1992 (8) TMI 233 - HC - Companies Law

Court Upholds Decision on Petition Refusal under Companies Act

Pavan Om Parkash Kejriwal Versus Partap Steel Rolling Mills (1935) Ltd.

The High Court upheld the decision to refuse to advertise the petition under sections 433 and 434 of the Companies Act, 1956. The court found the debt ... Company when deemed unable to pay its debts Issues:Refusal to advertise the petition under sections 433 and 434 of the Companies Act, 1956.Analysis:The appellant supplied iron scrap to the respondent-company, and a balance of Rs. 2,88,366.89 stood outstanding against the respondent on March 31, 1989. Despite partial payments, a sum of Rs. 1,23,638.08 remained due to the appellant. The appellant served a statutory notice under section 434 of the Act upon the respondent due to non-payment, leading to the filing of a company petition.In response, the respondent claimed that the appellant failed to comply with the necessary formalities for the legal transfer of import licenses, which resulted in the respondent reversing an advance payment of Rs. 1,56,839 made to the appellant. The respondent contended that the appellant owed Rs. 41,236.50 to the respondent based on the running account between the parties. The learned company judge found the debt genuinely disputed by the respondent and considered the defense substantial, thus refusing to proceed with the company petition.Upon appeal, the High Court upheld the decision, stating that the appellant's submission that the sum of Rs. 1,56,839 was not remitted lacked merit. The Court noted that the appellant was to facilitate the transfer of import licenses for iron scrap and failed to do so, leading to the reversal of the advance payment by the respondent. The Court found that the debt was genuinely disputed by the respondent, indicating the respondent's ability to pay the debt.While dismissing the appeal, the High Court directed the respondent to provide security of immovable property worth Rs. 1,23,638.08 within three months to ensure the appellant's ability to recover the amount through the sale proceeds if successful in a civil suit. The appellant was granted the benefit of section 14 of the Limitation Act for the period the petition was pending in court, maintaining the option to pursue the claim through a civil suit.In conclusion, the High Court dismissed the appeal without costs, affirming the refusal to advertise the petition and directing the respondent to provide security for potential recovery in a civil suit.