TMI Blog1998 (11) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... commercially insolvent and, therefore, disqualified from continuing to do business. The facts are hardly material because the two learned counsel who have argued the case with a high degree of skill and have been of considerable assistance to me, have basically proceeded on points of law. The petitioners claim that in the year 1987, they had advanced a sum of Rs. 6,00,000 to the respondent-company and that the amount being outstanding, they were required to institute a recovery suit in the civil court at Ahmedabad, since the claim was getting time-barred. According to them, the fact that the respondents have not responded to the statutory notice served on them to pay up the amount and complied with the requisition contained therein is prim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and until the respondents are able to demonstrate to the court that they have discharged the debt, refusal to pay on the, ground of all sorts of specious defences is only a cover-up for inability to meet the liability and he submits that the necessary ingredients having been made out under section 433 of the Companies Act the consequences must follow. I need to record here that Mr. Krishnamurthy, learned counsel who represents the respondents, has taken up a two-fold plea. Firstly, he contends that this petition is not maintainable because this court ought to accept the position that the respondents have presented a bona fide defence the merits of which will have to be examined and that the civil court is seized of the matter and, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act winding up proceedings is to stop the operations of insolvent companies, as far as the recovery of the amounts that are due is concerned, the law does permit the institution of appropriate recovery proceedings in a civil court and that the two remedies are not mutually exclusive. This argument advanced is not only tenable but correct but I need to add one rider, namely, that the situations in which the courts have permitted such a course of action have been in cases where the winding up proceedings have commenced first and the party, thereafter approached a civil court and not vice versa as has happened in the present case. Secondly, Mr. Kolar submitted that the court has got to take a realistic view of what transpires in summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the defence is entered leave to defend is granted. On the contrary, learned counsel demonstrated that the situation is exactly the opposite in so far as it is the duty of the court to decree the suit if there is no defence or the defence is worthless. There is a duty cast on the civil court to examine the defence and if what one may call a prima facie defendable case or a plausible defence in such cases has been presented, then alone is leave to defend granted. I need to accept the argument advanced by Mr. Krishnamurthy, because first of all this position in law is correct but for the additional reason that when the court granted his client leave to defend, one would have to presume that the court applied its mind to the defence and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and adjudicated upon, it cannot be categorised as an undisputed liability and if this is the position, it would not be permissible to proceed further in the winding up proceedings. The respondents' learned counsel drew my attention to a few decisions. In the case of Divya Export Enterprises v. Producins (P.) Ltd. [1991] 70 Comp. Cas. 692; [1990] ILR Kar. 1610, this court took the view that a defence pleaded is required to be summarily evaluated in the manner in which a court would examine the reply in a summary suit. In the decision of Airwings (P.) Ltd. v. Viktoria Air Cargo Gmbh [1995] 84 Comp. Cas. 688 ; [1994] ILR Kar. 2560 the Division Bench has laid down various guidelines in relation to winding up petitions but what is arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar submitted that the argument is untenable because the debt has not been extinguished. He points out to me that even though the respondents have not acknowledged their liability the petitioners have instituted legal proceedings within the period of limitation and that those proceedings were very much pending and alive in 1995, when the present petition was filed. It is pointed out that since that proceeding is yet to be concluded through a process of legal fiction the debt in question is deemed to be still alive and learned counsel submitted that there is absolutely no substance in the argument that in 1995, there was no enforceable debt in existence because he submits that the suit in question was for enforcement of that very debt and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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