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While admitting a petition U/S.433 of Companies Act, 1956, it is not necessary to establish that the entire claim is undisputed: Supreme Court of India

Whether the defense of a Company is in good faith or as to whether it is of a substance and as to whether it is likely to succeed in point of law and as to whether the company adduces prima facie proof of the facts on which defense depends, would depend upon the facts of each case. This was held in SHITAL FIBERS LTD. V. INDIAN ACRYLICS LIMITED[CIVIL APPEAL NO. 1105 OF 2021] in the Supreme Court of India by division bench consisting of JUSTICE R.F. NARIMAN, JUSTICE B.R. GAVAI, and  JUSTICE HRISHIKESH ROY.

The facts are that the appellant had entered into an agreement with the respondent. For which payment was not made by the appellant. On the basis, the respondent filed a Company Petition seeking winding up, which learned Company Judge had admitted. The appellant had appeared in the High Court, which was dismissed. This appeal has been filed with regard to interest at the rate of 24% per annum claimed by the respondent.

The counsel for the petitioner contended that the claim of the respondent could not stand even if it was made under Order XXXVII of CPC. That requirements U/S.433(e) and (f) of the Companies Act, 1956 stood on a higher pedestal, and as such, the learned Company Judge has erred in admitting the petition and the claim of the respondent for interest does not stand.

The counsel for the respondent submitted that demand notice under Section 434 read with S.433 (e) of the said Act was duly served upon the appellant, no specific defense was taken. That no interference would be warranted in the concurrent findings of fact.

The court made reference to the Apex court judgment in Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries Pvt. Ltd., “Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt, see Re. A Company. [94 SJ 369] Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely See Re Tweeds Garages Ltd. [1962 Ch 406] The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends.”

The court also referred to the judgement of Vijay Industries vs M/S. Natl Technologies, wherein the Apex Court had made the following observations, “ In the present case, on the date of filing of the application, dues in respect of at least a part of the debt which was more than the amount specified in Section 433 [sic Section 434(1)(a)] of the Companies Act was not denied. It is not a requirement of the law that the entire debt must be definite and certain”

Considering the facts of the case and settled proposition of law the Court held, that the learned Company Judge as well as the Division bench had found, that the defense of the appellant could not be said to be bona fide, in good faith and of substance. The court found no merit in the appeal. Thus dismissing it accordingly.

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