M/s. Krsna Minerals vs Pradhan Industries Ltd

Arindam Sinha, J

This is a winding up petition. Mr. Baug, learned advocate appears on behalf of petitioner. He submits, a sum of Rs.1,96,71,136/-remains unpaid to his client by the company. The debt is admitted. His client caused to be issued statutory notice dated 29th August, 2013, copy of which is annexure-4. Upon receipt of the notice, the company did not reply but gave a hand written undertaking dated 8th September, 2013 issued by the Managing Director and signed by other persons in management of the company. He submits, the company has been unable to pay the admitted debt owing to his client. It should be wound up.

Mr. Patnaik, learned advocate appears on behalf of the company and submits, the winding up petition is not maintainable. He refers to averments in paragraph-16 of the petition for his above submission. Paragraph-16 is reproduced below.

“16. That the Opp. Party is financially very sound and doing well in its business besides having adequate properties in its name and the factory situated at Jajpur district will be atleast about Rs.25,00,00,000.00 if not more. However, the Opp. Party with malafide and fraudulent intention is not making the paying to the petitioner/firm though it is well capable of doing so.”

He relies on judgment of the Supreme Court in IBA Health (India) Private Ltd. v. Info-Drive Systems SDN.BHD reported in (2010) 10 SCC 553, paragraph-24. The paragraph is reproduced below.

“The Appellant company raised a contention that it is commercially solvent and, in such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the company's insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company's liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434 (1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation application to rebut that presumption.”

(emphasis supplied)

On query from Court he submits, there is reference in the note of argument filed on behalf of his client that the debt stands denied.

Mr. Patnaik submits further, petitioner had filed a suit on same claim. Mr. Baug responds, the suit was withdrawn. On query from Court he submits, summon in suit was not issued.

It appears, there is no dispute regarding the debt owing from the company to petitioner. The petition also discloses writing dated 10th June, 2013 issued by the company and accepted by petitioner saying, inter alia, during course of business transactions, a sum of Rs.1,96,71,136/- remains outstanding of petitioner with the company. The letter says further that both parties mutually decided to settle outstanding amount by allowing the company to repay within two months to petitioner and with the letter was being issued a cheque for said amount, drawn in favour of petitioner, to be held as additional security. The company has not been able to demonstrate any payment made pursuant to said letter.

Petitioner has duly issued statutory notice for winding up the company, for it to be deemed as unable to pay its debts. It is true that in paragraph-16 there are averments as reproduced above. The question is, on petitioner having an admitted claim against the company and petitioner’s perception being that the company is solvent but deliberately not paying the debt, whether the company can be deemed to be unable to be pay its debts.

In IBA Health (supra) the Supreme Court also said that if there is no dispute as to the company’s liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under section 434(1)(a), meaning thereby, if the debt is undisputedly owing, then it has to be paid. On query from Court Mr. Patnaik is unable to demonstrate that his client had denied the assertion, particularly that being solvent, his client had not paid on good reason. From materials on record Court is convinced that the company is in involved financial circumstances, was and still is unable to pay the debt of petitioner.

Clause (e) under section 433 in Companies Act, 1956 gives one of the circumstances, in which a company may be wound up by Court.

The circumstance is, if the company is unable to pay its debts. Section 434 is a deeming provision on when a company is unable to pay its debts. Clause (a) under sub-section (1) provides for issuance of notice and it had been issued by petitioner. Furthermore, it is well settled that winding up is a equitable mode of execution. Filing a commercial claim by suit is not a bar to winding up proceeding being initiated.

The winding up petition is admitted. There will be direction for advertisements. Petitioner is directed to advertise within 14 days from date, notice in prescribed form in one issue each of ‘Times of India’ published from Bhubaneswar and ‘Prameya’ from Cuttack. Petitioner will also serve certified copy of this order on Registrar of Companies, not later than one month from date. Costs of the petition be taxed and paid out of assets of the company.

This order be communicated to Official Liquidator in Form nos. 50 and 52 under the Companies (Court) Rules, 1959.

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