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TMI Blog2007 (7) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants invoked the jurisdiction of the company court on the basis of the endorsed bills. The respondents in their defence pleaded that nothing was payable in respect of the two bills of exchange as the supplier had issued two credit notes dated February 27, 2003, to the appellants; that the goods supplied had been received back and consequently there was no amount outstanding against the invoices and bills of exchange. The respondent-company then also pleaded that the notice dated February 4, 2005, had been withdrawn by the petitioner-company and as such no cause of action subsists. The claim of the appellant-company was fraudulent and even a belated one in as much as the bills were to be presented on March 15, 2003, the maturity date was March 15, 2005 and thus no action was taken by the claimants nearly for about two years. 2. Keeping in view the above stand of the parties, the learned company judge, vide the impugned order, dismissed the company petition relegating the appellants to invoke the proper jurisdiction of filing a civil suit. The relevant finding in the impugned judgment reads as under (page 60 of 146 Comp. Cas.) : "In these circumstances, the defence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never cancelled and gave rise to a subsisting cause of action in favour of the appellants. 4. It is a settled principle of law that the jurisdiction of the company court to admit a winding up petition is a special and limited jurisdiction and the court in its discretion would always relegate the petitioner in a winding up petition to the remedy of a civil suit as it may raise complex issues and there is reasonable defence raised by the respondent to the claim of the petitioner in that petition. The provisions of section 433(e) of the Companies Act, 1956, clearly postulate that the company is unable to pay its debt. The inability to pay the debt has to be coupled with an intent of wilful default. In other words, the debtor in a winding up petition should have defaulted to clear its debt, despite notice and without any reasonable cause. 5. The jurisdiction to wind up a company court is an equitable jurisdiction, normally founded on accepted cannons of equity in law. The statutory provisions of the Companies Act, 1956, vest wide discretion in the company court to examine the petition in a wide spectrum and then exercise its discretion in accordance with the settled principles. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up petition and further observed that the discretion has to be exercised keeping in view the facts and circumstances of each case. The court held as under (pages 261, 262 and 264 of 86 Comp Cas) : "The real controversy is as to when a winding up court should get transferred to itself a pending proceeding initiated by secured creditor; and when a winding up court should grant leave to the secured creditor to pursue his remedy in the civil court, despite winding up order having been passed. Shri Salve brought to our notice, on the first aspect of the controversy, a decision of two-judge Bench decision of this court in Central Bank of India v. Elmot Engineering Co. [1994] 81 Comp. Cas. 13 (SC); [1994] 7 JT SC 54; [1994] 4 SCC 159. It was held therein that the aim of section 446 is to safeguard the assets of the company against wasteful or expensive litigation as far as matters which could be expeditiously and cheaply decided by the company court. It was also observed that while granting leave under this section the court always takes into consideration whether the company is likely to be exposed to unnecessary litigation and cost. In this context, it would be apposite and useful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and instead, provided a cheap and summary remedy by conferring the required jurisdiction on the company court. . . We are, therefore, of the view that the approach to be adopted in this regard by the company court does not deserve to be put in a straight jacket formula. The discretion to be exercised in this regard has to depend on the facts and circumstances of each case. While exercising this power we have no doubt that the company court would also bear in mind the rationale behind the enactment of the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993, to which reference has been made above. We make the same observation regarding the terms which a company court should like to impose while granting leave. It need not be stated that the terms to be imposed have to be reasonable, which would, of course, vary from case to case. According to us, such an approach, would maintain the integrity of that secured creditor who had approached the civil court or desires to do so, and would take care of the interest of other secured creditors as well which the company court is duty bound to do. The company court shall also apprise itself about the fact whether dues of wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In a winding up petition the delay itself is a relevant consideration and no justification whatsoever has been rendered by the appellant-company as to the circumstances or reasons for which the company took no steps for recovering its amount, particularly before invoking the limited jurisdiction of the court under section 433 of the Companies Act. The stand taken by the respondent in reply to the company petition raises genuine and bona fide dispute and at least prima facie offers proper explanation in law for its plea of no liability. This would certainly require a regular trial and parties may be called upon to lead evidence in support of their respective pleadings. The issues raised are certainly complex as according to the respondents, the claim itself is fraudulent and motivated one. It may be useful to notice at this stage that the learned company judge has also adverted to the financial status of the respondent-company. With that kind of financial status there is hardly any possibility to conclude at the stage of the petition that the company has wilfully defaulted to pay its debt. In addition to such stand it was also argued before the company court that the two bills of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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