2012 (6) TMI 588 - HC - Companies Law

Winding up petition filed u/S 433(e) and (f) of the Companies Act - petitioner, Director of the respondent Company, and also employed as CEO in the respondent company seeking to realize the amount due towards annual bonus with 15% interest and towards balance of Consultancy fee - in respect of the other claims the petitioner has initiated Arbitration proceedings as per the terms of the agreement - Held that - Settled position of law is that the dispute would be substantial and genuine, if it is bona fide and not spurious, speculative, illusory or misconceived, it is also the position that the company Court at that stage is not expected to hold a full trial of the matter and it must decide whether the grounds appear to be substantial. In the background of facts, dispute raised by the respondent company will have to be considered as substantial and not spurious, illusory and misconceived. The petitioner will have to therefore establish his claim in an action. In any event, the petitioner has admittedly raised a claim before the Arbitrator wherein he can secure complete adjudication. At this stage, since it cannot be classified as an admitted debt, no reason is seen to exercise the discretion vested in this Court to entertain the petition - Petition dismissed.

Summary

Issues Involved:
1. Claim for unpaid annual bonus under the Employment Agreement.
2. Claim for unpaid balance of Consultancy fee under the Consultancy Agreement.
3. Validity of the winding-up petition in light of the pending arbitration and disputed debts.

Issue-wise Detailed Analysis:

1. Claim for Unpaid Annual Bonus:
The petitioner claimed a sum of Rs. 1,12,50,000/- towards annual bonus under the Employment Agreement dated 01.02.2007. The respondent company argued that the bonus payment depended on the performance assessment and criteria outlined in the agreement and the minutes of the Board of Directors meeting dated 03.03.2009, which decided against any salary increase or bonus for the year 2008. The petitioner did not protest this decision at that time. The court found that the amount claimed as due under the Employment Agreement could not be considered an admitted debt at this stage and required adjudication in appropriate proceedings.

2. Claim for Unpaid Balance of Consultancy Fee:
The petitioner claimed 700,000 USD as the balance of the Consultancy fee under the Consultancy Agreement dated 31.12.2009. The respondent company contended that the petitioner violated Clause 12 of the agreement by engaging in competing business, which led to the termination of the agreement. The court noted that the petitioner had entered into business with a competitor, and the dispute regarding the violation of Clause 12 required determination in an appropriate forum. The court held that the claim could not be classified as an admitted debt and needed to be established through arbitration or other proceedings.

3. Validity of the Winding-up Petition:
The court referred to several precedents, including the decisions in Pradeshiya Industrial & Investment Corpn. v. North India Petrochemicals Ltd. and IBA Health India (P.) Ltd. v. Info-Drive Systems Sdn. Bhd, which emphasized that a winding-up petition is not a legitimate means of enforcing payment of a bona fide disputed debt. The court concluded that the disputes raised by the respondent company were substantial and not spurious, speculative, illusory, or misconceived. The petitioner had already initiated arbitration proceedings, and the court saw no reason to entertain the winding-up petition, as the debt could not be classified as admitted.

Conclusion:
The court dismissed the petition for winding up the respondent company, emphasizing that the disputes raised were substantial and required adjudication in appropriate proceedings. The petitioner was advised to pursue claims through arbitration. The court made no order as to costs.