2002 (10) TMI 712 - HC - Companies Law

Company Winding-Up Order Granted for Unpaid Debts

The Court granted the petition filed under section 433(e) of the Companies Act, 1956, ordering the winding up of the respondent-company due to unpaid ... Winding up - Circumstances in which a company may be wound up Issues:Petition filed under section 433(e) of the Companies Act, 1956 for winding up the respondent-company due to unpaid debts.Analysis:1. The petitioner, engaged in manufacturing/distribution of specific products, sought winding up of the respondent-company due to unpaid dues amounting to Rs. 43,33,732.78. The respondent denied liability, claiming inferior quality supplies led to customer rejections. Despite demands and statutory notice, the debt remained unpaid, leading to the petition under section 433(e) of the Act.2. The respondent, in defense, argued lack of privity of contract, sub-quality supplies, and cancellation of certain orders. The Court, after considering the defense, found it lacking in good faith and substantiality, allowing the petition to proceed.3. The respondent contended that the petitioner should seek civil court intervention for contract enforcement, citing a previous case. However, the petitioner argued that disputed debts, if not in good faith, can warrant winding up under section 433(e), as per legal precedents.4. The Court, after prima facie assessment, deemed the defense frivolous and unsubstantial, aligning with legal principles that genuine, substantial defenses prevent winding up. The petitioner's claim of unpaid dues, lack of good faith in defense, and commercial insolvency of the respondent justified the winding-up order.5. In light of legal interpretations and factual findings, the Court granted the petition, ordering the winding up of the respondent-company. An Official Liquidator was appointed, and specific steps were outlined for implementation, including publication in a newspaper and depositing initial expenses.This detailed analysis of the judgment highlights the legal arguments, precedents, and factual considerations leading to the decision to wind up the respondent-company based on unpaid debts and lack of good faith in defense.