Case: Tata Advanced Materials Limited Vs. M/S. Tooltech Global Engineering Private Limited

4. The case of the Appellant as set out in the company petition is as follows:(a) During the period 2007 to 2009, the Respondent company placed purchase orders in respect of some engineering items upon the Appellant;(b) The Appellant thereupon supplied the items and from time to time raised invoices aggregating to Rs.2,16,64,437/upon the Respondent company;(c) The Respondent company made payments to the extent of Rs.1,31,44,778/upto July 2009; on 29 July 2009, the Respondent company executed a writing acknowledging and undertaking to pay the balance amount of Rs.81,94,426/then due and payable to the Appellant. The undertaking provided for a payment schedule within which the Respondent company agreed and undertook to make payments to the Appellant;(d) As there was no compliance, the Appellant by Lawyers notices dated 6 July 2010 and 12 October 2010, called upon the Respondent company to pay the amount of Rs.85,40,220/as undertaken by the Respondent company;(e) Despite receipt of the notices, the Respondent Company neither furnished any response, nor paid the amounts as demanded;(f) On 20 April 2011, the Respondent company addressed anpromising to pay Rs.25 Lakhs and expressing difficulties in payment of the balance. There was no dispute raised with regard to payments of the balance amounts in the saidAn amount of Rs.25 Lakhs was infact paid by the Respondent company to the Appellant in the month of April 2011;(h) On 25 March 2010 and 7 March 2011 the Respondent company, in response to balance confirmation letters, confirmed to the Appellant that an amount of Rs.85,40,219.80 was receivable by the Appellant as on 28 February 2010 and 28 February 2011 respectively;(i) As no further payments were forthcoming, the Appellant after adjustment of Rs.25 Lakhs sent a statutory notice dated 25 January 2012, calling upon the Respondent company to pay an amount of Rs.60,40,220/alongwith interest thereon within 21 days from the receipt of the notice;(j) The Respondent company replied to the statutory notice (undated). Although there was no outright denial of debt, the Respondent company contended that the undertaking dated 29 July 2009 was subject to reconciliation; That payment of Rs.25 Lakhs effected in April 2011 was in full and final settlement; and that the contract between the parties stipulated that the Respondent company shall pay the Appellant only after receipt of payments from HAL, for whom the Appellant was executing engineering contracts and the items purchased by the Respondent company from the Appellant, were for the purposes of such contract;(k) The Appellant thereupon instituted Company Petition No.198 of 2012 seeking winding up of the Respondent company under Section 433 (e) and Section 434 of the Companies Act,1956; and(l) The Respondent company filed a reply reiterating substantially the defences raised in its reply.5. The learned Company Judge vide judgment and order dated 17 October 2012 has dismissed the petition. In dismissing the company petition, the learned Company Judge has held as under:(i) The defence that amount of Rs.25 Lakhs was paid in full and final settlement is contradictory, inconsistent, without any basis and cannot be accepted.(ii) The undertaking dated 29 July 2009 furnished by the Respondent company was subject to reconciliation of invoice amount and further subject to receipt of corresponding payments from HAL. As such the debt was not yet due and the petition as filed was premature.(iii) The Appellant has failed to establish that the Respondent company has deliberately and intentionally neglected to pay the amount due. Merely because, in the present case, the amount is due and payable and/or though acknowledged is not paid, that by itself is not a sufficient ground to wind up the Respondent company.

Court's reasoning:
21. 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 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 see Re. Tweeds Garages Ltd (1962 Ch 406). The principles 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.9. Applying aforesaid principles to the facts and circumstances of the present case, we have to determine whether the debt is bona fide disputed and whether the defence is a substantial one.10. The undertaking executed by the Respondent company on 29 July 209 and the unequivocal endorsement made upon the balance confirmation letters dated 25 March 2010 and 7 March 2011 establishes that the dispute regarding the debt payable by the Respondent company to the Appellant is neither bona fide, nor substantial. There is no dispute that the Respondent company placed purchase orders upon the Appellant and the Appellant supplied goods in pursuance of the same. There is no dispute that the Appellant raised invoices from time to time aggregating to Rs.2,16,64,437/out of which an amount of Rs.1,31,49,778/was paid by the Respondent company to the Appellant without any demur. Even with regard to the balance, there was never any serious demur. In these circumstances, we are of the opinion that the dispute as regards the debt, belatedly raised is an afterthought and is neither bona fide, nor substantial.In any case, as observed by the Supreme Court in Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd (1999) 5 Supreme Court Cases 688) ,a claim in a petition for winding up is not for money. The petition filed under the Companies Act in a matter like this, is to the effect, that the company has become commercially insolvent and, therefore, should be wound up. The power to order winding up of a company is contained under the Companies Act and is conferred on the Court. An Arbitrator, notwithstanding, any agreement between the parties, would have no jurisdiction to order winding up of a company.16. In the aforesaid circumstances, the objections as to maintainability of a petition for winding up on the ground that the contract between the parties contains an arbitration clause is liable to be rejected.17. In our judgment, therefore, the Appellant has made out a case for admission of Company Petition No.198 of 2012.