TMI Blog2015 (6) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... utes evolved from the Supreme Court decision in Tube Investments of India Ltd. - If there is dispute as regard the payment of sum towards principal however small, petition for winding up is not maintainable - Existing of dispute with regard to payment of interest can not be construed as existence of bona fide dispute - If ther is no bona fide dispute with regard to sum payable towards principal, it is open to the creditor to resort both the remedies of filing a civil suit as well as filing a petition for winding up . In the present case also it is not shown that the respondent company is unable to meet its liability as and when they accrued. It is also accepted in the present case that the respondent company is a profit making company and not a single instance of any creditor's legal action before any forum was pointed out by P.W.1. In view of that, therefore, since, prima facie, dispute exists about the debt, as claimed by the petitioner company, I do not find any justification for ordering winding up of the respondent company. There are neither pleadings nor any evidence to support the petitioner's claim that the respondent company is liable to be wound up on the ground that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under invoices cum delivery challans and the petitioner company is figuring as one of the sundry creditors in the annual accounts and balance sheet of the respondent company. It is alleged that as on 07.04.2010 the respondent company was due a sum of ₹ 14,47,540/- payable to the petitioner company towards arrears for supply of material already received by the respondent company, as per the terms of invoices together with contracted rate of interest at 24%. It is alleged that all the PCBs supplied to the respondent company by the petitioner company under invoices cum delivery challans were acknowledged and certified with the stamped endorsement 'RECEIVED CONTENTS VERIFIED'. It is alleged that though 90 days grace period for payment is allowed, the respondent company has been making payment from time to time but committed default since January 2009, as stated in para 12(ii) of the petition. The overdue and pending payments together with interest payable thereon for the overdue period is mentioned in tabulated form in para 12 (iii) and as such, on the basis of certificate of the statutory Auditor of the petitioner company certifying that the respondent company is due a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which order itself is worth ₹ 25 crores. Further, the fixed assets of the respondent company are already described in detail in the balance sheet. It, further, claimed that there are 25 employees on the rolls of the company and salaries are being paid on time, apart from 20-50 labourers working in the manufacturing unit of the respondent company and that the respondent company is paying direct taxes and excise duty of lakhs of rupees. 7. So far as the merits of the claim of the petitioner company is concerned, it is stated that the petitioner company has been supplying PCBs since 2008 and it was agreed that rejection of defective PCBs should be replaced by the petitioner company on intimation of such rejections from time to time. It is stated that as on 31.03.2009, as per the invoices raised by the petitioner company, an amount of ₹ 34,29,687.72/- was due by the respondent company, which includes the value of the defective PCBs also. Even subsequent thereto also, the petitioner company supplied PCBs to the value of ₹ 21,13,003.72/- under various invoices. 8. Under para 9 of the counter, the payments made by the respondent company without conciliation of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is without any basis and that at no point of time, any such thing was pointed out to the petitioner company. It was, therefore, claimed that the defence raised by the respondent company was moonshine and there is no iota of honesty in the plea of rejection, as made. So far as the publication of advertisement is concerned, para 15 of the rejoinder admits the error but it is claimed that it is inadvertent and unintentional and correct publication has since been made, as permitted by this Court and a regret for the mistake is mentioned. Along with the said rejoinder reconciliation statement and various invoices cum delivery challans are produced, which contain stamped endorsements of the stores of the respondent company showing that 'RECEIVED CONTENTS VERIFIED' endorsement on the challans. 11. On the basis of the aforesaid pleadings, the following points emerge for consideration: 1. Whether the petitioner company has established indebtedness of the respondent company, as claimed in the petition? 2. If the answer to the first point is in the affirmative, whether winding up of the respondent company is warranted under Section 433(e) of the Companies Act, 1956? 3. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many years the PCBs were delivered and payments were received and only disputes are the boards at the end that we have submitted along with the company petition. The respondent's statement in para 9 of the counter affidavit that it had made payments between April 2009 and July 2010 for various invoices aggregating to ₹ 44,29,688/- is, however, not disputed by the petitioner company. The only dispute, therefore, appears to be with regard to the alleged defective and rejected PCBs supplied by the petitioner company, which are quantified at ₹ 13,43,663/- and together with CST at 2%, the said figure is shown as ₹ 13,70,536/-. However, the respondent witness, R.W.1, admits in his evidence with CST was wrongly claimed and therefore, the defective and rejected PCBs account has to be taken at ₹ 13,43,663/-. Whether the said rejection is within the stipulated shelf life of PCBs and whether the respondent company intimated the petitioner company at the earliest point of time to receive the defective PCBs etc. are matters on which there is no clear evidence by the parties. 14. Hence, keeping in view the ratio of the decision of the Supreme Court in M/s. MADHUSU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up proceedings. Paras 33 and 35 in that context are relevant, which are extracted hereunder: 33. We may notice, so far as this case is concerned, there has been an attempt by the respondent company to force the payment of a 19 debt which the respondent company knows to be in substantial dispute. A party to the dispute should not be allowed to use the threat of winding up petition as a means of enforcing the company to pay a bonafide disputed debt. A Company Court cannot be reduced as a debt collecting agency or as a means of bringing improper pressure on the company to pay a bona fide disputed debt. Of late, we have seen several instances, where the jurisdiction of the Company Court is being abused by filing winding up petitions to pressurize the companies to pay the debts which are substantially disputed and the Courts are very casual in issuing notices and ordering publication in the newspapers which may attract adverse publicity. Remember, an action may lie in appropriate Court in respect of the injury to reputation caused by maliciously and unreasonably commencing liquidation proceedings against a company and later dismissed when a proper defence is made out on subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: This right to a winding up order is, however, qualified by another rule, viz., that the court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a winding up order, the court in its discretion may refuse the order'. The wishes of the creditors will however be tested by the court on the grounds as to whether the case of the persons opposing the winding up is reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding up order is made. It is also well settled that a winding up order will not be made on a creditor's petition if it would not benefit him or the company's creditors generally. The grounds furnished by the creditors opposing the winding up will have an important bearing on the reasonableness of the case (See Re. P. J. Macrae Ltd. [(1961) 1 AER 302]. 19. In the present case, no other creditor has come before this Court supporting the winding up of the respondent company in response to the advertisement published. However, in the cross-examination of P.W.1, it was specifically asked whether he has any information of any claim in any Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 abovementioned 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 abovementioned 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 abovementioned 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 provision does not come into play and the winding up on the ground that the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Whether it is commercially solvent means that the company should be in a position to meet its liabilities as and when they arise. 24. The Madras High Court in Tube Investments of India Ltd. v. Rim and Accessories (P) Ltd. (1990) 3 Comp LJ 322 (Mad) has evolved the following principles relating to bona fide disputes: (i) If there is a dispute as regards the payment of the sum towards principal however small that sum may be, a petition for winding up is not maintainable and the necessary forum for determination of such a dispute existing between parties is a Civil Court; (ii) The existence of a dispute with regard to payment of interest cannot at all be construed as existence of a bona fide dispute relegating the parties to a Civil Court and in such an eventuality, the Company Court itself is competent to decide such a dispute in the winding up proceedings; and (iii) If there is no bona fide dispute with regard to the sum payable towards the principal, it is open to the creditor to resort to both the remedies of filing a civil suit as well as filing a petition for winding up of the company. As held by the Supreme Court in the aforesaid decision, in the present ca ..... 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