Interest on unpaid debt: reasonable rate awarded when principal is paid during winding-up; nonpayment triggers advertisement.

Where a winding-up petition remained pending but the company paid the undisputed principal debt while disputing interest, the court held that entitlement to interest should be determined to avoid multiplicity of litigation and that a reasonable contractual or market-linked rate may be awarded; invoices expressly providing for interest and trade usage supported liability. The court fixed interest at 12% per annum until payment and directed that failure to pay the interest within one month will lead to the winding-up petition being advertised and the petition proceeding accordingly.

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Issues: Whether a company can be ordered to be wound up under Section 439 of the Companies Act, 1956 if, after filing of the winding-up petition, the respondent pays the principal debt during the pendency of the petition but refuses to pay the interest.

Analysis: The Court considered circumstances where the liability to pay the principal debt was not disputed and was in fact discharged by the company sought to be wound up to avoid winding-up. The Court relied on the principle that the company judge is the appropriate forum to determine entitlement to interest on the amount in question so as to avoid multiplicity of litigation. The invoices contained an express stipulation for interest (19.5% per annum) which was not objected to by the purchaser, and trade usage supports liability to pay interest for delayed payment. Taking into account prevailing banking rates and comparable decisions of the Division Bench in Company Appeal No. 16 of 1984, the Court held that an award of interest at a reasonable rate is appropriate where interest is disputed but principal is paid during pendency of a winding-up petition. The Court fixed interest at 12% per annum until payment and directed that if interest is not paid within one month the petition shall be advertised.

Conclusion: The petitioner is entitled to interest at the rate of 12% per annum until payment; if the respondent fails to pay the interest within one month the winding-up petition shall be advertised and the petition proceeds accordingly.

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