TaxTMI 
TaxTMI 
2016 (7) TMI 342
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....that the petitioner addressed a letter dated 8.7.2015 to the respondent-Company specifically raising and demanding the aforesaid sum of security deposit illegally and arbitrarily deducted by the respondent-Company from R.A. bills of the petitioner. Ultimately, the correspondences took place between the petitioner and the respondent-Company from 8.7.2015 to 28.10.2015, whereby it is crystal clear that there is mutual denial between the parties and the petitioner as well as the respondent have raised various disputes. 2. It is pertinent to note that by a statutory notice dated 17.2.2016, the petitioner called upon the respondent-Company to comply with the requirements of the said notice, failing which, the winding up proceedings shall be initiated. The case of the petitioner in the said statutory notice is reflected in paragraphs 11, 13 and 14 in particular. As averred in Paragraph 14, the petitioner Company has called upon the respondent through the learned advocate to make payment of Rs. 18,63,271/within a period of three weeks. The record indicates that the said notice was replied by the petitioner through his advocate, wherein the contentions raised in the notice and more part....
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....65.02 Less : Amount withheld by client 9.92 Total 1155.10 Deductions as per work order Material cost 168.26 Other recoveries 55.24 Security Deposit 69.97 29.947 Payable amount to Balaji 861.63 Payment made to Balaji 934.99 Excess payment made 73.36 From above it can be seen that in terms of contract provisions we have already overpaid you Rs. 73.36 lacs. This amount does not include recoveries to be made in respect of material reconciliation repairs to the faulty works ect.. Neither any recovery towards compensations for delay. Inspite of you being paid in excess of what was your legal dues, you have not cleared dues of your labours, vendors etc. From above it is very clear that the claim vide your letter dated 25.7.15 received by us on 27.7.15 is baseless concocted. You have spoiled the work * misused our issued materials lime cement & steel. Lot of repair & rectification we will have to do at your risi & cost apart from balance left our works. Under above situation your claim at sl. no.(01), (02) of your letter dtd. 25.7.15 does not stand at all. Also when you have adandoned the work, with 90 ....
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....tion or by some other proceedings. There are various factors and facets, contours and chronicles emerging from the facts of the case requiring consideration before adjudicating upon the plea of winding up by the Court. When the petitioner is forcing payment of debt, which it knows to be in substantial dispute the evidence may support an action by the company against the petitioner for the tort of malicious prosecution. No monetary loss or special damage to the company need be proved for the presentation of the petition is, from its very nature, calculated to injure the credit of the company. It will be interesting to refer to a decision in A Company (No.003729 of 1982), (1984) 1 W.L.R. 1090, that even in a case where the company in good faith and on substantial grounds disputed the debt and could not know the sum due but was willing to pay a lesser amount, its omission to pay either the statutory demand or the lesser amount did not constitute 'neglect' within the meaning of section 123(1)(1) of the Insolvency Act, 1986, which is applicable in case of an issue of winding up of a company in England and Wales. In a recent decision in "ReBayoil SA Seawind Tank....
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....ly be a matter for the discretion of the court, albeit that its exercise may have been narrowed by authority. So, there may be two categories of cases, one disputed debt category and another crossclaim case category. In the present case, there is a bonafide dispute of debt and also substantial dispute of counter claim. The principles, which we have enunciated hereinabove, are extensively, explored in catena of judicial pronouncements. For short, we cannot resist the temptation of referring the following decided cases: (1) Madhusudan Gordhandas & Co. v. Madhu Woolen Industries Pvt. Ltd, (1972) 42 Company Cases, 125 (SC), wherein, it is held that one act of dishonesty on the part of the petitioner is sufficient for rejection of petition. (2) Harinagar Sugar Mills v. Court Receiver, H.C.Bombay, AIR 1966 SC 1707, wherein it has been observed, relying on Palmer's Company Precedents that a winding up order is not a normal alternative. (3) Pradeshiya Industrial & Investment Corporation v. North India Petrochemicals Ltd., (1994) 3 SCC 348, wherein it is held that mere inability to pay debt without any other evidence itself is not always sufficient to exercise....
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....table to wind up the company. After the petitioner had ceased to be a creditor, the winding up petition at the instance of such person either on the ground of inability to pay its debts, or on the ground that it is just and equitable to wind up, will not lie. Moreover, a petition on just and equitable grounds will not be entertained when an adequate alternative remedy is available to the petitioner. If the petitioner has a legally enforceable claim against the respondent, it is open to the petitioner to resort to remedies in civil courts which he is entitled to do. The petitioner cannot, merely by asserting that it has a claim even though the claim is barred by limitation, further assert that it is just and equitable to wind up the company. A case for winding up on the grounds that it is just and equitable to do so has also not been made out in the petition. In any event, the petitioner cannot be heard at this stage to contend that the company should be wound up on that ground. Learned counsel for the respondent submitted that the petitioner has failed to furnish any of its documents such as its accounts and ledger books, etc., even though the respondent had called upon th....
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....ided is that, on a default, the defaulting company would be liable to pay the interest @ 3% per month. There is no clause suggesting that whole of the amount would become due and recoverable on a single or more defaults. I respectfully agree with the law laid down in the above mentioned ruling. 22. The end result of all this discussion would be that a suit would clearly be barred by limitation on the date on which the petition under section 433 of the Companies Act was filed. In that view, the petition itself would be of no consequence and will be required to be dismissed as there is a valid and bona fide defence of limitation available to the respondent company." 8. It would also be advantageous to refer to the judgment of the Apex Court in the case of Madhusudan Gordhandas and Co., Vs. Madhu Woollen Industries Pvt. Ltd., reported in (1972) 42 Company Cases 125 (S.C.), wherein it has been observed as under: " Two rules are well settled. First, if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the com....
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....there are matters which should be inquired into and investigated if a winding up order is made. It is also wellsettled that a windingup order will not be made on a creditor's petition if it would not benefit him or the company's creditors generally. The grounds furnished by the creditors opposing the winding up will have an important bearing on the reasonableness of the case. (See P & J. Macrae Ltd. In re [1961] 1 All ER 302; [1961] 31 Comp Case 424 (CA). It is beyond dispute that the machinery for winding up will not be allowed to be utilized merely as a means for realising its debts due from a company. In Amalgamated Commercial Traders (P.) Ltd. vs. Krishnaswami (A.C.K.)[1965] 35 Comp Case 456, 463 (SC) this court quoted with approval the following passage from Buckley on the Companies Acts, 13th edition, page 451: 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 windingup order but really to exercise pressure will be dismissed, and under circumstances may be stigmated as a scandalous abuse of the process of t....
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....te ground. If there is no dispute as to the company's liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434 (1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434 (1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an 5 opportunity on the liquidation application to rebut that presumption. 25. An examination of the company's solvency may be a useful aid in determining whether the refusal to pay debt is a result of a bona fide dispute as to the liability or whether it reflects an inability to pay. Of course, if there is no dispute as to the company's liability, it is difficult to hold that the company should be able to pay the debt merely by proving that it is able to pay the debts. If the debt is an undispu....