2016 (5) TMI 732 - HC - Companies Law

Winding up - cheques dishonored - Held that - Merely because certain cheques issued by the respondent have been dishonoured for want of funds, that does not mean, that the respondent company has to be wound up. Perusal of the balance sheet does not indicate that the company deserves to be wound up for non-payment of lesser amount of ₹ 2,11,799/- allegedly due, from 27.05.2013 nor the respondent could be termed as commercially insolvent warranting appointment of a Provisional Liquidator under the provisions of the Companies Act, 1956. Company Petition dismissed

Summary

Issues:
1. Winding up petition filed under Sections 433, 434, and 439 of the Companies Act, 1956.
2. Dishonored cheques issued by the respondent.
3. Disputed outstanding amount and interest claimed by the petitioner.
4. Commercial insolvency and appointment of Provisional Liquidator.
5. Legal principles governing winding up petitions and creditor's malicious intentions.

Analysis:
Issue 1: The petitioner, a model management company, filed a winding-up petition against the respondent media company for non-payment of invoices related to model services provided for a magazine shoot. The petitioner claimed an outstanding amount with interest, seeking winding up under relevant sections of the Companies Act.

Issue 2: The respondent issued cheques for the invoiced amounts, which were later dishonored due to insufficient funds, leading to a dispute over the outstanding payment owed to the petitioner.

Issue 3: The petitioner contended that despite receiving partial payments, a significant sum remained outstanding, which, when combined with interest, led to a statutory notice demanding payment. The petitioner argued that the respondent's commercial insolvency warranted winding up under the Companies Act.

Issue 4: The court assessed the financial position of the respondent based on the balance sheet provided by the petitioner and concluded that the disputed amount did not justify winding up the company or appointing a Provisional Liquidator. The court emphasized the commercial insolvency criteria for such proceedings.

Issue 5: The judgment referenced legal precedents highlighting the misuse of winding-up petitions to pressure companies into paying disputed debts. The court stressed the importance of avoiding vexatious abuse of the legal process and the need for vigilance in assessing the genuine financial distress of a company before ordering winding up.

The court dismissed the winding-up petition, citing the petitioner's failure to establish a prima facie case for winding up the respondent company based on the disputed outstanding amount. The judgment emphasized the need for caution and circumspection in handling such petitions to prevent misuse and protect the interests of both creditors and the public.