TaxTMI 
TaxTMI 
2015 (6) TMI 574
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....d of by this order. 3. The averments in the petition states that the petitioner company is a public limited company and that it has been engaged in manufacturing activity of Printed Circuit Boards (PCBs) of various descriptions and selling it to various clients of the petitioner company. The authorized capital of the petitioner company is Rs. 12,00,00,000/- divided into 1,20,00,000 equity shares of Rs. 10/- each. It is stated that the respondent company is a private limited company incorporated on 07.09.2004 and that respondent company, inter alia, carries on business as manufacturer, purchaser, processor etc. in populated, loaded or stuffed printed circuit boards, electronic circuit boards and all other king of circuit boards and also deals in electricity meters, water meters and other statistical meters or instruments. It is stated that the authorized share capital of the respondent company is Rs. 10,00,000/- divided into 1,00,000 equity shares of Rs. 10/- each. 4. It is alleged that the petitioner company sold, supplied and delivered PCBs from time to time to the respondent company under invoices cum delivery challans and the petitioner company is figuring as one of the sundry....
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....vent and is unable to discharge its debt to its creditors. The deponent of the company petition stated on the basis of his belief that there are already a number of cases filed against the respondent company due to its commercial insolvency and inability to fulfill its commitments. Hence, it was prayed that the respondent company be wound up and the Official Liquidator be appointed as the Liquidator of the company. 6. The respondent company filed a counter affidavit denying all material allegations in the petition vide para 4 to 6 of the counter. It was stated that the respondent company is a profit making company and the total earnings of the company in the last three years has been over Rs. 1.5 crore. It was also claimed that the respondent company's business is projected to be between Rs. 40 to 50 crores in the current financial year and the profit expected for the current financial year 2011-2012 is more than Rs. 1 crore. It was also claimed that the respondent company has an order on hand from the Maharashtra State to supply electricity meters to MSEDLC, which order itself is worth Rs. 25 crores. Further, the fixed assets of the respondent company are already described in....
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....ng with the counter affidavit, the income tax returns for the years 2009-10 and 2010-11 together with balance sheet and profit and loss account for the last three years were also enclosed to substantiate the contentions in the counter that the respondent company is a profit making company. 10. Petitioner company filed a rejoinder to point out that the legal notice of the petitioner company was replied only with vague and untenable reply. Hence, the presumption under Section 434 of the Companies Act arises in favour of the petitioner company. It was also pointed out that the reduction in profits of the respondent company shows that the net worth of the respondent company is eroded fast and is unable to pay its debts to the creditors. The petitioner company also placed strong reliance upon the stamped endorsement on the invoices cum delivery challans that the PCBs were "RECEIVED. CONTENTS VERIFIED". Hence, it is claimed that after two years of supply, the allegation of defective and rejected PCBs made by the respondent company is without any basis and that at no point of time, any such thing was pointed out to the petitioner company. It was, therefore, claimed that the defence raise....
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....n they may have to repay us. But without lifting the rejected material and without proper reconciliation of the accounts, how can they claim any amount". Petitioner company was, therefore, requested to lift the rejected material and reconcile the account. 13. According to the petitioner company, however, the question of rejection of material and reconciliation of account does not arise, as they claim that all the invoices except that the material was received and contents are verified, as per rubber stamp to that effect placed on each invoice for which payment is made. Further, according to the petitioner company the said allegation as to rejection of material is made by the respondent company, for the first time, two years after the supply. Hence, the petitioner claims that the allegation of rejected/defective PCBs is merely an after thought. However, in the cross-examination of P.W.1, he agreed that the stores section personnel do no carry out any inspection of the products. He also agreed that for many years the PCBs were delivered and payments were received and only disputes are the boards at the end that we have submitted along with the company petition. The respondent's ....
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....HUSUDHAN GORDHANDAS & CO.'s case (1 supra), which in turn is based upon the ratio of the Supreme Court in AMALGAMATED COMMERCIAL TRADERS v. A.C.K. KRISHNASWAMI [(1965) 35 COMP CASE 456] wherein the Supreme Court has laid down that if the debt is bonafide disputed and the difference is a substantial one, the Court will not wind up the company. 16. The ratio of the decision of the Supreme Court in M/s. MADHUSUDHAN GORDHANDAS & CO.'s case (1 supra) as well as the ratio of the latest decision of the Supreme Court in IBA HEALTH (INDIA) (P) LTD. v. INFO-DRIVE SYSTEMS SDN. BHD is strongly relied upon by the learned counsel for the petitioner company. I shall, therefore, consider the said contention by assuming that the petitioner company has established the debt required for an order for winding up without establishing the exact amount of debt. 17. In the context, therefore, the Supreme Court also cautioned against attempt to pressurize the respondent company by process of winding up proceedings. Paras 33 and 35 in that context are relevant, which are extracted hereunder: "33. We may notice, so far as this case is concerned, there has been an attempt by the respondent company t....
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.... of the respondent company are declining, it's inability to pay has to be taken as established. I find it very unreasonable and difficult to hold that even for a profit making company, an order of winding up is required to be made against it. In my view, the law is exactly to the contrary. In M/s. MADHUSUDHAN GORDHANDAS & CO.'s case (1 supra) it was clearly held in para 22 as follows: "22. Another rule which the court follows is that if there is opposition to the making of the winding up order by the creditors the court will consider their wishes and may decline to make the winding up order. Under section 557 of the Company Act 1956 in all matters relating to the winding up of the company the court may ascertain the wishes of the creditors. The wishes of the shareholders are also considered though perhaps the court may attach greater weight to the views of the creditors. The law on this point is stated in Palmer's Company Law, 21st Edition page 742 as follows: "This right to a winding up order is, however, qualified by another rule, viz., that the court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a wind....
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.... commercially insolvent there are no pleadings much less any material to support the contention of the learned counsel for the petitioner company that the respondent company is required to be wound up for its alleged inability to pay. 20. Petitioner counsel also placed strong reliance upon the decision of the Supreme Court in IBA HEALTH (INDIA) (P) LTD.'s case (2 supra) wherein the Supreme Court referred to the ratio of the Supreme court in M/s. MADHUSUDHAN GORDHANDAS & CO.'s case (1 supra) in paras 21 and 22, which are extracted herein along with para 23: "21. In this connection, reference may be made to the judgment of this Court in Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami and another (1965) 35 Company Cases 456 (SC), in which this Court held that: (comp Cas p.463) "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." 22. The abovementioned ....
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.... the petition and make the order. Secondly, if the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated. Thirdly, a debt about the liability to pay which at the time of the service of the insolvency notice, there is a bona fide dispute, is not 'due' within the meaning of Section 434(1)(a) and non-payment of the amount of such a bona fide disputed debt cannot be termed as "neglect to pay" the same so as to incur the liability under Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956. Fourthly, one of the considerations in order to determine whether the company is able to pay its debts or not is whether the company is able to meet its liabilities as and when they accrue due. Whether it is commercially solvent means that the company should be in a position to meet its liabilities as and when they arise." 24. The Madras High Court in Tube Investments of India Ltd. v. Rim and Accessories (P) Ltd. (1990) 3 Comp LJ 322 ....