A winding up petition cannot be granted if there is a genuine dispute regarding the debt owed by the respondent company.

M. Jaichandren, J.

1. This Original Side Appeal has been filed against the order, dated 28.3.2014, made in C.P.No.183 of 2011.

2. It has been stated that the appellant is the sole proprietor carrying on business in supplying of cotton, cotton bales and allied products to the spinning mills, under the name and style of K.G.Cotton Company, having its regional office at Coimbatore. The respondent company had been incorporated on 28.4.1983, and it has been functioning under the name and style of L.S.Mills Limited. The respondent company has been purchasing cotton from the appellant company. While so, the respondent company had committed default in making its payment, in respect of the cotton supplied by the appellant company. As on 20.1.2011, a sum of Rs.29,60,795/- remained due and payable to the appellant company, by the respondent company.

3. It has been further stated that a statutory notice, dated 8.8.2011, had been sent on behalf of the appellant company, calling upon the respondent company to clear its debt, within a period of three weeks from the receipt of the said notice, with interest on the sum of Rs.29,60,795/-, at the rate of 18% per annum, failing which the appellant company would initiate winding up proceedings against the respondent company. The said notice had been served on the respondent company, on 10.8.2011. It has been further stated that the respondent company had acted fraudulently by raising a false claim that the appellant company had failed to supply 200 bales of cotton due to which the respondent company had to purchase cotton bales from one M/s.Shri Rajendra Ginning Factory and it had incurred a loss, by doing so, to the tune of Rs.26,89,980/- and that the respondent company was ready to settle the balance amount by making a payment of Rs.2,70,815/-. In such circumstances, the appellant company had been constrained to file a winding up petition against the respondent company in C.P.No.183 of 2011 and C.A.No.805 of 2011 under Section 433(e) of the Companies Act, 1956.

4. It has been further stated that a learned single Judge had passed the order, dated 28.3.2014, stating that on a perusal of the relevant records and taking into consideration the nature of transaction between the appellant and the respondent company, it was clear that the claim made by the appellant company had been disputed by the respondent company, both in terms of quality and the quantity of the cotton bales said to have been supplied by the appellant company. The learned single Judge had also noted that after the filing of the Company Petition, payments had been made by the respondent company to the appellant company to the tune of Rs.15 lakhs. As such, the appellant company had not made out a case for the winding up of the respondent company for the alleged debt said to be payable by the respondent company to the tune of Rs.29,60,795/-.

5. The learned counsel appearing on behalf of the appellant company had submitted that raising a dispute with regard to the quality and the quantity of the cotton bales supplied by the appellant company is a moon shine. The claim of the respondent company that it had incurred a loss to the tune of Rs.26,89,980/- due to non supply of 200 bales of cotton by the appellant company is false. The learned counsel had further submitted that from the particulars given by the respondent company in the annual reports for the years 2011-2012, 2012-2013 and 2013-2014, it could be clearly seen that the respondent company had borrowed large sums of money from various financial institutions running into several crores of rupees. The assets of the respondent company cannot meet the debt payable to the banks concerned.

6. It has also been submitted that a sum of more than Rs.10 lakhs is due and payable by the appellant company, in addition to the interest payable by the respondent company, even after the payment of a sum of Rs.15 lakhs during the pendency of the winding up petition before this court. All the cl