2008 (5) TMI 400 - HC - Companies Law

Court dismisses winding up application due to company's defenses; emphasizes not a debt collection court.

The court ruled in favor of dismissing the winding up application due to the company's arguable defenses and lack of clear acknowledgment of debt. The ... Winding up - Circumstances in which a company may be wound up - Held that:- This Court expresses no opinion on whether the documents submitted to the income-tax authorities were genuine or not. The issue of whether the documents were, in fact, genuine and whether Mr. Kumar had authority to sign the documents are issues which can only be tried in regular trial. The receipt of the bills have not been acknowledged. The question of whether any bills, as alleged, were actually raised and served on the company requires adjudication upon evidence. It cannot be held that the company has no defence at all to the claim of the petitioning creditor. The company has an arguable case. The Company Court is not a debt collecting court. In view of the defence raised by the company, the claim of the petitioning creditor is relegated to a suit. The winding up application is dismissed. Issues:1. Locus standi of the petitioning creditor to file winding up application.2. Outstanding dues of the partnership firm.3. Admissibility of winding up application based on company's defence.4. Scrutiny of accounts and acknowledgement of debt.Analysis:1. The primary issue in this case revolves around the locus standi of the petitioning creditor to file the winding up application. The company challenged the creditor's standing, arguing that the transactions were with the partnership firm, not the proprietorship concern of the creditor. However, the court found it difficult to accept this argument, emphasizing that the creditor, being a partner and legal heir of the deceased partner, had the necessary standing to pursue the debt due to the firm.2. Concerning the outstanding dues of the partnership firm, the court noted that the firm had rendered various services to the company, including advertising and publicity, for which bills were raised. Despite the company's acknowledgment of liability and assurances of payment, a substantial amount remained outstanding. The court highlighted the continuous nature of the transactions and rejected the company's contention that the bills were not received or disputed.3. The admissibility of the winding up application hinged on the company's defence to the creditor's claim. The court clarified that for a winding up application to be entertained, the company must lack a plausible defence to the claim. In this case, the company raised objections regarding the authenticity of documents submitted to income-tax authorities and disputed the authority of the signatory. As there was no clear acknowledgement of debt and the company had raised arguable defences, the court dismissed the winding up application.4. Lastly, the court emphasized that the Company Court is not a debt collecting court and that the adjudication of the creditor's claim required a thorough examination of accounts and evidence. Disputes regarding the genuineness of documents and the authority of signatories were deemed issues for a regular trial, not a winding up proceeding. Due to the company's arguable defences and lack of clear acknowledgement of debt, the court ruled in favor of dismissing the winding up application, relegating the creditor's claim to a separate suit.