TMI Blog2014 (6) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... at the respondent wanted to test the products in the market. The fact that the respondent was not successful in reselling the goods was attributed by the respondent to high prices and local competition. These defenses are certainly not available for a purchaser to avoid payments of the goods purchased by him. The petitioner is certainly not responsible for the inability of the respondent to resell the goods or any difficulty faced by the respondent in its business. The fact that respondent has not initiated any action for recovery of the amount claimed in the said notice also indicates that the respondent was not serious in respect of the claims made in the said notice - Decided in favour of appellant. - CO.PET.95/2011 - - - Dated:- 21-2-2014 - MR VIBHU BAKHRU, J. Ms. Rekha Palli and Ms. Punam Singh for the Petitioner Mr. Manik Dogra for the Respondent JUDGMENT 1. The present petition has been filed by the petitioner company under Sections 433(e) and 434 of the Companies Act, 1956, inter alia, praying for winding up of the respondent company on the ground that the respondent company has failed and neglected to pay a sum of USD 534,696.20, due and payable by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Terms Payment for a consignment delivered is to effect: 90 days from bill of lading xx xx xx xx xx xx Until the distributor has paid in full the purchase price and any interest and other charges in respect of the goods (each order being treated as a whole) and any other sums which may be due to the Company from the buyer: (1) Legal beneficial ownership of the goods shall remain with the Company; and (2) The Company shall be entitled to repossess the goods at any time. xx xx xx xx xx xx j. Product Warranty and Liability The Supplier warrants that the Products are free from defects and safe for their intended use, and indemnifies. The Distributor against any and all claims, damages and injuries resulting from or connected with the Products. The Product liability is covered by The Supplier's German insurance xx xx xx xx xx xx m. Validity of Agreement The term of this agreement shall be for: 60 months from April 1st, 2007*** for India, Sri Lanka, Bangladesh, Nepal 3.2 Pursuant to the said agreement, the respondent placed two orders dated 19.06.2007 and 12.07.2007 with the petitioner for supply of the goods in question to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 850171 18.06.2008 2063.34 23. 850172 18.06.2008 805.76 24. 850173 18.06.2008 892.96 Total 537,226.52 Credit Note dated 11.08.2008 (95.05) Debit Note raised by Respondent (2435.27) Net Balance 534,696.20 3.3 The petitioner raised the invoices dated 31.08.2008 to 19.10.2007 and invoices dated 18.03.2008 to 29.04.2008 (mentioned at serial no. 1 to 10 and 18 to 20 in the above table) for the goods supplied by the petitioner to the respondent company. The petitioner also raised invoices towards freight charges (mentioned at serial no. 11 to 17 and 21 to 24 in the above table). Therefore, the petitioner raised invoices for an amount aggregating to USD 537,226.52. 4. It is contended by the counsel for the petitioner that, despite shipment of goods, the respondent failed to clear the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch, but then we will be forced to ship. Reg. The sales situation I am still waiting on your input reg. Marketing activities. Moreover, I plan to visit Benara in Feb together with your Marketing people to develop a sales/marketing strategy in a mutual discussion. Please check with Mr. Benera when he will be available and let me know soonest to arrange visa and flights. 6. It is submitted by the petitioner that as the respondent company failed to clear the outstanding amount the respondent was put to notice by an e-mail dated 13.08.2008 that the respondent would be liable to pay interest at the rate of 8.5% per annum on the outstanding amount. It is contended that since the respondent failed to comply with the terms of the agreement, the petitioner terminated the said Letter of Agreement on 30.10.2008. It is submitted by the petitioner that, thereafter, the respondent company had requested to the petitioner to transfer the stock lying with the respondent to any other distributor and also requested for a 50% price discount with respect to the goods supplied as the respondent was facing the difficulty in selling the goods in the market due to the competition offered by local deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent has a valid counter claim against the petitioner. It is submitted by the respondent that the entire case of the petitioner is premised on the assumption that the e-mail dated 10.11.2008 indicates an admission of debt. it is contended that this is erroneous since it overlooks other communications, which indicate that the petitioner's claim is disputed. It is submitted that the respondent had on several occasions raised the issue of quality of the goods, even prior to the said e-mail dated 10.11.2008. The counsel for the respondent has drawn my attention to the e-mails dated 18.08.2007, 30.04.2008 and 18.03.2009 sent by the petitioner to the respondent. It is submitted by the respondent that the petitioner, by the e-mails dated 30.04.2008 and 18.03.2009, gave the details with regard to the safety measures required in respect of products which were hazardous. Therefore, it cannot be said that the defense raised by the respondent is an afterthought or a sham defense. 10. It is submitted by the respondent that the petitioner had dumped the products with the respondent against its instructions. It is contended that despite several requests being made by the respondent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges and cost of warehousing for storing the goods after termination of the agreement. 15. I have heard the learned counsel for the parties at length. The law on this subject is now well settled. A winding up petition is not a legitimate means of seeking enforcement of a debt which is otherwise disputed by a company. A winding up petition can also not be used to exert pressure on the company to settle the claims which are not accepted by the company. It is obvious that if a debt is disputed, a refusal to pay such a debt cannot possibly lead to an inference that the company is unable to pay its debts. Having stated above, it is also equally well settled that a sham and spurious defense would not be permitted to deprive a creditor from maintaining a petition for winding up of the company. The scope of inquiry in the present petition is, therefore, limited to examining whether the dispute raised by the respondent is bonafide or has been raised only for the purposes of defeating the legitimate claims of the petitioner. In proceedings for winding up, the merits of the disputes raised are not as relevant as the sincerity on the part of the respondent in raising such disputes. The p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esponse to the products supplied. This is clearly evident from the e-mail dated 01.10.2007 sent by the respondent, the relevant extract of which reads as under: Please do not cancel the order. You can manufacture the same but please hold the material (if possible) at your end and we shall inform you latest by 15th November regarding shipment dates. This is with a view that we have to see the response of all these products first and then decide what we can sell and what we cannot. 19. Subsequently, by an e-mail dated 10.01.2008, the respondent informed the petitioner that they were not in a position to accept the goods as ordered by them since the respondent was facing problems in selling the goods. The contents of the said e-mail are relevant and are quoted below: We regret to inform you that right now we are unable to take the goods of last order as we are facing lot of problems in selling these goods in the market due to high prices and local level competitors those are selling the similar range at very low cost. It is material to note that the reasons given by the respondent for its difficulty in selling the goods were (a) high prices a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the respondent in its business. 21. The petitioner continued to demand payment for the goods and also put the respondent to notice, by email dated 13.08.2008, that it would charge interest at the rate of 8.5% p.a. on the outstanding amount. 22. The exchange of e-mails that ensued thereafter, clearly indicates that efforts were being made by the petitioner and the respondent to amicably arrive at a resolution whereby the dues of the petitioner could be discharged. It is clearly evident from the correspondence exchanged between the parties that the respondent could only resell a fraction of goods that it had purchased and accordingly, the efforts of the respondent were directed at persuading the petitioner to take back some goods and grant further discounts. The email dated 10.11.2008 sent by the respondent is relevant as it also indicates the reason attributed by the respondent for its inability to resell the goods and further also indicates that the respondent was aware that the petitioner had taken steps to take a legal recourse against the respondent. The relevant extract of the said email is quoted below: We have offered them to ship the stocks to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to tell him the alleged problem items and to quote the quantity . It is contended that the above quoted sentence indicates that the respondent had already communicated to the petitioner that the goods were defective and sub-standard. The respondent has also relied on the e-mail dated 18.08.2007 which included the following sentence: Thanks for your explanation for the Mattel case. We will check the again for the goods contain lead or not. It seems do children business getting more difficult more and more. It is contended that the above sentence also indicates that the respondent had already communicated that the goods were defective. In my view, the reliance placed by the respondent on the aforesaid e-mails is completely misconceived and above all not honest. The first email refers to certain problem that seems to have been communicated and the second mail is an e-mail from the suppliers of the petitioner that had been forwarded to the respondent. The only problem pointed out by the respondent at that stage was with regard to the prices of the goods and there was not even a whisper that the goods were not of a requisite quality or were hazardous. It is appa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt. 29. The respondent has contended that a notice dated 31.07.2009 was caused to be served by the respondent on the petitioner wherein certain counter claims on account of custom duty and storage charges had been made. The learned counsel for the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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