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TMI Blog2021 (4) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of a Company is in good faith or as to whether it is of a substance and as to whether it is likely to succeed in point of law and as to whether the company adduces prima facie proof of the facts on which defence depends, would depend upon the facts of each case. Both the learned Company Judge as well as the Division Bench upon appreciation of the materials placed on record have found, that the defence as sought to be raised by the appellant with regard to the quality of the material supplied by the respondent being defective was by way of an afterthought. The Division Bench found, that when the appellant raised a dispute about the quality, the same was acknowledged by the respondent and it was reflected in its conduct by the grant of credit. It observed, that the respondent had fairly acknowledged the defects when there were any and it was reasonable to presume, that if there were any other defects, it would have recorded the same in some manner or the other. The Division Bench further found, that it was difficult to accept the case of the appellant, that the discussions with regard to defective material were only oral. In the present case, the Division Bench has not issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing balance of ₹ 8,92,723/as on 28.7.2008. Since despite repeated requests, balance amount was not paid, the respondent issued a statutory notice to the appellant. The same was duly responded to. As the payment was not made despite notice being duly served on the appellant, the respondent filed the aforesaid Company Petition seeking winding up of the present appellant for its inability to pay admitted debts. The learned Company Judge vide order dated 28.9.2015 admitted the Company Petition. However, while doing so, the learned Company Judge observed, that since the appellant was an ongoing concern, an opportunity should be granted to it to settle the accounts with the respondent by 31.12.2015. Only in case of failure of the settlement, the citation was directed to be published. Being aggrieved thereby, the appellant preferred an appeal before the Division Bench of the High Court. By an order dated 24.12.2015, the Division Bench of the High Court, while issuing notice, stayed the publication of the admission notice, subject to the appellant paying the amount in question by 31.12.2015. Accordingly, the amount was so paid by the appellant. Though the Division Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hra relies on the judgments of this Court in Mediquip Systems (P) Ltd. vs. Proxima Medical System Gmbh (2005) 7 SCC 42 , Vijay Industries vs. NATL Technologies Ltd. (2009) 3 SCC 527 , and IBA Health (India) Private Limited vs. InfoDrive Systems Sdn. Bhd. (2010) 10 SCC 553 . 7. Shri Tarun Gupta, learned counsel appearing on behalf of the respondent submits, that since the appellant, in spite of various communications sent by the respondent requesting it to pay the outstanding amount, had failed to do so, it was required to issue statutory demand notice under Section 434 read with Section 433 (e) of the said Act. It is submitted, that the said notice was duly served upon the appellant and also replied to. Apart from making a vague denial and stating that the claim of the respondent is a matter of record, no specific defence was taken. He further submits, that the appellant had totally changed the stand taken by it before the learned Company Court as against the stand taken by it in the reply to the statutory notice. He therefore submits, that the learned Company Judge as well as the Division Bench of the High Court had rightly held, that the defence of the appellant was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds. 10. As to whether the defence of a Company is in good faith or as to whether it is of a substance and as to whether it is likely to succeed in point of law and as to whether the company adduces prima facie proof of the facts on which defence depends, would depend upon the facts of each case. 11. In the present case, in the statutory notice dated 25.8.2008, the respondent Company has specifically stated as under: 4. That in that regard a sum of ₹ 35,14,776.30 was outstanding against you against various bills as on 25.8.2007 against the material supplied to you by my client, vide following invoices: S. No. Invoice No. Date Amount (Rs.) 1 162 26.6.07 8,55,370.65 2 177 30.6.07 8,66,788.29 3 216 16.7.07 9,07,891.19 4 300 25.8.07 8,84,726.17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depict the correct picture, rather on the contrary your client himself had been coming to my client and settled the amount and agreed to return ₹ 25 Lacs out of which ₹ 5 lacs returned, rest of the amount was not returned. 7. Para no.7 of your notice is wrong and incorrect. Detailed reply has already been given in previous paras. 13. It is thus clear, that in response to paragraph 4 and 5 wherein the respondent has specified its claim, the only reply given is, that it is a matter of record and that it shows about the business worth of his client. No doubt, that in paragraph 6, it is stated, that the respondent had himself been coming to the appellant and settled the amount and agreed to return ₹ 25 lakh out of which only ₹ 5 lakh was returned. 14. From the perusal of the written statement filed to the Company Petition, it would reveal, that the main contention of the appellant was, that it was a running company making profits and further, that the claim of the respondent was not admitted by it. It was contended, that the petition was filed only to pressurise the appellant to pay the dues which were neither admitted nor legally due. 15. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner company was used, as a result of which the product was defective, which was not marketable and on that account, the respondent company suffered losses. The products were sold in the market, which were returned back. No communication has been referred to, which was addressed by the respondent company to the petitioner company, pointing out such defects. It was further sought to be claimed that after giving credit note of ₹ 5,00,000/in May, 2008, the petitioner company agreed to give rebate to the extent of 50% on the total invoices on account of the defective material. The calculations were made in the following terms. Inv. No.162 ₹ 8,55,370.65 Inv. No.177 ₹ 8,66,788.29 Inv. No.216 ₹ 9,07,891.19 Inv. No.300 ₹ 8,84,726.17 Total : ₹ 35,14,776.30 Less: Goods returned ₹ 6,22,073.00 Balance ₹ 28,92,703.30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... knowledged by the respondent it was reflected in its conduct by the grant of credit. It is reasonable to presume that if there were any other defects and, in any event, if the appellant s case was that the goods were defective, it would have recorded the same in some manner or the other. The appellant, however, contends that the discussions in this regard were only oral. In the facts of this case it is difficult to accept this contention. The appellant s case has varied between its reply to the statutory notice and its written statement. The respondent served a statutory notice dated 25.08.2008. The appellant s reply dated 10.09.2008 to the statutory notice does not refer to an oral agreement much less an agreement by the respondent to pay the appellant compensation for the alleged defective goods. This belies the defence now raised in the reply. 9. There is yet another fact which clearly disentitles the appellant to any credit in respect of the balance goods. The appellant, admittedly, retained the goods and, in fact, used the goods, namely, synthetic yarn, in the manufacture of its products, such as blankets. Having done so, the appellant cannot refuse to pay for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant had taken contradictory stand in order to defeat the claim of the respondent. It was also concurrently found, that the appellant had failed to adduce prima facie proof of facts contented by it. 21. Insofar as the contention of the appellant, that the appellant was an ongoing Company running into profits and that the claim of the respondent was not admitted by it, is concerned, it is not a requirement in law. Reliance in this respect could be placed on various judgments of this Court including the one in the case of Vijay Industries (supra). 22. Insofar as the reliance placed by the learned counsel for the appellant on the judgment of this Court in the case of Mediquip Systems (P) Ltd. (supra) is concerned, in the said case this Court came to a finding, that there was a bona fide dispute concerning the claim of the appellant. It was also found, that there was no clear cut finding by the learned single judge, that a debt is prima facie due and payable by the Company to the petitioning creditor. It was further found, that the company court had no jurisdiction to direct the company to deposit the amount payable to a third party or to a party other than the petitioning credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce it has not been placed by means of any cogent evidence in this case, in view of the judgment of the Rajasthan High Court in Kitply Industries case [(1998) 91 Comp Cas 715 (Raj)] , cannot constitute an agreement between the parties for payment of interest. The legal position, thus, seems to be obvious. Before seeking a company to be wound up on the ground that it is unable to pay its debts, it must be shown before the Court that the debt claimed against the company is ascertained and definite and that the company failed to pay the same. Mere failure to pay the amount would not constitute the requisite neglect to pay as envisaged under clause (a) of subsection (1) of Section 434 of the Act when the company bona fide disputes the very liability and hence the defence taken up by it is of substance. It was furthermore held: Having regard to the facts and circumstances of the instant case, we are of the considered view that the claim of the petitioner towards interest on delayed payments since not covered by any specific agreement between the parties inter se is a contentious issue and the dispute as regards the payment of interest is bona fide and it cannot, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissing the appeal, has done so without prejudice to the respondent s contention regarding interest which may be claimed either by way of an application for clarification before the learned judge or by way of an appeal or by any other proceeding. 26. We find, that the judgment of this Court in the case of IBA Health (India) Private Limited (supra) would also not be applicable to the facts of the present case. In the said case, it will be relevant to refer to the following observations of this Court. 29. On a detailed analysis of the various terms and conditions incorporated in the deed of settlement as well as the compromise deed and the averments made by the parties, we are of the considered view that there is a bona fide dispute with regard to the amount of claim made by the respondent Company in the company petition which is substantial in nature. The Company Court while exercising its powers under Sections 433 and 434 of the Companies Act, 1956 would not be in a position to decide who was at fault in not complying with the terms and conditions of the deed of settlement and the compromise deed which calls for detailed investigation of facts and examination of evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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