2016 (4) TMI 434 - HC - Companies Law

Winding-up petition dismissed as court rules in favor of respondent company. Defense deemed bona fide.

The court dismissed the winding-up petition, ruling in favor of the respondent company. The court found the defense raised by the respondent to be bona ... Winding up petition - Held that:- The present case does not fall within the parameters of admitted liability enabling the Court to pass the winding up order, much less admit the petition as the defence raised by the respondent company is bonafide and not malafide. The reproduction of the e-mails, ibid, leaves no manner of doubt that the respondent company had placed the Purchase Order vis-a-vis CP 6 MT at the rate of ₹ 12,250/-, Kg. whereas the petitioner company had offered the rate at the rate of ₹ 12,750/- and ultimately agreed for ₹ 12,250/- Kg., but the schedule of payment was deferred month-wise owing to the shortage of BF3 gas, in essence, they have agreed to supply 1 MT spanning over six months. The affidavit filed in pursuance to the order of this Court in view of the correspondences is not correct and rather the aforementioned correspondences leave this Court to an irresistible conclusion that there was a concluded contract for supply of CP. There is no dispute that prior to the placing of the Purchase Order dated 18.8.2010, the respondent company had placed the Purchase Order with regard to CT and had been supplied the material worth ₹ 3,20,64,210/-, but owing to the non-supply of CP, the company had purchased the material from other source at a higher price, for which the civil suit is pending and the same shall be proved in those proceedings and the petitioner company shall have a right to rebut the same. In view, at this stage, the petitioner company cannot be permitted to continue, much less seek winding up order of admission. Issues Involved:1. Whether the dispute raised by the defense is bona fide.2. Whether the liability is disputed.3. Applicability of Section 434 of the Companies Act, 1956.4. Admissibility of the winding-up petition.Detailed Analysis:1. Whether the dispute raised by the defense is bona fide:The court examined whether the dispute raised by the respondent company was bona fide. The petitioner company, a creditor, claimed that the respondent company owed them Rs. 3,20,64,210 for the supply of Cefixime Trihydrate (CT) as per various invoices. The respondent company, however, contended that they had suffered a loss of Rs. 3.30 crores due to the non-supply of another product, Cefpodoxime Proxetil (CP), and had set off/adjusted this amount against the claimed debt. The court noted that the respondent had communicated this set-off in a legal notice dated 31.10.2011 and had filed a civil suit for recovery/damages of Rs. 3.30 crores. The court found the defense bona fide, noting that the respondent had raised the issue of non-supply and resultant losses well before the winding-up petition was filed.2. Whether the liability is disputed:The court analyzed the correspondences between the parties, which included various emails and legal notices. It was established that the petitioner company had acknowledged its inability to supply the required 6 MT of CP due to a shortage of BF3 gas and had communicated this to the respondent. Despite this, the respondent placed a Purchase Order for 6 MT of CP. The petitioner company later sought an amendment in the rate due to increased costs, which the respondent did not agree to. The court concluded that there was a genuine dispute regarding the liability, as the respondent had consistently maintained that they had suffered losses due to the non-supply of CP and had adjusted the amount against the debt claimed by the petitioner.3. Applicability of Section 434 of the Companies Act, 1956:The petitioner argued that the case fell within the parameters of Section 434 of the Companies Act, 1956, which pertains to the winding up of companies unable to pay their debts. However, the court referred to the precedent set in Madhusudan Gordhandas and Co. vs. Madhu Woolen Industries Private Ltd., AIR 1971 (SC) 2600, which states that if the defense is bona fide and substantial, the court will not order the winding up of the company. The court found that the defense raised by the respondent was bona fide and substantial, thus Section 434 did not apply in this case.4. Admissibility of the winding-up petition:The court considered whether the winding-up petition was admissible given the disputed liability. It referred to several judgments, including Martin & Harris Pvt. Ltd. vs. Organon (India) Pvt. Ltd., Kuoni Travel (India) Private Limited vs. Tecumseh Products India Private Limited, and others, which establish that a winding-up petition is not maintainable if the debt is disputed bona fide. The court found that the respondent had consistently disputed the debt and had filed a civil suit for recovery of damages. Therefore, the court concluded that the winding-up petition was not admissible.Conclusion:The court dismissed the winding-up petition, finding that the defense raised by the respondent was bona fide and that the liability was genuinely disputed. The court held that the petitioner should seek remedy through the civil suit already filed by the respondent, rather than through a winding-up petition. The petitioner was advised to pursue their claims in the appropriate legal forum, and the trial court was directed to adjudicate the matter based on the evidence presented by both parties.