1976 (2) TMI 136 - HC - Companies Law

Winding up Power to order costs It is duty of Court to consider each case on merits, Cost and expenses payable out of assets in a winding-up by Court

Summary

Issues:
1. Whether the company is unable to pay its debts.
2. Whether there is a bona fide dispute regarding the debt.
3. Whether the company is commercially solvent.
4. Admission of the winding-up petition.

Detailed Analysis:
1. The petition was filed against a company for being unable to pay its debts. The petitioners claimed a balance of Rs. 58,262.30, alleging that the company failed to pay the remaining amount after making a partial payment. The company disputed the debt, citing ongoing negotiations and provisional payments made. The court considered the evidence presented, including correspondence and payment history, to determine the company's ability to pay the debt. The court concluded that the company had failed to pay the admitted amount, indicating its inability to meet its liabilities, leading to the admission of the winding-up petition.

2. The company raised a bona fide dispute regarding the debt, claiming negotiations for settlement and ongoing communication with the petitioners. The court analyzed the correspondence, meeting arrangements, and alleged settlements between the parties. Despite the company's contentions, the court found discrepancies in the company's claims, such as inconsistent payment patterns and lack of evidence supporting the alleged settlement terms. The court determined that the company's defense was not bona fide, especially considering the admitted amount due and unpaid, leading to the rejection of the company's dispute as genuine.

3. The court assessed the company's commercial solvency by considering its ability to meet liabilities as they accrued. The company failed to produce the latest audited balance sheet despite multiple opportunities, indicating a lack of evidence to demonstrate commercial solvency. The court noted the absence of sufficient proof of solvency, further supporting the conclusion of the company's inability to pay its debts. This assessment contributed to the decision to admit the winding-up petition against the company.

4. After evaluating the evidence, correspondence, payment history, and the company's financial status, the court decided to admit the winding-up petition. The court directed the advertisement of the petition in specified publications and scheduled a hearing for further proceedings. The decision to admit the petition was based on the company's failure to pay the admitted debt, lack of commercial solvency evidence, and inconsistencies in the company's defense regarding the disputed amount.