2012 (4) TMI 183 - HC - Companies Law

Winding up application - failure to make payment of dues - held that - From the facts of this case it can safely by concluded that there is no bona fide dispute about the amount receivable by the petitioning creditor. That the purported defense as taken in the Affidavit in Opposition is totally misconceived, sham and illusory and also not bona fide. It prima face appears that a sum of Rs. 3,57,73,135/- remained due and payable by the Company to the petitioner as on 15th March, 2010. The Company is indebted to pay the sum claimed by the petitioner and, therefore, I prima face hold that the petitioner is entitled to get a sum of Rs. 3,57,73,135/- as detailed hereinbefore and interest at the rate of 15 per cent plus 2 per cent penal interest from the date of default until payment as well as overdue service charges at the rate of 1 per cent per month. The interest which is charged by the banker that is 15 per cent plus 2 per cent penal interest is fixed by this Court. Therefore, this winding up application is admitted. However, the Company is granted an opportunity to pay the dues as aforesaid by five monthly equal installments.

Issues Involved:
1. Contractual Obligations and Terms
2. Outstanding Dues and Payment Default
3. Allegations of Overcharging
4. Bona Fide Dispute and Winding Up Petition
5. Settlement Attempts and Interest Rate Dispute
6. Court's Decision on Winding Up Application

Issue-Wise Detailed Analysis:

1. Contractual Obligations and Terms:
The petitioner and the Company entered into an agreement where the petitioner would procure and finance the purchase of newsprint for the Company. The terms included payment within 45 days, interest on overdue payments, and additional service charges. The agreement detailed the price, inclusive of taxes, transportation, and storage costs. The petitioner adhered to these terms by paying the mills and delivering the newsprint to the Company.

2. Outstanding Dues and Payment Default:
The petitioner claimed that the Company owed Rs. 3,18,34,478/- as of June 11, 2009, which was later adjusted to Rs. 2,97,96,087.06 as of September 30, 2009. The Company failed to make the necessary payments, resulting in the petitioner's bank account becoming irregular. The petitioner issued a statutory notice under Section 434 of the Companies Act, 1956, demanding Rs. 3,28,58,899/- plus interest and service charges, which the Company did not pay.

3. Allegations of Overcharging:
The Company alleged that the petitioner overcharged for the newsprint. However, the petitioner argued that the price included various costs such as taxes, transportation, and storage, which were agreed upon in the contract. The court found that the petitioner's charges were consistent with the contract terms, and the Company's allegations of overcharging were not substantiated by any evidence.

4. Bona Fide Dispute and Winding Up Petition:
The Company contended that there was a bona fide dispute regarding the debt and that the winding up petition was an abuse of the court's process. The court, however, determined that the dispute raised by the Company was not bona fide, as the terms of the contract were clear and the Company had not objected to them initially. The court concluded that the Company failed to pay its dues and the petitioner's claim was legitimate.

5. Settlement Attempts and Interest Rate Dispute:
During the proceedings, the Company proposed a settlement of Rs. 6.05 crores to be paid in installments without additional interest. The petitioner rejected this proposal, insisting on the interest rate charged by their bank (15% plus 2% penal interest). The court noted that the petitioner's claim for interest was justified based on the contractual terms and the bank's charges.

6. Court's Decision on Winding Up Application:
The court admitted the winding up application, finding that the Company was unable to pay its debts. The court ordered the advertisement of the winding up application in specified newspapers, with a provision to stay the advertisement if the Company paid the dues in five equal monthly installments. The first installment was due by February 15, 2012, and failure to pay any installment would allow the petitioner to proceed with the advertisement.

Conclusion:
The court concluded that the Company was indebted to the petitioner for Rs. 3,57,73,135/- plus interest and service charges. The winding up application was admitted, with conditions for installment payments to avoid the advertisement of the winding up notice. The findings were specific to this proceeding and did not extend beyond it.

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