitioner alleged that the respondent supplied defective machinery under a contract and failed to pay Rs. 2,60,000 as acknowledged in a letter dated August 29, 1967. The respondent denied liability, citing a subsisting dispute under the contract. The main issue was whether the respondent was indebted to the petitioner exceeding Rs. 500. The contracts between the parties, exhibits R-1 and P-1, outlined terms and obligations regarding machinery supply and jurisdiction. The respondent raised objections in the High Court of Calcutta, challenging jurisdiction and disputing the debt claimed by the petitioner. The Court analyzed the terms of exhibits R-1 and P-1 to determine the parties' rights and obligations. Exhibit P-1 canceled certain items from the original contract but did not explicitly state the complete fulfillment or cancellation of all terms of exhibit R-1. Notably, exhibit R-1 included provisions for machinery supply and erection, which were not addressed in exhibit P-1. The Court emphasized the importance of examining whether additional rights and obligations existed beyond exhibit P-1. Regarding the dispute's bona fides, the Court applied the test of whether the dispute was raised to avoid payment without substantial grounds. Citing legal precedent, the Court highlighted that a bona fide dispute must be based on substantial grounds, warranting the court to refuse a winding-up order even if only part of the debt is disputed substantially. Considering the ongoing legal proceedings in the High Court of Calcutta and the genuine dispute raised by the respondent, the Court concluded that until the respondent's indebtedness was clearly established, it was not appropriate to wind up the company. The Court criticized the petitioner for rushing the winding-up petition instead of waiting for the Calcutta High Court proceedings to conclude. Consequently, the petition for winding up was dismissed, and each party was directed to bear their respective costs.
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