1997 (12) TMI 539 - HC - Companies Law

Court dismisses winding-up petition due to bona fide dispute over outstanding amount.

Azeet International (P.) Ltd. Versus Himachal Pradesh Horticultural Produce Marketing & Processing Corpn. Ltd.

The court dismissed the winding-up petition filed by Azeet International (P.) Ltd. against Himachal Pradesh Horticultural Produce Marketing & ... Winding-up - Inability to pay debt Issues:- Winding-up petition under sections 433 and 439 of the Companies Act, 1956.- Dispute over outstanding amounts and financial position of the respondent-company.- Bona fide dispute regarding payment and liability.Analysis:1. The petitioner, Azeet International (P.) Ltd., filed a winding-up petition against Himachal Pradesh Horticultural Produce Marketing & Processing Corpn. Ltd. for unpaid dues amounting to Rs. 11,27,164.50. The petitioner alleged that the respondent was commercially insolvent and unable to pay its debts, citing significant accumulated losses and liabilities exceeding assets.2. The respondent disputed the amount owed, claiming only Rs. 1,80,239.10 was payable based on the supply of cartons. The respondent argued that certain deductions, including for sub-standard cartons and testing expenses, should be considered, reducing the outstanding amount significantly. The respondent also contested liability for freight charges, warehousing charges, and interest claimed by the petitioner.3. The court emphasized that a winding-up petition cannot be used to enforce payment where a bona fide dispute exists. Citing legal precedents, the court highlighted that the defense raised by the respondent must be in good faith, likely to succeed in law, and supported by prima facie evidence. The court considered the principles established in previous cases to assess the validity of the dispute.4. The court acknowledged that the disputed claims between the parties involved complex interpretations of supply order terms, unsuitable for summary proceedings. It was determined that the respondent's defenses appeared bona fide and were likely to succeed in a civil court, indicating that a winding-up order was not appropriate in this case.5. Additionally, the court noted that a civil suit for recovery of the disputed amount was already pending between the parties. Considering this ongoing legal action, the court declined to grant the winding-up petition as it would essentially duplicate the relief sought in the civil suit. Citing a similar decision by the High Court of Punjab and Haryana, the court dismissed the winding-up petition.6. Ultimately, the court ruled in favor of the respondent, dismissing the winding-up petition due to the existence of a bona fide dispute, ongoing civil litigation, and the unsuitability of winding-up proceedings for resolving complex contractual disputes.