1989 (5) TMI 257 - HC - Companies Law

Winding-up Petition Dismissed, Emphasizes Not for Debt Recovery Alone. Consider Discretionary Remedy.

The court dismissed the creditor's petition for winding-up, emphasizing that it is not an alternative to regular debt recovery procedures. The court ... Winding up – Circumstances in which a company may be would up This is a creditor's petition under section 439 read with sections 433(e) and 434 of the Companies Act, 1956, seeking winding up for alleged inability to pay a debt of Rs. 17,49,865.90 with interest. The respondent pleaded that the petitioner had instituted a concurrent civil suit on the same cause of action and made a counter-claim, contending that the petitioner had availed an alternative remedy. The court held that, although service of a demand and non-payment may establish that a company is 'unable to pay its debts' under section 434(1)(a), that alone does not entitle the creditor to a winding-up order as of right. Citing Harinagar Sugar Mills Co. Ltd. v. M. W. Pradhan, the court quoted: 'A winding-up petition is a perfectly proper remedy for enforcing payment of a just debt. It is the mode of execution which the court gives to a creditor against a company unable to pay its debts.' The court also emphasized the discretionary nature of the remedy under section 433, quoting: 'It is true that ' a winding-up order is not a normal alternative in the case of a company to the ordinary procedure for the realisation of the debts due to it'; but none the less it is a form of equitable execution. Propriety does not affect the power but only its exercise.' Applying these principles and precedent, the court declined to allow winding up as a substitute for ordinary debt recovery and dismissed the petition.