2016 (8) TMI 872 - HC - Companies Law

Winding up petition - ex-Director of the respondent company seeking winding up of the respondent company on account of the alleged failure to pay interest at 24% p.a. on the admitted liability of ₹ 75.50 lakhs due by the respondent company to the petitioner, against the loan advanced by the petitioner to the respondent company - Held that - This Court is of the clear opinion that no ground as is set out in S. 433(e) of the Act viz., the inability to pay the admitted debt of the company, has been established in the present case to the extent of interest of 24% claimed by the petitioner, an ex-director of the company and therefore, the winding up petition has no merit and the same is liable to be dismissed.

Issues Involved:
1. Admitted liability of ?75.50 lakhs.
2. Claim for interest at 24% p.a. on the admitted liability.
3. Alleged bonafide dispute about the debt.
4. Application of legal precedents and statutory provisions.

Issue-wise Detailed Analysis:

1. Admitted Liability of ?75.50 Lakhs:
The petitioner, an ex-director of the respondent company, advanced ?1.41 crores to the respondent company to settle dues with Andhra Bank. The respondent company repaid ?65.50 lakhs, leaving ?75.50 lakhs outstanding, which was reflected in the company's books. Despite a statutory notice under Section 434 of the Companies Act, the respondent company did not clear the dues, leading to the winding-up petition under Sections 433(e) and 439 of the Act.

2. Claim for Interest at 24% p.a. on the Admitted Liability:
The petitioner claimed interest at 24% p.a. on the outstanding ?75.50 lakhs. The respondent company disputed this, stating no written agreement existed for such interest. The petitioner argued that the debt was admitted and relied on precedents to support the claim for interest. However, the respondent contended that the payment of the principal amount during the petition did not imply an admission of liability for interest.

3. Alleged Bonafide Dispute About the Debt:
The respondent company argued that the petitioner, a disgruntled ex-director, created multiple legal issues and caused financial harm to the company, leading to disputes. The respondent also filed a civil suit for damages against the petitioner. The court noted that a winding-up petition is a serious proceeding and should not be used for debt recovery, especially when there is a bonafide dispute about the debt.

4. Application of Legal Precedents and Statutory Provisions:
The court referred to the Supreme Court's judgment in IBA Health (India) (P.) Ltd. v. Info-Drive Systems Sdn, Bhd, emphasizing the importance of determining whether the refusal to pay is due to a bonafide dispute or inability to pay. The court also cited Jyoti Ltd. v. Boving Fouress Ltd., where it was held that interest claims without a specific contract could not be enforced in winding-up proceedings. The court disagreed with the Delhi High Court's judgment in Devendra Kumar Jain v. Polar Forgings & Tools Ltd., which allowed the company court to determine interest in winding-up proceedings to avoid multiplicity of litigation.

Conclusion:
The court concluded that the winding-up petition lacked merit and dismissed it. It emphasized that the winding-up process is not suitable for resolving disputed debts, especially when there is no written agreement for the claimed interest. The court upheld the principle that a bonafide dispute about the debt should prevent the exercise of winding-up jurisdiction. The petitioner's actions, including multiple legal proceedings against the respondent company, indicated an attempt to coerce payment rather than resolve genuine disputes. The court found no grounds under Section 433(e) of the Companies Act to wind up the company based on the claimed interest, leading to the dismissal of the petition without costs.

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