Punjab-Haryana High Court
Simon-Carves India Ltd. vs Punjab Sulphur Products Ltd. on 4 February, 1986
Equivalent citations: [1987]62COMPCAS214(P&H)
JUDGMENT Rajendra Nath Mtttal, J.
1. This is a petition under Sections 433, 434 and 439 of the Companies Act for winding up of Messrs. Punjab Sulphur Products Limited, Chandigarh (respondent). It is pleaded that the respondent-company is a limited company with its registered office at Chandigarh. It entered into an agreement with the petitioner-company for turnkey installation of a 50 T.P.D. Sulphuric Acid Plant (hereinafter referred to as "the plant") at Ropar in the State of Punjab. The petitioner duly performed its part of the agreement, installed the plant and handed it over to the respondent. At the time of handing over the plant an amount of Rs. 14,48,740 was due from it to the petitioner. In addition to the said amount, the petitioner did some other work and an amount of Rs. 4,76,063.63 was due to it from the respondent. The respondent was also liable to pay interest to the petitioner at the rate of 18% per annum which came to Rs. 11,87,078 up to March 31, 1983.
2. The petitioner wrote several letters to the respondent to pay the said amount but nothing was paid. Ultimately, on March 24, 1983, the respondent entered into an agreement with the petitioner according to which it was agreed that the former would pay Rs. 14,48,740 to the latter in full and final settlement in 14 equal instalments of Rs. 1,00,000 each to be paid on or before the close of each month, the first instalment to be paid on or before April 30, 1983. The final instalment of Rs. 48,740 would be paid on or before June 30, 1984. It was further agreed that in the event of default of the payment, the respondent would be liable to pay in addition a consolidated sum of Rs. 2,00,000. After the agreement, the respondent paid only an amount of Rs. 30,000.
3. The petitioner, thereafter, served a legal notice through M/s. Orr Dignam and Co., Solicitors, on the respondent, demanding the amount of Rs. 2,70,000 due till June 30, 1983, and a confirmation that the balance would be paid in terms of the agreement dated March 24, 1983. In reply to the notice, the respondent admitted its liability and promised that they would be making the payment at a very early date. Subsequently, on October 19, 1983, the petitioner's said solicitors wrote a letter dated October 19, 1983, calling upon the respondent to make the payment forthwith. In reply, the respondent wanted time to make the payment. The petitioner, vide notice dated August 27, 1984, under Section 434 of the Act, demanded the balance amount of Rs. 13,28,740 plus Rs. 2,00,000 from the respondent. It is stated in the notice that out of the amount of Rs. 14,48,740, the petitioner had received an amount of Rs. 1,20,000. Consequently, they have prayed that the respondent-company may be ordered to be wound up.
4. The petition has been contested by the respondent. It is, inter alia, pleaded by it that the petitioner committed violation of the contract resulting in delay in the installation and commissioning of the plant. It is further pleaded that the respondent has provided employment to about 100 persons and it has gone into production. The hearing of the petition be adjourned for a period of two years and the respondent be allowed to pay the principal amount in instalments.
5. From the facts given above, it cannot be disputed that an amount of Rs. 14,48,740 was due from the respondent to the petitioner. This fact is clear from the agreement dated March 24, 1983, annexure P-2, according to which the respondent agreed to pay the said amount in 14 monthly instalments of Rs. 1,00,000 each. Further, in reply dated July 12, 1983, to the notice dated July 7, 1983, it requested the petitioner to wait for some time as it was trying to pay the outstanding amount. Before the service of the notice dated August 27, 1984, under Section 434 of the Act an amount of Rs. 1,20,000 was paid by the respondent to the petitioner leaving a balance of Rs. 13,28,740. It is thus abundantly clear that the sum 6f Rs. 13,28,740 was due from the respondent to the petitioner at the time of filing the petition. During the pendency of the petition a further amount of Rs. 1,00,000 was paid by the respondent to it. Thus, the amount now due comes to Rs. 12,28,740. No further amount was paid by the respondent.
6. Mr. Majithia, learned counsel for the respondent, has vehemently argued that on account of late installation of the machinery, the respondent suffered a huge loss. Consequently, the respondent is not liable to pay the amount claimed by the petitioner. I do not find any force in the contention of the learned counsel. No such dispute was ever raised by the respondent. On the other hand, it admitted its liability to pay the amount claimed by the petitioner. The respondent has further stated in the written statement that it would seek redress regarding the claim of damages in the appropriate court. Otherwise also, the respondent has prayed for instalments in the written statement which shows that it is not disclaiming its liability. It appears from the contention that the plea now sought to be raised is a frivolous plea and the same has been taken to delay the payment. It has been held in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd., AIR 1971 SC 2600 ; [1972] 42 Comp Cas 125 (SC), that the principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed on point of law and, thirdly, the company adduces prima facie proof of the facts on which the defence depends. In the present case, as already stated above, the defence is not supported by any document nor is it in good faith. There is also no prima facie substance therein. Consequently, I reject the submission of learned counsel.
7. Faced, with this situation, Mr. Majithia contends that even if the company is unable to pay its debts, the court should not order its winding up and before doing so other circumstances should be taken into consideration. He submits that the respondent is indebted to financial institutions and banks to the tune of more than Rs. 85 lakhs and the properties of the company are mortgaged with them. According to him, in case the properties are sold, the petitioner is not likely to get anything and the other creditors would suffer. In support of his contention, he places reliance on Aluminium Corporation of India Ltd. v. Lakshmi Ratan Cotton Mills Co. Ltd., [1970] 40 Comp Cas 259 ; AIR 1970 All 452.
8. I have duly considered the matter but do not find any substance therein. The matter is still at a preliminary stage. These arguments may be raised after the petition has been advertised. At the stage of preliminary hearing these matters are normally not taken into consideration. In Aluminium Corporation of India's case [1970] 40 Comp Cas 259 ; AIR 1970 All 452, referred to by Mr. Majithia, the matter was not at a preliminary stage but was being finally decided. Consequently, I order that the petition be advertised on April 4, 1986, in the Indian Express, Chandigarh edition, Punjabi Tribune and the Chandigarh Administration Gazette.