9911796707
TMI Blog2007 (9) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... aside, and the said Company Petition No. 157 of 2005 is hereby dismissed.The respondent-company is at liberty to recover the amount claimed in the company petition from the appellant-company by resorting to such legal remedy as may be available to it under law and, in that event, the appellant-company would be at liberty to take all such defences as may be available to it under law. The appellant-company is permitted to withdraw the amount deposited by it in the said company petition - ORIGINAL SIDE APPEAL NO. 14 OF 2006 - - - Dated:- 26-9-2007 - V. GOPALA GOWDA AND ARALI NAGARAJ, JJ. R. Ganesh Kumar for the Appellant. K.G. Raghavan for the Respondent. JUDGMENT Arali Nagaraj, J. This appeal is filed under section 4 of the Karnataka High Court Act, 1961, by the appellant who is the respondent in Company Petition No. 157 of 2005 on the file of the learned company judge of this court aggrieved by the order dated March 10, 2006, admitting the said company petition which was filed by the respondent herein under section 433( e ) and ( f ) of the Companies Act, 1956, (hereinafter referred to as "the Act") and directing the respondent herein (petitioner the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant-company for the use by it as raw material in the manufacture of adhesive tapes. Accordingly, during the period from May 9, 2003 to June 3, 2003, the respondent-company supplied the said materials to the appellant-company under four different bills, totally worth rupees three lakhs twenty seven thousand and odd, which remained unpaid by the appellant despite demands made by the respondent. Therefore the respondent-company sent a legal notice dated July 28, 2005, (annexure K) to the appellant-company demanding a total sum of Rs, 4,63,491, which is inclusive of the total amount under the said bills and interest thereon. The appellant-company, despite the receipt of the said notice, did not choose to give any reply to it. Therefore, the respondent-company filed the said company petition under section 433( e ) and ( f ) of the Act seeking winding up of the appellant-company. ( b )The appellant-company contested the said petition by filing its statement of objections and additional statement of objections, wherein, though it admitted the supply of said materials by the respondent-company under the said bills for the said amount, it set up the defence that some of the materials t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r bills during the period from March 9, 2003 to June 3, 2003, the adhesive materials totally worth Rs. 3,27,485 for being used by the appellant-company as raw material in the manufacture of adhesive tapes by it and the appellant-company did not pay the same to the respondent-company despite the demand made by the respondent-company by issuing legal notice dated July 28, 2005, nor did it give any reply to the said notice. Similarly, the respondent-company has not disputed the case of the appellant-company that the latter returned to the former some of the adhesive materials on the ground that the same were not of specified quality. Thus, it is clear that there exists a dispute between the appellant and the respondent. Further, it is the case of the appellant-company that the adhesive tape that was manufactured by it by using the said sub-standard materials supplied to it by the respondent-company was found to be defective and therefore the customers of the appellant-company returned the same to it and consequently it sustained loss and therefore the value of the returned materials and also the damages for the loss sustained by it has to be recovered from the respondent-company and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of dues payable to the petitioner-company and therefore the said submissions cannot be accepted as bona fide." It is pertinent to note that in the affidavit sworn to by Sri S. Kannan, the manager of the respondent-company in response to the additional statement of objections of the appellant-company, he has only stated that the materials which were returned to the respondent by the appellant under annexures Rl, R3 and R5 did not pertain to the transactions covered under the company petition but they pertain to a period much prior to the said four invoices in respect of which the money is due and that the appellant-company debited a portion of the bill and deducted that portion of money in respect of the said rejected materials, it is not further stated in the said affidavit as to which particular period or transaction the rejected materials pertain, and what was the exact value of the said materials and under which bills it came to be deducted by the appellant-company. Therefore, it is contended that having regard to these undisputed facts it could not be held that the dispute raised by the appellant-company has not been bona fide one. This being so, we are of the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim under section 433( e ) of the Act." It is also observed further at page 702 of the above decision as : "Under section 433( e ) of the Companies Act a company may be wound up by the court if the company is unable to pay its debts. The provision vests a discretion in the court. But the discretion has to be exercised in the manner in any other judicial discretion is to be exercised ; it is a judicial power warranting a proper exercise to grant relief in appropriate cases. If the respondent-company pleads defence in good faith and puts-forth a substantial case against the petitioner's claim, the petition for winding up will be rejected. A mere assertion of a debt payable by the respondent-company is not sufficient to attract the discretion of the court in favour of the petitioner." In the said decision the learned judge of this court has quoted with approval the relevant paragraph in the case of Amalgamated Commercial Traders P. Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp Cas 456 (SC) (relevant page 463) which reads thus : "It is well-settled that a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... catena of decisions held that an order under section 433( e ) of the Companies Act is discretionary. There must be a debt due and the company must be unable to pay the same. A debt under this section must be a determined or a definite sum of money payable immediately or at a future date and that the inability referred to in the expression "unable to pay its dues" in section 433(e) of the Companies Act should be taken in the commercial sense and that the machinery for winding up will not be allowed to be utilized merely as a means for realising debts due from a company." (emphasis supplied by us) Applying the principles laid down by the hon'ble Supreme Court in Madhusudhan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd. [1972] 42 Comp Cas 125 ; Mediqup Systems P. Ltd. v. Proxima Medical Systems GmbH [2005] 124 Comp Cas 473 , and also the observations of this court in the case of Divya Export Enterprises v. Producin P. Ltd. [1991] 70 Comp Cas 692, to the instant case we are of the view that the defence taken by the appellant-company is bona fide and one of substance and it is likely to succeed in law inasmuch as the respondent-company, having admitted the factum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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