Gujarat High Court
Gujarat State Financial Services Ltd. vs Amar Polyester Ltd. on 19 December, 1997
Equivalent citations: (1998)1GLR731
Author: S.D. Pandit
Bench: S.D. Pandit
JUDGMENT S.D. Pandit, J.
1. Affidavit-in-reply filed by the respondent is taken on record. Heard both the sides.
2. This application is filed by Gujarat State Financial Services Ltd., a Government of Gujarat undertaking. By this application, the applicant is seeking revival and restoration of Company Petition No. 245 of 1996, disposed of on 12-8-1997, to the file and proceed further in the same.
3. The applicant had filed Company Petiton No. 245 of 1996, against the respondent, Amar Polyester Ltd. on the allegations that the respondent-company was owing Rs. 46.94 lakhs to the applicant as the principal dues and further the amount of interest as per the agreement between the parties, executed before filing of the above Company Petition No. 245 of 1996. The applicant-company Gujarat State Financial Services Limited had filed two criminal cases against the respondent. One criminal case under Section 138 of Negotiable Instruments Act, during the pendency of that Company Petition, another complaint filed, after filing of the Company Petition, under Section 406, and 477(A) of the Indian Penal Code for the same transactions, which was the subject-matter of earlier prosecution. It also seems that the respondent-company has also filed a suit against the present applicant making certain monetary claim before the City Civil Court, Ahmedabad. It seems that during pendency of Company Petition No. 245 of 1996, the parties arrived at settlement and executed consent terms on 6-8-1997. As per the said conset terms, respondent No. 1 agreed to pay all its dues by certain instalments mentioned in the said consent terms. It was further agreed between the parties that the applicant would withdraw both the prosecutions. Whereas the respondent would withdraw his suit. Those consent terms filed in the Court on 12-8-1997 and in view of the said consent terms Company Petition No. 245 of 1996 was dismissed as withdrawn by this Court on 12-8-1997.
4. The applicant has now come before the Court with the case that though said consent terms were executed on 6-8-1997, the respondent has not made payment of its dues as per the said consent terms, except first instalment, which was paid prior to the recording of said consent terms by this Court. It is further claimed that the applicant-company has withdrawn one of his prosecutions, but there is no payment of instalments by the respondent. The second prosecution is not withdrawn. It is the claim of the applicant that as per the consent terms the petitioner was having liberty to revive the proceeding. Therefore, he has filed the present application.
5. The claim of the applicant is resisted by the respondent by filing affidavit-in-reply. It is contended that once the original Company Petition is withdrawn the application for revival of the proceedings is not at all tenable in law. It is contended that as per the provisions of Companies Act, the order of winding-up of the company if happened to be passed in the proceedings, they would relate back to the date of filing of the original petition. Admittedly, the Company Petition was disposed of on 12-8-1997 and if it is to be restored by allowing his application and if ultimately said Company Petition happened to be allowed then transaction which have taken place between 12-8-1997 and till date of allowing of this application will become invalid and illegal and that would cause prejudice to the third parties, who have entered into transaction with the respondent between 12-8-1997 and till this date. Therefore, in public interest the present application should not be allowed.
6. It is further contended on behalf of the respondent that on account of the financial crisis the respondent has already approached the B.I.F.R., New Delhi under Section 156 of Sick Industrial Companies (Special Provisions) Act, 1985. Therefore in view of the provisions of Section 22(1) of the said Act, no proceedings for winding-up of the company could be initialed. Therefore, in the circumstances the present application deserves to be rejected. The respondent has provided the scheme to be presented before B.J.F.R. for the purpose of survival of the respondent-company and in the same scheme necessary steps are taken to protect the interest of the present applicant. Therefore, in the circumstances also it is not necessary to allow the present application.
7. It is admitted fact that the present applicant had filed Company Petition No. 245 of 1996 under Section 433 of the Companies Act, 1956. Said application was filed by the present applicant after serving notice under Section 434 on the respondent. As a matter of fact, there is no dispute that the respondent is owing debt to the present applicant. The proceeding under Section 433 of the Act is the proceeding to be initiated for the purpose of winding-up of the company. It is not a proceeding meant for recovery of debt. Admittedly, after filing of Company Petition No. 245 of 1996 the applicant has entered into the consent terms with the respondent-company, its debtor, and had entered into agreement to receive its debts by instalments. When the creditor enters into agreement with the debtor and accepts to receive its debt in instalments, then that conduct of creditor itself shows that the claim of the creditor, which is made in Company Petition that the debtor is not in a position to satisfy its debts, is not correct. The consent terms are voluntarily executed by the creditor and creditor agrees and allows the debtor to satisfy its debts in instalments, thereby the cause of action in the Company Petition goes away. Merely because subsequently the debtor makes default in payment of instalments would not revive the original cause of action, though that conduct of debtor may amount to a fresh cause of action. As stated earlier, the company proceeding is not meant for recovery of debt or dues. This is a proceeding, which is to be initiated in public interest for just and reasonable cause and not for the purpose of protecting interest of any single creditor. Therefore, in the circumstances, even if there happen to be a consent term saying that the petition could be revived by the creditor for failure of the consent terms, the Company Petition which once stands disposed of on account of creditor accepting claim of the respondent that he will satisfy his debt, will not give a right to have revival of the proceeding. The foundation for the proceeding under the Companies Act is inability of debtor to pay its debt. Therefore, when the creditor by his own conduct accepts the position that the debtor will be in a position to satisfy its debt by entering into consent terms and by his own conduct he shows no cause of action surviving. The moment he enters into consent terms there is nothing to proceed "with the Company Petition. In the circumstances, I hold that merely because the term in consent giving liberty to revive the proceeding, it will not change the law and will not give right to the creditor to ask the Court to revive the proceeding.
8. It is also an admitted fact that as per the consent terms an amount of Rs. 4/- lakhs no doubt out of the total of more than Rs. 48/- lakhs has been paid by the respondent. The respondent has also withdrawn its civil suit filed by him in the City Civil Court. The present applicant has withdrawn one of his prosecutions against the respondent. No doubt, the second prosecution still continues. But once the proceedings are withdrawn by them and one instalment is paid by them, by that conduct of both the sides the consent terms were acted upon by the parties. Therefore, once the consent terms, in agreement, are acted upon by the parties, the cause of action for fulfilment of the terms of the contract would not make the contract illegal or voidable. Therefore, on that count also the present application could not be allowed.
9. It must also be mentioned that original Company Petition stands disposed of on 12-8-1997 and this application is filed by the original petitioner on 17-11-1997. Now between these two dates, i.e., 12-8-1997 and 17-11-1997, the respondent must have entered into numerous transactions with other persons, namely, the persons who could not be aware of these proceedings would be put to difficulty and harassment. If the present application is allowed and the original Company Petition ijaevived that will definiterly cause prejudice to these persons for no fault of theirs
10. Therefore, in view of this aspect of the matter also the present application could not be allowed. Thus, 1 hold that the present application is not tenable in law. I reject the same. No order as to costs.