1974 (10) TMI 46 - HC - Companies Law

Appeal allowed, winding up order set aside. Payment directed from company's deposit. Majority creditors' wishes prevail.

The appeal was allowed, and the order for winding up was set aside. The court directed the payment of the petitioning-creditor's claim and the claims of ... Company when deemed unable to pay its debts, Winding up - Meetings to ascertain wishes of creditors or contributors Issues Involved:1. Preliminary objection regarding the particulars of the debt in the winding-up petition.2. Bona fide dispute over the debt claimed by the petitioning-creditor.3. Consideration of the wishes of other creditors opposing the winding-up.Detailed Analysis:1. Preliminary Objection Regarding the Particulars of the Debt in the Winding-up PetitionThe company raised a preliminary objection that the winding-up petition did not contain any particulars of the alleged debt, thus not complying with the Companies (Court) Rules, 1959. The learned company judge rejected this objection, stating that in cases where the petition is based on a deemed inability to pay due to non-compliance with a statutory notice under Section 434(a) of the Companies Act, 1956, there is no need to provide particulars of the debt. The judge emphasized that the petition should set out:- The petition is by a creditor for a certain amount.- A statutory notice in respect of that claim was served on a particular date.- The company neglected to comply with the notice within three weeks.The company argued that the petition must disclose a cause of action, indicating a debt and non-compliance with the statutory notice. The court noted that particulars of the debt must be given either in the petition or the statutory notice annexed to the petition. In this case, the petition lacked such particulars, but since the company admitted the debt through its counsel, this objection lost relevance.2. Bona Fide Dispute Over the Debt Claimed by the Petitioning-CreditorThe company contended that there was a bona fide dispute over the debt, suggesting that some bills were not received, and there were disputes over certain amounts. The court found that the company failed to explain any dispute concerning the balance amount, which exceeded the statutory figure of Rs. 500. The company had admitted the debt in court, and consent terms were drawn up, although not filed. The court concluded that there was no bona fide dispute affecting the winding-up petition.3. Consideration of the Wishes of Other Creditors Opposing the Winding-upSection 557 of the Companies Act, 1956, allows the court to consider the wishes of the creditors. Eight creditors with claims aggregating Rs. 7,68,000 opposed the winding-up, while some creditors with claims totaling Rs. 3,03,862.07 supported it. The court noted discrepancies in the figures presented and considered the actual claims of creditors supporting the winding-up to be around Rs. 1,75,000, excluding certain disputed claims.The court emphasized that the wishes of the creditors must be based on reasonable grounds. The opposing creditors argued that the company was commercially solvent, had competent management, and could make payments in the near future. The court found sufficient material on record to support the view that the company was commercially solvent, with substantial assets and payments made to creditors.The court concluded that the wishes of the creditors opposing the winding-up were reasonable and supported by evidence. The learned company judge erred in dismissing these wishes as mere statements. The court also noted that winding up the company would not benefit the petitioning-creditor or the creditors generally, as the company had the means to pay its debts.ConclusionThe appeal was allowed, and the order for winding up was set aside. The court directed the payment of the petitioning-creditor's claim and the claims of other supporting creditors from the deposit made by the company. The application for stay by Turner Hoare & Company Ltd. was rejected. The court emphasized that the wishes of the majority creditors, based on reasonable grounds, should prevail, and winding up the company was not justified in this case.