2007 (6) TMI 290 - HC - Companies Law

Court Orders Payment of Debt: Rs. 2,51,716 + 12% Interest

The court concluded that the respondent-company failed to discharge its debt to the petitioner-firm. The petitioner was entitled to recover the principal ... Company when deemed unable to pay its debts Issues Involved:1. Winding up of the respondent-company under sections 433(a), 434, and 439 of the Companies Act, 1956.2. Liability and acknowledgment of debt by the respondent-company.3. Dispute regarding the full and final settlement of the debt.4. Entitlement to customary interest at 18% per annum on delayed payments.5. Validity of the petition under sections 433 and 439 for realizing interest.Issue-wise Detailed Analysis:1. Winding up of the respondent-company under sections 433(a), 434, and 439 of the Companies Act, 1956:The petitioner-firm filed a petition for winding up of the respondent-company under sections 433(a), 434, and 439 of the Companies Act, 1956. The court noted that another creditor had filed a similar petition (C.P. No. 287 of 1999), which was admitted, and the instant petition was ordered to be heard along with it. The court concluded that the respondent-company had failed to discharge its debt to the petitioner-firm and thus, the petitioner-firm was entitled to recover the principal amount along with interest.2. Liability and acknowledgment of debt by the respondent-company:The petitioner-firm claimed that the respondent-company owed Rs. 5,51,716 as of September 30, 1997, and had made part payments leaving a balance of Rs. 2,51,716 as on March 28, 1998. The respondent-company acknowledged the debt in its balance sheet for the year 1997-98. The court found that the respondent-company had acknowledged its liability to pay the petitioner-firm.3. Dispute regarding the full and final settlement of the debt:The respondent-company argued that the payment of Rs. 2,99,550 was made as a full and final settlement of the debt. However, the court found no evidence to support this claim. The documents produced by the respondent-company did not show acceptance by the petitioner-firm, and there were no signatures from the petitioner-firm on the settlement documents. The court concluded that the payment was part of the debt and not a full settlement.4. Entitlement to customary interest at 18% per annum on delayed payments:The petitioner-firm claimed customary interest at 18% per annum on delayed payments. The court noted that the petitioner-firm had provided a certificate of deduction of tax at source under section 203 of the Income-tax Act, 1961, showing interest payments. However, the court found no mutually agreed rate of interest and considered the financial crisis faced by the respondent-company due to the sudden death of its directors. The court awarded interest at 12% per annum from March 28, 1998, till the date of realization.5. Validity of the petition under sections 433 and 439 for realizing interest:The respondent-company argued that a petition under sections 433 and 439 for realizing interest was not maintainable. The court rejected this argument, stating that once the company judge is seized of the matter regarding payment of dues and winding up, it is the proper forum for determining entitlement to interest to avoid multiplicity of litigation. The court relied on precedents from the Division Bench of the Punjab and Haryana High Court and other High Courts.Conclusion:The court concluded that the respondent-company had failed to discharge its debt to the petitioner-firm. The petitioner-firm was entitled to recover the principal amount of Rs. 2,51,716 with interest at 12% per annum from March 28, 1998, till the date of realization. The respondent-company was directed to pay the amount within two months, failing which it would be deemed unable to pay its debts and would be wound up. The petition was disposed of accordingly.