TaxTMI 
TaxTMI 
1988 (9) TMI 268
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petition is only a pressure tactic. Till August 17, 1987, trading members of the company were directly buying and selling shares in the premises of the company. With effect from August 17, 1987, a settlement procedure was adopted by which the transactions of buying and selling shares and clearance of liabilities were made through the intervention of the company. Settlement period was fixed as 14 days. Settlement is not on the basis of individual dealings. The entire purchases and sales of a member for that period will be taken into account and the balance struck. The company collects and pays on the basis of details of purchases and sales given by the trading members. The company is neither a purchaser nor a seller. Shares are handed ov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e amount due to Mr. Joy is not by way of purchase of shares, but something else which the company cannot take into account in making the payment due to him. He says that he will settle his liability directly with Mr. Joy and that for that reason the company cannot withhold payment. It is not disputed that the company is having assets worth more than Rs. 37 lakhs. There is no case that it has any other liability or that it is unable to discharge the liability to the petitioner. On the basis of the order in O.P. No. 7225 of 1987 produced as exhibit R-1(a), the company issued a notice to the petitioner to produce his accounts and records to settle the admitted transaction with Mr. Joy. Without complying with that notice, the present petition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e cases. The interest of the company and its members, shareholders and creditors as a whole is one of the considerations that will have to weigh with the court. The machinery for winding up will not be allowed to be utilised merely as a means of realising debts due from a company. It is not a legitimate means of seeking to enforce payment of debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed. It can even be stigmatised as a scandalous abuse of the_process of the court. A winding up order will not be made on a creditor's petition if it would not benefit him or the company's creditors generally. An order under section 433(e) of the Companies....
X X X X Extracts X X X X
X X X X Extracts X X X X
....its debts" and not "neglect to pay". But even in such cases of "neglect to pay", all the relevant considerations will have to weigh with the court before ordering winding up. A contingent or conditional liability is not a debt unless the contingency or condition has happened. A bona fide dispute with a conditional offer as in this case cannot be taken as "neglect to pay" within section 434(1)(a). If there is no neglect in the strict sense, the deeming provision of section 434(1)(a) does not come into the picture at all. It must be neglect to pay an undisputed debt in the sense that it is a debt on which the dispute of the company is not bona fide. Further, in order to apply section 434(1)(a), there must be a demand satisfying the formalitie....