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of <h1>Petition to Wind Up Company Dismissed for Unproven Debt - Importance of Debt Proof in Winding-Up Cases</h1> <h3>LKP Merchant Financing Ltd., In re</h3> LKP Merchant Financing Ltd., In re - [2003] 42 SCL 863 (BOM.) Issues Involved:1. Petition for winding-up under sections 439, 433, and 434 of the Companies Act, 1956.2. Alleged failure to pay debt by the respondent company.3. Dispute over the ascertained debt and its enforceability.4. Bona fide dispute of the debt by the respondent.5. Financial condition and substratum of the respondent company.6. Just and equitable grounds for winding-up.Issue-wise Detailed Analysis:1. Petition for winding-up under sections 439, 433, and 434 of the Companies Act, 1956:The petitioner sought the winding-up of the respondent company under section 439 read with sections 433 and 434 of the Companies Act, 1956, and the appointment of an Official Liquidator. The petitioner alleged that the respondent failed to pay an alleged debt of Rs. 52,22,114.2. Alleged failure to pay debt by the respondent company:The petitioner claimed that they had deposited Rs. 5 crores with the respondent under a portfolio management scheme, and after partial refunds and payments, a balance of Rs. 50,22,114 remained unpaid. The petitioner issued a statutory notice demanding the payment within 21 days, which the respondent failed to comply with, leading to the filing of the winding-up petition.3. Dispute over the ascertained debt and its enforceability:The respondent opposed the petition, arguing that no debt was due or payable and that the claim was time-barred and speculative. They contended that the returns on the invested amount were subject to market fluctuations and not a fixed or ascertained sum.4. Bona fide dispute of the debt by the respondent:The respondent provided a schedule of payments to assert that the entire amount of Rs. 5 crores and the accrued returns were fully paid. They argued that the dispute over the debt was bona fide and substantial, and the petitioner had not established the debt payable by the company.5. Financial condition and substratum of the respondent company:The petitioner argued that the respondent company had incurred significant losses and its liabilities exceeded its assets, making it just and equitable to wind up the company. They cited several judgments to support their claim that the company had lost its substratum and net worth.6. Just and equitable grounds for winding-up:The court found that the petitioner failed to establish the debt under section 433(e), which is a prerequisite for invoking section 433(f) on just and equitable grounds. The court emphasized that the proceedings under section 439 read with sections 433 and 434 are not of public interest litigation nature and the petitioner must establish its locus and the debt.Conclusion:The court concluded that the petitioner had not established the alleged debt of Rs. 52,61,918, which was bona fide disputed by the respondent. The court held that a running company employing over 300 employees and having an annual turnover of crores of rupees cannot be ordered to be wound up based on an unestablished debt. The petition was dismissed with no orders as to costs.
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