Winding-up petition rejected as debt recovery tool

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In IBA Health (India) Private Limited v Info-Drive Systems, the Supreme Court said “it is well-settled that a winding-up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the court.”

In this case Info-Drive petitioned Karnataka High Court to wind up IBA Health, under sections 433(e) and (f), 434 and 439 of the Companies Act, 1956, on the ground that IBA Health owed it US$1,065,714.

Admitting the winding-up petition, the judge ordered that the case should be relisted for the court to decide about advertising the matter in a newspaper.

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The update of court judgments is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.