2013 (2) TMI 226 - HC - Companies Law

Winding up petition - Appellant seeks balance payment of Rs. 2 crore in respect of sale of his leasehold rights under an agreement - Respondent-company disputed said claim stating that amount of 2 crore had been utilized to settle claims of third parties as agreed in agreement - Held that - It is found that not only the agreement provides the names of the parties whose claims have to be settled but the respondents have also filed an affidavit with supporting evidence pointing out the persons to whom the payment was made and in support thereof evidence of the reasons for the same. The entire case of the appellant that the documents under which payments were made were fraudulent is a matter which would require investigation/adjudication by way of suit. As the appellant may have a very good case on merits and would possibly be able to establish in an appropriate proceeding that the respondent have acted in a fraudulent manner and defrauded him to Rs. 2 crore. However, in proceedings for winding up the company, the Court cannot adjudicate upon a bona fide disputed debt as it is well settled principle of company law that wherever there is a bona fide disputed debt, the petition for winding up of a company is not appropriate remedy to enforce the debt - appeal dismissed.

Summary

Issues:
Challenge to order dismissing petition for winding up under Companies Act, 1956 based on disputed debt of Rs.2 crores.

Analysis:
The appellant challenged the order of the Learned Single Judge dismissing the petition for winding up of the respondent company under the provision of Companies Act, 1956. The appellant claimed that the respondent owed him Rs.2 crores from the total consideration of Rs.7 crores for the sale of leasehold rights under an agreement dated 10.02.2010. The respondent disputed this claim, stating that the amount was utilized to settle claims of third parties as agreed upon in the same agreement. The Learned Single Judge examined the agreement and found that the claim of Rs.2 crores was genuinely disputed, thus requiring adjudication before a regular court rather than through winding up proceedings.

In the appeal, the appellant argued that the respondent fraudulently diverted the amounts meant for him to meet obligations to third parties. However, it was noted that the appellant had previously executed a power of attorney allowing the respondent to deal with all claims related to the property transferred. The agreement specified the parties whose claims needed settlement, and the respondent provided evidence of payments made to support their position. The court emphasized that the dispute over the alleged fraudulent payments needed investigation and adjudication through a suit, as winding up proceedings are not suitable for enforcing a bonafide disputed debt.

The judges highlighted the well-settled principle in company law that winding up is not an appropriate remedy for enforcing a bonafide disputed debt. While acknowledging the appellant's potential merits in proving fraudulent actions by the respondent, the court maintained that such disputes should be resolved through proper legal proceedings rather than winding up the company. Consequently, the appeal was dismissed, and no costs were awarded.