1974 (9) TMI 82 - HC - Companies Law

Summary

Issues Involved:
1. Whether the demands raised by the petitioning company in respect of the debts are correct.
2. Is the defendant-company liable to be wound up?

Detailed Analysis:

Issue No. 1: Whether the demands raised by the petitioning company in respect of the debts are correct.

The petitioning company claimed three amounts: Rs. 60,357.71 for materials supplied, Rs. 75,000 lent on October 3, 1970, and Rs. 10,500 as interest on the loan. The defendant-company admitted the debt of Rs. 60,357.71 and the loan of Rs. 75,000 but disputed the interest claim. The receipt for Rs. 75,000 (Exhibit 1) did not mention interest, and no supporting documents were provided. The petitioning company's witness claimed a verbal agreement for 6% interest, but this was not substantiated. The court found the defense's claim of a temporary accommodation more probable and ruled that the petitioning company failed to establish the interest claim.

Issue No. 2: Is the defendant-company liable to be wound up?

The defendant-company did not dispute the principal amounts but had not paid them despite statutory notices under Section 434(1)(a) of the Companies Act. The court noted that the company had suffered business setbacks but was attempting to revive operations. Evidence showed the company had assets, including iron ore and manganese, and was negotiating for credit facilities. The court considered precedents emphasizing commercial insolvency and the discretionary nature of winding-up orders. The court found the defendant-company had not paid its debts for over two years and was unable to satisfy the creditor's demands.

Conclusion:

The court directed the winding up of the defendant-company but stayed enforcement for six months to allow the company to pay its dues, considering the company's efforts to revive its business. The court emphasized the creditors' interests and noted the shared interests of the petitioning company's constituents as shareholders of the defendant-company. If the debts are not paid within six months, the winding-up proceeding will continue. Each party was directed to bear its own costs.