1978 (2) TMI 159 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the petition under Section 433(e) read with Section 434(1)(a) of the Companies Act.
2. Acceptance and adequacy of security provided by the petitioner.
3. Obligation of the respondent-company to pay the prize amount.
4. Right of the petitioner to claim a refund of the instalments paid.
5. Applicability of Section 434(1)(a) regarding the inability to pay debts.

Detailed Analysis:

1. Maintainability of the Petition:
The primary issue in this case is whether the petition under Section 433(e) read with Section 434(1)(a) of the Companies Act is maintainable. The petitioner sought relief on the grounds that the respondent-company failed to pay the prize amount or refund the instalments paid, thereby indicating an inability to pay its debts. The court noted that for a winding-up petition to be sustained, the debt must be undisputed and ascertainable without the need for extensive investigation. Since there was a prima facie dispute regarding the debt, the court held that the petition was not maintainable.

2. Acceptance and Adequacy of Security:
The petitioner argued that she had provided security of immovable property, which was allegedly accepted by the respondent-company. However, the respondent contended that the security was under investigation and additional security by way of a bank guarantee was required. The court emphasized that the foreman of the company had the discretion to determine the adequacy and acceptability of the security. Since the demand for additional security was within the contractual terms, the court could not adjudicate on the reasonableness of this demand in a winding-up petition.

3. Obligation to Pay the Prize Amount:
The petitioner claimed that the respondent-company was obligated to pay the prize amount after accepting the security. The respondent, however, maintained that the obligation to pay the prize amount did not arise until the petitioner furnished additional security as required. The court found that this issue involved a detailed examination of the contractual terms and could not be resolved in a winding-up petition. Therefore, the court could not assume the respondent's inability to pay the debt based on this disputed obligation.

4. Right to Claim Refund of Instalments:
The petitioner alternatively sought a refund of the instalments paid towards the chit. The court referred to a previous judgment, which held that the prize chit amount is an advance from the common fund of the organization and not a loan simpliciter. The contract between the subscriber and the chit fund company is continuous and indivisible, and the subscriber cannot demand a refund of instalments before the end of the chit period. The court concluded that the petitioner could not seek a refund of the instalments midway through the chit period.

5. Applicability of Section 434(1)(a):
Section 434(1)(a) of the Companies Act creates a fiction of inability to pay debts if a debt, which is admittedly payable, remains unpaid for 21 days after a demand. However, in this case, the court found that the debt was disputed and not payable on demand. Since the debt was not due and payable, the fiction under Section 434(1)(a) did not apply. The court held that the demand was premature and the debt was disputed, thus Section 434(1)(a) was inapplicable.

Conclusion:
The court dismissed the petition on the grounds that the debt was disputed, not payable on demand, and required detailed investigation. The petition was deemed not maintainable under Section 433(e) read with Section 434(1)(a) of the Companies Act. The court emphasized that such disputes should be resolved in a civil court rather than through a winding-up petition.