2014 (5) TMI 864 - HC - Companies Law

Winding up of company - Inability to pay debts - Respondents contends that only partial amount is due to them - Held that - services were provided by the petitioner to the respondent company and the respondent is liable to pay for the services being provided to the respondent. However, the respondent company has disputed the amount claimed by the petitioner is due and payable by the respondent - invoices for the month of August, 2011 could not be raised as the services of the petitioner were terminated in the month of July, 2011. The said contention is liable to be rejected in view of the e-mail dated 16.09.2011 sent by the respondent to the petitioner. The respondent company, by an e-mail dated 16.09.2011, has terminated the service of the petitioner with effect from 16.09.2011 - It is also well settled that proceedings under Section 433(e) cannot be used by a creditor as a means for recovery of its dues - Following decision of Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami and Anr. 1965 (1) TMI 16 - IN THE SUPREME COURT OF INDIA - It cannot be held that Respondents is unable to pay its debts - Therefore, petitioner may institute appropriate proceedings for recovery of the dues claimed by the petitioner - petition dismissed - Decided against Petitioner.

Summary

Issues Involved:
1. Whether the defense raised by the respondent is bona fide or a sham defense.
2. Whether the petition for winding up of the respondent company should be admitted.
3. Dispute regarding the amount due and payable by the respondent to the petitioner.
4. Validity of invoices raised by the petitioner.
5. Adjustment of Debit Note and TDS.
6. Alleged double billing by the petitioner.
7. Payments made by the respondent to the petitioner.
8. Applicability of Section 433(e) of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Bona Fide Defense:
The core issue is whether the defense raised by the respondent is bona fide or merely a sham. The respondent disputes the petitioner's claim of Rs.4,43,857/- and asserts that only Rs.39,343/- is due. The court must determine if the respondent's defense is genuine or fabricated.

2. Admission of Winding Up Petition:
The petition under Sections 433(e) and 434 of the Companies Act, 1956, seeks the winding up of the respondent company for failing to pay the claimed amount. The court must decide if the petition should be admitted based on the defense raised by the respondent.

3. Dispute Over Amount Due:
The petitioner claims a total of Rs.4,43,857/- is due, while the respondent acknowledges only Rs.39,343/-. The petitioner provided housekeeping services and raised invoices totaling Rs.19,07,158/-, out of which Rs.14,63,301/- was paid. The respondent disputes this, claiming payments totaling Rs.19,97,592/- were made, including TDS adjustments.

4. Validity of Invoices:
The respondent challenges the validity of invoices for August 2011, claiming services were terminated in July 2011. However, an email dated 16.09.2011 from the respondent terminated services effective from 16.09.2011, thus validating the invoices for August 2011.

5. Adjustment of Debit Note and TDS:
The respondent claims a Debit Note dated 31.05.2011 for Rs.97,850/- due to damages caused by the petitioner's staff. The petitioner disputes this debit note. The respondent also argues that TDS of Rs.39,218/- was not accounted for by the petitioner, which the petitioner acknowledges partially.

6. Alleged Double Billing:
The respondent alleges double billing for August 2011, with one set of invoices including taxes and another without. The petitioner clarifies that initial invoices covered only half the manpower, and subsequent invoices corrected this error. Verification of manpower deployment and attendance sheets is required, which is beyond the scope of these proceedings.

7. Payments Made by Respondent:
The respondent claims to have paid Rs.19,97,592/-, including TDS, against the petitioner's invoices. The petitioner acknowledges the payments but argues that the amount includes invoices not considered in the claimed Rs.19,07,158/-. Verification of these payments is necessary but not feasible within the current proceedings.

8. Applicability of Section 433(e):
For a winding-up petition under Section 433(e) to be maintainable, the company must be unable to pay its debts. A company is deemed unable to pay its debts if it fails to pay an admitted debt despite notice under Section 434(1)(a). The court must determine if the debt is admitted and unpaid. The court references the Supreme Court ruling in Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami, stating that winding-up petitions are not legitimate for enforcing payment of bona fide disputed debts.

Conclusion:
The court concludes that the issues raised by the respondent are contentious and require detailed inquiry beyond the scope of the current proceedings. The petitioner's claim is not an admitted debt, and the respondent's defense is substantial. Consequently, the petition for winding up is dismissed, with the petitioner advised to seek appropriate recovery proceedings. Both parties are to bear their own costs.