2008 (2) TMI 634 - HC - Companies Law

Court emphasizes clarity in debt acknowledgment for winding up petitions

The court found that the statutory notice and acknowledgment of debt provided by the petitioner were not sufficient to establish the respondent's ... Winding up – Company when deemed unable to pay its debts - Held that:- Perusal of the letter dated March 21, 2002 would only show that the deputy manager of the respondent-company informed the petitioner-company that they shall resume the normal production and shall start releasing the payments against the petitioner's outstanding bills as per the understanding with the petitioner. Therefore, this letter dated March 21, 2002, is not an unambiguous and categorical admission of a specified amount due and payable by the respondent to the petitioner. Similarly, the balance confirmation report dated July 19, 2002, cannot also be said to be an unconditional admission of the debts by the respondent. According to the respondent, they have rejected some materials sup plied by the petitioner for which proper credit was not given by the petitioner. They have also filed certain letters in the additional typed set of papers to show that some materials were rejected and they asked for credit notes towards the value of the same.In such circumstances, the above company petition filed by the petitioner is misconceived and if at all the petitioner is aggrieved, they have to approach the proper forum. Also rejecting the arguments of learned counsel for the respondent that there is statutory compliance of sending the notice before filing the petition. Appeal dismissed. Issues:- Validity of statutory notice and acknowledgment of debt- Admissibility of liability by respondent- Proper service of statutory noticeValidity of statutory notice and acknowledgment of debt:The petitioner filed a company petition seeking winding up of the respondent-company due to unpaid invoices and interest. The petitioner claimed that the respondent failed to make payments despite multiple notices. The respondent disputed the debt, alleging rejection of supplied materials and questioning the validity of notices. The petitioner argued that a letter and a balance confirmation report proved the respondent's liability. However, the court found that the letter and report did not unambiguously admit to a specific amount due, and the respondent's rejection of materials raised doubts on the debt's validity. Therefore, the court deemed the company petition misconceived and suggested the petitioner seek alternative recourse.Admissibility of liability by respondent:The petitioner relied on a letter and a balance confirmation report to establish the respondent's admission of debt. The court analyzed these documents and concluded that they did not unequivocally confirm the debt owed by the respondent. The respondent contended that the materials supplied were rejected, leading to discrepancies in the debt claimed by the petitioner. This raised doubts about the legitimacy of the debt and the respondent's liability. Consequently, the court dismissed the company petition, emphasizing the lack of clear admission of debt by the respondent.Proper service of statutory notice:Regarding the service of statutory notice, the court held that sending a notice to the correct address via registered post with acknowledgment due constituted valid service. The court rejected the respondent's argument challenging the service of notice. However, the court clarified that the respondent could contest the receipt of the notice and the method of service in a separate legal proceeding if initiated by the petitioner. Ultimately, the court dismissed the company petition, highlighting the importance of proper service and the need for clear admission of debt in such cases.