M/S. VIJAY INDUSTRIES versus M/S. NATL TECHNOLOGIES LTD.

Citation: [2008] 17 S.C.R. 972 · Decided: 17-12-2008 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2008] 17 S.C.R. 972 
A 
MIS. VIJAY INDUSTRIES 
v. 
M/S. NATL TECHNOLOGIES LTD. 
(Civil Appeal No. 7352 of 2008) 
B 
DECEMBER 17, 2008 
[S.B. SINHA AND CYRIAC JOSEPH,. JJ.] 
. Companies Act, 1956 - ss. 433 and 434 - Winding up 
petition under - Maintainability of - Interest payable on the 
c sum due whether debt to attract ss. 433 and 434 - Held: 
Failure to pay agreed interest or statutory interest would be 
'debt' - s.433 does not state that debt must be a definite sum 
- On facts, failure of purchaser to pay price for the goods to 
supplier on presentation of invoices - Credit bill signed by 
D purchaser's representative contained clause for payment of 
interest on delayed payments - Purchaser agreed to 
compensate supplier for delay in payment and never denied 
demand of interest - Supplier issued notices that payments 
' 
had been adjusted towards interest first and balance would be 
,r· 
adjusted towards principal, thus, a prima face case was 1J7ade 
E 
out - On receipt of legal notice also purchaser did not make 
payment to liquidate debt - More so, when application for 
winding up filed, dues were more than the amount specified 
in s.433 - Thus, High Court not justified in setting aside 
application for winding up admitted by Company Judge - In 
F 
the interest of justice, purchaser directed to pay simple 
interest on admitted sum @ 12% pa on the balance amount 
instead of 24% pa within the specified period. 
., 
Interest - Grant of - Held: Interest is infer alia payable 
by way of restitution - It is also payable in terms of s.62(1)(a) 
G of Sale of Goods Act; s.3 of Interest Act, 1978 as also ss.5 
and 6 of Interest on Delayed Payments to Small Scale and 
Ancillary Industrial Undertakings Act, 1993. 
Appellant-small scale unit was supplying Castor Oil 
')'--
to the respondent-company. The invoices of credit bills 
H 
972 
M/S. VIJAY INDUSTRIES v. MIS. NATL TECHNOLOGIES 973 
-, • 
LTD . 
- contained a clause that the amount was to be paid within 
A 
.... 
seven days, else buyer would be liable to pay 2% interest 
... 
per month. The representative of the respondent_signed 
._:.; 
the credit bill. Respondent did not pay the complete price 
of the said supplies on presentation of the invoices. 
Appellant adjusted the amount first towards interest at the 
B 
stipulated rate and balance against the principal amount. 
Appellant raised the demand but the respondent did not 
make the payment. Parties negotiated as regard the 
~ 
manner of.making payment. Appellant agreed to restore 
supply of Castor Oil provided the ,respondent deposited c 
the outstanding dues. Certain sum was paid and the 
appellant refused to make further supplies. A meeting 
took place. Respondent agreed to square up the old 
dues and also agreed to compensate respondent for the 
delay in payment on account of earlier supplies. The said 
agreement was not adhered to. Appellant issued a notice 
D 
u/s. 434 of the Companies Act, 1956 to the respondent 
) 
that if payment is not paid after availing the credit period, 
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respondent would be liable to pay interest @ 2% pm. 
Respondent was to pay Rs. 65, 15,947 with interest @ 2% 
pm. Respondent did not deny or dispute demand of E 
interest and according to it Rs. 16,80,468/ was due. But 
the said amount was not paid. Appellant filed a winding 
c 
up petition u/s. 433(e) and 433(f) r/w s. 439 of the Act. 
' 
Single Judge admitted the company petition and held 
that a prima facie case was made out therefor h~ving F 
regard to the correspondences passed between the 
~ 
parties, the credit bills and also the minutes of the 
meeting. Respondent filed an appeal. Division Bench of 
High Court allowed the same. Hence the present appeal. 
Allowing the appeal, the Court 
G 
HELD: 1.1 Circumstances in which a company may 
be wound up by the court are contained in s. 433 of the 
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Companies Act, 1956. If a company is unable to pay its 
debts as contained in Clause (e) thereof, it would be one 
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of the grounds therefor. Section 434 raises a legal fiction 
H 
974 
SUPREME COURT REPORTS 
(2008]. 17 S.·G.R 
r 
A as to when the company would be deemed to be unable 
to pay its debts. On a plain reading of clause (a) of sub-
~ 
e-, 
section (1) of s.434, it is evident that what is necessary 
. 
/ 
for invoking the said provision is that despite service of 
notice, company which was indebted i.n a sum exceeding 
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B one lakh rupees then due failed and/or neglected to paY-
....-
the same within three weeks thereaf

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