M/S. Krsna Minerals vs Pradhan Industries Ltd
2022 Latest Caselaw 3319 Ori

             IN THE HIGH COURT OF ORISSA AT CUTTACK

                            COPET No.65 Of 2013
                           (Through hybrid mode)

        M/s. Krsna Minerals                    ....            Petitioner

                                       Mr. Banshidhar Baug, Advocate
                                   -versus-

        Pradhan Industries Ltd.                ....       Opposite Party

                                               Mr. A. Patnaik, Advocate


                 CORAM: JUSTICE ARINDAM SINHA
                                   ORDER

Order                             19.07.2022
No.
  27.   1.      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.

2. Mr. Patnaik, learned advocate appears on behalf of the

company and submits, the winding up petition is not maintainable. He

// 2 //

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

// 3 //

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.

3. 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.

4. 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

// 4 //

security. The company has not been able to demonstrate any payment

made pursuant to said letter.

5. 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.

6. 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.

7. 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

// 5 //

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.

8. 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.

9. This order be communicated to Official Liquidator in Form

nos. 50 and 52 under the Companies (Court) Rules, 1959.

(Arindam Sinha) Judge Sks