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HIGH COURT OF CALCUTTA
A. N. Sen
OFU LYNX LTD. - Appellant
Versus
SIMON CARVES INDIA LTD. - Respondent
C. A. 183 Of 1968
Decided On : MARCH 21, 1969
COMPANY - WINDING UP - PETITION - STAY OF - DISPUTE AS TO DEBT - ARBITRATION AGREEMENT - NOTICE UNDER SECTION 434 OF THE COMPANIES ACT, 1956 - VALIDITY OF - CONSTRUCTION OF.
Fact of the Case:
The respondent, a creditor of the company, presented a petition for winding up of the company on the ground that the company was unable to pay its debts. The company filed an application for stay of the winding up petition on the ground that the debt was disputed bona fide and that there was an arbitration agreement between the parties.
Finding of the Court:
The court held that the debt was disputed bona fide and that the arbitration agreement was a bar to the winding up petition. The court also held that the notice under Section 434 of the Companies Act, 1956 was valid even though the amount of debt mentioned in the notice was not the exact amount of the debt due.
Issues: 1. Whether the debt was disputed bona fide? 2. Whether the arbitration agreement was a bar to the winding up petition? 3. Whether the notice under Section 434 of the Companies Act, 1956 was valid?
Ratio Decidendi: 1. The court held that the debt was disputed bona fide on the basis of the following factors: - The nature of the disputes and the particulars thereof had been fully set out in the affidavit and in the annexures thereto. - The disputes were not mala fide or manufactured for the purpose of resisting the claim of the respondent. - The company had not raised the disputes when the respondent had been making demands, which did not go to show that there were no disputes or that the claim of the respondent was being admitted by the company. 2. The court held that the arbitration agreement was a bar to the winding up petition on the basis of the following factors: - The existence of an arbitration agreement in the contracts between the parties in respect of which any claim is made, should be considered to be a bar to any winding-up proceeding and a party to such an agreement should not be allowed to present a winding-up petition till the disputes are resolved in the manner agreed upon by the parties. 3. The court held that the notice under Section 434 of the Companies Act, 1956 was valid even though the amount of debt mentioned in the notice was not the exact amount of the debt due, on the basis of the following factors: - The statute requires a Creditor to whom the company is indebted in a sum exceeding Rs. 500 then due to serve a notice of demand requiring the company to pay the sum so due. - If for some reason or other, the demand is in respect of a sum which may be in excess of the debt due, the sum due remains included in the demand and if the sum due exceeds the amount of Rs. 500, the notice will be a valid notice, as the company is required to pay the amount which is due and which is included in the notice.
Final Decision: The court allowed the application for stay of the winding up petition and stayed the winding up petition permanently. The court also granted an injunction against the company from dealing with, disposing of, transferring or encumbering the assets of the company except in the usual course of business for a period of three months from the date of the order.
( 1 ) THIS is an application by Ofu Lynx Limited (hereinafter referred to as the company) for an order that the petition for winding-up of the company pre-sented by the respondent Simon Carves India Limited also a company (and hereinafter referred to as the respondent) be dismissed and/or stayed permanently.
( 2 ) THE respondent claims to be a Creditor of the company for a sum of Rupees 8,32,400. 43 paise, The respondent had caused a notice to be served on the company under Section 434 of the Companies Act, 1956 demanding payment of the said sum of Rs. 8,32,400. 43 paise together with interest. On the expiry of the prescribed period of three weeks the respondent has presented, the petition for the winding-no of the company on the allegation that the company is unable to pay its debts. After the petition presented by the respondent for the winding-up of the company has been admitted by this Court, the company has made this application for an order that the said petition presented by the respondent be dismissed or permanently stayed. The company has obtained an interim order of stay of further proceedings of the said petition for winding-up.
( 3 ) THE main ground oa which the company has made this application is that the winding-up petition presented by the respondent is an abuse of the process of this Court and is not maintainable, as there is no debt due and payable by the company to the respondent. It is contended on behalf of the company that the claim made by the respondent is seriously in dispute and there is a bona fide dispute with regard to the claim of the respondent. It is the contention of the company that as there is a genu-ine dispute with regard to the claim of the company and the alleged debt of the company is disputed bona fide by the company, the petition for the winding-up of the company cannot be entertained. It has also been contended that the respondent has presented the winding-up petition mala fide with the intention of humiliating the company which is a rival of the respondent in its trade. Mr. S. C. Sen, learned Counsel appearing in support of this application has submitted that the alleged claim of the plaintiff arises in respect of works of construction done on the basis of contracts between the parties. He has submitted that although on the basis of the value mentioned in the contracts between the company and the respondent the company has to pay a sum of about Rupees 12 Lakhs in respect of the works covered by the contracts between the parties, the company has already paid about Rupees 13 Lakhs to the respondent. It is his submission that the claim for the further sum of Rs. 8,32,400,43 paise is absurd, excessive and exorbitant and the company has no liability to pay the said sum or any portion thereof to the respondent. He has argued that in any event the sum claimed by the respondent is disputed bona fide by the company and so long as the claim of the company is not properly established in appropriate proceedings it cannot be said that there is any debt due to the respondent and that there has been any failure or neglect on the part of the company to pay any debt due and payable to the respondent. He has drawn my attention to the contracts which were entered into between the parties and he has contended that the very nature of the contracts indicates that there is every likelihood of honest disputes and differences arising between the parties in the matter of execution of the same; and it is his contention that as disputes and differences are embedded in the contracts and contemplated by the parties themselves, the contracts provide the method as to how such disputes and differences are to be resolved by arbitration. Mr. Sen has argued that in the instant case there is a dispute with regard to the quality of works done, the quantity of works done, the rates on the basis of which bills have been made out, apart from the question of non-completion or the work by the respondent and t
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