2004 (8) TMI 684 - HC - Companies Law

Appeal Overturns Order for Winding-Up Petition; Defense Deemed Bona Fide; Proceedings Adjourned Pending Suit Outcome.

SRC Steel (P) Ltd. Versus Bharat Industrial Corporation Ltd.

SRC Steel (P) Ltd. Versus Bharat Industrial Corporation Ltd. - 2005 (4) CHN 343 Issues Involved:1. Admissibility of the winding-up petition.2. Nature of the debt and whether it is bona fide disputed.3. Concurrent proceedings in the Company Court and Suit Court.4. The discretionary power of the Company Court in admitting the winding-up petition.Summary:1. Admissibility of the winding-up petition:The appeal challenges the receiving order passed by the Company Court admitting the respondent's petition for winding up of the appellant company and directing advertisements. The respondent claimed a debt of Rs. 52.33 lac for goods supplied, which the appellant disputed, arguing that the transactions were not straightforward sales but involved a commission-based arrangement for delivery orders from SAIL.2. Nature of the debt and whether it is bona fide disputed:The appellant admitted the outstanding amount but claimed damages for non-supply of agreed quantities of steel, asserting a counter-claim for breach of contract. The court examined whether the debt was bona fide disputed. The appellant's defense included allegations of oral agreements and lack of documentary evidence for the promised supplies and the claimed damages. The court emphasized that the company must show a reasonable ground for not paying the debt, and mere assertions without evidence do not suffice.3. Concurrent proceedings in the Company Court and Suit Court:Both parties had approached the Suit Court for reliefs before the judgment in the winding-up petition. The court discussed whether the petitioning creditor could pursue remedies in both forums. It was held that there is no bar in the Companies Act or Civil Code preventing concurrent proceedings. The Company Court has the power to stay its proceedings or restrain parties from proceeding elsewhere to avoid parallel adjudication of the same claim.4. The discretionary power of the Company Court in admitting the winding-up petition:The court clarified that the discretion in admitting a winding-up petition is exercised after determining whether the debt is bona fide disputed. The Company Court must find the debt to be indisputable before admitting the petition. The court found that the appellant's defense, although not positively good, could not be ruled out as bona fide at this stage. Therefore, the winding-up petition was not admitted, and the proceedings were adjourned until the disposal of the suit.Conclusion:The appeal was allowed, setting aside the order under appeal. The winding-up petition was adjourned until the suit's disposal, with costs to abide by the result of the suit.