1979 (7) TMI 212 - HC - Companies Law

Summary

Issues Involved:
1. Claim for price of goods sold and delivered.
2. Dispute over the quality and specification of the goods delivered.
3. Alleged rejection of goods by the company.
4. Timing and validity of the rejection notice.
5. Bona fide dispute over the payment for goods.
6. Winding-up petition as a mode of equitable execution.

Issue-wise Detailed Analysis:

1. Claim for Price of Goods Sold and Delivered:
The petitioning creditor claimed the price for goods sold and delivered to the company. The company had placed an order for 200 mm of conveyor belts, which were urgently required. The goods were delivered, and a formal purchase order was issued on December 7, 1978. The company acknowledged receipt of the goods, confirming they were in good condition and in conformity with the purchase order.

2. Dispute Over the Quality and Specification of the Goods Delivered:
The company later disputed the quality of the goods, claiming they did not meet the specifications. This dispute arose only after the statutory notice was served by the petitioning creditor. The company's initial acceptance and certification of the goods contradicted their later claim of non-conformity.

3. Alleged Rejection of Goods by the Company:
The company claimed to have rejected the goods based on a performance report by a senior maintenance engineer. This rejection was communicated for the first time in a letter dated May 10, 1979, long after the goods were delivered and certified as acceptable.

4. Timing and Validity of the Rejection Notice:
The court found that the rejection notice was not issued within a reasonable time. The goods were delivered and certified in December 1978, but the rejection was only communicated in May 1979, after the statutory notice. The court held that the company's rejection was not bona fide and seemed engineered to create a dispute.

5. Bona Fide Dispute Over the Payment for Goods:
The court determined that the company's dispute over the quality of goods was not raised in good faith. The company had accepted the goods, issued a certificate of their good condition, and only raised the issue of non-conformity after the statutory notice was served. The court concluded that the dispute was frivolous and an afterthought.

6. Winding-up Petition as a Mode of Equitable Execution:
The court held that the winding-up petition was a legitimate mode of equitable execution. The company's failure to pay for the goods and the frivolous dispute raised indicated commercial insolvency. The court admitted the winding-up petition, directing that it be advertised unless the company paid the amount due with interest and costs by July 31, 1979.

Conclusion:
The court found in favor of the petitioning creditor, concluding that the company's rejection of the goods was not bona fide and that the winding-up petition was justified. The company was given an opportunity to settle the claim to avoid the winding-up proceedings.