Court dismisses respondent's defence in winding-up petition, directs payment within 8 weeks to avoid admission

The court dismissed the respondent-company's defence against a winding-up petition for non-payment under derivative agreements, finding it not bona fide due to the company's prior authorization and actions. The court directed the company to deposit the disputed amount within eight weeks to avoid admission of the petition, emphasizing the need for a substantial defence in winding-up proceedings. Failure to comply would result in admission of the petition and publication in local newspapers, with non-compliance leading to dismissal for non-prosecution.

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Issues:
1. Alleged non-payment of a sum of Rs. 2,94,60,698 by the respondent-company under a credit arrangement letter and an internal swaps and derivative association master agreement.
2. Dispute regarding derivative transactions and agreements entered into by the company with the petitioner-bank.
3. Validity of the defence raised by the company against the winding-up petition.
4. Requirement for the respondent-company to deposit the disputed amount to avoid admission of the winding-up petition.

Analysis:
1. The petitioner filed a winding-up petition against the respondent-company for non-payment of Rs. 2,94,60,698 under a credit arrangement letter and an internal swaps and derivative association master agreement. The agreements allowed the company to enter into derivative transactions with the petitioner-bank to hedge currency risks. The company disputed the liability, citing issues with specific transactions and the borrowing limits imposed by its articles of association.

2. The company claimed that certain transactions were illegal and not binding, contending that the agreements were executed in excess of borrowing limits and without proper authority. However, the court found that the company's defence was not bona fide as it had authorized the agreements, made payments, and issued a dishonored cheque related to the transactions in question.

3. The court noted that the company's defence would be examined in the pending suit and emphasized that the observations made were prima facie and limited to the winding-up proceedings. The court rejected the argument that filing a suit before a statutory notice automatically makes a dispute bona fide, stressing the need for substantial defence against winding-up proceedings.

4. The court directed the respondent-company to deposit the disputed amount within eight weeks to avoid admission of the winding-up petition. Failure to comply would lead to the petition being admitted, and the petitioner would advertise it in local newspapers. Additionally, the petitioner was instructed to deposit publication charges, with non-compliance resulting in dismissal of the petition for non-prosecution. If the amount was deposited as directed, it would be credited to the original application.

Overall, the judgment addressed the disputed non-payment issue, evaluated the company's defence, and set a deadline for depositing the disputed amount to prevent the winding-up petition from being admitted.

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