HIGH COURT OF
Helen Brothers
v.
Modi Threads Ltd.
SUNIL AMBWANI,
J.
COMPANY
PETITION NO. 102 OF 1997
January 10,
2006
Section 433 of
the Companies Act, 1956 - Winding up - Circumstances in which a company may be
wound up - Petitioner supplied certain goods to respondent-company - Case of
petitioner was that respondent had made only part payment in respect of goods
supplied and there was unreasonable delay in making payment of outstanding
amount - Petitioner sent notice to respondent-company which came back with
endorsement that company was closed - Hence, instant petition was filed under
section 433(e) and (f) seeking winding up of respondent-company - Respondent
resisted petition mainly on ground that it did not make full payment as certain
goods were of inferior quality which had
been returned - Respondent further denied receipt of any notice - It was
however seen from record that during pendency of
instant petition, respondent had made a reference under section 15(1) of Sick
Industrial Companies Act 1985 which was rejected by BIFR and order passed by it
showed that respondent was unable to pay its dues - Further, respondent’s defence that goods were not of agreed standard and were
returned was not established as respondent could not provide details of date
when it made a protest and returned goods - ‘Finally, petitioner, on basis of
evidence on record, proved that notice was addressed to respondent-company
which refused to receive it - Whether, in aforesaid circumstances, it was just
and equitable to wind up respondent-company - Held, yes - Whether, therefore,
instant petition was to be allowed - Held, yes
The petitioner
supplied certain goods to the respondent-company. The case of petitioner was
that the respondent had made only part payment in respect of goods supplied and
there was unreasonable delay in making payment of the outstanding amount. The
petitioner sent a registered notice to the respondent-company which came back
with the endorsement that the company was closed. Hence, the instant winding up
petition under section 433(e) and (f) was filed which was resisted by the
respondent mainly on ground that there was a bona fide dispute as
certain goods had been returned because of the inferior quality and being
sub-standard. Besides, receipt of any notice was also denied by the respondent
company.
It was seen
from records that during the pendency of winding up
petition, the respondent-company had made a reference under section 15(1) of
the Sick Industrial Companies (Special Provisions) Act 1985, which was rejected
by the Board for Industrial and Financial Reconstruction (BIFR) as
non-maintainable. The proceedings before the BIFR established that the
respondent company had completely lost its substratum. These proceedings
clearly showed that the net worth of the respondent-company was negative and
that it had completely become insolvent and was not financially viable any more
in the year 2000 when the reference was rejected. It had not brought any
material on record to show any improvement in its financial condition. [
The respondent-company had not given the details
of the quality of the goods which according to them were returned as
sub-standard. The dates when the respondent-company made a protest and returned
the goods had not been given. In the rejoinder affidavit, the
petitioner-company had denied that any complaint was made or that any quantity
of goods was returned. The respondent-company had failed to establish that the
goods were of inferior quality and that the goods were actually returned to the
petitioner. [
Further, there was no substance in the
contention that the statutory notice was not served upon the
respondent-company. The petitioner had not only annexed copy of the notice but
also annexed xerox copy of the cover of the
registered notice and the postal receipt. The notice was returned with the
endorsement that the company was closed. There was no averment in the counter
affidavit or supplementary counter-affidavit that the respondent-company was receiving
other letters or correspondence at the same address. [
In the instant case the notice was addressed to
the registered office of the respondent-company, which refused to receive it.
The defence that goods were not of the agreed
standard and were returned, was not established. The
order of the BIFR also showed that the respondent-company was unable to pay its
dues. It was therefore, just and equitable to wind up the
respondent-company. [
The company
petition was accordingly allowed. [