2000-(001)-CLJ -0050 -P&H Companies Act Judgements


2000-(001)-CLJ -0050 -P&H


Company Petition No. 217 of 1998, decided on August 3, 1999.


A. C. Jain, Advocate, for the petitioner.


ANAND CHHIBAR, Advocate, for the respondent.

H. S. BAWA, Official Liquidator.


V. S. AGGARWAL, J. – This is a petition under section 433, section 434 read with section 439 of the Companies Act (for short, the Act) filed by the petitioner company seeking an order at winding up against Super Tec Machineries (P) Ltd., hereinafter called the respondent-company.

2. It has been asserted that the petitioner-company deposited a sum of Rs. 40,000 through demand draft, dated 21.8.1995 payable at State Bank of Patiala, Faridabad, and another sum of Rs. 35.000 vide demand draft, dated 1.12.1995 payable at Punjab & Sindh Bank, Faridabad. The proceeds of these demand drafts have been credited in the account of the respondent-company. The respondent-company wanted this amount for their business and had agreed to pay interest @ 18% per annum as interest on the principal amount. It was a commercial transaction. Despite repeated requests, the respondent company failed to pay the amount. A notice was sent to the respondent company by registered post. Since the respondent company failed to pay the amount, the present petition for winding up of respondent company was filed.

3. The petition was contested. It was asserted that this is not an admitted debt payable to the petitioner company. The question of inability to pay would arise once the debt is crystallised or admitted. It was even the plea of the respondent company that the petition has not been filed in accordance with the provisions of the Act. As per respondent company, it is manufacturing machines for agro-waste fuel briquetting. It was doing business till the year 1998. Due to financial constraints, the respondent-company was shut down for a period of about 8-10 months. Subsequently, the respondent-company had received orders to the tune of Rs. 1.50 crores and had started refunctioning. Statutory notice was not served as regards the amount claimed. The respondent-company asserted that the petitioner-company had given an order for the supply of a briquetting plant for a sum of Rs. 44.00 lakhs. Accordingly, a quotation was sent by the respondent-company to the petitioner company for setting up the said plants. For the said purpose, the petitioner-company had given a token advance of Rs. 40,000 followed by another advance of Rs. 35,000 to be paid to the financial institution of the World Bank which was to finance the machinery of the petitioner-company. The said machinery had to be bought from the respondent-company. It is denied, therefore, that the claim of the petitioner-company as stated was correct. The respondent company went on to urge that the machinery which was ordered by the petitioner company was lying ready at the factory premises of the respondent company. The value of the machinery is about Rs. 44 lakhs. It is to the knowledge of the respondent company that the loan which was to be sanctioned by the financial institute of the World Bank has since been cancelled and the petitioner company is not in a position to take back the machinery. Hence, the petitioner company has filed the present application for winding up.

4. It is a settled principle of law that the provisions of section 433 and section 434 of the Act cannot be utilised to recover the amount. The proper forum is to file a civil suit. The Supreme Court in the case of Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd. AIR 1971 SC 2600, considered this question and held as under :

“Where the debt is undisputed, the court will not act upon a defence that the company has the ability to pay the debt, but the company chooses not to pay that particular debt (see Re A Company 94 SJ 369). Where, however, there is no doubt that the company owes the creditors a debt entitling him to a winding up order; but (since) the exact amount of the debt is disputed, the court will make a winding up order without requiring the creditor to quantify the debt precisely, (see Re Tweeds Garages Ltd. (1962) 1 Ch 406). 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.”

5. It is in this backdrop that one has to see whether the defence of the respondent-company can be termed to be general or in good faith or not.

6. As per petitioner company, the said amount was a commercial loan given by the petitioner company to the respondent company. The factum of the receipt of the amount has not been disputed, but the respondent company asserts that an order has been placed for the machinery worth Rs.44 lakhs. The said amount was given as a token advance to be paid to IRRADA i.e., financial institute of the World Bank who has financed the machinery of the petitioner company. A copy of the quotation, dated 7.2.1996 has been placed on the record. The relevant portion of the same reads as under :

1. Briquetting press 1260-650 8.00 3 Nos.  24,00,000.00

2. Material handling system 3.50 1 No.  35,00,00.00

3. Hammer mill grinder 3.00 1 No.  3,00,000.00

4. Flash drier 5.50 1 No.  5,50,000.00

5. Storage bin/bunker .75 3 Nos.  2,25,000.00

6. Vibrating screen separator 1.00 1 No.  1,00.000,00


7. Erection & commissioning charges

(Rs. forty lakhs, twenty five thousand only) 40,25,000.00

Erection material arrangement to be made by you.

Additional expenses

8. Wear parts 1 Lot  2,10,000.00

9. Essential spares  90,000.00

10. Erection material  95.000.00

Total  44,20,000.00

7. In addition to that, Annexure R-2 is the letter purported to have been written by the petitioner company to the respondent company. It reads as under :

“Sub : Advance against machinery supply.

Dear Sir,

As per verbal negotiations with you, we are sending you a demand draft of Rs. 40,000 (Rs. forty thousand only) payable at State Bank of Patiala, Faridabad, vide draft No. 209879/13/106 in your favour.

Kindly acknowledge the same.

Thanking you.”

8. A bare reading of these documents for the purpose of the present petition reveals that the defence taken is bona fide. An amount of Rs.40,000 has been sent as advance in respect of the machinery supply. Seemingly, ‘what the respondent company asserts cannot be ignored. It was an advance with respect to the supply of machinery and consequently, the plea of the petitioner that the respondent company is unable to discharge its debt and, therefore, it should be wound up cannot be accepted.

9. For these reasons, the petition being without merit must fail and is accordingly, dismissed.

10. However, it is more clear that if subsequently, the petitioner company chooses to file a civil suit, nothing said herein shall be taken as expression of opinion on the merits of the matter.

This site uses Akismet to reduce spam. Learn how your comment data is processed.