TaxTMI 
TaxTMI 
2010 (9) TMI 229
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....6, calling upon the company to pay the amount within twenty one days from the date of the receipt of that notice, failing which the appellant was informed that appropriate legal proceedings would be initiated. Specific reference was also made to the deed of settlement dated 19-12-2003 and the terms of the Compromise entered into by the parties on 18-3-2006 in O.S. No. 9655 of 2005 before the City Civil Court at Bangalore. 4. The appellant replied to the said notice vide its letter dated 28-8-2008 stating that it had not violated any of the terms and conditions of the said deed of settlement or the compromise entered into by the parties and that whatever amount received by the appellant prior to 31-12-2006 from M/s. Solutions Protocol Sdn. Bhd., a company incorporated in Malaysia, was paid to the respondent. The appellant also denied the liability to pay the amount demanded. The respondent was advised not to indulge in any frivolous litigation against the appellant which would be at their risk and costs. 5. The Company Judge, however, admitted the company petition vide its order dated 17-9-2009 holding that the respondent company has established a prima facie case and ordered that....
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....lth (India) Private Limited] was originally incorporated as Medicom Solutions Private Limited. The name of the appellant company was changed to M/s. IBA Health (India) Private Limited in December 2005 following its acquisition by IBA Health (Asia) Holding Pte. Limited and IBA Health (Singapore) Pte. Limited, both of which are entities incorporated in Singapore. The paid up capital of the appellant company was in excess of Rs. 10.06 crores at the end of 31-3-2009 and its fixed assets and investments were in excess of Rs. 23.83 crores. At the end of 31-3-2009, it had made a profit of over Rs. 15 crores and there were over 300 employees working in the appellant company. The respondent is a company incorporated in Malaysia which was originally incorporated as Bhari Information Technology Systems Sdn. Bhd. and subsequently changed its name to Info-Drive Systems Sdn. Bhd. 9. Pursuant to a Co-operation Agreement dated 18-2-2002 entered into by the appellant and the respondent, the respondent introduced the appellant to one M/s. Solutions Protocol Sdn. Bhd. for the sale and supply of the appellant's Hospital Information Systems (HIS) Software applications and for that service, the appella....
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....d out that the invoice dated 2-2-2007 had no basis as it has been issued to M/s. IBA Health Limited, a company incorporated in Australia and was not a party to the Corporation agreement or the deed of settlement. The respondent company was advised not to indulge in any frivolous proceedings against the appellant, which it was stated would be at their risk and costs. The respondent company then issued a legal notice dated 16-8-2008 under section 434 of the Companies Act calling upon the appellant to pay the amount demanded within twenty one days from the date of receipt of notice, failing which the appellant was informed that appropriate legal proceedings would be initiated. The notice was replied by the appellant company vide letter dated 28-8-2008 denying its liability. Further, it was also pointed out that any attempt to initiate proceedings under section 433(e) of the Companies Act, 1956 has to fail as there is no debt payable by the appellant. 13. We are, in this case, primarily concerned with the terms and conditions of the deed of settlement followed by the terms of the compromise entered into by the parties on 18-3-2006 in O.S. No. 9655 of 2005. In order to examine the riva....
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....nd/or the HIS software applications modules contracted for the HICT Package I Contract with SP/JV only and it is conclusively agreed to that Bitech shall not in any circumstances whatsoever be entitled in law or otherwise for any payment for any other contracts including contracts involving. Medicom and Solutions Protocol from the Government of Malaysia or otherwise, whether in Malaysia or any other country. (4)The Parties hereto hereby acknowledge that the obligation of Medicom to pay Bitech the Settlement Sum shall always be subject to Medicom (or its representatives or nominees) having received payments of sufficient value from SP and/or SP/JV to enable the payment of up to the maximum amount of the Settlement Sum to be made on or before 31st December, 2006 (hereinafter referred to as the "Cut-Off Date") and in the event that such payments are not received on or before the Cut-off Date, the Parties agree that Bitech shall receive a proportion of the total value of payments received by Medicom (or its representatives or nominees) to be calculated in accordance with clause 2(i) and (ii) above. (5)Bitech may designate a nominee to receive payments from Medicom constituting the Se....
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....he Plaintiff in respect of Deed of Settlement mentioned in the suit, to M/s. IBA Health Limited, Australia in the understanding entered with them. (6)This compromise shall be binding on the parties and shall not be construed as creating an executable decree. ******" 15. The respondent company in company petition alleged that the appellant had failed to comply with the terms and conditions of the deed of settlement and since no payment was forthcoming from the appellant company and, it was under such circumstances, that a legal notice dated 16-8-2008 was issued on the appellant reminding of its obligations under the deed of settlement. Further, it is also stated that the respondent had reliably learnt that substantial payment had been received by the appellant from M/s. Solutions Protocol Sdn. Bhd. and, in spite of that, the appellant company had failed to honour its commitments under the deed of settlement. Reference was also made to clause (4) of the deed of settlement. 16. Appellant company in its statement of objections stated that it had paid the amount of RM 1,069,583.89 to the respondent company in due compliance with the terms of the deed of settlement. Further it was po....
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....ted debt. 18. In this connection, reference may be made to the judgment of this Court in Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 456 , in which this Court held that : "It is well-settled that a winding up petition is not a legitimate means of seeking to enforce payment of the 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, and under circumstances may be stigmatized as a scandalous abuse of the process of the court." 19. The above mentioned decision was later followed by this Court in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1971] 3 SCC 6321 . The principles laid down in the above mentioned judgment have again been reiterated by this Court in Mediquip Systems (P.) Ltd. v. Proxima Medical Systems (GMBH) [2005] 7 SCC 42 2, wherein this Court held that the defence raised by the appellant-company was a substantial one and not mere moonshine and had to be finally adjudicated upon on the merits before the appropriate forum. The above mentioned judgments were later followed by this Court in Vijay Industries v. N....
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.... then it should be paid. If the company refuses to pay, without good reason, it should not be able to avoid the statutory demand by proving, at the statutory demand stage, that it is solvent. In other words, commercial solvency can be seen as relevant as to whether there was a dispute as to the debt, not as a ground in itself, that means it cannot be characterized as a stand alone ground. 23. We have gone through various terms and conditions of the deed of settlement as also the compromise agreement and the allegations raised in the company petition and the objections filed by the appellant company. Both the parties are in agreement that they are bound by the terms and conditions of the deed of settlement. The respondent maintained the stand that substantial payments have been released by M/s. Solutions Protocol Sdn. Bhd. in respect of various invoices raised by the appellant on or before 31-12-2006, this is the cut-off date mentioned in the deed of settlement. The appellant company categorically denied that it had received payments on or before 31-12-2006, except the amount already received from M/s. Solutions Protocol Sdn. Bhd. had been paid over to the respondent. Clause (2) of....
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....as happened and it has become actually due. In the absence of any evidence, it is not possible to conclude that M/s. Solutions Protocol Sdn. Bhd. had in fact paid any amount to the appellant company towards commission charges due to the respondent company before the cut-off date. A legal notice prior to the institution of the company petition could be served on the company only in respect of a debt (then due) and a company could be wound up only if it was unable to pay its debts. In this case, there is a bona fide dispute as to whether the amount claimed is presently due and if, at all, it is due, whether the appellant company is liable to pay the sum unless they have received the same from M/s. Solutions Protocol Sdn. Bhd. Where the company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the company for the purposes of winding up. "Bona fide dispute" implies the existence of a substantial ground for the dispute raised. Where the Company Court is satisfied that a debt upon which a petition is founded is a hotly contested debt and also doubtful, the Company Court should not entertain such a petition. The Company Court is expected to go into the causes of ....