1. The Registry has raised an objection in view of the notification dated 7/12/2016 for transferring the matter to the NCLT. The respondent in pursuance to the direction of this court has filed an affidavit dated 7/6/2018 disclosing that the notice of the present company petition was served upon the respondent on 5/11/2016 whereas, in terms of the said notification, the cutoff date is 15/12/2016. Hence, the company petition is required to be heard by this court and it is not required to be transferred to NCLT. Hence the objection is rejected. With consent heard on the question of admission.
2. By this petition under Section 439 of Companies Act, 1956 the petitioner is seeking winding up of respondent company under Section 433 (e) of the Act on the ground of inability to pay the 2 debt.
3. The case of petitioner is that the respondent company is engaged in the business of constructing roads and highways as also civil engineering works and petitioner is engaged in the business of supplying electronic tolling and traffic management equipment and highway traffic management system associated with road projects and rendering technical service/assistance design, AMC etc. The petitioner had entered into an agreement dated 17/8/09 with the respondent for design, manufacture, inspection, testing, supply and i
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nstallation of toll collecting system at three toll plaza locations for the project 4 laning of Jaora Nayagaon Section of SH-31 at a total cost of Rs. 1,87,95,000/-. The respondent had also entered into annual maintenance contracts for maintenance of equipment installed at Nayagaon toll booths. Three such AMCs were entered into in succession. It is also alleged that respondent had purchased equipment worth Rs. 4,62,119/- from petitioner, hence total invoice amount was Rs. 2,17,00,278/- and against the said invoices, the petitioner had made payment of Rs. 1,59,72,466/-. Hence a sum of Rs. 42,41,993/- is still outstanding which inspite of repeated request was not paid by respondent, therefore, petitioner had issued the statutory notice dated 12/11/2015 demanding the aforesaid outstanding amount and the reply dated 5/12/2015 was sent by respondent denying the liability. Hence the present petition has been filed to wind up the respondent company on the ground of neglecting to pay the outstanding due of Rs. 42,41,993/- together with interest @ 8% per annum.
4. The stand of respondent in the reply is that due amount has been paid and the alleged outstanding amount is a disputed amount and petitioner had failed to comply with the terms and 3 conditions of the agreement.
5. Learned counsel for petitioner referring to chart as contained in paragraph 7(e) of the petition has submitted that out of total amount reflected therein only a part payment has been made and outstanding amount of Rs. 42,41,993 has not been paid and that in the reply to the statutory notice the defence which is taken is a moonshine and since the respondent has neglected to pay the outstanding amount inspite of statutory notice and respondent company is running in losses, therefore, a case of winding up is made out.
6. As against this learned counsel for respondent has submitted that the debt is bonafidely disputed and the amount is not payable by respondent and respondent is a commercially solvent company having 200 employees involved in BOT project, therefore, for such a disputed debt no case for winding up is made out.
7. I have heard the learned counsel for parties and perused the record.
8. It is also the settled position in law that if debt is bonafide disputed on substantial grounds, petition for winding up shall not be entertained. In such a case party seeking winding up cannot be regarded as creditor of company for purpose of winding up. If the debt is bonafide disputed, there cannot be 'neglect to pay' within the meaning of Section 433(1)(a) of the Companies Act and if there is no neglect, the deeming provision does not come into play.
9. The Supreme Court in the matter of IBA Health (India) Private Limited Vs. Info-Drive Systems SDN. BHD. reported in (2010) 10 SCC 553 has held that if the creditor's debt is bonafide disputed on substantial grounds, the Court should dismiss winding up petition and that a dispute would be substantial and genuine if it 4 is bona fide and not spurious, speculative, illusory and misconceived. The winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company and a party to the dispute should not be allowed to use the threat of winding up petition as a means of enforcing the company to pay the bona fide disputed debt and that a Company Court should act with circumspection, care and caution and examine as to whether an attempt is made to pressurise the company to pay a debt which is substantially disputed. It has also been held that provision of Section 433 (e) & (f) cannot be invoked where there is a bonafide dispute as to liability and it is the duty of the court to ascertain the causes for refusal to pay debt and if the debt is bonafide disputed on substantial ground petition for winding up should not be entertained and that the court should act with circumspection and examine whether winding up petition is used as ploy to pressurise company to pay substantially disputed debt and the court has to ascertain whether refusal was due to reasonable cause or existence of bonafide dispute which can be adjudicated only by trial in civil court and if not so adjudicated, cause serious prejudice to company. In this regard in IBA Health (supra) it has been held that:
20. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of 5 a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt.
21. In this connection, reference may be made to the judgment of this Court in Amalgamated Commercial Traders (P) Ltd. Vs. A.C.K. Krishnaswami in which this court held that (Comp Cas P. 463) "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. Vs. Madhu Woolen Industries (P) Ltd. The principles laid down in the above mentioned judgment have again been reiterated by this Court in Mediquip Systems (P) Ltd. Vs. Proxima Medical System GmbH, wherein this Court held that the defence raised by the appellantcompany 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 Vs. NATL Technologies Ltd.
23. The principles laid down in the above mentioned cases indicate that if the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of Section 433 (1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated and non-payment of the amount of such a bona fide disputed debt cannot be termed as "neglect to pay" so as to incur the liability under 6 Section 433 (e) read with Section 434 (1)(a) of the Companies Act, 1956.'
10. The Supreme Court in the matter of M/s Madhusudan Gordhandas & Co. Vs. Madhu Woolen Industries Pvt. Ltd. reported in AIR 1971 SC 2600 has held that where there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of debt is disputed, the Court will make a winding up order without requiring the creditor to quantify the debt precisely. It has further been held that the principles on which the Court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends.
11. It is also settled position in law that if the debt is bonafidely disputed and defence is substantial one, no winding up order is to be passed. While examining this aspect it is to be seen that the defence should be in good faith and one of substance; it should likely to succeed in point of law and there should be prima face proof of facts on which the defence depends. (See: M/s Madhusudan Gordhandas and Co. Vs. Madhu Woolen Industries Pvt Ltd. Reported in 1971 (3) SCC 632; Mediquip Systems (P) Ltd. Vs. Proxima Medical System GMBH reported in 2005(7) SCC 42.)
12. It is also settled that Section 433 should be seen in commercial sense (See: (2005) 7 SCC 42.)
13. On examining the present case in the light of the aforesaid legal position, it is noticed that there is no document on record wherein the respondent has admitted liability to pay the alleged 7 outstanding amount of Rs. 42,41,993/-. There is also no document on record conclusively showing the liability on the part of respondent as claimed. On the contrary, the reply and documents enclosed therewith by respondent reveal that the debt is bonafidely disputed.
14. In reply to the statutory notice dated 12/11/15 itself the respondent had denied that the amount of Rs. 42,41,993/- was payable. As per reply against service regarding TMS system the petitioner had raised invoice of Rs. 1,87,95,000/- out of which the respondent had paid Rs. 1,56,92,636/- including the TDS of Rs. 13,65,650/- and debited Rs. 29,02,364/- in view of deficiency in service. For AMC petitioner had raised invoice of Rs 15,73,040/- and respondent had paid sum of Rs. 11,79,780/- after deducting Rs. 3,93,260/- i.e. 25% of the invoice value as penalty towards poor performance. Further stand of respondent is that against the invoice of Rs. 4,62,119/- respondent had paid of Rs. 3,52,065/- after debiting sum of Rs. 1,10,054/- as per agreement towards poor maintenance of TMS system.
15. The aforesaid details as disclosed by respondent clearly reveal that the debt is bonafidely disputed by respondent and the defence which respondent has taken is not a moonshine.
16. Counsel for petitioner referring to the balance sheet filed alongwith the reply as Annexure R-1 has submitted that respondent company is running in losses therefore, it has inability to pay debt. But a perusal of the balance sheets enclosed as Annexure R-1 reveal that in the initial period respondent company was incurring losses but in financial year ending on 31st March 2016 it had earned profit.
17. Counsel for respondent in this regard has also pointed out that since it is a BOT project with a concession period of 25 years, 8 therefore, the entire cost of the project has been borne by the company which is to be recovered through toll collection during the concession period. Alongwith IA No. 3356/18, the respondent has filed the solvency certificate issued by State Bank of India and certificate of Chartered Accountant Krishnamurthy Jain and Suryawanshi showing its healthy financial state as also the CARE rating wherein the respondent has been rated A+ stable and also enclosed the tax payer counterfoil showing that respondent is paying the huge amount towards income tax. These documents clearly reveal that substrata of the company has not been eroded.
18. That apart undisputedly respondent is a running company having more than 200 employees.
19. It is settled position in law that winding up proceeding cannot be used as a tool to recover the bonafidely disputed debts as a substitute for recovery suit.
20. The aforesaid analysis of facts clearly reveal that in the present case not only alleged debt is bonafidely disputed by respondent but financial condition of the company and other circumstances noted above do not make out a case for winding up the company under Section 433(e) of the Act. Hence the company petition is dismissed. C.C.
As per rules.