Rajarajeswari Packaging Products vs Dev Fasteners Ltd.

M. Chockalingam, J.—This appeal challenges an order of the learned single judge dismissing the Company Petition No. 568 of 2000 (Rajearajeswari Packaging Products v. Dev Fasteners Ltd. 2002 108 Comp Cas 715, whereby the appellant came with the request for winding up the respondent-company for the reasons stated therein.

Learned Counsel for the appellant is heard. Despite service of notice, the respondent has not appeared. The grounds on which the order of the learned single judge is assailed, are looked into.

The case of the appellant in short is that the respondent-company having its registered office in Madras, was manufacturing fasteners (bolts and nuts) for the automobile industries; that the appellant-company, a sole proprietorship concern, was manufacturing the corrugated boxes, and they supplied the same for packaging the products of the respondent-company; that by way of supply, there was an outstanding balance of Rs. 42,544; that whenever there was an outstanding, it was to carry interest at 24 per cent, on the delayed payments; that there was a number of notices and reminders; that actually there were letters sent on May 10, 2000 and June 2, 2000, making the demand of the payments; that they were also acknowledged; that following the same, there was a statutory notice issued on June 23, 2000, as required by law; that the same has also been acknowledged; but, the outstanding amounts were not paid, and under the circumstances, the appellant came forward with this petition for winding up.

The petition was countered by the respondent stating, inter alia, that it is not correct to state that there was a balance of Rs. 42,544; that it is true that there was a supply of corrugated boxes; but, they are of substandard quality; that number of complaints were received from the transporters and their customers; that actually this matter has been reminded by communications to the appellant; that there was actually a payment of Rs. 29,222; that as far as the balance was concerned, there was a dispute; that apart from that, there was no proper notice served, and hence, the petition was to be dismissed.

The learned single judge on enquiry, has dismissed the petition and in the opinion of this Court, rightly too. The appellant/petitioner sought the winding up on the defence plea that there was an outstanding balance of Rs. 42,544. According to the respondent, there was a payment of Rs. 29,222 and the corrugated boxes supplied were of substandard quality, and there were complaints regarding the same, and therefore, they were claiming damages from the appellant, and thus, there were issues to be decided as to the liability. Now, at this juncture, it is to be pointed out that whenever there is a petition for winding up on the basis of any liability, the liability at the time of the demand must be definite. In the instant case, it was one under dispute. As far as the service of notice was concerned, it was also a disputed fact.

Apart from the above, the learned single judge has pointed out that there was a thorough lack of pleading. What was all stated in paragraph 8 of the petition was that "the petitioner states that as on date of this petition, the company has failed to liquidate the said outstanding". But, what is required for invoking Section 433(e) of the Companies Act, 1956, is that there must be minimum plea that the respondent was unable to pay its debts. Now, the contention put forth by learned Counsel for the appellant that "failed to liquidate" would suffice, and also it would have the same meaning as that of "unable to pay". Attractive though the said contention put forth by learned Counsel may be at the first instance, it will not stand the scrutiny of law in the considered opinion of this Court since "unable to pay the debt" has got an instinct of "neglect to pay". But, in the instant case, what was mentioned was only "failed to liquidate", and hence, "failed to liquidate" cannot be taken as the necessary plea what is required for "unable to pay". Learned Counsel would further submit that there was a demand that was made in the notice, and so long as the payment was not made, it has got to be inferred that the respondent was unable to pay. This contention cannot be accepted for the simple reason that the notice issued u/s 434(1)(a) of the Companies Act, 1956, has got to be liberally construed. In a case like this where winding up is sought for, the law would expect that the plea should be strict; but, the case on hand, in the opinion of this Court, lacks pleading.

On the above grounds, this Court is of the view that the appeal does not carry merit, and accordingly, it is dismissed. No costs.