The proceedings before a Company Court are not recovery proceedings and the Company Court cannot be used as a debt collecting agency
While disposing of the present winding up petition, the Delhi High Court held that a petition for the winding up of the company under Section 433(e) of the Act is maintainable if the company is unable to pay its debt. A company is deemed to be unable to pay its debt, if a demand is made on the company for the amount due and payable by the company and the company has failed and neglected to pay its debt. However, there can be no presumption of inability to pay debts where the same are not accepted as such. Where the company is solvent and claim raised by the creditor is disputed by the respondent company, then a proceeding for winding up is not maintainable.
In the present matter there were some disputes with regard to the quality of goods, however, substantial parts of the amount claimed by the Petitioner was undisputedly payable by the Respondent. The respondent not only tendered the amount as admitted by it but also tendered the amount disputed by the Respondent for which debit notes were issued. This was held sufficient to indicate that the Respondent Company was able to pay its debts and could not be considered as commercially insolvent.
In regard to claim of interest on delayed payment it was held that mere mentioning about delayed payment interest in a bill or invoice would not per se constitute an agreement for payment of interest. The same can by no stretch be considered to be a debt admitted by the Respondent. In order to claim any amount on account of late payment charges, the claimant or Petitioner would have to establish that there was an agreement between the parties that such charges would be paid. Further, if the delayed payment charges are claimed in the nature of damages, it has to be first established that the same reflects reasonable damages suffered by the Petitioners.
The proceedings before a Company Court are not recovery proceedings and the Company Court cannot be used as a debt collecting agency or as a means of bringing improper pressure on the company to pay a bona fide disputed debt. A company court should not exercise its discretionary power provided under Section 433 of the Act where there is ample material on record to substantiate the fact that there are substantial and bona fide disputes against the amount claimed by the creditor of the company.
[M/s. Nakshatra Steel Sales & Services Ltd. vs. M/s. Radlay Metal Products Pvt. Ltd. ]
(Delhi HC, 05.05.2014)