1977 (6) TMI 83 - HC - Companies Law

Summary

Issues Involved:
1. Whether the respondent-company is unable to pay its debts.
2. Whether the debt claimed by the appellant-firm is bona fide disputed by the respondent-company.
3. Whether the plea of discharge raised by the respondent-company is acceptable.

Issue-wise Detailed Analysis:

1. Whether the respondent-company is unable to pay its debts:
The appellant-firm sought the winding up of the respondent-company under section 433(e) of the Companies Act on the grounds that the company is unable to pay its debts. The debt claimed by the appellant-firm amounted to Rs. 4,47,511.58 with interest at 12% per annum. The respondent-company did not dispute the debt but claimed it had been discharged through various payments.

2. Whether the debt claimed by the appellant-firm is bona fide disputed by the respondent-company:
The respondent-company opposed the winding-up petition on the grounds that the debt had been discharged by payments made to creditors of the partnership or to those interested in receiving money from the partnership. The court emphasized that the burden of proof initially lies on the petitioning creditor to establish the existence and reality of the debt. However, if the debtor-company admits the debt and raises a plea of discharge, the burden shifts to the debtor-company to prove such discharge. The court must determine if the plea of discharge is bona fide or merely a ruse to abuse the winding-up provisions.

3. Whether the plea of discharge raised by the respondent-company is acceptable:
The plea of discharge was examined under three heads:

a. Payment to Hanuman Steel Traders:
The respondent-company produced a receipt dated May 5, 1971, for Rs. 1,50,000, executed by an employee of Hanuman Steel Traders, indicating payment towards iron materials supplied to the appellant-firm. The appellant-firm challenged the receipt but did not take steps to disprove the transaction, such as summoning Hanuman Steel Traders. The court found prima facie evidence that the company paid Rs. 1,50,000 on behalf of the appellant-firm.

b. Payment to Calcutta Branch:
The respondent-company claimed to have sent Rs. 46,000 to the Calcutta branch of the appellant-firm, supported by Exhibit R-8, a letter from the Calcutta branch requesting funds for business purposes. The correspondence between the branch office and N.K. Somani, a director of the respondent-company, indicated a close relationship between the partnership and the company. The court accepted the company's version of the payment.

c. Adjustment of Credit to Hemalatha Somani:
The respondent-company claimed an adjustment of Rs. 2,51,511.28 due to Hemalatha Somani, the wife of one of the promoters, shown as a credit in the appellant-firm's accounts. Evidence, including Exhibit R-10, a letter from Hemalatha Somani consenting to the transfer of credit, supported the company's claim. The court found that the debt claimed by the appellant-firm had been bona fide disputed by the company.

Conclusion:
The court concluded that the plea of discharge raised by the respondent-company was bona fide and prima facie established. The existence of a bona fide dispute regarding the debt and its quantum led the court to dismiss the winding-up petition. The appeal was dismissed, affirming the trial judge's decision.