2018 (2) TMI 1419 - HC - Companies Law

Winding up of the Company - Held that - In the case on hand, the respondent has raised a bonafide disputes as regards to the debt and in facts of the case, the proceedings under Sections 433 and 434 of the Companies Act, 1956 is not an alternative method of recovering debt which is disputed only because the plant of the respondent-Company is closed and therefore, it cannot be said that the respondent-Company has neglected to pay on a statutory demand as decided by this Court in the case of Tata Iron & Steel Company Ltd. (2000 (3) TMI 920 - HIGH COURT OF GUJARAT). Considering the aforesaid facts of the case and considering the ratio relied upon by the Apex Court as well as this Court, the affidavits and counter affidavits, it appears that the debt is not an admitted debt and bonafide disputes are raised by the respondent-Company and on the basis of the aforesaid, it cannot be said that nonpayment of bonafide disputed debt would amount to neglect to pay so as to make liable under Sections 433 and 434 of the Act and thus, the present case would not fall under the same.

Issues Involved:
1. Petition for winding up of the company under Sections 433 and 434 of the Companies Act, 1956.
2. Dispute over unpaid purchase orders and the amount due.
3. Maintainability of the petition based on the limitation period.
4. Impact of the dismissal of Special Civil Suit No. 134 of 2013.
5. Bona fide dispute over the debt.
6. Applicability of the judgment in M/s. Vijay Industries v. M/s. NATL Technologies Ltd.
7. Respondent's financial status and ongoing proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Detailed Analysis:

1. Petition for Winding Up:
The petitioner filed a petition under Sections 433 and 434 of the Companies Act, 1956, seeking the winding up of the respondent company, Arcoy Bio Refinery Pvt. Ltd. The petitioner claimed that the respondent had failed to pay for various job works completed as per purchase orders, amounting to ?43,33,750, despite statutory notice.

2. Dispute Over Unpaid Purchase Orders:
The petitioner asserted that eight purchase orders remained unpaid, with no disputes raised by the respondent, who had even made part payments and deducted TDS. The respondent, however, denied these claims, contending that the accounts were not properly maintained and the dues were disputed. The respondent also claimed a counter amount of ?29,28,026 from the petitioner.

3. Maintainability Based on Limitation:
The respondent argued that the petition was not maintainable due to the limitation period, referencing the dismissal of Special Civil Suit No. 134 of 2013, where the petitioner's accountant admitted in cross-examination that no amount was due.

4. Impact of Special Civil Suit No. 134 of 2013:
The dismissal of Special Civil Suit No. 134 of 2013 by the Principal Civil Judge, Ankleshwar, was significant. The respondent highlighted that no appeal was filed against this dismissal, and the petitioner's own accountant had admitted that the amount claimed was not due, thus adding to the dispute over the debt.

5. Bona Fide Dispute Over Debt:
The court referred to the principle that a bona fide dispute over debt, supported by substantial grounds, precludes a winding-up order. The court cited several judgments, including Tata Iron & Steel Company Ltd. v. Micro Forge (India) Ltd., which emphasized that winding-up petitions should not be used to enforce payment of disputed debts.

6. Applicability of M/s. Vijay Industries Judgment:
The petitioner relied on the judgment in M/s. Vijay Industries v. M/s. NATL Technologies Ltd. to support their case. However, the court found this judgment inapplicable, as the present case involved bona fide disputes over the debt, unlike the circumstances in Vijay Industries.

7. Respondent's Financial Status and Ongoing Proceedings:
The respondent's financial difficulties, including a large amount due to the State Bank of India and the cessation of manufacturing activities since 2013, were noted. The respondent argued that these issues did not justify a winding-up order, especially given the disputed nature of the debt.

Conclusion:
The court concluded that the debt was not an admitted debt but a disputed one. The bona fide disputes raised by the respondent meant that the petitioner could not force payment of the debt through winding-up proceedings. The court emphasized that non-payment of a bona fide disputed debt does not constitute neglect to pay under Sections 433 and 434 of the Companies Act, 1956. Consequently, the petition was dismissed, and the notice was discharged, with parties bearing their own costs.

← Previous Next →