Rajasthan High Court - Jaipur
O L vs K K Dalmia on 17 May, 2018
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
S.B. Company Petition No. 27/2016
Rajesh Jalan, S/o Shri Radha Krishna Jalan, Aged About 58
Years, R/o S.c. Goswami Marg, Panbazar, Guwahati-781001.
----Petitioner
Versus
M/s Prestige City Developers Private Limited, Having Its
Registered Office At 1/sf, Kamal Complex, Panchbatti, M.i. Road,
Jaipur 302001.
----Respondent
For Petitioner(s) : Mr. Amol Vyas, Adv. For Respondent(s) : Mr. S.N. Kumawat, Adv.
HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Judgment / Order Reserved on 26/04/2018 Pronounced on 17/05/2018
1. Instant Company Petition under Section 439 of the Companies Act, 1956 (for short, the 'Act of 1956') has been preferred by one Mr. Rajesh Jalan with regard to M/s Prestige City Developers Private Limited, A Company incorporated under the Act of 1956 as a Private Limited Company having its registered office at 1/SF, Kamal Complex, Panchbatti, M.I. Road, Jaipur.
2. As per the petition, the authorized share capital of the respondent-Company is Rs.1,75,00,000/- with equity shares of Rs.10/- which is the paid up capital of 17000000 equity shares. As per balance-sheet of the respondent-Company dated 31/03/2015, it had a total secured loan to the tune of Rs.2,96,84,530/- and unsecured loan as on 31/03/2014 at Rs.8,12,37,230/- which has been reduced to Rs.2,91,95,000/- as on 31/03/2015.
(2 of 11) [COP-27/2016]
3. The petitioner Mr. Rajesh Jalan claims to have provided funds to the respondent-Company in the form of unsecured loan in the year 2005-06 with the condition that the financial assistance shall be repayable on demand and would carry interest. It is stated that for the period from 01/04/2009 to 31/03/2016, the petitioner had advanced substantial amount as unsecured loan. The details of the said amount as well as interest debited in respondent-Company's account together with the amount paid by cheque or by depositing TDS has been detailed out as under:-
1 2 3 4 5 6 7
FY Receipt Payment Rent Interest TDS on TDS on Received Received Rent Interest 2006- 2000000 5800000 266520 27185 2007 2007- 6520709 2500000 900000 245735 139050 25311 2008 2008- 2000000 900000 446301 139050 45969 2009 2009- 200000 2179500 900000 1035858 90000 103586 2010 2010- 1725000 450000 1773160 45000 177316 2011 2011- 7533855 2452497 245250 2012 2012- 3500000 4288172 428817 2013 2013- 1500000 1500000 4614198 461420 2014 2014- 13350000 300000 3743080 374308 2015 2015- 1300000 3160880 316088 2016 28370709 23538355 3150000 22026401 413100 2205250
4. The petitioner vide his letter dated 13/07/2016, by adding interest on the aforesaid amount for subsequent years, claims a total amount as against the respondent-Company to the tune of (3 of 11) [COP-27/2016] Rs.1,86,53,747/- as on 01/07/2016 and also claims interest on the same @21% per annum.
5. The respondent, in reply, has refuted claim of the petitioner ans has pointed out that the authorized capital and paid up capital is not disputed. However, the distribution of share capital was between two different groups who had joint together to form the respondent-Company. One group was that of Kedia & Saanju Group which had paid up share capital of Rs.98,61,500/- and the other was that of Jalan Group of whom the petitioner Mr. Rajesh Jalan is a member which had a total share capital of Rs.71,38,300/-. Thus, each group had 985150 and 713850 shares with face value of Rs.10/- each respectively.
6. It is further stated by the respondent-Company that the respondent-Company had embarked on setting up the housing project named as "Prescon City" at National Highway 65, Pali Road, Jodhpur. The payment obligations were co-terminus with generation of cash flows of the Company as well as the other obligations taken by the concerned parties. The advances of share holders and Directors and institutional funding was to be refunded subject to the business earned by the Company. Unsecured loans were sought to be reduced by the Company and the financial resources were raised by the Company in connection with its business related requirements and routed through the accounts in accordance with generally accepted accounting principles and accounting standards and further the statutory audit of the Company also did take place and the financial statement of the year ending 31/03/2015 alongwith the audited Balance Sheet, Proft & Loss Account, Directors' Report and Auditor's Report were placed before the AGM of the Company and were duly approved (4 of 11) [COP-27/2016] and the statutory filing of the same as required under provisions of the Act of 1956.
7. It is asserted by the respondent that the petitioner and other members of Jalan Group are not the only person who have advanced loan to the Company. Even the members of Kedia Group have advanced amount to the Company as loan and merely because the petitioner opted out from continuing to remain on the Board of Directors, he cannot be allowed to ruin the Company which is ready to pay out its debts. It is stated that apart from the present petition filed by the petitioner Mr. Rajesh Jalan, his brother has also filed one application under Section 397, 398 before the Company Law Board alleging mismanagement of the Company. The respondent has submitted that the facts stated are vehemently disputed and denied. It is further informed that the purported debit of Rs.9 Lac and Rs.2,45,735/- made by the petitioner has been on account of his own figment of imagination and hence, does not give any right or privilege to the petitioner to fasten this purported liability in a unilateral and arbitrary manner. Further, the petitioner is under obligation to place on record the requisite documents and credentials by which it can establish that the flat at "Ballyhigh" in Kolkata belongs to him and further since it is alleged to have been rented out, the pertaining rent/lease deed pursuant to which the same could have been considered to be rented out to respondent-Company and further the compliance with statutory provisions more particularly under Section 299 and 300 of the Act of 1956. It is also required to be proved by the petitioner that he was entitled for loading of the interest on the said amount of provided rent. It is stated that while the petitioner was under obligation to place on record or the essential (5 of 11) [COP-27/2016] credentials about the same, the non-compliance to the same aspects that the entire claim has been raised in a farcical manner.
8. It is further stated by the respondents that so far as the deduction of Tax at source (TDS) and its deposit with Government treasury, if at all has taken place, cannot give the blanket lever in the hand of the respondent to allege that the Company was under
a liability to make payment to the petitioner in an undisputed manner and further he can allege that the Company has become commercially insolvent so as to have become unable to honour the commitment as and when they fall due.
9. The respondent-Company, in its reply has further denied the fact of accepting interest on the amount @21% per annum. In this context, it is stated in the reply that while it is vehemently denied that the respondent-Company is under obligation to make payment and the said amount which has been blown up artificially by loading interest @21% per annum and further none of the statement of account forming part of the Exhibit 5 has been signed on behalf of the respondent-Company by the Directors who are having authority to do so and hence the said averment is vehemently and stoutly denied by the respondent-Company. So far as Exhibit-6, being TDS Certificate issued by the respondent- Company, it is stated that merely on the basis of the said TDS Certificate, the respondent-Company cannot be considered to be under the liability of Rs.177.25 Lac as alleged by the petitioner. It is also stated that one of the brothers of the petitioner namely; Mr. Dinesh Jalan is still continuing as Director of the respondent- Company and thus, while two brothers have filed cases against the respondent-Company, one of the brothers, while sitting as (6 of 11) [COP-27/2016] member and Director of the Company, is still continuing with the Company.
10. The petitioner in the present Company Petition prayed for and was granted restraint order on 12/05/2017 whereby the Company was restrained from alienating the immovable property. Since the respondent-Company is engaged in selling and purchase of flats, the entire business of the Company, through which it could gather finances for repaying the loan amount, has been blocked. Resultantly, while on one side a restraint order has been passed in the present petition, the prayer has been made by the petitioner that the Company is not able to pay out its debts and should therefore be wound up.
11. The respondent-Company has further stated that the interest amount of unsecured loans was not to exceed 15% as per the resolution of the Board. In the circumstances, it is stated that the Company is not liable to pay to the petitioner the amount as claimed. Further, it is argued that for claiming the said amount, the present winding up proceedings could not have been undertaken and it is a sheer abuse of the process of law and the Company is a running Company and has been able to reduce its debts continuously. Apart from the petitioner, the loans of the other loanees have been meted out by the Company and the other claimants like the Directors, who were required to be paid their dues by the Company, so far as the petitioner is concerned, during the earlier proceedings, the learned counsel for the Company had offered to either handover the flats of equivalent value as loan advanced by the petitioner or allow the Company to sell its project and flats constructed by it for the purpose of repayment of loan. However, the petitioner had refused on both the counts. Thus, (7 of 11) [COP-27/2016] merely because the petitioner was a Director and advanced loan to the Company and merely because he had opted out from the Board of Directors in 2014, he cannot turn back and put the company on doldrums.
12. The petitioner has taken up case relating to the balance- sheets and the auditor's report and has stated that the auditor of the Company has not submitted the report correctly and when a letter was sent to the auditor of the Company by the petitioner, the auditor of the Company has reported that TDS of Rs.11.22 lacs and interest accrued thereon for the period 2016-17 of Rs.9.95 lacs for Assessment Year 2017-18 has not been paid and therefore, it is submitted that the respondent-Company is indulged in siphoning of the funds of the Company.
13. It is to be noted that this Court had attempted to get the matter resolved by settlement. However, the petitioner has not agreed. The Company has filed an application pointing out that an accrued interest amount of Rs.22,51,603/- has been credited in the account of the petitioner and while the outstanding amount is disputed, in order to maintain the system and as per the running account procedure, interest has been paid as indicated. This, however, would not mean or admission on the part of the Company to be liable to pay interest @21% and the claim has again been refuted. The respondent-Company has also placed on record copy of the minutes of meeting held on 17/02/2018 but the petitioner's brother Director Mr. Dinesh Jalan sent an e-mail showing his inability to attend the meeting wherein the Company resolved as under
(8 of 11) [COP-27/2016] "The Petitioner lives in Jaipur and the Prescon City in which plots are located, is in Jodhpur, as such, it is impossible for the Petitioner to sell the said immovable property more particularly when the Company which is engaged in real estate business having required man power and expertise has not been able to sell the plots. It may also be pertinent to note that the Directors of the Company who are managing the affairs have already sold the plot which are situated at VIP place and are easily marketable. It is further submitted that the Petitioner is not engaged in the real estate business nor has any expertise in the same. Also the Petitioner is suffering from various ailments and it is not possible for him to travel to Jodhpur. The Petitioner does not reside with his children as his two daughters are married and settled in U.S.A whereas third daughter is studying in U.S.A and Petitioner is the only person in the family to look after his business in Jaipur. In these facts and circumstances, the proposal given by the Respondent Company is not acceptable."
14. Having noted above, the question before this Court is whether the Company Petition filed in terms of Section 439 of the Act of 1956 be allowed and the Company be wound up in terms of Section 433 of the Act of 1956. Section 433 of the Act of 1956 provides as under:-
quote section 433
433. Circumstances in which company may be wound up by Tribunal :- A company may be wound up by the Tribunal,
(a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal ;
(b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting ;
(c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year ;
(d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two ;
(e) if the company is unable to pay its debts ;
(f) if the Tribunal is of opinion that it is just and equitable that the company should be wound up.
(9 of 11) [COP-27/2016]
(g) if the company has made a default in filing with the Registrar its balance sheet and profit and loss account or annual return for any five consecutive financial years ;
(h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality ;
(i) if the Tribunal is of the opinion that the company should be wound up under the circumstances specified in section 424G :
Provided that the Tribunal shall make an order for winding up of a company under clause (h) on application made by the Central Government or a State Government"
15. Section 434 of the Act of 1956 lays down the provisions as to when the Company would be deemed to be unable to pay its debts.
16. Thus, while examining case of the present petition, it is seen that the present petition is essentially under Section 433(e) of the Act of 1956.
17. As regards referring to the wrongful method by it, the auditors have submitted their report, it would not come within the provisions of Section 433(g) of the Act of 1956 and the remedy is otherwise.
18. As regards the circumstances mentioned in Section 433(f) of the Act of 1956, it is for this Court to examine whether in its opinion it is just and equitable that the Company should be wound up.
19. Having said so, a look at the facts of the present case shows that the Company is engaged in business of construction of flats and selling them at premium rates and earning therefrom. A project at Jodhpur-Pali Road was launched and it appears that the flats have already been constructed. The process of selling the (10 of 11) [COP-27/2016] flats was underway when the present Company Petition came to be filed claiming the dues. It appears that Kedia Group and Jalan Group have fallen apart and while Kedia Group continued to be to in touch with the Company, Jalan Group, apart from one Dinesh Jalan have opted out and are claiming their loans advanced while he was a Director.
20. From the facts noted above, it is apparent that the petitioner is an unsecured creditor to whom the Company is indebted to a sum exceeding Rs.One Lac as due. However, a close look at Section 434(1)(a) i.e. the deeming clause, shows that for arriving to a conclusion that the Company would be deemed to be unable to pay its debts, following ingredients are required to be considered:-
(i) The company has a creditor by assignment or otherwise
(ii)The Company is indebted to whom for a sum exceeding Rs.One Lac as due.
(iii)The said creditor has served on the Company by methods mentioned a demand to the Company to pay the sumeso due.
(iv) The Company has neglected to pay the sum for three weeks and
(v) or is neglected to secure the amount or has compounded for it to the reasonable satisfaction of the creditor.
21. If we examine case of the petitioner, it falls in the category
(i), (ii) and (iii).
22. The question arises whether it can be said that the Company has neglected to pay the same to the petitioner or has not secured the same due to the petitioner.
23. As noted from the aforesaid facts, it is apparent that the amount, which the petitioner had advanced as loan as Director of the Company, has been repaid from time to time which is also (11 of 11) [COP-27/2016] admitted from the averments made by the petitioner in his Company Petition. It is accepted by the petitioner that he received an amount of Rs.55,00,000/- and 10,00,000/- on 09/07/2007 and 10/07/2007 respectively in addition to a cheque of an amount of Rs.20,709/- on 26/03/2008. The respondent-Company has also offered to pay the dues of the petitioner by securing flats constructed by it. However, as noted, the petitioner has refused to take the said flats. Thus, it cannot be said that the respondent- Company would be deemed to be unable to pay its debts within meaning of Section 434 of the Act of 1956.
24. In view of above, no case is made out to initiate proceedings for winding up of the respondent-Company in terms of Section 433(e) of the Act of 1956. The petitioner would, however, be free to recover the amount as he claims by taking up other remedies available to him under the Civil Procedure Code or any other provisions of law.
25. Consequently, the instant Company Petition is dismissed. The interim order dated 12/05/2017 is vacated. No costs.
(SANJEEV PRAKASH SHARMA),J Raghu/