TaxTMI 
TaxTMI 
2001 (8) TMI 1419
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly, it appears that the respondent company had returned the material worth Rs. 79,00,589 for which the petitioner company issued a credit advice. It further appears that the respondent company made payment from time to time to the petitioners to the tune of Rs. 84,14,0121 reducing the balance to the tune of Rs. 92,18,693. To this amount, the petitioner company has added interest at the rate of 25% p.a. to the tune of Rs. 4,70,271 to which the petitioner company has further added interest alleging failure on the part of the respondent company for delay in making payment. The petitioner company appears to have sent a debit note alleging failure to furnish the 'C' Forms under the Central Sales-tax Act in respect of the sales and supplies made to the respondent company. The petitioner company has totalled up its entire claim to the tune of Rs. 1,20,75,041 and had sent a notice under Sections 433 and 434 of the Act calling upon the respondents to pay the aforesaid amount with interest. 3. The respondent company in reply to the said statutory notice by its letter dated 12 September, 2000, raised several disputes in respect of the claim of the petitioner company. The first disp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....company has challenged various averments and statements made in the petition. It has also alleged [that] the motive of the petitioner company was [to use ?] pressure tactics to recover payment of the unjust amount claimed by the petitioner company. It has also pointed out that the aforesaid petition was filed on 25 November, 2000, while on 8 February, 2001, the petitioner company filed a summary suit bearing No. 39 of 2001 in the Court of Civil Judge, Senior Division, at Pune, claiming a sum of Rs. 1,16,01,574. The said suit is pending consideration before the civil court at Pune. The respondent company has also made it very clear in the affidavit that its intentions are to make payments of the debt, but only the correct amount of the debt; and that it had offered to pay off the whole debt by installments of Rs. 10 lakhs per month. The petitioner company having accepted the proposed settlement by installment and after receiving the amounts, has filed not only the company petition, but has also filed a civil suit for recovery of the amounts which were inflated by the petitioner company. According to the respondent company, the claim was correctly stated by the respondent company in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve heard both the learned counsel for their respective parties. Both the learned counsel have made submissions in tune with their pleadings. Shri Samdani, the learned counsel for the petitioner, has vehemently submitted that the debt due to the petitioner company was as ascertained and liquidated amount on the basis of the terms and conditions of the supply of material under various invoices, debit notes and credit notes. Shri Samdani has pointed out that a part of the claim is admitted by the respondent company, while the payment of interest was not disputed. In any case, the debt would exceed Rs. 500 and the respondents have not made payment after the statutory notice and, therefore, the petition deserves to be admitted. Shri Samdani has taken me through the petition as well as the several other documents. He has also submitted that filing of the civil suit was no bar for admission of the winding up petition. He has relied upon the following judgments in support of the contentions. (i) Seksaria Cotton Mills Ltd., In re (1969) 2 C LJ 155 : (1969) 39 CC 475 . (ii) Focus Advertising (P) Ltd., In re (1974) 44 C C 567. (iii) Fibrex Inc. v. A.B.K. Publication....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the dictates of the petitioner company to make payment of the amount claimed by the petitioner company without any grievance. The universally accepted principle in the commerce and trade world is that 'errors and omissions are excepted (E.O.E.)'. According to me, the petitioners ought to have discussed the points as offered by the respondent company. There is no doubt that the respondent company has been in financial difficulties, but, at the same time, it has recovered itself to meet the difficult situation with the help of the financial institutions. It must be borne in mind that had the respondent company been a commercially insolvent and economically unviable unit, the financial institutions would certainly not have come forward to help and salvage the respondent company. The financial institutions have considered it proper to help the respondent company in its rehabilitation scheme. The financial institutions have been satisfied with the economic viability of the potential of the respondent company. I, therefore, do not agree with the submissions of Shri Samdani, the learned counsel for the petitioner company, that the respondent company has become commercially insol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ities 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. (iv) No hard and fast rule can be laid down in inquiring into the question of a bona fide dispute with regard to any debt; whether there is a bona fide dispute or not will necessarily depend on the facts and circumstances of each particular case. (v) Again, it is well settled that a detailed inquiry at the preliminary stage of admission should be avoided. All the same, the court has to consider the dispute raised by the company. This can be achieved by assessment and appreciation of the affidavit evidence before the court at the stage of the admission. It is for the limited purpose of arriving at a conclusion whether a bona fide serious and substantial dispute arises or not, that the court examines the matter. The court looks out for a prima facie case. If a petitioner makes out a prima facie case, then the court would exercise its discretion. 8. Applying the aforesaid test construed by the learned Judge to the facts and circumstances of the present case, I am of the opinion that there is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re : if there is a bona fide dispute about a debt, and the defence is a substantial one, the court would not order winding up. The defence of the company should be in good faith and one of substance. If the defence is likely to succeed on a point of law, and the company adduced a prima facie proof of the facts on which the defence depends, no order of winding up would be made by the court. Further, under Section 557 of the Companies Act, 1956, in all matters relating to winding up of a company the court may ascertain the wishes of the creditors. If, for some good reason, the creditors object to a winding up order, the court, in its discretion, may refuse to pass such an order. Also, the winding up order will not be made on a creditor's petition, if it would not benefit the creditor or the company's creditors generally. (1) In the present case, the claims of the appellants were disputed both in fact and in law. The company had given prima facie evidence that the appellants are not entitled to any claim. The company had also raised the defence of lack of privity and of limitation. (2) One of the claims of the appellants was proved by the company to be unmeri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wledge of the company's affairs and never made demands for their alleged debts. They sold their shares, went out of management of the company and just when the sale of the machinery was going to be effected, presented the petition for winding up." 10. I have followed the aforesaid principles by applying the same in the present case. As far as other case cited by the learned counsel for the petitioner are concerned, each one of them is decided on the facts and circumstances present in that particular case, and I need not burden this judgment by referring to all of them. As far as the principles are concerned, there is no doubt and dispute, and there cannot be one. 11. I am in complete agreement with the submissions of Shri Diwan, the learned counsel for the respondents, that the petitioners have filed the present petition with a motive to pressurise the respondent company to surrender or to yield to the dictates of the petitioner company. He has rightly submitted that the company petition is not a legitimate means to be resorted to, to recover any debt which is bona fide disputed by the debtor. I have narrated the entire material to show how the respondent company has bona....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt will examine the correctness of the contentions of both the parties and would pass appropriate orders in the suit. In my opinion, having resorted to the alternative remedy, it is not at all proper and legitimate for the petitioner company to seek admission of the present winding up petition on the basis of the same debt. 12. The law laid down by the Supreme Court in the judgment quoted below is crystal clear that the winding up petition is not a legitimate remedy for recovery of a debt which is bona fide disputed: (i) Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwalla and Anr. [1976]2SCR226 . (ii) Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami and Anr. (1965) 35 C C 456 (SC) . (iii) Pradeshiya Industrial & Investment Corporation of UP v. North India Petrochemicals Ltd. and Anr. [1994]1SCR815 . 12.1 In my case of Amalgamated Commercial Traders Pvt. Ltd., supra, the Supreme Court has held as follows: "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 winding up order, but re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad of pursuing that other remedy. 37. Again, under Sections 397 and 398 of the Act, there are preventive provisions in the Act as a safeguard against oppression in management. These provisions also indicate that relief under Section 433(f) based on the just and equitable clause is in the nature of a last resort when other remedies are not efficacious enough to protect the general interests of the company." 12.3 In the case of Pradeshiya Industrial & Investment Corporation of UP, supra, the Supreme Court, in para 29, has observed as follows: "29. It is beyond dispute that the machinery for winding up will not be allowed to be utilised merely as a means for realising its debts due from a company. In Amalgamated Commercial Traders (P) Ltd. v. ACK Krishnaswami (1965) 35 CC 456 (SC) this court quoted with approval the following passage from Buckley on the Companies Acts, (13th Edn., 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 winding up order, but really to exercise pressure will be ....