2011 (7) TMI 737 - HC - Companies Law

Winding Up Application Admitted Against Company for Lack of Valid Defense: Court Emphasizes Commercial Morality

The court admitted the winding up application against the company due to the absence of a valid defense. Despite the company's contentions of unauthorized ... Application for winding up - Time limitation - The making of the admission or acknowledgment of liability, that the sum of Rs. 22,56,571 was payable by the company to the petitioning-creditor as on March 31, 2003, is admitted - Upon segregation of the value of the said 13 bills which make up the entire claim of the petitioning-creditor, nothing was payable by the company to the petitioning-creditor, according to the company - As the payment pattern as reflected in the statement appended to the statutory notice shows part payment and payment is made till July 10, 2009, limitation is saved - This is a case where the company has not only absolutely no defence but has tried its best, to deceive the court, into believing by false projection of statement of accounts and absolutely erroneous allegations that no work was done and false bills were raised by the petitioning-creditor, that the company has a defence. Such a company cannot be said to have any commercial morality - this winding up application is admitted Issues:1. Claim of outstanding payment by the petitioning-creditor against the company.2. Company's defense against the outstanding payment claim.3. Consideration of limitation period for the claim.4. Analysis of the payment pattern and defense presented by the company.5. Legal principles governing winding up applications without substantial defense.Analysis:1. The petitioning-creditor claimed a sum of Rs. 20,43,158 as outstanding payment for works performed between 1998 and 2009. The company acknowledged a balance of Rs. 22,56,571 as of March 31, 2003, but disputed the current claim, alleging unauthorized bills and excess payments made.2. The company contended that certain bills were unauthorized, without work orders, and raised in collusion with tea estate staff. They argued that the acknowledgment of debt was obtained through undue influence and that excess payments were made, totaling Rs. 2,65,977.3. The company raised a defense of limitation and initiated a separate suit for recovery of alleged excess payments. The court considered the limitation period and the ongoing suit, but noted the continuous part payments made by the company until July 2009, saving the claim from being time-barred.4. The court scrutinized the payment pattern and defense presented by the company, finding discrepancies in the company's claims of excess payments and unauthorized bills. Lack of substantial evidence to refute the petitioning-creditor's claim and reliance on statement of accounts were highlighted.5. Referring to legal precedents, the court emphasized that a winding up application should not be admitted if a good defense exists. It noted that where no defense or a deceptive defense is presented, winding up may be justified. The court found the company's defense lacking in commercial morality, justifying the admission of the winding up application due to the absence of a valid defense.This detailed analysis considers the petitioning-creditor's claim, the company's defense, the limitation period, payment patterns, legal principles governing winding up applications, and the court's findings based on the evidence presented during the proceedings.