TaxTMI 
TaxTMI 
2015 (9) TMI 1766
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.... Heard learned advocate Mr. Vishal Dave for the petitioner and learned advocate Mr. Shelat for respondent. 3. Learned advocate Mr. Dave appearing for the petitioner contended that the respondent-company, as per the agreement i.e. the work order dated 12.5.2011, had assigned the construction and civil work to the petitioner as per the terms and conditions stipulated in the said agreement and the rates mentioned in the work order for carrying out construction work at the site Shri Balaji Green Valley, Opp. Divine International School, Ahmedabad to the petitioner. The aforesaid construction work was to be carried out with regard to a bunglow scheme in which the task of the petitioner was to do various items of execution of construction work as per the work order for bunglow no.10(A)(B) to 14(A)(B) respectively. As per the work order, the petitioner has carried out various works from time to time and different bills were also raised. It is the case of the petitioner that the petitioner carried out total work for an amount of Rs. 3,34,80,819.11. 4. Learned advocate Mr. Dave thereafter contended that as per the terms and conditions of the agreement of work order dated 12.5.2011, th....
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....ht and the said dispute cannot be termed as reasonable and bonafide dispute. In response to the document which is produced at page 161 of the compilation produced by the respondent, learned advocate for the petitioner submitted that the document is concocted document and the petitioner has not signed the said document at all. Thus, the respondent has wrongly relied upon the said document and hence the said document be ignored. At this stage, learned advocate Mr. Dave referred to the document produced at page 183 produced by the respondent along with the affidavit-in-reply and submitted that the said report was not at all communicated to the petitioner. There is no reference to the said report even in the reply given to the statutory notice by the respondent. The respondent has not produced any proof that the said report was communicated to the petitioner and, therefore, it is clear that for the first time the respondent has produced the said report on record along with the affidavit-in- reply and tried to raise the dispute. The said dispute cannot be termed as a reasonable and bonafide dispute and the said document is nothing but an afterthought on the part of the respondent and, t....
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.... pleaded by the parties and if a prima facie case is made out by the petitioner, the company should shoulder the onus of disproving it, by showing that its defence is in good faith and is one of substance and it is likely to succeed in point of law. The defence must be substantial and not mere moonshine. So also where the dispute is a mere after-thought, an adverse inference may have to be drawn against the company that the defence being an after-thought, is a mere cloak to cover up its inability or refusal to pay. Adverse inference may also have to be drawn where the cheque(s) issued by the company for the debt in question or a part thereof is (are) dishonoured. For determining whether a debt is disputed bona fide or not, the conduct of the parties in relation to the transaction in question, the character of the pleas and the circumstances which will be peculiar to each case will have to be considered. IV. Court's findings on bona fides of company's defence and orders which may be passed upon such findings - (1) After considering the material on record, if the court comes to the conclusion that the defence raised by the company is not only not bona fide, but the d....
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.... of Star Cruise Management Ltd. V/s Delhi Express Travels Private Ltd., reported in [2009]151 CC 514(Delhi) and more particularly has relied upon the observation made by the Delhi High Court in paragraphs 12 to 16, 18 and 20. "12. Having heard the counsel of the parties and perused the record, I am inclined to allow this petition for winding up under section 433(e) of the Act. What is to be examined by the Court in these proceedings is whether there is clear cut admission of a debt by the respondent company and the debt, which should be in excess of Rs. 1 Lakh, is not discharged by the respondent company despite a notice issued in compliance with Section 434 of the Act. In case of a disputed debt, the Court has to examine whether the dispute on the face of it is genuine, or merely a cloak to cover the company's real inability or unwillingness to pay its debts. When the debt is undisputed the Court will order winding up and will not act upon a defense that the company has the ability to pay the debts but the company chooses not to pay the debt.( see Madhusudan Gorhandas and Company V. Madhu Woollen Industries Pvt. Ltd & Ors., (1971) 3 SCC 632). 13. Admittedly t....
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....s amount was a top priority for the respondent. 16. From the conspectus of these emails it is evident that the respondent company had all along admitted the amount of Rs. 1,48,93,580/- to be due towards the petitioner and assurances were given to remit these amount. The denial of the liability in the reply to the legal notice of the petitioner and in the reply filed to the present petition is, therefore, an afterthought and malafide, only to somehow ward off the consequences of winding up. The subsequent denials have no basis and the respondent has not attempted to explain the circumstances in which the aforesaid categorical admissions of liability were repeatedly made. I, therefore, reject the stand sought to be taken by the respondent in its reply to the legal notice and in reply to this petition. 18. The balance sheet of the respondent company as at 31.03.2008 also shows a rather grim picture of the financial health of the respondent company. The company suffered losses of Rs. 2,18,74,569.38 in the year ending 31.03.2007 and the losses as at 31.03.2008 stood at Rs. 42,75,347.60 after exhausting the entire general reserves of the company. 20. The other ....
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....4 from the concerned financial institutions for various projects of the company suggest that the respondent-company borrowed Rs. 126.20 crores from different banks and financial institutions. However, the outstanding as on 31.8.2014 is only Rs. 1.31 crores in relation to the said loans. The track record of the respondent-company towards the payment of interest and repayment of loan is also excellent and none of the accounts of the respondent-company is bad debts or declared as NPA. At this stage, learned advocate Mr. Shelat has referred to the provisional balance sheet for the year 2013-2014 which is produced at page 160. From the said document, it is revealed that the profit earned by the respondent-company as on 31.3.2014 is Rs. 12,12,99,000/-. 11. Learned advocate Mr. Shelat thereafter contended that in relation to the civil work which was given to the petitioner with regard to Green Valley site, the said site consist of setting up of 48 residential bunglows as per the plans sanctioned by the competent authority, out of which bunglow no.10(A)(B) to 14(A)(B) constituting ten bunglows was the subject matter of the work order dated 12.5.2011 entered into between the parties whic....
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....oner is nothing but an abuse of process of this Court and, therefore, this petition be dismissed. Learned advocate Mr.Shelat has placed reliance upon the decision rendered by the Honourable Supreme Court in the case of IBA Health (India) Private Limited V/s Info-Drive Systems SDN.BHD, reported in (2010)10 SCC 553. 12. Learned advocate for the respondent thereafter placed reliance upon the decision rendered by the Division Bench of this Court in the case of Tata Iron and Steel Company Limited V/s Micro Forge (India) Limited, reported in 2000(2)GLR 1594. Learned advocate Mr.Shelat thereafter relied upon the order dated 26.8.2015 passed by this Court in Company Petition No.53 of 2011 in the case of Supreme Telecommunication Ltd. V/s Petronet V.K. Ltd.. 13. Learned advocate Mr. Dave appearing for the petitioner, in rejoinder, submitted that the respondent is trying to mislead this Court by narrating false averments and misleading statements based on forged document and thereby respondent is trying to create a baseless defence of creating a picture of poor work quality on the part of the work done by the petitioner. Learned advocate Mr. Dave submitted that the work order dated 12.....
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.... a delay in handing over the site to the respondent for which the respondent is claiming damages @Rs.5,00,000/- per bunglow. It is further clear from the document produced at page 164 of the compilation that the respondent is claiming Rs. 20 lacs by way of recovery for poor workmanship. The said document is received by the petitioner on 3.11.2012. Thus, from the averments made in the affidavit-in-reply as well as the documents produced on record by the respondent, it is clear that the respondent has raised reasonable and bonafide dispute with regard to the claim of the petitioner. The said dispute cannot be said to be an afterthought, sham or bogus. 15. It is also clear from the record that the respondent-company is a profit making company. The respondent-company borrowed Rs. 126.20 crores from different banks and financial institutions. However, only 1.31 crores is outstanding as on 31.8.2014. The track record of the respondent-company towards the payment of interest and repayment of loan is good. The respondent-company has paid an amount of Rs. 92.76 crores to its contractor, suppliers, vendors during the period between 1.9.2012 to 30.6.2014. The said fact is revealed from the....
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....urt in Amalgamated Commercial Traders (P) Ltd. v. A.C.K. 13 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 the court." 22. The above mentioned decision was later followed by this Court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. 1971) 3 SCC 632. The principles laid down in the above mentioned judgment have again been reiterated by this Court in Mediquip Systems (P) Ltd. v. Proxima Medical Systems (GMBH) (2005) 7 SCC 42, wherein this Court held that the defence raised by the appellant-company was a substantial one and not mere moonshine and had to be finally adjudicated upon on the merits before the appropriate forum. The above mentioned judgments were later followed by this Court in Vijay Industries v. NATL Technologies Ltd. (2009) 3 SCC 527. 23. The....
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....y sell settled, extensively explored by catena of judicial pronouncements. The expression in section 433(e) "inability to pay its debts" is required to be considered and examined taking into account various aspects. It may also, be mentioned, at this stage, that a claim of order of winding-up is not a matter of right, but it is the discretion of the Court on one or more of the grounds having been established as mentioned in Sec.433 of the Companies Act. Even, at the stage of admitting the petition, unlike other petitions, the Company Court has to be very alive to the relevant aspects and is oblige to consider many circumstances. 17. Certain important chronicles and contours to be kept in the mental radar, before reaching to the conclusion in a winding up petition, can be articulated, as under: (1) The remedy under Sec.433 in general and under clause (e) in particular is not a matter of right, as such, and it is the discretion of the Company Court. It does not confer any right on any persons to seek order that the company should be wound up. It is a provision empowering the Court by a statutory provision to pass order of winding-up in an appropriate case. ....
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....any is unable to make the payment of dues and that by itself could not be construed as a ground to winding it up. (7) Winding-up of a company, as such, is nothing but a commercial death or insolvency and, therefore, the Company Court is obliged to take into consideration not only the temporary inability, or disability to make the payment of debts, but the entire status and position of the company in the market. (8) When grounds on which the winding-up order can be denied, upon an evaluation of the facts of the case, after admission, exists from the record already placed before the Court, it would be a sound exercise of discretion to reject the petition instead of admitting it. This view is very much celebrated. (9) Inability to pay debts in terms of Sec. 433(e) read with Sec.434(1)(a), demand of the debt would raise a presumption as to inability to pay its Page 27 of 35 debts. But such a presumption is rebuttable. Such a presumption may be rebutted on existing material and what evidence is sufficient depends on the facts and circumstances of the case. (10) If the Company has shown considerable growth in a reasonable span and is a growth oriented ....
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....s solvent, the wishes of the contributories would carry more weight as they are persons, mainly, interested in the assets. (18) The element of public policy in regard to commercial morality has, likewise, to be taken into account before determining the winding-up issue. The Court has also to consider the purpose and policy behind Secs. 443 and 557 of the Companies Act. (19) Winding-up is the last thing the Court would do and not the first thing to do having regard to its impact and consequences. Winding-up of a company would ensue : (a) closing down of a company which is engaged in production or manufacture or which provides some services; (b) it would throw out of employment numerous persons and result in gross hardship to the members of families of the employees; (c) loss of revenue to the State by way of collection of taxes which other wise should have been collected, on account of customs, excise duties, sale tax, income tax etc. (d) scarcity of goods and diminishing of employment opportunities. (20) Winding-up petition has to be submitted in prescribed form highlighting all the facts and emphasizing the inability o....
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....ot be a recourse of recovery of debt. 19. In the case of Ficom Organics Limited (supra), this Court has observed that while considering the petition for winding up, summary inquiry is required to be carried out by this Court and certain issues are required to be considered at the admission stage. The Court is also required to consider whether the defence raised by the respondent-company is bonafide defence or not. 20. Thus, from the various decisions rendered by the Hon'ble Supreme Court as well as by this Court, it can be said that while considering the winding up petition, this Court is required to consider whether the claim of the petitioner is within the period of limitation or not, i.e. debt is time barred or not and if the defence is raised by the respondent-company, whether the said defence can be said to be reasonable and bonafide dispute or not. If the defence is bonafide and reasonable, then the petition for winding up is not required to be entertained whereas if the defence/dispute raised by the respondent-company is an afterthought or if the same is raised with a view to hide its inability to pay its debt, then the Court would consider the petition filed by the pe....