Winding up petition not maintainable where a bona fide dispute exists

High Court of Karnataka: In its recent judgment against a company petition, a single judge bench of Raghavendra S. Chauhan, J. observed that the winding up proceeding is not the right remedy for settling dispute between the parties.

The petitioner and the respondent were in an agreement according to which the petitioner was required to supply machinery and equipment required by the respondents. The petitioner claims that during the course of supply, the respondent defaulted in payment, and after receiving multiple reminders informed tthe petitioner that due to some internal reasons it would postpone the project to the next session and assured the petitioner to release the balance amount. The respondent informed the petitioner that after reconciling its account they were not liable to pay the outstanding amount they had stipulated earlier and would pay the meager sum that was due. The respondent challenged the maintainability of the winding up petition as a bona fide dispute existed between the two regarding the outstanding amount, the termination of contract, the breach of contract and the liability of the parties under the contract.

Considering the facts of the case and lack of merit in the winding up petition, the case was accordingly dismissed. The Court held that since there are serious disputes between the parties, the parties should settle their disputes before the Arbitration Tribunal where the proceedings were pending. It upheld the Supreme Court’s observation that where a bona fide dispute exists with regards to the amount awed and rights and liabilities of the parties, the winding up petition should not be entertained. [Uttam Industrial Engineering Ltd. v. Shree Basaveshwar Sugars Ltd., COP No. 124 of 2013, decided on 23-05-2017]

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