Gujarat High Court
Ashima vs Argus on 14 September, 2011
Author: Anant S. Dave
Bench: Anant S. Dave
Gujarat High Court Case Information System
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COMP/12/2009 3/ 5 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY
PETITION No. 12 of 2009
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ASHIMA
LIMITED - Petitioner(s)
Versus
ARGUS
CLOTH COMPANY LTD - Respondent(s)
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Appearance :
MRS
SWATI SOPARKAR for Petitioner(s) : 1,
MR RS SANJANWALA for
Respondent(s) : 1,
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CORAM
:
HONOURABLE
MR.JUSTICE ANANT S. DAVE
Date
: 12/01/2011 ORAL ORDER
1. The Petitioner Company- Ashima Limited s claim arise out of the supply of material to Argus Cloth Company Limited, the Respondent Company, who was acting as a Distributor for the products of the Petitioner Company. Separate Agreements of Distributorship for the West and Southern regions of India were entered into between the parties.
2. Several transactions were entered into and invoices were raised from time to time for the supplies made during the period beginning from December 1994 to July 2005 and against the said supplies made by the Petitioner, the Company made several on account payments during this period. The Respondent Company also had a practice of accepting hundis from the Petitioner, which were drawn for 90 days. However, on account of these transactions over the period of years, an amount of Rs. 79,14,21,059.97 remained unpaid towards its outstanding dues. During the year 2005, the Petitioner had sent number of letters calling upon the Respondent Company to make payments towards outstanding dues. However, only small part payments were received from the Company leaving huge amount as outstanding. Many times bills of exchange were not retired on the due dates and the Company started to raise false disputes and demanded extended credit period. A notice dated 01.08.2005 was served upon the Company through its advocate demanding Rs. 79,14,21,059.97 along with interest at the rate of 12% p.a. from the dates of respective invoices till realization within seven days from the date of receipt of the notice. The Company gave an evasive reply dated 06.08.2005 through its advocate raising the contention that the Company was willing to sit across and settle the matter in an amicable manner. Therefore, as per the arbitration clause of the Distributorship Agreement, the parties decided to resolve the dispute through arbitration.
3. Considering the claims and counterclaims and the submissions made by the parties, the Arbitrator vide an order dated 24.01.2006 passed an award of Rs. 23.50 crores in favour of the Petitioner directing the Company to pay the said amount in 36 quarterly installments ranging from Rs. 31.25 lacs to Rs. 110.00 lacs commencing from 31.03.2006 and ending on 31.12.2014. The Arbitrator further directed that in case of default of three consecutive installments and failure on part of the Company to clear them within 30 days of the notice given by the Petitioner, the Petitioner shall be entitled to claim the total balance due of the awarded amount at that stage and the same shall become payable forthwith.
4. The said arbitration award was challenged by the Petitioner as well as the Respondent Company in the civil court during 2006. However, by respective orders passed by the Hon ble Civil Court in July 2008, the said proceedings were dismissed.
5. In compliance of the said Award, the Respondent Company paid first seven instalments upto 30th September 2007 regularly. However, the 8th instalment, which was due on 31st December 2007, was not paid. Thus, the Company has made a total payment of Rs. 2.60 crores only leaving the unpaid balance of Rs. 2,387.50 lacs. In view of the non payment of further instalments, the Petitioner vide various reminders requested the Company to pay the remaining outstanding dues but no further payment was received from the Company. the Company had refused to abide by the arbitration award and had refused even to give the balance confirmation for the books of accounts of the Petitioner. Since three consecutive instalments were not paid by the Respondent Company, the Petitioner was, therefore, compelled to send a notice dated 13th October 2008 as per the terms of Arbitration Award calling upon the Company to make payment of Rs. 97.5 lacs being the aggregate amount of three overdue instalments of Rs. 32.50 lacs each, which became due on 31.3.2008, 30.06.2008 and 30.09.2008 within a period of 30 days from the receipt of the said notice. Vide the said notice, it was also made clear that in case of non payment of the said dues within the specified period, the entire unpaid amount of Rs. 20.90 crores would become due and payable by the Company but no response has been received from the Company. A Statutory Notice dated 21/11/2008 under Sections 433 and 434 of the Companies Act, 1956, calling upon the Company to pay to its Advocate or to the Petitioner the above mentioned principal sum together with running interest at the rate of 12% per annum.
6. The Respondent Company replied to the said Statutory Notice through its advocate vide letter dated 10/12/2008 and raised vague disputes and issues about delayed supplies, poor quality, debit notes and discounts, which has been already considered by the arbitrator. The respondent has further submitted that it has made some payments despite challenging the said arbitration order and has refused to adhere to the payment schedules for the outstanding balance. The Respondent Company is liable to pay the total amount of Rs. 20,94,86,164/-, (Rs. 20,90,00,000/- towards the principal sum and Rs. 4,86,164/- towards the interest on unpaid instalments) as on 31/10/2008 and further interest till payment or realization. In spite of the arbitration award and the statutory notice, the Company has not paid the said outstanding amount. This clearly indicates its inability to pay.
7. The petition came to be presented on 19th January 2009 and notice was issued on 20th January 2009 which was made returnable on 9th February 2009. The Respondent Company filed its reply on 16th February 2009. After hearing the parties, vide a speaking order dated 13th July 2009, the said petition was admitted and the publication of Notice of hearing of petition in two newspapers was directed. The petitioner had published the same in Sandesh, Gujarati daily and Indian Express, English daily both Ahmedabad editions of 23rd July 2009. An affidavit in this regard came to be filed on 27th July 2009.
8. Even currently, there is no change in the financial condition of the respondent company and there is no chance for the revival of business of the said Respondent Company. Considering the facts and circumstances, it has been strongly contended that the Respondent Company deserves to be wound up with immediate effect in the interest of justice as well as all the other creditors of the company.
9. Considering all the facts placed on record and considering the submissions made by both the parties, it is very clear that the Respondent Company has undeniably failed to pay its debts to the petitioner and is even today unable to pay its debts or carry on any business. All the ingredients of Section 433 of the Companies Act,1956 are therefore satisfied. Therefore, this court has come to the conclusion that no meaningful purpose would be served by continuing the said respondent company. Hence, the Respondent Company is ordered to be wound up. The Official Liquidator attached to this High Court is hereby appointed as the Liquidator of the said Respondent Company. He is permitted to exercise all powers in his capacity as the Liquidator under the Companies Act, 1956 including under Sections 456 and 453, thereof. He shall immediately take possession of all the assets and movable and immovable properties of the Respondent Company, as also the records and books of accounts of the Company. In the meanwhile, the respondent-company, its Directors, Officers and servants are hereby restrained from transferring, alienating, encumbering, dealing with or creating third party interest over the assets and properties of the company.
10. The notice for final order of Winding up shall be published in two daily newspapers, viz. Indian Express, English daily and Sandesh, Gujarati daily both Ahmedabad editions being the same newspapers in which the Notice of Admission was published. The same shall also be published in the Official Government Gazette.
This petition is allowed accordingly.
(ANANT S. DAVE, J.) (swamy) Top