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1998 (1) TMI 401

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..... ition. Supply of goods was made as per oral agreement between representatives of the parties at Alwar wherein it was decided that goods shall be supplied on credit and the respondent-company shall make payment within seven days on receiving the goods. In case of default in payment, the petitioner shall be entitled to get interest at the rate of 24 per cent per annum. 3. Before filing winding-up petition, a registered notice, dated 18-7-1995, was given to the company detailing out the above factual aspect. The said notice was replied by the company vide registered letter dated 4-8-1995 through its advocate Shri Babu Lal Goyal. In reply supply of tin-plates was admitted. Value of the goods was also not disputed. However, other conditions regarding payment of price of the goods within seven days from the date of receiving goods and in case of default liability of the company to pay interest at the rate of 24 per cent per annum were denied. The plea for non-payment taken, inter alia, is that the goods were not of proper quality and the same could not be used by the company. There- after, another notice, dated 18-8-1996, was given by the petitioner through its advocate Shri Alok .....

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..... and neglected to make payment deliberately while there is no dispute about the amount due. It is also contended that the plea abou supply of sub-standard goods has been taken by the company first time in its reply to the legal notice given by the petitioner which is without any basis and an after-thought. The learned counsel contended that the company has taken a different stand in its reply to the petition. The plea taken about some other disputes has no relevance with the present matter. 6. Before I turn to merits of the case, it would be proper to examine legal position in such matters. Section 433 states the circumstances in which a company may be wound-up by the Court. Under clause ( e ) a company may be wound-up by the Court if the company is unable to pay its debts. Section 434 details out the circumstances when a company is deemed unable to pay its debts. Under clause ( a ) of section 434(1) a company shall be deemed to be unable to pay its debts if it has neglected to pay a sum exceeding Rs. 500 to the creditor for three weeks after getting notice by registered post from the creditor demanding to pay the sum so due. 7. Law is well settled now by various judicial pr .....

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..... e means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the Court. At one time petition founded on disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petition. But, of course, if the debt is not disputed on some substantial ground, the Court may decide it on the petition and make the order... If the debt was bona fide disputed, as we hold it was, there cannot be 'neglect to pay' within section 434(1)( a ) of the Companies Act. If there is no neglect, the deeming provision does not come into play and the ground of winding-up, namely, that the company is unable to pay its debts is not substantiated." 8. The above principle has been reiterated by the Supreme Court in Madhusudan Gordhandas Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 1 .....

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..... confirmed view that the plea/defence for non-payment of debt taken by the company is wholly frivolous having no genuine and concrete basis. The facts clearly indicate that goods were supplied to the company in the year 1994 but still payment of the same has not been made. In reply, dated 4-8-1995, to the first notice, the company has admitted in unequivocal term to have purchased and received goods from the petitioner. Value of the goods (tin-plates) amounting to Rs. 33,09,673 was also not disputed. The dispute raised was with regard to payment within seven days from the date of receiving of the goods and liability to pay interest at the rate of 24 per cent per annum in case of default. Liability to make payment of the price of goods was disputed on the ground of supply of sub-standard goods without pointing out the defects. The plea of supplying defective or sub-standard goods was taken first time by the company in its reply dated 4-8-1995, i.e., after more than nine months from the date of its supply and that too when a legal notice was given demanding payment. It is also note-worthy that prior to this the company never intimated the petitioner making complaint about supply of .....

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..... by it and that, too without any concrete material completely falsifies the plea/defence of the respondent-company. The plea taken by it appears to be merely to halt legitimate payment of the amount to the petitioner and to avoid a winding-up order which is natural consequence on non-payment of debts in absence of any reasonable and sufficient cause. 13. The petitioner's claim appears to be bona fide and I am, prima facie, satisfied that the company is unable to pay its debt and, thus, making out a prima facie case of winding-up. 14. The technical objection about non-maintainability of winding-up petition, taken by the learned counsel for the company for describing wrong address of the registered office of the petitioner-company can be rejected conveniently as address of administrative office was wrongly stated to be that of registered office. In rejoinder the petitioner-company has explained and corrected this mistake by giving correct address of its registered office as "Plot No. 241 -242 ( b), Road No. 6-D, V.K.I., Area, Jaipur". 15. The petition is, therefore, admitted. The petitioner shall take necessary steps to advertise the petition for hearing on 26-2-19 .....

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