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High Court Of Delhi
G.K.W.LIMITED - Appellant
Versus
SHRIRAM BEARINGS LIMITED - Respondent
Decided On : 10/01/1998
COMPANY - WINDING UP - PETITION - MAINTAINABILITY - RUNNING ACCOUNT - AFFIDAVIT - DEFECTIVE - RECTIFICATION - ADMISSION OF LIABILITY - DEFENCE - BONA FIDE - DELAY IN SUPPLY - DEFECTIVE MATERIAL - PROPERTY IN GOODS PASSED - PAYMENT OF PRICE.
Fact of the Case:
Petitioner, G. K. W. Limited, filed a winding-up petition against the respondent company for non-payment of dues amounting to Rs. 49,07,785.85 paise for the supply of diverse quantities of materials of iron and steel. The respondent company challenged the maintainability of the petition on legal and merit grounds, including the claim being based on a running account, defective affidavit, irregular and defective supply of materials, and a counterclaim for losses.
Finding of the Court:
The court held that the petition was maintainable despite the defective affidavit, as the petitioner was allowed to file a fresh affidavit in accordance with the prescribed rules and form. The court found that the claim was not based on a running account but on individual invoices raised against the respondent company, as evidenced by the payment history and correspondence between the parties. The court also found that the respondent company's defense of delay in supply and defective material was not bonafide and lacked supporting evidence.
Issues: 1. Whether the petition is maintainable despite the defective affidavit? 2. Whether the claim is based on a running account or individual invoices? 3. Whether the respondent company's defense of delay in supply and defective material is bonafide?
Ratio Decidendi: 1. A defective affidavit in a winding-up petition does not render the petition liable to be dismissed, and the petitioner can be allowed to file a fresh affidavit in accordance with the prescribed rules and form. 2. The nature of a claim, whether based on a running account or individual invoices, is determined by the payment history and correspondence between the parties, rather than mere averments in a plaint. 3. A defense of delay in supply and defective material raised by a respondent company in a winding-up petition must be supported by evidence and cannot be considered bonafide if it appears to be an afterthought or lacks supporting documentation.
Final Decision: The court admitted the winding-up petition, appointed the Official Liquidator as the Provisional Liquidator of the respondent company, and directed the publication of a citation in various newspapers and the Delhi Gazette.
( 1 ) THE present petition by G. K. W. Limited has been filed seeking winding up order against respondent, primarily on the ground that the respondent company placed order upon petitioner for the supply of diverse quantities of materials of iron and steel. These orders were placed by the respondent company upon petitioner from April,1994 to August,1996. For the sale and delivery of these diverse quantities of materials of iron and steel petitioner raised 23 invoices/ bills amounting to Rs. 54,84,784. 85 paise. The respondent company paid Rs. 5,77,000. 00 leaving the balance of Rs. 49,07,785. 85 paise against the outstanding bills. This amount of the bills has not been paid by the respondent company inspite of repeated demands. Finally statutory notice was served on the respondent company. As per petitioner, the respondent company is still indebted to it to the tune of Rs. 49,07,785. 85 paise.
( 2 ) RESPONDENT challenged the claim of the petitioner on legal grounds as well as on merits. Legal objections relate to the maintainability of this petition. It is the defence of the respondent that since the petition is based on running account, therefore, not maintainable. Secondly the affidavit filed in support of winding petition is not in accordance with Rule 21 of the Companies Rule and Form No. 3. Finally, supply made by the petitioner was irregular and defective, therefore, there exist serious commercial dispute. This Court under the Companies Act cannot adjudicate the dispute. On merits it has been contended that the supply of materials was irregular with the result the respondent company suffered losses. The question of supply of defective material and irregular supply was brought to the notice of the petitioner immediately after the supply was made in September,1996. That the company is entitled to a counter claim. The petitioner is not entitled to any amount.
( 3 ) AFTER hearing counsel for the parties, I have taken up the second legal objection raised by respondent first. Lets examine whether the affidavit filed in support of the petition is in accordance with the rules and the form. Admittedly, the affidavit filed with the petition is not properly verified. Rule 21 of Companies (Court) Rules 1959, deals with the verification of the affidavit to a company petition. Reading of Rule 21 clearly show that the affidavit has to be in Form No. 3. In order to appreciate the arguments, Rule 21 and Form No. 3 are reproduced as under:-
RULE 21. Affidavit verifying petition.- Every petition shall be verified by an affidavit made by the petitioner or by one of the petitioners, where there are more than one, and in the case the petition is presented by a body corporate,by a director, secretary or other principal officer thereof; such affidavit shall be filed along with the petition and shall be in Form No. 3. FORM NO. 3 [ See rule 21] [heading as in Form No. 1] Affidavit verifying petition I, A. B. , son of. . . . . . . . . . aged. . . . . residing at. . . . . . do, solemnly affirm and say as follows:- 1. I am a director/ secretary/. . . . . . . / of. . . . . . Ltd. , the petitioner in the above matter * (and am duly authorised by the said petitioner to make this affidavit on its behalf.) [note.-This paragraph is to be included in cases where the petitioner is the company. ] 2. The statements made in paragraphs. . . . . . of the petition herein now shown to me and marked with the letter `a , are true to my knowledge, and the statements made in paragraphs. . . . . . are based on information, and I believe them to be true. Solemnly affirmed etc. *note.-To be included when the affidavit is sworn to by any person other than a director, agent or secretary or other officer of the company.
( 4 ) COMBINED reading of form No. 3 and Rule 21 makes it clear that the person verifying the affidavit has to disclose whether he is Director or Secretary of the company or an authorised person empowered to sign the affidavit. He has also to in
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