TaxTMI 
TaxTMI 
2021 (4) TMI 320
X X X X Extracts X X X X
X X X X Extracts X X X X
....imited under which the respondent was to supply acrylic yarn to the appellant on credit basis. As per the said arrangement, the supply of raw material commenced from 20.4.2007. The respondent supplied material worth Rs. 81,98,014.45. There were certain issues raised by the appellant with regard to the quality of the material supplied by the respondent. As such, a sum of Rs. 6,22,073/was credited by the respondent in the account of the appellant on account of material returned and also a credit note of Rs. 5,00,000/was given on account of some defect in quality. As per the respondent, appellant had made a payment of Rs. 61,83,218/. However, there was an outstanding balance of Rs. 8,92,723/as on 28.7.2008. Since despite repeated requests, balance amount was not paid, the respondent issued a statutory notice to the appellant. The same was duly responded to. As the payment was not made despite notice being duly served on the appellant, the respondent filed the aforesaid Company Petition seeking winding up of the present appellant for its inability to pay admitted debts. The learned Company Judge vide order dated 28.9.2015 admitted the Company Petition. However, while doing so, the lear....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irements under Section 433(e) and (f) of the Companies Act, 1956 (hereinafter referred to as "the said Act") stood on a much higher pedestal and as such, the learned Company Judge has erred in admitting the petition. He submitted, for the same reason, the Division Bench has also erred in not interfering with the direction of the learned Company Judge. 5. Shri Nehra further submitted, that since there was no agreement between the parties to pay interest on the balance/delayed payment, the direction issued by the Division Bench of the High Court to consider the claim of the respondent for interest does not stand the scrutiny of law. 6. Shri Nehra relies on the judgments of this Court in Mediquip Systems (P) Ltd. vs. Proxima Medical System Gmbh (2005) 7 SCC 42, Vijay Industries vs. NATL Technologies Ltd. (2009) 3 SCC 527, and IBA Health (India) Private Limited vs. InfoDrive Systems Sdn. Bhd. (2010) 10 SCC 553. 7. Shri Tarun Gupta, learned counsel appearing on behalf of the respondent submits, that since the appellant, in spite of various communications sent by the respondent requesting it to pay the outstanding amount, had failed to do so, it was required to issue statutory demand ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....settled, that if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. It is equally well settled, that where the debt is undisputed, the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. It is equally settled, that the principles on which the court acts are first, that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. 10. As to whether the defence of a Company is in good faith or as to whether it is of a substance and as to whether it is likely to succeed in point of law and as to whether the company adduces prima facie proof of the facts on which defence depends, would depend upon the facts of each case. 11. In the present case, in the statutory notice dated 25.8.2008, the respondent - Company has specifically stated as under: "4. That in that regard a sum of Rs. 35,14,776.30 was outstanding against you against various bills as on 25.8.2007 against the material supplie....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is thus clear, that in response to paragraph 4 and 5 wherein the respondent has specified its claim, the only reply given is, that it is a matter of record and that it shows about the business worth of his client. No doubt, that in paragraph 6, it is stated, that the respondent had himself been coming to the appellant and settled the amount and agreed to return Rs. 25 lakh out of which only Rs. 5 lakh was returned. 14. From the perusal of the written statement filed to the Company Petition, it would reveal, that the main contention of the appellant was, that it was a running company making profits and further, that the claim of the respondent was not admitted by it. It was contended, that the petition was filed only to pressurise the appellant to pay the dues which were neither admitted nor legally due. 15. It was also stated in the written statement that till 26.6.2007 there was no issue with regard to supply of raw material by the respondent. However, with effect from 26.6.2007 it was noticed, that raw material supplied was defective and the goods which were sold in the market utilizing the said raw material were received back with some complaints. It was stated, that the good....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that after giving credit note of Rs. 5,00,000/in May, 2008, the petitioner - company agreed to give rebate to the extent of 50% on the total invoices on account of the defective material. The calculations were made in the following terms. Inv. No.162 Rs. 8,55,370.65 Inv. No.177 Rs. 8,66,788.29 Inv. No.216 Rs. 9,07,891.19 Inv. No.300 Rs. 8,84,726.17 Total : Rs. 35,14,776.30 Less: Goods returned Rs. 6,22,073.00 Balance Rs. 28,92,703.30 Less: 50% Rebate Rs. 14,46,351.3 0 Balance payable Rs. 14,46,352.0 0 Already paid Rs. 15,00,000.00 Excess paid: Rs. 53,648.00 9. From the aforesaid calculations, it is evident that now the stand is that the respondent-company is to recover a sum of Rs. 53,648/from the petitioner - company, whereas in reply to the notice, the claim was to the tune of Rs. 11,07,297/. It is further relevant to add here that in reply to the petition, the story that settlement between the parties had taken place in May, 2008 regarding rebate on the invoice value is merely an after thought just to defeat the petition, as no such plea was taken when reply to the statutory notice was given in September, 2008. 10. In view of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....credit in respect of the balance goods. The appellant, admittedly, retained the goods and, in fact, used the goods, namely, synthetic yarn, in the manufacture of its products, such as blankets. Having done so, the appellant cannot refuse to pay for the same. If the goods were defective, the appellant ought to have rejected the same. Having utilised the raw material supplied by the respondent, it is now not even possible for the appellant to return the same to the respondent. Moreover, the appellant nowhere raised the contention that its customer, who purchased the final product, raised grievance regarding the quality of the product. Moreover, the appellant has not furnished any details regarding its transactions with its customers involving the sale of goods manufactured from the raw material supplied by the respondent. There is nothing to indicate that the appellant suffered any damages on account thereof or that the appellant was not paid for the same. 10. In these circumstances, the learned judge rightly rejected the appellant's contentions. In our opinion, there is no bona fide dispute raised by the appellant in respect of the respondent's claim." 19. It is thus amply c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and payable by the Company to the petitioning creditor. It was further found, that the company court had no jurisdiction to direct the company to deposit the amount payable to a third party or to a party other than the petitioning creditor. As such, on facts, the said judgment would not be applicable to the facts of the present case. 23. In the case of Vijay Industries (supra) relied by the appellant, the learned single judge after finding, that a prima facie case has been made out, admitted the company petition. However, in appeal, the Division Bench set aside the order of the learned single judge. This Court while setting aside the order of the Division Bench observed thus: "41. In the present case, on the date of filing of the application, dues in respect of at least a part of the debt which was more than the amount specified in Section 433 [sic Section 434(1)(a)] of the Companies Act was not denied. It is not a requirement of the law that the entire debt must be definite and certain. The Division Bench of the High Court proceeded on the basis that the entire sum covering both the principal and the interest must be undisputed, holding: "Except making a bald allegation in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... towards interest on delayed payments since not covered by any specific agreement between the parties inter se is a contentious issue and the dispute as regards the payment of interest is bona fide and it cannot, therefore, legitimately be concluded that the respondent has neglected to pay. The petitioner, who pleaded inter alia in his petition that as per the trade practice payments made shall be adjusted towards interest first and balance, if any, shall be adjusted towards principal later, failed to establish the same by any prima facie evidence. In the absence of any such trade practice, appropriating the amounts towards interest first and the balance, if any towards principal next becomes inappropriate, in which event the claim of the petitioner that the respondent is liable to pay Rs. 65,15,947 basing upon such calculations cannot be accurate. The total amount claimed by the petitioner as due in that view of the matter becomes doubtful and not definite. It is still got to be ascertained if the claim of the respondent were to be considered that there has been no agreement for payment of interest on delayed payments. For the above reasons, it cannot be presumed prima facie that ....