Case Note & Summary
The Appellant, Tata Advanced Materials Ltd., filed a winding up petition against the Respondent, M/s. Tooltech Global Engineering Pvt. Ltd., under Section 433(e) of the Companies Act, 1956, claiming the Respondent was unable to pay a debt of Rs.99,74,784/-. The Appellant had supplied engineering items between 2007 and 2009, raising invoices totaling Rs.2,16,64,437/-. The Respondent made partial payments of Rs.1,31,44,778/- and on 29 July 2009 executed a written undertaking acknowledging the balance of Rs.81,94,426/- and agreeing to a payment schedule. Despite reminders and statutory notices dated 6 July 2010 and 12 October 2010, the Respondent neither replied nor paid. On 20 April 2011, the Respondent sent an email promising to pay Rs.25 lakhs and expressing difficulties, without disputing the balance. The Respondent paid Rs.25 lakhs in April 2011 but failed to pay the remaining amount. The Company Judge dismissed the petition, holding that the debt was bona fide disputed. The Appellant appealed. The Division Bench allowed the appeal, holding that the debt was not bona fide disputed as the Respondent had acknowledged the debt in writing and via email, made part payments, and failed to respond to statutory notices. The court found the Company Judge's finding perverse and ordered winding up of the Respondent company, appointing the Official Liquidator.
Headnote
A) Company Law - Winding Up - Inability to Pay Debts - Section 433(e) Companies Act, 1956 - Debt Acknowledgment - The Appellant supplied goods and the Respondent acknowledged the debt in writing and via email, making part payments. The Respondent failed to respond to statutory notices and raised no bona fide dispute. The Company Judge erred in dismissing the petition on the ground of disputed debt. Held that the debt was not bona fide disputed and the company was unable to pay its debts, warranting winding up. (Paras 1-13) B) Company Law - Winding Up - Bona Fide Dispute - Section 433(e) Companies Act, 1956 - The test for a bona fide dispute is whether the defense is substantial and not frivolous. Mere denial or raising a dispute after statutory notice does not constitute a bona fide dispute. The Respondent's conduct of acknowledging the debt and making part payments negates any bona fide dispute. Held that the Company Judge's finding of a bona fide dispute was perverse. (Paras 8-12)
Issue of Consideration
Whether the Company Judge was correct in dismissing the winding up petition on the ground that the debt was bona fide disputed, despite the Respondent company having acknowledged the debt and not raising any dispute in response to statutory notices.
Final Decision
Appeal allowed. Impugned judgment and order dated 17 October 2012 set aside. Company Petition No.198 of 2012 is admitted and the Respondent company is ordered to be wound up. Official Liquidator appointed to take over assets.
Law Points
- Winding up
- inability to pay debts
- bona fide dispute
- debt acknowledgment
- statutory demand
- Companies Act 1956 Section 433(e)
- Companies Act 1956 Section 434
