2014 (6) TMI 18 - HC - Companies Law

Winding up of company - Inability to pay debts - Respondents claims the goods supplied were defective - whether the defence raised by the respondent is bonafide or a sham defence. - Held that - facts clearly indicate that the invoices were due and payable on 24.01.2013, 20.02.2013 and 07.03.2013 respectively. There has been no specific complaint which has been produced on record prior to this period. The letter dated 22.01.2013 is only in response to the demands being made by the petitioner and even this letter does not specify that the amount claimed by the respondent is disputed or not payable. The complaints which have been adverted to by the respondent are also generic in nature and it is material to note that all the complaints are in the month of April, 2013 i.e. much after the payments of the invoices had become due and payable. It is also material to note that one of the customers who is alleged to have complained is also a party related to the respondent. The debit note on the basis of which the respondent claims that amounts are not payable to the petitioner is dated 08.05.2013 which is more than two months after the last invoice became due and payable and after the respondent had received the notice of the present petition. Although, the respondent has filed photograph of goods supplied which is contended to be defective, there is no communication on record which indicates that the respondent ever attempted to return the said goods - It is also material to note that the notice issued under Section 434 (1) (a) of the Act had elicited no response and even at that stage, the respondent had not crystallized any issue - defence raised by the respondent is spurious and created for the purposes of resisting the present petition - However time is granted to Respondent to pay off debts before publication of winding up notice - Decided favour of Appellants.

Summary

Issues:
1. Allegation of non-payment by respondent under Section 433(e) of the Companies Act, 1956.
2. Determination of whether respondent's defense is bonafide or a sham defense.

Analysis:

Issue 1: Allegation of non-payment by respondent under Section 433(e) of the Companies Act, 1956
The petitioner filed a petition under Section 433(e) of the Companies Act, 1956, claiming that the respondent failed to pay its dues. The respondent disputed the claim, alleging defects in goods supplied by the petitioner. The petitioner had a history of supplying goods to the respondent, with minor delays in payment previously but no major disputes. The invoices in question were due for payment, and reminders were sent to the respondent. Despite notices and reminders, the respondent did not make the payments, leading the petitioner to file the present petition.

Issue 2: Determination of whether respondent's defense is bonafide or a sham defense
The core issue was whether the defense raised by the respondent regarding defective goods was genuine or a sham to avoid payment. The terms and conditions of the contract specified that any complaints about goods had to be made within a specific period, which the respondent failed to do. The respondent claimed defects in goods supplied, supported by customer complaints and photographs of alleged defective goods. However, the court noted that these complaints surfaced after the invoices were due, and no specific complaints were raised earlier. The respondent's defense was deemed spurious as it lacked substance and was created to resist the payment claim. The court admitted the petition and directed its publication, allowing a settlement period before further action.

This detailed analysis covers the issues raised in the judgment, focusing on the petitioner's claim of non-payment and the determination of the respondent's defense authenticity.