2003 (2) TMI 411 - HC - Companies Law

Court dismisses company petition under Companies Act sections 433(e) and (f) due to genuine payment dispute.

The court dismissed the company petition under sections 433(e) and (f) of the Companies Act, as the respondent's dispute over payment for supplied goods ... Winding up - Circumstances in which a company may be wound up Issues:1. Company petition filed under section 433(e) and (f) of the Companies Act to wind up the respondent-company.2. Dispute over payment for supplied goods and alleged defects in the goods supplied.Analysis:1. The petitioner claimed that the respondent owed Rs. 18,929.27 for goods supplied, with interest, and had made repeated demands for payment. The respondent, on the other hand, contended that they had paid Rs. 1,20,000 and disputed the amount due, citing defects in two bearings supplied by the petitioner. The respondent argued that they had informed the petitioner about the defects and expected replacements, which were not provided. The respondent retained the balance amount to ensure the defective goods were replaced. The court noted the bona fide nature of the dispute raised by the respondent and found no prima facie case for admitting the company petition.2. The petitioner relied on the presumption of acceptance of goods under section 42 of the Sale of Goods Act, emphasizing that the respondent had utilized the supplied goods. However, the court found that the respondent's dispute regarding defective goods, as communicated to the petitioner before the statutory notice, was genuine. The respondent had provided detailed correspondence and evidence of defects in the supplied bearings, indicating a bona fide reason for withholding payment. The court observed that the petitioner's failure to replace the defective goods contributed to the dispute, and the respondent's position was justified in retaining the balance amount until replacements were made. The court concluded that the petitioner had not established a prima facie case to warrant winding up the respondent-company.3. The court highlighted the extensive communication between the parties regarding the alleged defects, including letters, fax messages, and debit advice related to the defective bearings. The respondent consistently requested replacements for the faulty goods before settling the remaining payment. The court found that the respondent's actions were reasonable given the circumstances and the petitioner's failure to address the defective goods. Ultimately, the court dismissed the company petition, advising the petitioner to seek recovery through the appropriate civil court after substantiating the claim, as the respondent's dispute over the defective goods was deemed legitimate and not a basis for winding up the company.