TaxTMI 
TaxTMI 
TaxTMI 
2015 (12) TMI 638
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.... 33,44,185/- is time barred though it is the case of the company that 97 invoices are time barred. 2 It is the case of the petitioner that they repeatedly called upon the company to make the payment including by sending a statutory notice to the company but the company failed and neglected to pay the outstanding amount. The petitioner states that the company vide its e-mail dated 2.9.2014 acknowledged and confirmed that invoices listed therein for an aggregate amount of Rs. 1,42,84,471/- were outstanding. The petitioner therefore, has alleged that the company is unable to pay its debts in the normal and ordinary course of its business and hence is liable to be wound up. 3 The company's defence is that the petition is filed as a counter-blast to the respondents' claim in arbitration where the respondent had claimed a sum of Rs. 5,55,62,526.30 along with interest @ 18% from 19.12.2010 until payment and/or realization. The facts leading to the arbitration is that one of the consignment that the petitioner carried on 19.12.2010 met with an accident and the cargo got damaged resulting in loss amounting to Rs. 5,55,62,526/-. The respondents' insurance claim was rejected and....
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....e is a substantial dispute as to liability, the creditor cannot prefer an application for winding up for discharge of that liability. The court has to first examine whether the company has a genuine dispute to the claimed debt. A dispute would be substantial and genuine if it is bonafide and not spurious, speculative, illusory or mis-conceived. It is also stated that the company court is not expected to hold a full trial of the matter. It must decide whether the grounds appeared to be substantial. Certainly the court would also consider whether the grounds of dispute is a clever mask invented to deprive the creditor of a just and honest entitlement. Therefore, if the creditors' debt is bonafide disputed on substantial ground, the court should dismiss the petition and leave the creditor first to establish its claim in action, less there is danger of abuse of winding up procedure. 8 Let us examine the petition. In the petition there is not even a whisper that the company had raised the issue of damage to cargo and denied their liability to pay the invoices. There is not a whisper that the company had already initiated arbitration on 25.11.2013, that is almost 11 months prior to ....
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....unter claim set up by the company was prima facie valid and the company has raised bonafide dispute regarding its liability to pay the debts claimed by the petitioner and hence cannot be deemed unable to pay its debts on account of any legal presumption arising under Section 434. The relevant passages from the judgment are quoted as under :- "It is well settled that in order to raise the presumption under section 434(I) as to a company's inability to pay its debts, it is not sufficient to show merely that the company has omitted to pay the debt due to the petitioner despite service of the statutory notice : it must be shown that the company has omitted to pay without reasonable excuse. The existence of valid counter claims would clearly constitute reasonable excuse for non-payment. What has to be seen in the present case therefore is whether the counter-claims set up by the company are prima facie valid and bona fide. .................... .................... I am satisfied that the company has a bona fide counterclaim against petitioner No. I for rent ( or damages for use and occupation) of the premises which he continues to occupy in spite of a notice to quit. If t....
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.... what the arbitrators would have done would be to set off the amount found to be due and owing by the company to the petitioner as against the larger amount found to be due and owing by the petitioners to the company and after deducting that amount an award in favour of the company would have been passed. But, it appears that, since there were two separate references, the arbitrators found it difficult to adopt this procedure and, therefore, these two awards have been passed. Undoubtedly, in the present case, there is an award decree in favour of the petitioning creditor. That award decree has not been challenged and it has become final. Even before me in this winding up petition, the company has not challenged that there is a decree for Rs. 26,083.83 in favour of the petitioners, but what the company states is that the company has an award against the petitioners for a much larger amount, and that is of Rs. 55,000. Therefore, it cannot be said that the company has not a bona fide claim against the petitioners. What is required to be seen is whether the company is liable to pay and in considering the liability to pay, the court must also necessarily consider the liability of the pe....
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....ments held that where there are claims and cross-claims between a creditor seeking the winding up and a company sought to be wound up, the debt can be said to be bona fide disputed and the court will not order the winding up of the company. Whiding up proceedings are not intended to be exploited as a normal alternative to the ordinary mode of debt realisation. It would be worthwhile to mention that the counter claim set up in the said case was not an admitted amount. However, such a claim, prima facie, was found to be bona fide and could not be treated as frivolous and mala fide. The court therefore, held that once there was a prima facie case for the cross claim the winding up proceedings were not appropriate............." 10................... 11................... 12 ................. Here, the respondents claim has already been adjudicated in one forum i.e., before an Arbitrator and has resulted in the Award. It is not merely a claim pending adjudication. May be objections are filed against this Award. But this dispute raised by the petitioner would not make the claim of the respondent lacking in bona fides. Further, the claim before the Arbitrator was not an after tho....
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....ounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt. 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 "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 th....
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....of enforcing the company to pay a bona fide disputed debt. A Company Court cannot be reduced as a debt collecting agency or as a means of bringing improper pressure on the company to pay a bona fide disputed debt. Of late, we have seen several instances, where the jurisdiction of the Company Court is being abused by filing winding up petitions to pressurize the companies to pay the debts which are substantially disputed and the Courts are very casual in issuing notices and ordering publication in the newspapers which may attract adverse publicity. Remember, an action may lie in appropriate Court in respect of the injury to reputation caused by maliciously and unreasonably commencing liquidation proceedings against a company and later dismissed when a proper defence is made out on substantial grounds. A creditor's winding up petition implies insolvency and is likely to damage the company's creditworthiness or its financial standing with its creditors or customers and even among the public." 16 Therefore, where a 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 existe....