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High Court Of Delhi
MADHYA PRADESH IRON AND STIL COMPANY - Appellant
Versus
G.B.SPRINGS PRIVATE LIMITED - Respondent
Civil 366 of 1999
Decided On : 12/03/2002
Winding-up Petition - Company's Inability to Pay Debts - Companies Act, Section 434(1)(a) - The court considered the Respondent's defence and the failure to respond to the statutory notice, and directed the Respondent to deposit a sum of money to the credit of the civil suit, failing which the winding-up petition would stand admitted.
Fact of the Case:
The Petitioner sought recovery of a principal sum and interest from the Respondent. The Respondent raised objections and contended that a civil suit for recovery of money was pending, and an arbitration clause existed between the parties.
Finding of the Court:
The court found that the Respondent's defence was not dishonest and had substance, and that the failure to respond to the statutory notice did not automatically lead to winding-up orders. The court directed the Respondent to deposit a sum of money to the credit of the civil suit, failing which the winding-up petition would stand admitted.
Issues: The main issue was whether the Respondent's defence and failure to respond to the statutory notice warranted the admission of the winding-up petition.
Ratio Decidendi: The court considered the bona fide nature of the Respondent's defence, the impact of the failure to respond to the statutory notice, and the equitable considerations in winding-up proceedings.
Final Decision: The court directed the Respondent to deposit a sum of money to the credit of the civil suit, failing which the winding-up petition would stand admitted.
( 1 ) THIS Order shall operate in CP 366/1999 entitled madhya Pradeshron and Steel Company Vs. G. B. Springs (P) Ltd. as well as in CP 443/1999 entitled Madhya pradesh Iron and Steel Company Vs. Hohta Bright Steels (P ). Ltd. In Cp 366/1999 the Claim is for a principal sum of Rs. 73,46,674. 37 together with Rs. 13,44,990. 99 towards Interest at the rate of 21% per annum calculated upto 31. 12. 1998 A Statutory Notice dated January 6, 1999 was served on the Respondent Company which sent its response thereto in terms of its letter dated 1. 2. 1999. The defence of the Respondent is that problems commenced due to the supply of defective material by the petitioner leading to its rejection. In the Reply there is a reference to a Debit Note dated 28. 9. 1997 raised by the Respondent Company for a sum of Rs. 9,89,888. 86. Mention has also been made to the Respondent s letter dated 23. 12. 199 whereby the Petitioner was notified of discrepancies including insufficient and deficient supply of material and poor quality of material. A demand for a Credit Note was made by the Respondent company and according to it Debit Note for rs. 7,93,430. 40 was made on 20. 12. 1997. Paragraph 15 of the Reply refers to a Debit Note dated 17. 12. 1998 which reads as under :-
GBS/misc-DN/018 17-12-98 debit NOTE m/s. MADHYA PRADESH IRON and STEEL CO. , kanchenjunga , 9th Floor,k 18, Barakhamba. Road, new) DELHI-10001. Dear Sir , we debited your account, for Rs. 6910210=80p (Rs. Sixty nine lacs ten thousand two hundred ten and paisa eighty six only), towards the details given below:-Thanking you, yours faithfully sd/-illegible for GB. SPRINGS (P) LTD. , AUTHORISED SIGNATORY. " this stand wsa controverted by the Petitioner in terms of its Advocate s latter dated 5. 6. 1999.
( 2 ) MR. Krishnamani, Learned Senior Counsel appearing for the Respondant has contended that a civil Suit for the recovery of monay under Order XXXVII of the Code of Civil procedure ia pending on the Original Side of this Court and, therefore, the present Petition ought not to be entertandinad any further. His argument is that any Order that may now com* to be paaaed in these proceedings would adversely affect and jeopardise the Respondent s defence in the said Summary Suit. The Reinstatement of the law regarding winding-up is to be found in the perspicuous judgment of the Hon ble Supreme Court in Pradeshiya industrial and [nvestment Corporation of Uttar Pradesh Vs. North India Pet O-Chamical Ltd and Another. (1994) 2 Comp lj 50; 1994 (79) Co. Cases 835; 1994 (1) JT 579 (SC);l994 (3) SCC 348. In NEPC Vs. Indian Airlines. 100 (202) Delhi Law Times 14, I had attempted to distil the observations of Jtha Apex-court in PIICUP case (supra) by setting down the following proposition:
(I) If there is a bona fide dispute and the defance is a substantial one, the Court will not windtsup the compay.
(II) Where he debt is undisputed the Court will not ac upon a defence that the company has the ability to pay the debt but the company chooses not to pay it.
(III) Where the defence of the company is in good faith and one of substance, and the defence is likely to succeed in point of law, and the company adduces prima facie proof of the facts on which the defence depends, the petition should be rejected.
(IV) The Court may consider the wishes of creditors so long as these appear to be justified.
(V) The machinery of winding-up should not be allowed to be utilised merely as a means of realising its debts.
(VI)IF the stance of the adversaries hangs in balance it is always open to the Company court to order the Respondent Company to deposit the disputed amount. This amount may be retained by the Court and be held to the__credit of the suit, if any is pending, or likely to be filed in the immediate future. [see Civil Appeal No. 720 of 1999 arising out of SLP (C) No. 14096 of 1998 - m/s. Nishal Enterprises v. Apte amalgamations Ltd. , decided by the Hon ble supreme Court on February 5, 1999].
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