Madhya Pradesh High Court
Astha Textile Co. Ltd. vs Indo Rama Synthetics (I) Ltd. on 11 November, 2003
Equivalent citations: IV(2004)BC508, (2004)1COMPLJ481(MP)
Author: A.M. Sapre
Bench: A.M. Sapre
ORDER A.M. Sapre, J.
1. This is a company petition filed under Section 433(e) of the Companies Act against the respondent company known as Indo Rama Synthetics (I) Ltd. (hereinafter referred to as 'company') seeking for its (company's) winding up. The winding up is sought essentially, or rather, only on the ground falling under Section 433(e) of the Act contending that the company has failed to pay a sum of Rs. 4,39,466 to the petitioner, i.e., inability to pay the debt.
2. It is the case of the petitioner that they purchased certain goods from the respondent, but respondent though agreed to give cash discount to petitioner, failed to do so. It is contended that respondent issued credit notes worth Rs. 4,39,085 in favour of petitioner, on different dates between 1997 to 1998, yet did not either repay the money or gave credit of the same amount. It is for realisation of this amount, the petitioner went on to press upon the respondent to pay and eventually, when found that respondent is not paying, served a legal notice under Section 434 of Companies Act calling upon the respondent to pay the money or face the consequence of winding up. Since, despite service, the respondent failed to pay, hence, this petition was filed claiming winding up of company on the ground falling under Section 433(e) of the Act, i.e., for non-payment of the sum of Rs. 4,39,085.
3. In the return, the company has denied the claim of the petitioner. They have their own defence to deal with the transaction in question. According to the company, they have had the business dealing of supply and purchase with petitioner as also one of its sister concerns. It is the case of the company that the company had to recover quite a huge outstanding money against certain transaction from the sister concern of the petitioner. It is against those outstanding, the respondent company gave adjustment of the concerned credit notes, and accordingly, reduced their liability at the request of petitioner. It is further contended that firstly there is no case of the petitioner on facts ; secondly, the debt in question is a disputed one at the instance of respondent, because of bona fide defence, thirdly, no case of winding up is made out because the company has been doing good business, and earning profit as also distributing dividend every year to its shareholders. This, in substance, is the defence.
4. Heard Shri S. Athawale, learned counsel for the petitioner, and Shri R. Saboo, learned counsel for respondent.
5. Having heard learned counsel for the petitioner, and having perused record of the case, I find no substance in the petition and, hence, it must merit in its dismissal.
6. In my considered view, filing of a company petition for winding up on the facts alleged and relied upon are not enough and/or proper for entertaining a petition for winding up of any company. It is essentially a case of enforcement of some agreement entered into between the parties. It requires civil adjudication in Civil Court, namely, what are the rights and obligations of the parties vis-a-vis each other, whether they were performed or breached, and if so, as per the terms of the so-called agreement or not. Whether respondent had agreed to give any cash discount, and if so, on what terms and conditions? Whether respondent had to recover some money from any sister concern of the petitioner ; and if so, whether respondent could adjust the alleged cash credit notes against the dues of sister concern, etc. It is then the question can be answered as to whether petitioner is entitled to claim money which they claim to recover from the respondent company. As observed supra, this can be decided more properly, effectively and suitably by the Civil Court in a civil suit, but not by the Company Court under the Companies Act in winding up petition. Merely because the debtor happens to be a company, in itself is no ground to file and entertain a company petition for its winding up, though it is one of the main attributes for its entertaining. The Company Court in its special jurisdiction under the Companies Act cannot hold any factual inquiry on questions which are material for deciding the entitlement of petitioner in claiming back the amount. Indeed, the real object and purpose of petitioner is not to see winding up of the company, but to recover their money. It is much more so when the dues to be recovered from the respondent company are only to the tune pf Rs. 4,39,085 -- whereas the financial net worth of the respondent company is much more. It is a running company engaged in business of manufacture and earning profit.
7. A remedy of winding up of any company under the Companies Act is a discretionary remedy. It is for this court to decide as to whether a strong prima facie case on facts is made out for admission of the winding up petition against any company. Indeed, Section 443(2) of the Act empowers this court to dismiss the petition, if it is of the opinion that some other remedy is available to the petitioner for realisation of their dues or that they are unreasonable in pursuing the remedy of winding up. The reason is that winding up of any company is always regarded as an extreme and/or last remedy. It is a death of any company whose existence comes to an end on passing of a winding up order. The courts have to be very cautious in their approach while entertaining any winding up petition against any company. No creditor can take advantage of the fact for filing a petition for winding up, only because their debtor happens to be a company. Though this is one of the most important factors which enable the creditor to file petition for winding up; but it is equally necessary for the petitioner to make out a very strong and prima facie case on facts.
8. The aforesaid discussion is sufficient for dismissal of the petition. The petition, thus, fails, and is dismissed in limine.