1999 (8) TMI 858 - HC - Companies Law

Dismissed winding up petition, creditor to pursue civil suit for payment. Instructions on deposit and legal action timeline.

The High Court dismissed the winding up petition, directing the creditor to pursue a civil suit to establish the claim for payment of goods supplied. The ... Winding up - Circumstances in which a company may be wound up Issues:Dismissal of winding up petition, claim for payment of goods supplied, rejection of goods by foreign buyer, dispute over debt, necessity of filing a civil suit.Dismissal of Winding Up Petition:The appeal was against the dismissal of a winding up petition by a single judge of the High Court. The petitioning creditor had supplied goods to the company, which were accepted and consumed without objection. A part payment was made, leaving a balance due. The defense claimed the goods were defective, delivered late, and rejected by the foreign buyer. The court noted the terms of the contract holding the supplier liable for claims if goods were defective or not sea-worthy. The foreign buyer indicated intent to lodge a claim for damages. The court observed that the debt was disputed bona fide, leading to the dismissal of the winding up petition and the creditor being directed to file a civil suit.Claim for Payment of Goods Supplied:The petitioning creditor claimed payment for goods supplied, including interest. The company's defense included allegations of defective goods, late delivery, and rejection by the foreign buyer. The court considered the part payment made by the company and the absence of evidence of goods rejection. It was noted that the defense's contentions needed to be proven in a civil suit, emphasizing the need for the company to secure the claim due to its financial position.Rejection of Goods by Foreign Buyer:The company contended that the goods supplied were rejected by the foreign buyer, citing letters as evidence. The court examined the authenticity of these letters and found that the dispute over the rejection needed to be resolved in a civil suit. The court emphasized the need for the company to secure the claim and prove its bona fide in disputing the debt.Dispute Over Debt:The court highlighted the principle that where a debt is disputed bona fide, winding up proceedings should not be ordered, and parties should resort to a civil suit. The determination of the animus behind the dispute involves considering the conduct of parties and the circumstances of the case. In this instance, the court found the debt to be genuinely disputed, warranting dismissal of the winding up petition and referral to a civil suit.Necessity of Filing a Civil Suit:The court emphasized the need for the petitioning creditor to file a civil suit to establish its claim against the company. The company was directed to deposit the balance sum with the court, which would be held in satisfaction of the claim. Failure to make the deposit would result in the restoration of the winding up petition. The creditor was granted liberty to take legal steps for establishing the claim within a specified period, failing which the company could apply for withdrawal of the deposited amount.In conclusion, the High Court's judgment dismissed the winding up petition, directing the petitioning creditor to pursue a civil suit to establish the claim for payment of goods supplied, considering the bona fide dispute over the debt and the necessity of securing the claim. The court outlined specific instructions regarding the deposit of the balance sum and the timeline for legal action, balancing the interests of both parties involved.