2005 (2) TMI 898 - HC - Companies Law

Court Orders Winding-Up Petition: Respondent Must Pay Rs. 1,52,471/- with Interest or Face Publication of Citations.

Sheetal Fabrics Versus Coir Cushions Ltd.

Sheetal Fabrics Versus Coir Cushions Ltd. - TMI Issues Involved:1. Whether the respondent company is indebted to the petitioner and unable to pay its debt.2. Whether the statutory notice was served upon the respondent company.3. Whether the petitioner's claim is barred by limitation.4. Whether the petitioner firm is registered and capable of filing the present proceedings.5. Whether the respondent company is commercially solvent.6. Whether a petition based on a running account is maintainable.Detailed Analysis:1. Indebtedness and Inability to Pay Debt:The petitioner sought the winding up of the respondent company under Sections 433(e), 434, and 439 of the Companies Act, 1956, on the ground that the respondent company was indebted to the petitioner for Rs. 3,52,471/- and unable to pay the debt. The petitioner supplied furnishing fabrics to the respondent company from June 3, 1992, to August 1, 1995, for a total value of Rs. 5,49,221/-. Out of this amount, the respondent company paid only Rs. 1,96,750/-, leaving a balance of Rs. 3,52,471/-. The petitioner also claimed interest on the overdue payment at 18% per annum, amounting to Rs. 3,20,683/-, making a total of Rs. 6,73,154/-. The respondent company contested the petition, claiming it was commercially solvent and able to pay its debts.2. Service of Statutory Notice:The petitioner sent a statutory notice dated July 28, 1998, which was allegedly received by the respondent company on August 3, 1998. The petitioner provided a postal receipt and an acknowledgment card signed on behalf of the respondent company. The respondent company denied receiving the statutory notice. However, the court noted that the petitioner enclosed the postal receipt and AD card with the correct address of the respondent company, and the respondent did not press this plea during arguments.3. Limitation:The respondent company argued that the petitioner's claim was time-barred. However, the court observed that the last payment was made on September 15, 1995, and the petition was filed on September 9, 1998, within three years of the last payment. Thus, the claim was not time-barred.4. Registration of Petitioner Firm:The respondent company contended that the petitioner firm was not registered and thus barred under Section 69 of the Partnership Act. The petitioner, however, provided evidence of its registration, which was not challenged by the respondent company. Therefore, the court found that the petitioner firm was registered and capable of filing the proceedings.5. Commercial Solvency:The respondent company claimed to be commercially solvent and able to pay its debts as and when established. The court, however, noted that the respondent company admitted the petitioner's liability in its books of accounts and balance sheet, which constituted an acknowledgment of debt. The court held that once the debt was acknowledged, the defense of commercial solvency did not hold water.6. Petition Based on Running Account:The respondent company argued that the petition was not maintainable as it was based on a running account. The court referred to the judgment in Rishi Pal Gupta v. S.J. Knitting and Finishing Mills (P) Ltd., which held that a winding-up petition based on a running account was not maintainable. However, the court distinguished the present case, noting that apart from the running account, there was a clear acknowledgment of debt by the respondent company in its books of accounts and balance sheet. The court concluded that the petition was maintainable as it was based on the acknowledgment of debt, not merely on a running account.Conclusion:The court admitted the petition for hearing, directed the publication of citations in newspapers, and allowed the respondent company to deposit the balance amount of Rs. 1,52,471/- along with interest at 6% per annum within six weeks. If the amount was not deposited, the petitioner could proceed with the publication of citations. The case was listed for further orders on July 12, 2005.