Punjab-Haryana High Court
Leela Mercantile Private Limited vs Eastman Fab Limited on 9 December, 2011
Author: Ajay Kumar Mittal
Bench: Ajay Kumar Mittal
Company Petition No.49 of 2010 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
C.P.No.49 of 2010
Date of decision: December 9, 2011
Leela Mercantile Private Limited
...Petitioner
Versus
Eastman Fab Limited
...
Respondent
CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL
Present: Mr. Deepak Suri, Advocate for the petitioner.
Mr. S.K.Mukhi, Advocate with
Ms. Jyoti, Advocate for the respondent.
Ajay Kumar Mittal,J.
1. The petitioner-company has filed the present petition under Sections 433(e), 434 and 439 of the Companies Act, 1956 (in short, "the Act") for winding up of the respondent-company for its inability to pay its liability and for the reason that it is just and equitable to wind up the aforesaid company.
2. The petitioner company is a private limited company and is engaged in the business of manufacturing, trading and sale of sugar boiled confectionary like sweets, candies etc. and also packaging material. The respondent company is a limited company incorporated under the provisions of the Act. It placed an order on the petitioner- company for packing material for the packaging of 'Lejon' brand of sweets and candies manufactured and sold by the respondent- Company Petition No.49 of 2010 2 company. The petitioner supplied the packaging material and had also issued invoice No.1 dated 25.4.2007 for a sum of Rs.4,08,815/-. The said material sent by the petitioner has been duly received and consumed by the respondent-company. The respondent-company did not make the payment of the said amount. The petitioner-company issued letters and reminders to the respondent-company for making payment. No payment has been made by the respondent-company. The respondent-company had also issued Form 'C' to the petitioner- company being the Form of declaration to avail sales tax concession. The petitioner has also obtained balance sheet of the respondent- Company as on 31st March 2009 which shows that the respondent company has admitted that an amount of Rs.4,08,815/- is due and payable to the petitioner. The name of the petitioner appears in the detail of sundry creditors of the respondent-company. As per terms and conditions on the invoice issued by the petitioner, it is entitled to charge interest @ 28% per annum on the over due accounts. No payment being made by the respondent company, the petitioner sent a legal notice dated 30.3.2010 under Sections 433 and 434 of the Act to the respondent-company for payment of the aforesaid amount alongwith interest at the rate of 28% per annum from the date of invoice till payment. No reply to legal notice has been received nor payment has been made till date. Hence the present petition for winding up.
3. Notice of this petition was issued to the respondent- company. The petition has been contested by the respondent by filing reply. The primary ground of contest as raised in paras 10 to 12 of the reply is that the petitioner had closed its manufacturing unit and Company Petition No.49 of 2010 3 had requested the respondent to keep the packing material with it with the condition that the payment shall be subject to the sale of the material and therefore, no amount as claimed by the petitioner is due.
4. Learned counsel for the petitioner submitted that the petitioner had supplied material worth Rs.4,08,815/- to the respondent-Company. The respondent has failed to make the payment thereof. In order to substantiate the claim of the petitioner, learned counsel referred to Annexure P.10 - declaration in Form 'C' under the Sales Tax Act issued by the respondent Company in favour of the petitioner in respect of tax paid thereon. Reference was also made to the balance sheet of the respondent-company wherein the aforesaid amount was shown in the details of the sundry creditors in the liability column for the year ending 31.3.2008 and also 31.3.2009. Learned counsel, thus, submitted that the respondent-Company having failed to make the payment of the undisputed amount was unable to pay the debts within the meaning of Section 433(e) of the Act and was, thus, liable to be wound up under the provisions of the Act.
5. Controverting the averments of learned counsel for the petitioner, learned counsel for the respondent submitted that even according to the case of the petitioner, the goods were allegedly supplied on 25.4.2007 and therefore, the suit became time barred on 25.4.2010 whereas the present petition having been filed on 28.4.2010 was clearly barred by time. On the basis of the plea taken in the written statement, it was submitted that the amount was disputed and recourse to proceedings under the Act was unwarranted. It was next contended that winding up petition can only be filed Company Petition No.49 of 2010 4 where company is either insolvent or is unable to pay admitted debt. Concluding his arguments, learned counsel urged that depicting of the amount in the balance sheet is not sufficient to presume that the liability was undisputed. Reliance was placed on judgments of this Court in State Trading Corporation of India Limited v. Punjab Tanneries Limited, (1989) 66 Company Cases 634, the Hon'ble Supreme Court in Pradeshiya Industrial and Investment Corporation of Uttar Pradesh v. North India Petro Chemical Limited and another, (1994) 79 Company Cases 835, Andhra Pradesh High Court in Smt.Vijayalakshmi v. Hari Hara Ginning and Pressing, (1999) 96 Company Cases 723, Patna High Court in Mangal Finance Limited v. Express Confectioners Pvt. Limited, (2000) 100 Company Cases 399, Himachal Pradesh High Court in Marigold Papers Limited v. Renuka Packages Pvt. Limited, (2003) 113 Company Cases 636, Bombay High Court in K.K.Vasudeva Kurup v. Phulchand Exports Limited, (2003) 113 Company Cases 401, Delhi High Court in Shadow Communications v. Prince Gutka Limited, (2003) 116 Company Cases 536 and Rajasthan High Court in Nandlal Vithaldas v. Hindustan Fibres Limited, (2003) 117 Company Cases 117.
6. Rebutting the arguments of learned counsel for the respondent, Mr. Deepak Suri, learned counsel for the petitioner, reiterating his stand taken earlier, submitted that after excluding the period required for issuance of notice under section 434 of the Act, the present petition was within limitation. It was further submitted that the amount having been shown in the balance sheet for the year ending 31.3.2008 and 31.3.2009 as payable to the petitioner, in view Company Petition No.49 of 2010 5 of judgment of this Court in William Jacks & Company (India) Limited v. Sraswati Industrial Syndicate Limited, 1985(2) PLR 627, that was an acknowledgment within the meaning of Section 19 of the Limitation Act, 1908 and debt could not be said to be time barred. Reliance was also placed on judgments of the apex Court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Private Limited, 1972 (42) Company Cases 125, IBA Health (I) P. Limited v.Info-Drive Systems SDN. BHD,(2010) 159 Company Cases 369 and Single Bench judgment of this Court in Ratna Commercial Enterprises P. Limited v. Vasu Tech. Limited, (2009) 149 Company Cases 477 to submit that the respondent could not make out a case that the liability was disputed and where the defence taken by the respondent-Company is illusory or is not bonafide, recourse to Sections 433 and 434 of the Act can be taken as the Company is said to be commercially insolvent. It was submitted that it is not on the basis of the entry alone in the balance sheet that the amount was sought to be recovered, the respondent had even issued the sales tax form as noticed earlier and therefore, the denial of the liability was not justified.
7. After hearing learned counsel for the parties and perusing the record, I do not find any merit in the submissions of learned counsel for the respondent.
8. The respondent had not disputed that the material had been received by it. It was not established by the respondent that either the material had been returned to the petitioner or the value of the same had been paid to it. In the facts and circumstances of the present case, the plea taken by the respondent that the articles had Company Petition No.49 of 2010 6 been received to be kept by it does not stand to logic and reasoning. Learned counsel for the respondent on repeatedly being asked was unable to justify as to why entry with regard to liability in the balance sheet and also certificates regarding payment of sales tax had been issued if the ownership of the goods was not transferred to the respondent by the petitioner. The contention of the respondent that the debt was time barred also does not carry any substance as the same had been depicted in the balance sheets for the year ending on 31.3.2008 and 31.3.2009 and would be governed by Section 19 of the Limitation Act in view of judgment of this Court in William Jacks & Company (India) Limited's case (supra). Furthermore, even period of three weeks prescribed under Section 434 of the Act for issuance of prior notice comes to the rescue of the petitioner.
9. Referring to the judgments relied upon by learned counsel for the respondent, the issue before the Hon'ble Supreme Court in Pradeshiya Industrial and Investment Corporation of Uttar Pradesh's case was that the petitioner had already taken recourse to arbitration proceedings under the agreement for adjudication claiming specific performance of the agreement and in these circumstances, the Hon'ble Supreme Court refused to allow the petitioner to take recourse to winding up petition on the ground that once recourse had already been taken to alternative remedy and disputed claim had to be settled therein, resort to winding up petition was not justified. Similar position arose before this Court in State Trading Corporation of India Limited's case (supra).
10. The case before the Division Bench of the Andhra Pradesh High Court in Smt.Vijayalakshmi's case (supra) was where Company Petition No.49 of 2010 7 the petitioner had preferred a civil suit for recovery of the amount which included the admitted amount due and in such a situation, it was held that entertaining of the petition under the Act was not proper. The Patna High Court in Mangal finance Limited's case (supra) was dealing with a case where the petitioner in lieu of its claim for Rs.1,51,000/- had made a settlement for Rs.31000/- which was paid to the petitioner-company. It was claimed by the respondent that thereafter nothing remained to be paid in view of the settlement. On these premises, the High Court refused to admit the winding up petition.
11. In Marigold Papers Limited's case (supra), therein the petitioner company had claimed a sum of Rs.1,34,793/- on account of having supplied craft paper to the respondent-company. The company was required to make the payment within seven days of receipt of consignment and having failed, the winding up petition was filed. The respondent had disputed the amount and the question arose for consideration was whether two letters on the basis of which limitation was sought to be extended could constitute an acknowledgement within the meaning of Section 18 of the Limitation Act, 1963 and disputed questions of fact being involved, the winding up had not been an appropriate remedy. The Bombay High Court in K.K.Vasudeva Kurup's case (supra) was adjudicating a case of an advocate who had filed a petition for winding up on the ground that the respondent-company had failed to discharge its liability regarding the professional fees which was payable to him. The High Court after noticing that the petitioner had failed to supply the requisite information and to send the account in order to check up the records Company Petition No.49 of 2010 8 and to strike the balance payable for the professional fees and to account for the court fees which was paid to the petitioner for filing the suits, held the liability to be disputed and the winding up proceedings were held to be not justified.
12. The issue before the Delhi High Court in Shadow Communications's case (supra) was that where the petitioner had initiated winding up proceedings against the respondent-Company but the same were declined by the Court holding that the defence taken by the respondent raised a dispute on the basis of which the claim of the petitioner could not be termed as admitted liability and therefore, the winding up petition was not maintainable. Factual aspect before the Rajasthan High Court again in Nandlal Vithaldas's case (supra) was relating to disputed liability and recovery of payment of bills and in such circumstances, the company petition filed for winding up was dismissed.
13. Such being not the position in the present case, the aforesaid judgments do not advance the case of the respondent. As noticed earlier, the respondent did not dispute the receipt of the goods and the issuance of the declaration in Form 'C' and also entry in the balance sheet. In such circumstances, the defence taken that the goods had only been retained due to personal relationship cannot be said to be bonafide defence. Once it is concluded that the defence was not justified, the irresistible conclusion is that the case would fall within the ambit of Section 433(e) of the Act and the winding up petition is liable to be admitted.
14. Accordingly, the winding up petition is admitted and factum of admission be published in the Tribune, The Times of India Company Petition No.49 of 2010 9 (Delhi Edition), Dainik Bhaskar (Punjab Edition) and also in the Official Gazette of the State of Punjab.
15. The petition be listed for further consideration on 24.2.2012.
December 09, 2011 (Ajay Kumar Mittal)
'gs' Judge