TaxTMI 
TaxTMI 
2015 (3) TMI 584
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....averments made in the writ petition are; (i) the stock would be transferred by the petitioning-creditor to the Company (ii) the Company shall affect the sales of the product manufactured by the petitioning-creditor to various customers upon issuing the invoices. (iii) the sale proceeds collected by the Company shall be deposited in the account of the petitioning-creditor after deducting the commission at the rate of 10.5% of the sale proceeds as well as taxes and other expenses. (iv) the Company shall submit form 'F' for stock transferred by the petitioning-creditor at the end of the subsequent month. (v) on failure to remit the sale proceed, after deducting the commission, taxes and other expenses within 40 days from the date of the invoice, the Company would be liable to pay and interest at the rate of 2% per month. By a subsequent letter dated April 10, 2001, the earlier agreement was modified as certain dues, responsibilities and activities entrusted upon the Company was withdrawn and to be performed and/or observed by the petitioning-creditor. The petitioning-creditor underwent in change of management and ownership and the new management adopted policies, which resulted into ....
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....aving self-life, if not taken back, an effort would be made to sale the cerebral stock. The petitioning-creditor replied the said letter alleging that a complaint has received against the Company for supply of the damages and expired products to the consumer with categorical assertion that an arrangement are being made to take the delivery of all the stocks in possession of the Company. The Company once again showed their intention in a letter dated February 7, 2011 to hand over the stocks against the payments and also upon execution of the requisite documents. It appears that a winding up petition was filed in the meantime being Company Petition No. 358 of 2011 and an application for appointment of the Professional Liquidator was taken out therein. On refusal to pass the interim relief on the said application, an appeal was taken out APOT No. 534 of 2011 which was disposed of on 24 November, 2011 relegating the parties to the Trial Court with further direction upon the Company to prepare the statement of stocks lying in their hand and to hand over the same to the learned Advocate on record of the petitioning-creditor. The petitioning-creditor subsequently withdrew the said writ p....
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....arned senior Counsel appearing for the Company submits that the suit filed by his client is not restricted to the damages but several other claims are made therein. He further submits that though the Civil suit for recovery of money and the winding up petition are different but once the party has approached the Civil Court raising a bona fide dispute, the winding up petition should not be allowed to be proceeded with simultaneously. He vehemently submits that the petitioner has filed a counter-claim in the said suit for recovery of the amount which is the subject matter of dispute in the winding up petition which is indicative of the fact that there is a bona fide dispute on such entitlement. According to him, the negligence should not be attributed to non-payment, as it requires something more to prove. He audaciously submits that Company is otherwise solvent which could be ascertained from the annual report and, therefore, the Court should not direct the winding up of the Company. By refuting the contention of the petitioning-creditor, he submits that the winding up of the Company is the discretionary relief as it is not meant for recovery of the money for which the Civil Court ....
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....(4) CHN 343, the Division Bench of this Court in somewhat similar circumstances held: "20. Mr. Sen rightly submitted that the presentation of a winding up petition for a just debt above the floor limit specified in section 434 (1) (a) of the Companies Act is an unconditionally given statutory right. Whether a suit or a counter-claim is filed by the company or not, this remedy can always be resorted to Mr. Mukherjee's submission was that although section 10 of the Code of Civil Procedure does not apply, perhaps in terms, in a situation of this nature, yet the Company Court has ample jurisdiction to stay or adjourn the hearing of the winding up petition pending the disposal of the suit. He drew our attention to the Company Court Rules Nos. 6 and 9, which respectively provide that the practice of the Courts and the Code will apply as far as practicable to company matters and that the inherent powers of the Court are not affected by the rules at all, According to Mr. Mukherjee, proceeding in two forums is not to be encouraged. The petitioning creditor having chosen the remedy of filing a counter-claim, and having....
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.... to negligence. Therefore, I should hold, upon the words of the Statute, that where a debt is bona fide disputed by the debtor, and the debtor alleges, for example, that the demand for goods sold and delivered is excessive and says that he, the debtor, is willing to pay such sum as he is either advised by competent valuers to pay, or as he himself considers a fair sum for the goods, then in that case he has not neglected to pay, and is not within the wording of the Statute." The aforesaid proposition is further reiterated by the Bombay High Court in case of ITC Ltd -v- Fomento Resorts & Hotels reported in (1991) 70 Company Cases 459 as follows: " He clarified that neglect to pay is not equivalent to omission to pay for it requires that such omission is without reasonable cause or valid excuse." It admits no ambiguity to say that the winding up petition is not intended as a means to recover debts in an ordinary mode of debt recovery. It is not a substitute to ordinary procedure of law which provides the remedy before the Civil Court to recover the debts and, therefore, cannot be said to be ....
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....able and not when the dispute is bona fide and requires to be adjudicated before the Civil Court. The defence of the Company should be in good faith and one of substance and every possibility to sustain in law. The Apex Court in case of Pradeshiya Industrial -v- North India Petro reported in (1994) 79 Company Cases 835 interpreted the expression "unable to pay its debts" in commercial sense to mean that the existing liabilities of the Companies is more than its assets and, therefore, is insufficient to meet the same in the following: "What then is inability when the section says "unable to pay its dues"? That should be taken in the commercial sense, in that, it is unable to meet current demands. As stated by William James, V.C.; it is "plainly and commercially insolvent that is to say, that its assets are such, and its existing liabilities are such, as to make it reasonably certain- as to make the court feel satisfied - that the existing and probable assets would be insufficient to meet the existing liabilities." [European Life Assurance Society, In re ( 1869) LR 9 Eq 122, 128; V.V. Krishna Iyer Sons -v- New ....
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....bt merely by proving that it is able to pay the debts. If the debt is an undisputedly owing, 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 characterised as a stand alone ground." It is undisputed that the transaction between the parties continued for several years. The agreement provides the deposit of money in the bank account after deduction of the commission, taxes and other expenses. It is not an allegation of the petitioningcreditor that the Company has violated any of the terms and conditions embedded in the agreements. The termination came because of the change in the policy and it cannot be said at this stage that the remedy of the Company is not available in seeking the damages for illegal and wrongful termination. The Company has approached the Bombay High Court by filing the civil suit for recovery of money on account of damages though there has been some admission on t....