2013 (8) TMI 794 - HC - Companies Law

Winding up Petition - Inability to Pay Dues Dishonour of Cheque - no payment being made and criminal proceedings had been initiated - The winding up petition was presented by the respondent against the appellant company claiming balance of price of goods sold and delivered by the respondent were remained unpaid Held that - The grounds appear to be substantial to pass the said order and the Court found that there was any bona fide dispute had been raised on the basis of the material placed before the Court The company had failed to raise a bona fide dispute in the matter on the basis of the material placed before the Court - there was no ground to interfere with the order passed by the Hon ble Single Judge. There was no illegality and/or irregularity in respect of the order so passed by His Lordship - there was no ground made out by the appellant to entertain - The defence which had been taken by the appellant cannot be tried to be a bona fide defence or can raise any issue to be decided - It appears that the plea taken by the appellant was without any materials and cannot be entertained at all - without materials/particulars it was difficult to come to such a conclusion with regard to fraud.

Issues Involved:
1. Whether the appellant company was genuinely unable to pay its debts.
2. The validity and authenticity of the cheques issued by the appellant.
3. Allegations of fraud and suppression of material facts by both parties.
4. The legitimacy of the appellant's claim of reciprocal supply and set-off.
5. The appropriateness of the winding-up petition in light of disputed facts.

Detailed Analysis:

1. Appellant's Inability to Pay Debts:
The Hon'ble Single Judge found that the appellant company was unable to pay its debts as evidenced by dishonoured cheques. The court held, "I hold that company is unable to pay the debts of the petitioning creditor to the extent of Rs.43,09,848 being the amount covered by the said cheques." The court allowed the appellant to pay the amount in eighteen equal monthly installments to stay the winding-up petition permanently.

2. Validity and Authenticity of Cheques:
The appellant issued cheques totaling Rs.43,09,848, which were dishonoured upon presentation. The appellant claimed that these cheques were issued for future supplies, not to settle existing dues. However, the respondent contended that these cheques were for unpaid supplies. The court found the appellant's explanation lacking, stating, "there is no acceptable explanation given by the appellant as to why the cheques were dishonoured."

3. Allegations of Fraud and Suppression:
The appellant alleged that the respondent had committed fraud and suppressed material facts. Conversely, the respondent accused the appellant of fabricating documents. The court noted, "the documents disclosed by the appellant company are fabricated and forged," and found no credible evidence of fraud by the respondent. The Hon'ble Single Judge concluded that "the petition does not suffer from suppression of materials facts."

4. Reciprocal Supply and Set-Off:
The appellant claimed that there was a reciprocal supply of materials and that the dues were adjusted against these supplies. The court found this defense unconvincing, stating, "the plea of setting off in the action in Court for the first time cannot be taken on the ground of automatic adjustment." The court emphasized that there was no agreement for such an adjustment and that the appellant's defense was "a moonshine and sham defence."

5. Appropriateness of the Winding-Up Petition:
The appellant argued that the winding-up petition should not be admitted due to the existence of serious disputed facts and the alleged bona fide defense. The court, however, found no bona fide dispute, stating, "the company has failed to raise a bona fide dispute in the matter on the basis of the material placed before the Court." The court relied on precedents, including Iba Health (India) Private Limited Vs. Info-drive Systems Sdn. Bhd, which stated that a winding-up petition should be dismissed if there is a bona fide dispute on substantial grounds. However, the court held that this principle did not apply in the present case due to the lack of a bona fide dispute.

Conclusion:
The court dismissed the appeal, affirming the Hon'ble Single Judge's decision that the appellant company was unable to pay its debts and that there was no bona fide dispute regarding the dues. The court allowed the appellant to pay the amount in eighteen monthly installments to stay the winding-up petition permanently. The court found that the appellant's defenses were not credible and that there was no suppression of material facts by the respondent.

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