Court orders winding up of respondent-company for unpaid services, deeming dispute as harassment.

The court found that the respondent-company owed the petitioner Rs. 34,412.25 for services rendered, with the respondent's dispute deemed as not genuine but intended to harass. As a result, the court ordered the winding up of the respondent-company, appointing an official liquidator to oversee the process. The petition was granted with costs, and the order was to be published in specified newspapers.

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Issues Involved:
1. Whether any amount of debt is due to the petitioner by the respondent-company and whether any dispute has been raised.
2. Whether the respondent is unable to pay the debt.

Issue 1: Whether any amount of debt is due to the petitioner by the respondent-company and whether any dispute has been raised

The petitioner, M/s. Paramount Enterprises, filed a petition under section 439(1) of the Companies Act, 1956, seeking the winding up of the respondent, M/s. Reechem Private Ltd., on the grounds of inability to pay the debt under section 433(e) read with section 434(1)(a) of the Companies Act. The petitioner claimed that the respondent placed an order for the design, fabrication, erection, and commissioning of a PVC/FRP/Fume Exhaust system for zinc chloride, amounting to Rs. 32,500. The petitioner completed the work and sent invoices amounting to Rs. 25,036.25 and Rs. 1,738.75, which were not honored by the respondent. The respondent issued three cheques, which were dishonored, and despite several notices, the respondent failed to make the payment. The petitioner claimed a total of Rs. 34,412.25, including interest at 18% per annum and demurrage charges.

The respondent countered that the work was not completed, and the zinc chloride plant was stopped, making the exhaust system unnecessary. They argued that there was no liability to pay as the equipment was not taken delivery of, and the cheques were issued without any liability. They also contended that the petition under section 433(e) and (f) was not maintainable and was filed to bring disrepute to the respondent-company.

The court examined the evidence, including invoices, letters, and statutory notices. The petitioner provided detailed accounts and communication records showing the amount due. The respondent's failure to respond adequately to these communications indicated a lack of bona fide dispute. The court found that the respondent's objections were belated and not substantiated by any evidence. The debt was clearly established, and the dispute raised by the respondent was not bona fide but manufactured to harass the petitioner.

Issue 2: Whether the respondent is unable to pay the debt

The court analyzed whether the respondent was unable to pay the debt. The petitioner provided evidence of the debt amounting to Rs. 34,412.25, including interest and demurrage. The respondent did not produce any accounts or evidence to demonstrate their solvency or readiness to meet the claim. The court noted that the statutory notice under section 434 of the Companies Act is a serious matter, leading to the presumption of the company's inability to pay the debt if the claim is established.

The court referenced several legal precedents, emphasizing that a winding-up petition is not a legitimate means of enforcing payment of a bona fide disputed debt. However, in this case, the respondent failed to provide any credible evidence to dispute the debt or demonstrate their ability to pay. The court concluded that the respondent's inability to pay the debt was established, as they neglected to pay the sum due and failed to provide any evidence of solvency.

Conclusion

The court held that the respondent-company was due in the sum of Rs. 34,412.25 to the petitioner, and the dispute raised by the respondent was not bona fide but manufactured to harass the petitioner. Consequently, the respondent-company was ordered to be wound up, and the official liquidator was appointed to carry out the winding-up process. The company petition was allowed with costs, and the order was to be published in the "Deccan Chronicle" and "Andhra Bhoomi".

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