- 1 - IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA Company Petition No. 9 of 2007. Judgment reserved on 22.7.2008. Date of decision 26.8.2008. ___________________________________________________ Jagriti Plastic Ltd. ….Petitioner. Versus Adhunik Packagers (P) Ltd. ….Respondent. ___________________________________________________ Coram The Hon’ble Mr. Justice Dev Darshan Sud, J. Whether approved for reporting?1 No. For the petitioner Mr. K.D.Sood, Advocate. For the respondent Mr. Rahul Mahajan, Advocate. ___________________________________________________ Dev Darshan Sud, J. The petitioner has approached this Court under the provisions of Section 433 (e) of the Companies Act, 1956 (hereinafter referred to as the Act) on the allegations that respondent which is a private limited Company is unable to pay its debts and despite a notice of demand having been served 1 Whether reports of Local Papers may be allowed to see the judgment? No. - 2 - on the respondent at its Registered Office calling upon it to pay the amount due and outstanding, no payment has been made. It is pleaded that the defence as taken by respondents in their reply is not bonafide. The allegations made in the petition are that the petitioner is a Public Limited Company with its registered office at 107, M.G. House, Community Centre, Wazirpur, Industrial Area, Delhi and is engaged in the business of manufacture /sale of chemicals etc. The respondent is a private limited Company incorporated, constituted and registered under the provisions of the Act having its registered office at Plot No.12-A, Sector 2, Parwanoo. The allegations in the petition are that the respondent used to purchase various types of chemicals etc. manufactured by the petitioner both on cash and credit basis. All orders placed by respondent on the petitioner were duly executed. During the business dealings no dispute was raised by respondent regarding the quality of goods or the amount paid for. In the statement of account for the period w.e.f. 1.4.2006 to 31.3.2007 the respondent - 3 - owed a sum of Rs. 41,15,758/- as on 22.11.2006 according to the books of account maintained by petitioner as required by the Act. A registered notice dated 16.5.2007 Annexure P7 was also sent to respondent calling upon them to pay the amount claimed in this petition failing which action in accordance with law would be initiated against them. The defence set up by the respondent herein is that the accounts as filed by the petitioner are not correct and that the goods supplied to M/S Kolor Printers have also been debited to their account. They submit that according to the balance sheets prepared by them in accordance with law for the years 2003-2004, 2004- 2005, 2005-2006 and 2006-2007 filed as Annexures R- 1, R-2, R-3 and R-4, there is no liability due and outstanding to the petitioner company. The allegations made are denied in toto and the correctness of the accounts filed with the petition alleging the respondent to be a debtor has been challenged. The respondent also pleads and submits that since no debt was due and outstanding, no reply was filed to the notice. It is urged that - 4 - the company enjoys a sound financial health and there is no question of it being considered as having reached a point where it cannot pay its debt(s). These averments have been denied by the respondents in rejoinder. In Madhusudan Gordhandas & Com. V. Madhu Woolen Industries Private Ltd., AIR 1971 SC 2600, the Supreme Court held: “20. Two rules are well settled. First if the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company. The court has dismissed. a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed. 21. Where the debt is undisputed the Court will not act upon a defence - 5 - that the company has the ability to pay the debt but the company chooses not to pay that particular debt. Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but 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. 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. 22. Another rule which the Court follows is that if there is opposition to the making of the winding up order by the creditors the Court will consider their wishes and may decline to make the winding up order. Under Section 557 of the Companies Act, 1956 in all matters relating to the winding up of the company the Court may ascertain the wishes of the creditors. The wishes of the shareholders are also - 6 - considered though perhaps the Court may attach greater weight to the views of the creditors. The law on this point is stated in Palmer's Company Law, 21st Edition, Page 742 as follows: "this right to a winding up order is, however, qualified by another rule, viz., that the Court will regard the wishes of the majority in value of the creditors, and if, for some good reason, they object to a winding up order, the Court in its discretion may refuse the order". The wishes of the creditors will however be tested by the Court on the grounds as to whether the case of the persons opposing the winding up is reasonable; secondly whether there are matters which should be inquired into and investigated if a winding up order is made. It is also well settled that a winding up order will not be made on a creditor's petition if it would not benefit him or the company's creditors generally. The grounds furnished by the creditors opposing the winding up will have an important bearing on the reasonable of the case.” - 7 - This fundamental principle of law as settled has been subsequently followed in all cases. Reference may also be made to the case in Haryana Telecom Ltd. v. Himachal Futuristic Communication Ltd., (2006) 133 Comp Cas 351 (HP) wherein this Court has held that a winding up petition cannot be used for seeking enforcement or realization of a debt where there is a bonafide dispute. Learned counsel appearing for the petitioner submits that the very fact that the respondent did not respond to the notice issued by the petitioner to the respondent calling upon it to pay its debts and had acknowledged the petitioner as a creditor in its balance sheet as on 31.3.2003 (Annexure P-12), coupled with the fact that it was regularly reconciling accounts and making payments on behalf of Kolor Printers which was nothing but a camouflage for the other family business of the directors of the respondent, is sufficient proof of the indebtedness and inability of the respondent herein to pay the debt. It is not as if the debt is disputed once having acknowledged it in the balance sheet as submitted. - 8 - I am unable to accept this contention. Whether Kolor Printers is a family business of the directors of the respondents, whether accounts have been reconciled, what are the reasons for not acknowledging the respondents as creditors in the subsequent balance sheets to the one as mentioned in Annexure P-12 and whether payments were actually made on behalf of Kolor Printers by the petitioners, whether any relationship of creditor and debtor existed, are bonafide disputes which are required to be decided in a civil suit and not by enforcing winding up proceedings. As held by the Courts that where a bonafide dispute is raised, it is not sufficient to invoke the provisions of the Act for winding up which entails serious consequences, but what is required is that the debt is prima facie established and the defence put up is not bonafide but a subterfuge to dodge the law. The emphasis laid by the petitioner on the fact that non filing of the reply itself constitutes an act which would attract the provisions of winding up cannot be accepted. This fact gains importance only when other factors exist showing the inability of the - 9 - company to pay debts. Applying the principles of law laid down in the judgments referred to above, I do not find any merit in this petition which is accordingly rejected. It shall be open to the petitioner herein to file a suit for recovery of the amount. Pending application(s) shall stand disposed of. August 26, 2008 (PC). (Dev Darshan Sud), J.