Section 433 of the Companies Act, 1956

HIGH COURT OF ALLAHABAD 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 FACTS 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. HELD 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. [Para 5] 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. [Para 6] 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. [Para 7] 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. [Para 8] The company petition was accordingly allowed. [Para 9]