Company granted stay on winding-up petition, directed to pay creditor, resolve interest dispute

The court granted the company's application under Section 466 of the Companies Act for a permanent stay of the winding-up petition. The company made partial payments to certain creditors and was directed to pay the remaining principal amount due to one creditor within a specified period. The dispute over interest payment was unresolved, with the court emphasizing the company's financial solvency and the need to address genuine disputes through civil proceedings. The court also ordered the company to reimburse the official liquidator for expenses incurred due to the winding-up petition within a week to maintain the stay order.

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Issues:
1. Application under Section 466 of the Companies Act for stay of winding up proceeding.
2. Dispute regarding payment of interest to creditors.
3. Company's financial solvency and agreement to pay interest.

Analysis:
1. The judgment pertains to an application under Section 466 of the Companies Act filed by the company seeking a stay of the winding up proceeding. The company acknowledged its liability towards certain creditors and made partial payments towards the outstanding amounts. The court recorded these payments and directed the company to pay the remaining principal amount due to one of the creditors within a specified period. The court also kept the issue of interest payment open for future consideration.

2. The dispute arose when the company handed over the remaining principal amount to the creditor and asserted that the creditors were not entitled to claim any interest on the said amount. The creditors contended that the money was unreasonably withheld by the company, justifying their claim for interest. However, there was a disagreement regarding the entitlement to interest, particularly in the case of one creditor related to the supply of goods without a specific agreement for interest payment.

3. The court examined the arguments presented by both parties regarding the payment of interest. The company claimed that there was no express agreement to pay interest, and affidavits seeking waiver of interest were submitted in good faith to demonstrate willingness to pay the principal amount. The court considered the financial solvency of the company, noting that all principal amounts had been paid post the winding up petition advertisement, indicating the company's ability to meet its obligations. It emphasized that the winding up proceeding is not a tool for debt recovery and that genuine disputes should be addressed through regular civil proceedings. As the company raised a triable issue regarding interest payment, the court directed the matter to be resolved in a civil suit, ultimately allowing the application under Section 466 of the Companies Act for a permanent stay of the winding up petition.

Additionally, the official liquidator highlighted incurring expenses due to the advertised winding up petition and requested reimbursement from the company. The court directed the company to pay the stated expenditure within a week, with the consequence of automatic recall of the stay order in case of default.

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