1999 (8) TMI 739 - HC - Companies Law

Court dismisses petition under Companies Act due to genuine debt dispute. Parties to bear own costs.

Twinkle Exports Versus Tartans Infomark Ltd.

The court dismissed the petition under sections 433(a), 434, and 439 of the Companies Act, 1956, as the debt was genuinely disputed by the respondent. The ... Winding up - Circumstances in which a company may be wound up Issues:Petition under sections 433(a), 434, and 439 of the Companies Act, 1956 against respondent for non-payment and breach of contract.Analysis:1. The petitioner offered quotations for costume jewellery items to the respondent, who placed an order for supply within 90 days. The respondent was to be paid a commission of US $58,000. The petitioner sought an extension for supplying the goods, agreed upon by the respondent. An inspection was carried out, goods found in order, but respondent failed to arrange a fresh letter of credit as promised.2. Despite repeated requests, respondent did not arrange the letter of credit, leading to a notice from the petitioner for payment. Respondent denied receiving the commission and disputed the inspection details. Petitioner claimed the respondent owed Rs. 5,25,000 along with interest.3. Petitioner accused respondent of a fraudulent scheme to collect advance commissions without fulfilling obligations, deceiving exporters. Respondent argued it fulfilled obligations by arranging the letter of credit, and petitioner failed to deliver within the stipulated period, causing the letter of credit to expire.4. The letters exchanged between the parties highlighted delays, disputes over inspections, and non-compliance with the terms of the agreement. Respondent contended that the petitioner's actions were in violation of the agreement terms, leading to the expiration of the letter of credit and losses for the buyer.5. The respondent disputed the debt, citing the petitioner's failure to adhere to the agreement terms. Citing legal precedents, the respondent argued that a winding-up petition is not appropriate when the debt is genuinely disputed. The court dismissed the petition, directing each party to bear their own costs.In conclusion, the judgment dismissed the petition as the debt was genuinely disputed by the respondent due to the petitioner's failure to adhere to the agreement terms, leading to the expiration of the letter of credit. The court emphasized that a winding-up petition is not suitable when the debt is legitimately contested, and parties were directed to bear their own costs.