2018 (10) TMI 176 - HC - Companies Law

Winding up of the company - commercial insolvency - Held that - The defence of the company against the claim of the petitioner for the said amount of ₹ 15,92,544/- is that the goods supplied by the petitioner, from time to time covered by the said four invoices nos. HSC/101, HSC/169, HSC/181 and HSC/194 were of inferior quality. The total value of the said 4 invoices is ₹ 33, 82,350/-. However, the company could not explain as to how it went on issuing fresh orders to the petitioner for supply of the said goods. It is the company s own case that it has utilised 20% of the said goods supplied by the petitioner covered by the last four invoices and paid ₹ 13,89,389/- to the petitioner. Even in the case of IDBI Trusteeship Ltd.(2016 (11) TMI 1529 - SUPREME COURT) cited by the company the Supreme Court has held that while dealing with the defence put up by a defendant in the affidavit for leave to defend, even if the defendant has raised a triable issues, if a doubt is left with the trial Judge about the defendant s good faith, or genuineness of the triable issues, the trial Judge may impose conditions, for payment in Court or furnishing security. Subject to deposit of ₹ 15,92,544/-, together with interest thereon at the rate of 10%, per annum from the date of receipt of the notice under Section 434 of the Act of 1956 by the company with the Registrar, Original Side of this Court, within October 10, 2018, the present winding up application shall stand permanently stayed and the petitioner shall file a suit against the company, before the competent Civil Court for realisation of its dues. In the default of deposit of the aforementioned amount by the company with the Registrar, Original Side of this Court within the time stipulated above the present winding up application shall stand admitted for ₹ 15,92,544/-, together with interest thereon at the rate of 10%, per annum from the date of receipt of the notice under Section 434 of the Act of 1956. In that event the petitioner shall cause publication of the notice of the winding up application against the company once in the Bengali newspaper, Bartaman and once in the English newspaper, The Statesman . In the said notices the petitioner shall also mention that this application shall appear before this Court on the first Monday falling after four weeks, from the publication thereof.

Issues Involved:
1. Application for winding up under Section 433(e) of the Companies Act, 1956.
2. Alleged commercial insolvency of the company.
3. Dispute over the quality of goods supplied.
4. Alleged manufactured documents by the company.
5. Payment and interest on outstanding dues.

Issue-wise Detailed Analysis:

1. Application for Winding Up under Section 433(e) of the Companies Act, 1956:
The petitioner sought the winding up of the company on grounds of commercial insolvency. The petitioner, engaged in the supply of steel materials, claimed the company failed to pay outstanding dues for goods supplied between July and November 2012. The petitioner issued five invoices totaling ?43,46,245, and despite part payments, ?15,92,544 remained unpaid.

2. Alleged Commercial Insolvency of the Company:
The petitioner contended that the company was commercially insolvent, having failed to pay the outstanding amount despite repeated demands. The company, however, disputed this claim, arguing that the goods supplied were of inferior quality and thus justified withholding payment.

3. Dispute Over the Quality of Goods Supplied:
The company argued that the goods supplied by the petitioner were of inferior quality, as evidenced by letters dated September 1, 2012, October 20, 2012, November 26, 2012, December 10, 2012, June 13, 2013, July 27, 2013, and November 12, 2013. The company requested replacements for the inferior goods but claimed that the petitioner failed to comply. The petitioner denied receiving these letters and alleged that they were manufactured documents.

4. Alleged Manufactured Documents by the Company:
The petitioner alleged that the letters produced by the company were fabricated and not received by them. The company, however, maintained that the letters were genuine and bore the seal and signature of the petitioner’s firm. The court noted that the dispute over the authenticity of these letters raised a triable issue that could only be resolved through a civil suit.

5. Payment and Interest on Outstanding Dues:
The petitioner claimed that the company agreed to pay the invoices within 30 days of receipt, with an interest rate of 18% per annum on delayed payments. The company made part payments but withheld the balance, citing the inferior quality of goods. The court considered the company’s defense and the petitioner’s claims, noting that the company had used 20% of the goods and made partial payments amounting to ?17,89,806.

Conclusion:
The court acknowledged the triable issue regarding the authenticity of the letters and the quality of goods supplied. It ordered that the winding-up application would be permanently stayed if the company deposited ?15,92,544 with interest at 10% per annum by October 10, 2018. If the company failed to deposit the amount, the winding-up application would be admitted, and the petitioner would be allowed to publish notices in specified newspapers, with the case to be heard subsequently.

Final Order:
The court directed the company to deposit the outstanding amount with interest or face the admission of the winding-up application. The petitioner was advised to file a suit in a competent civil court to realize its dues if the deposit was made.

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