M/S. IBA HEALTH (I) P. LTD. versus M/S INFO-DRIVE SYSTEMS SDN. BHD.

Citation: [2010] 12 S.C.R. 137 · Decided: 23-09-2010 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2010] 12 S.C.R. 137 
MIS. IBA HEALTH (I) P. LTD. 
v. 
M/S INFO-DRIVE SYSTEMS SON. BHD. 
(Civil Appeal No. 8230 of 2010) 
SEPTEMBER 23, 2010 
[S.H. KAPADIA, CJI AND K. S. PANICKER 
RADHAKRISHNAN, J.] 
Companies Act, 1956: 
ss. 433, 434 - Winding up petition by the creditor -
Maintainability of - Held: Not maintainable when there is 
substantial dispute as to liability - If the debt is bona fide 
disputed, there cannot be "neglect to pay" within the meaning 
A 
B 
c 
· of s.433(1)(a) - "Bona fide dispute" implies the existence of o 
a substantial ground for the dispute raised - On fact, there 
was bona fide dispute as to liability - Company Court erred 
in ordering winding up of the company -
The approach of 
Company Court was very casual as it did not make any 
endeavour to ascertain as to whether the company sought to 
E 
be wound up for non-payment of debt had a defence which 
was substantial in nature. 
ss. 434(1 )(a) -
Commercial solvency -
Held: An 
examination of the company's solvency may be a useful aid 
in determining whether the refusal to pay debt is a result of a 
F 
bona fide dispute as to the liability or whether it reflects an 
inability to pay - If the debt is an undisputedly owing, then it 
should be paid - If the company refuses to pay, without good 
reason, it should not be allowed to avoid the statutory demand 
by proving, at the statutory demand stage, that it is solvent -
G 
The commercial solvency cannot be characterized as a stand 
alone ground. 
ss. 433, 434 - Winding up proceedings - Abuse of -
137 
H 
138 
SUPREME COURT REPORTS 
[2010] 12 S.C.R. 
A Held: A creditor's winding up petition implies insolvency and 
is likely to damage the company's creditworthiness or its 
financial standing with its creditors or customers and even 
among the public - A party to the dispute should not be 
allowed to use the threat of winding up petition as a means of 
B enforcing the company to pay a bona fide disputed debt -
Company Court should be guarded from such vexatious 
abuse of the process and cannot function as a Debt Collecting 
Agency and should not permit a party to unreasonably set the 
law in motion, especially when the aggrieved party has a 
c remedy elsewhere. 
s.433 -
Winding up petition -
Publication in the 
newspaper about the filing of petition - Caution - Held: It may 
damage the creditworthiness or financial standing of the 
company and may also have other economic and social 
D ramifications - Company Court, at times, has not only to look 
into the interest of the creditors, but also the interests of public 
at large and should be more vigilant so that its medium would 
not be misused - Public policy. 
E 
Words and phrases: "Bona fide dispute" - Meaning of 
The appellant company was originally incorporated 
as Medicom Solutions Pvt. Ltd. (Medicom). In Dec., 2005, 
it was acquired by two Singapore companies. The paid 
up capital of appellant was in excess of Rs.10.06 crores 
F 
illt the end of 31.3.2009 and its fixed assets and 
investments were in excess of Rs.23.83 crores. At the end 
of 31.3.2009, it had made a profit of over Rs.15 crores and 
tlhere were over 300 employees working in the appellant 
company. The respondent company was incorporated in 
G Malaysia which was originally incorporated as Bitech. The 
appellant and the respondent entered into the 
Cooperation Agreement on 18.2.2002. Pursuant to the 
said agreement, the respondent introduced the appellant 
tel one M/s. Solution Protoc for the sale and supply of 
H 
IBA HEALTH (I) P. LTD. v. INFO-DRIVE SYSTEMS 
139 
SON. BHD. 
certain software services and the appellant agreed to pay 
A 
to the respondent company certain commission charges 
as set out in the said agreement. 
The dispute arose between the parties regarding the 
payment of the commission charges which led the parties 
B 
entering into a deed of settlement dated 19.12.2003, 
·pursuant to which the terms of the Cooperation 
Agreement were superseded by the deed of settlement 
and the appellant agreed to pay the commission charges 
due to the respondent in accordance with the terms and 
C 
conditions set out in the deed of settlement. The 
respondent filed a suit for restraining the acquisition of 
the appellant company alleging the breach of the terms 
of the settlement deed. The parties entered into a 
compromise on 18.3.2006, pursuant to which both the 
parties agreed to adhere to the terms and conditions of D 
the deed of settlement dated 19.12.2003. 
After the c

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