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of <h1>Court dismisses winding-up petition due to genuine dispute over outstanding balance</h1> <h3>Bansal & Company Versus Shagun Steels (P.) Ltd.</h3> The court dismissed the petition seeking a winding-up order under section 433 of the Indian Companies Act due to a genuine dispute over the outstanding ... Company when deemed unable to pay its debts Issues:Petition seeking winding up order under section 433 of the Indian Companies Act based on unpaid amount. Dispute over outstanding balance between petitioner and respondent. Allegations of fabricated entries in respondent's account books. Consideration of bona fide dispute raised by respondent. Comparison with relevant case laws to determine legitimacy of dispute.Analysis:The petitioner filed a petition seeking a winding-up order against the respondent-company under section 433 of the Indian Companies Act due to an unpaid amount of Rs. 1,94,579 as of March 31, 1992. The respondent claimed a running account with a balance due of Rs. 8,80,644, which was partially settled by a cheque of Rs. 5,00,000 and another cheque of Rs. 4,00,000 that bounced. The respondent alleged a criminal complaint against the petitioner for the dishonored cheque. The petitioner contended that two entries in the respondent's account were fabricated, but the respondent provided documents showing excise duty payment and gate passes for the disputed bills, refuting the fabrication claim. The court noted that no dispute existed between the parties until March 1992, questioning the petitioner's sudden claim of fabricated entries. The respondent argued that due to the nature of the goods supplied, signatures were not obtained upon delivery, indicating a long-standing relationship of trust. The court assessed the genuineness of the disputes raised by the respondent.The petitioner failed to submit its statement of accounts along with the petition, relying solely on the closing balance for its claim. The respondent's submission of the statement of account prompted the petitioner to challenge specific entries, alleging fabrication. However, the court found it unlikely that the entries were fabricated, especially considering the excise duty payment. The court highlighted the respondent's proactive steps, such as serving a notice on the petitioner for the dishonored cheque, indicating a genuine dispute. Case laws were referenced to distinguish scenarios where winding-up orders were justified based on non-bona fide disputes. The court emphasized the importance of a crystallized claim and the necessity to establish a clear, valid, and unimpeachable debt before seeking a winding-up order.In conclusion, the court dismissed the petition, ruling that a bona fide and genuine dispute existed, preventing the petitioner from obtaining a winding-up order based on the respondent's inability to pay the debt. The petitioner was ordered to bear the costs, including counsel fees. The judgment underscored the principle that a winding-up petition should not be used as a debt recovery tool and must be based on a crystallized and undisputed debt.
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