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TMI Blog2015 (9) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... or the petitioner and learned advocate Mr. Shelat for respondent. 3. Learned advocate Mr. Dave appearing for the petitioner contended that the respondent-company, as per the agreement i.e. the work order dated 12.5.2011, had assigned the construction and civil work to the petitioner as per the terms and conditions stipulated in the said agreement and the rates mentioned in the work order for carrying out construction work at the site Shri Balaji Green Valley, Opp. Divine International School, Ahmedabad to the petitioner. The aforesaid construction work was to be carried out with regard to a bunglow scheme in which the task of the petitioner was to do various items of execution of construction work as per the work order for bunglow no.10(A)(B) to 14(A)(B) respectively. As per the work order, the petitioner has carried out various works from time to time and different bills were also raised. It is the case of the petitioner that the petitioner carried out total work for an amount of Rs. 3,34,80,819.11. 4. Learned advocate Mr. Dave thereafter contended that as per the terms and conditions of the agreement of work order dated 12.5.2011, the cement and steel were to be supplied by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable and bonafide dispute. In response to the document which is produced at page 161 of the compilation produced by the respondent, learned advocate for the petitioner submitted that the document is concocted document and the petitioner has not signed the said document at all. Thus, the respondent has wrongly relied upon the said document and hence the said document be ignored. At this stage, learned advocate Mr. Dave referred to the document produced at page 183 produced by the respondent along with the affidavit-in-reply and submitted that the said report was not at all communicated to the petitioner. There is no reference to the said report even in the reply given to the statutory notice by the respondent. The respondent has not produced any proof that the said report was communicated to the petitioner and, therefore, it is clear that for the first time the respondent has produced the said report on record along with the affidavit-in- reply and tried to raise the dispute. The said dispute cannot be termed as a reasonable and bonafide dispute and the said document is nothing but an afterthought on the part of the respondent and, therefore, the dispute raised by the respondent be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the onus of disproving it, by showing that its defence is in good faith and is one of substance and it is likely to succeed in point of law. The defence must be substantial and not mere moonshine. So also where the dispute is a mere after-thought, an adverse inference may have to be drawn against the company that the defence being an after-thought, is a mere cloak to cover up its inability or refusal to pay. Adverse inference may also have to be drawn where the cheque(s) issued by the company for the debt in question or a part thereof is (are) dishonoured. For determining whether a debt is disputed bona fide or not, the conduct of the parties in relation to the transaction in question, the character of the pleas and the circumstances which will be peculiar to each case will have to be considered. IV. Court's findings on bona fides of company's defence and orders which may be passed upon such findings - (1) After considering the material on record, if the court comes to the conclusion that the defence raised by the company is not only not bona fide, but the defence is reeking with mala fides or the company's conduct leading to the dispute (in respect of which the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the observation made by the Delhi High Court in paragraphs 12 to 16, 18 and 20. "12. Having heard the counsel of the parties and perused the record, I am inclined to allow this petition for winding up under section 433(e) of the Act. What is to be examined by the Court in these proceedings is whether there is clear cut admission of a debt by the respondent company and the debt, which should be in excess of Rs. 1 Lakh, is not discharged by the respondent company despite a notice issued in compliance with Section 434 of the Act. In case of a disputed debt, the Court has to examine whether the dispute on the face of it is genuine, or merely a cloak to cover the company's real inability or unwillingness to pay its debts. When the debt is undisputed the Court will order winding up and will not act upon a defense that the company has the ability to pay the debts but the company chooses not to pay the debt.( see Madhusudan Gorhandas and Company V. Madhu Woollen Industries Pvt. Ltd & Ors., (1971) 3 SCC 632). 13. Admittedly the parties had a business relationship under the Sales Agency Agreement dated 01.04.2006 whereunder the respondent, inter alia, booked Star Cruise packages on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,48,93,580/- to be due towards the petitioner and assurances were given to remit these amount. The denial of the liability in the reply to the legal notice of the petitioner and in the reply filed to the present petition is, therefore, an afterthought and malafide, only to somehow ward off the consequences of winding up. The subsequent denials have no basis and the respondent has not attempted to explain the circumstances in which the aforesaid categorical admissions of liability were repeatedly made. I, therefore, reject the stand sought to be taken by the respondent in its reply to the legal notice and in reply to this petition. 18. The balance sheet of the respondent company as at 31.03.2008 also shows a rather grim picture of the financial health of the respondent company. The company suffered losses of Rs. 2,18,74,569.38 in the year ending 31.03.2007 and the losses as at 31.03.2008 stood at Rs. 42,75,347.60 after exhausting the entire general reserves of the company. 20. The other defense raised to resist this winding up petition is that the respondent company has the assets to liquidate the dues of the petitioner company. Assuming that the assets of the respondent compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the outstanding as on 31.8.2014 is only Rs. 1.31 crores in relation to the said loans. The track record of the respondent-company towards the payment of interest and repayment of loan is also excellent and none of the accounts of the respondent-company is bad debts or declared as NPA. At this stage, learned advocate Mr. Shelat has referred to the provisional balance sheet for the year 2013-2014 which is produced at page 160. From the said document, it is revealed that the profit earned by the respondent-company as on 31.3.2014 is Rs. 12,12,99,000/-. 11. Learned advocate Mr. Shelat thereafter contended that in relation to the civil work which was given to the petitioner with regard to Green Valley site, the said site consist of setting up of 48 residential bunglows as per the plans sanctioned by the competent authority, out of which bunglow no.10(A)(B) to 14(A)(B) constituting ten bunglows was the subject matter of the work order dated 12.5.2011 entered into between the parties which also include the term that the final bill is to be on the basis of the actual measurements of the work done by the petitioner as per the specifications and quality contemplated between the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of IBA Health (India) Private Limited V/s Info-Drive Systems SDN.BHD, reported in (2010)10 SCC 553. 12. Learned advocate for the respondent thereafter placed reliance upon the decision rendered by the Division Bench of this Court in the case of Tata Iron and Steel Company Limited V/s Micro Forge (India) Limited, reported in 2000(2)GLR 1594. Learned advocate Mr.Shelat thereafter relied upon the order dated 26.8.2015 passed by this Court in Company Petition No.53 of 2011 in the case of Supreme Telecommunication Ltd. V/s Petronet V.K. Ltd.. 13. Learned advocate Mr. Dave appearing for the petitioner, in rejoinder, submitted that the respondent is trying to mislead this Court by narrating false averments and misleading statements based on forged document and thereby respondent is trying to create a baseless defence of creating a picture of poor work quality on the part of the work done by the petitioner. Learned advocate Mr. Dave submitted that the work order dated 12.5.2011 produced by the respondent at page 161 is not the work order signed by the petitioner and the same was never issued by the respondent to the petitioner. The said document is forged by scanning the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the respondent is claiming Rs. 20 lacs by way of recovery for poor workmanship. The said document is received by the petitioner on 3.11.2012. Thus, from the averments made in the affidavit-in-reply as well as the documents produced on record by the respondent, it is clear that the respondent has raised reasonable and bonafide dispute with regard to the claim of the petitioner. The said dispute cannot be said to be an afterthought, sham or bogus. 15. It is also clear from the record that the respondent-company is a profit making company. The respondent-company borrowed Rs. 126.20 crores from different banks and financial institutions. However, only 1.31 crores is outstanding as on 31.8.2014. The track record of the respondent-company towards the payment of interest and repayment of loan is good. The respondent-company has paid an amount of Rs. 92.76 crores to its contractor, suppliers, vendors during the period between 1.9.2012 to 30.6.2014. The said fact is revealed from the statement produced at Annexure `R-8' with the affidavit-in- reply. Thus, it cannot be said that the respondent-company is commercially insolvent or it has lost its substratum. When inquired, learned advocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans 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 stigmatized as a scandalous abuse of the process of the court." 22. The above mentioned decision was later followed by this Court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. 1971) 3 SCC 632. The principles laid down in the above mentioned judgment have again been reiterated by this Court in Mediquip Systems (P) Ltd. v. Proxima Medical Systems (GMBH) (2005) 7 SCC 42, wherein this Court held that the defence raised by the appellant-company was a substantial one and not mere moonshine and had to be finally adjudicated upon on the merits before the appropriate forum. The above mentioned judgments were later followed by this Court in Vijay Industries v. NATL Technologies Ltd. (2009) 3 SCC 527. 23. The principles laid down in the above mentioned cases indicate that if the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a claim of order of winding-up is not a matter of right, but it is the discretion of the Court on one or more of the grounds having been established as mentioned in Sec.433 of the Companies Act. Even, at the stage of admitting the petition, unlike other petitions, the Company Court has to be very alive to the relevant aspects and is oblige to consider many circumstances. 17. Certain important chronicles and contours to be kept in the mental radar, before reaching to the conclusion in a winding up petition, can be articulated, as under: (1) The remedy under Sec.433 in general and under clause (e) in particular is not a matter of right, as such, and it is the discretion of the Company Court. It does not confer any right on any persons to seek order that the company should be wound up. It is a provision empowering the Court by a statutory provision to pass order of winding-up in an appropriate case. (2) Merely because any one of the circumstances enumerated in Sec.433 of the Companies Act, exists, the Court is not bound to order winding-up of the company. Nobody can aspire to wind-up the company as a matter of course. The Court has wide power and discretion. In this connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r disability to make the payment of debts, but the entire status and position of the company in the market. (8) When grounds on which the winding-up order can be denied, upon an evaluation of the facts of the case, after admission, exists from the record already placed before the Court, it would be a sound exercise of discretion to reject the petition instead of admitting it. This view is very much celebrated. (9) Inability to pay debts in terms of Sec. 433(e) read with Sec.434(1)(a), demand of the debt would raise a presumption as to inability to pay its Page 27 of 35 debts. But such a presumption is rebuttable. Such a presumption may be rebutted on existing material and what evidence is sufficient depends on the facts and circumstances of the case. (10) If the Company has shown considerable growth in a reasonable span and is a growth oriented enterprise, even in case of temporary inability would not be sufficient to drive it to wind-up. (11) Though, ordinarily, an unpaid creditor may aspire for an order of winding-up, then 'ex debito justitiae' rule is not of inflexible mandate, but is, as such a matter of discretion of the Court. (12) Section 433 is also indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng-up is the last thing the Court would do and not the first thing to do having regard to its impact and consequences. Winding-up of a company would ensue : (a) closing down of a company which is engaged in production or manufacture or which provides some services; (b) it would throw out of employment numerous persons and result in gross hardship to the members of families of the employees; (c) loss of revenue to the State by way of collection of taxes which other wise should have been collected, on account of customs, excise duties, sale tax, income tax etc. (d) scarcity of goods and diminishing of employment opportunities. (20) Winding-up petition has to be submitted in prescribed form highlighting all the facts and emphasizing the inability of the Company to pay its debts. The form prescribed under the Company Court Rules, clearly, indicate that the petitioner should provide all necessary material particulars. The petitioner is obliged to show that the financial status or the monetary sub-stratum or the commercial viability of the Company has gone so low and down that winding-up is obviously and evidently unavoidable. (21) It is a settled proposition of law that wind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Supreme Court as well as by this Court, it can be said that while considering the winding up petition, this Court is required to consider whether the claim of the petitioner is within the period of limitation or not, i.e. debt is time barred or not and if the defence is raised by the respondent-company, whether the said defence can be said to be reasonable and bonafide dispute or not. If the defence is bonafide and reasonable, then the petition for winding up is not required to be entertained whereas if the defence/dispute raised by the respondent-company is an afterthought or if the same is raised with a view to hide its inability to pay its debt, then the Court would consider the petition filed by the petitioner for winding up and admit the petition and thereafter will pass the order of winding up of the concerned company. In the facts and circumstances of the present case, this Court is of the opinion that the defence raised by the respondent-company is reasonable and bonafide and the defence cannot be termed as an afterthought, sham and bogus. The respondent-company is a going concern. It has not lost its substratum and the respondent-company is not commercial i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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