Karnataka High Court
M/S. Dream Logistics Company (India) vs M/S. Western Bulk Pte Limited on 19 November, 2013
Bench: N.Kumar, Rathnakala
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 19TH DAY OF NOVEMBER 2013
P RESENT
THE HON'BLE MR. JUSTICE N. KUMAR
AND
THE HON'BLE MRS. JUSTICE RATHNAKALA
OSA No.7/ 2012
BETWEEN:
M/S. DREAM LOGISTICS COMPANY
(INDIA) PRIVATE LIMITED,
A COMPANY INCORPORATED AND FUNCTIONING,
UNDER THE COMPANIES ACT,1956,
AND HAVING ITS REGISTERED OFFICE AT
DREAM CHAMBERS, NEAR BUS STAND,
YELLAPUR - 581359, KARNATAKA,
THROUGH ITS MANAGING DIRECTOR,
MR. VIVEK HEBBAR
... APPELLANT
(BY SRI DHANANJAYA, FOR
M/S.JOSHI ASSOCIATES, ADV.)
AND:
M/S. WESTERN BULK PTE LIMITED,
A COMPANY INCORPORATED UNDER THE
LAWS OF SINGAPORE AND HAVING ITS
REGISTERED OFFICE AT 6 BATTERY ROAD,
#38-01A, SINGAPORE - 049909.
REPRESENTED HEREIN BY ITS CHARTERING
MANAGER, MR. VIVEK KUMAR
...RESPONDENT
(BY SRIYUTHS : NARASAPPA,
DORESWAMY & RAJA, ADVS.)
THIS APPEAL IS FILED U/S 4 OF THE HIGH COURT
OF KARNATAKA ACT, 1961 R/W SECTION 483 OF THE
COMPANIES ACT, 1956, PRAYING THAT FOR THE
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REASONS STATED THEREIN THIS HON'BLE COURT MAY
BE PLEASED TO:-
SET ASIDE THE IMPUGNED ORDER DATED
02.02.2012 AND CONSEQUENTLY DISMISS THE COMPANY
PETITION NO.60/2011 PENDING BEFORE THE LEARNED
SINGLE JUDGE FILED BY THE RESPONDENT THIS
HON'BLE COURT.
THIS OSA COMING ON FOR ORDERS THIS DAY,
N. KUMAR, J., DELIVERED THE FOLLOWING: -
JUDGMENT
This appeal is preferred challenging the order passed by the learned Company Judge admitting the petition on 02.02.02012 on the ground that a prima facie case for admission is made out.
2. For the purpose of convenience parties are referred to as they are referred to in the company petition.
3. The petitioner - Western Bulk PTE Limited is a private limited company incorporated under the laws of Singapore and it is engaged in the business of dry-bulk shipping and has a fleet of over ninety commercially controlled vessels and offers reliable, high-quality dry- bulk shipping solutions to customers worldwide. The respondent - Dream Logistics Company (India) Pvt. Ltd. -3- is a private limited company incorporated under the Indian Companies Act, 1956, having its registered office at Dream Chambers, Near Bus Stand, Yellapura, Karnataka. It is primarily engaged in the business of export of iron ore from India to China for steel mills and trading houses. The respondent entered into five charter-parties with the petitioner for carriage of iron ore lumps/fines between India and China, the details of which are set out in the company petition. The chartered party provided for demurrage at the rate of 35,000/- US $ per day, the total demurrage at Karwar was 51,607.35 US $. The petitioner has also putforth a claim of laying charges at Bellikeri in a sum of 1,12,758.45 US $.
4. In para No.16 they have set out the particulars and the consolidated amount due to the petitioner is 1,30,057.56 US$. This is the amount which is due under the first contract. Likewise they have set out the amounts due under the each contract. In para No.63, the total liability under the five contracts has been demonstrated, which amounts to 7,98,588.80 US$. The -4- petitioner issued a email dated 20.08.2010 calling upon the respondent to pay the various sums due to the petitioner. Though the respondent sent a frivolous responses, they did not dispute the liability. Subsequently, arbitration clause was invoked and arbitrator was appointed. Before the arbitrator, the respondent remained exparte and arbitrator passed the award. In the circumstances, the petitioner got issued a legal notice under Sections 433 (e) and 434 of the Companies Act, 1956 (hereinafter referred to as 'the Act' for brevity), through their Counsel on 24.12.2010. The respondent replied to the notice on 24.12.2010, admitting the liability under the five charter-parties, but has stated that the respondent's 'cash fund flow' is severely affected and therefore, they are unable to generate funds to settle the dues to the petitioner however, they disputed the liability of interest payable. Therefore, the petitioner was constrained to file the petition under Section 433 (e) and (f) of the Act, for winding up of the company. It is after service of notice in the company petition, the respondent has chosen to -5- challenge the award in the competent civil court and the matters are pending. The respondent filed counter to the company petition contending that once the arbitration award is under challenge, till the said proceedings attain finality there is no executable award. Therefore, this company petition filed on the basis of this award is not maintainable. In support of his contention, he also relied on several judgments. The learned Company Judge after setting out the facts of the case and the judgments on which both of them relied upon, took note of the contract between the parties, the amounts due under each of the contract, notices demanding the said payment, the reply sent and the fact that the respondent has not paid any amount that too, even the admitted amounts, was of the view that a prima facie case for admission of the company petition is made out. Therefore, he admitted the petition and adjourned the case for fixing the date for advertisement. Aggrieved by the said order, the present appeal is filed.
5. Learned Counsel for the respondent submits that when a company petition is presented complaining -6- that in spite of the arbitration award passed, monies are not paid and when the said arbitral award is under challenge, till those challenge is negatived, the arbitration award is not enforceable and therefore, this company petition was premature and the learned company Judge committed serious error in admitting the petition. In support of his contention, he relied on several judgments. There is no quarrel with any of those judgments.
6. Section 433 of the Act states the circumstances in which the company may be wound up by the court. The two grounds provided under the said section are:
Clause (e) - if the company is unable to pay its debts and Clause (f) - if the Tribunal is of the opinion that it is just and equitable that the company should be wound up, whereas Section 434 of the Act, is a deeming provision which provides when a company could be deemed unable to pay its debts. Section 434(b) of the Act states that if execution or other process issued on a decree or order of any court or Tribunal in favour of a -7- creditor of the company is returned unsatisfied in whole or in part, then such a conduct amounts to the company being unable to pay the debts and by itself is a ground for winding up of a company. If a petition is filed under Section 434 (b) of the Act and the deeming clause is invoked, the condition precedent for application of the said provision is, existence of a valid decree or award passed by a competent court which is enforceable. A foreign award is enforceable subject to compliance of Sections 47, 48 and 49 of the Arbitration Act. If once there is a challenge to the foreign award, till the challenge is adjudicated upon, the foreign award is not enforceable. The judgment relied upon by the learned counsel for the appellant lays down the law that the company petition is not maintainable. Therefore, for application of the aforesaid judgments, the condition precedent is the company petition should be filed on the basis of the foreign award and its non-satisfaction.
7. In the instant case, a perusal of the company petition shows that they have narrated the facts from the date of the contract was entered into, set out how -8- the contract was performed, what is the amount due, the letters exchanged, the admission of the liability, then invoking the arbitration clause and referring the matter to arbitrator, the respondent remaining absent and the resultant passing of the exparte arbitral award, non-payment of the amount, in spite of such award and etc. The petitioner issued the legal notices even before passing of arbitral award i.e., during the pendency of the arbitral proceedings, calling upon the respondent to pay the amount due, failing which they made it clear that they would initiate winding up proceedings. Notice was duly served on the respondent; they sent reply through their counsel. In the said reply, they have stated that being unable to pay the amount due, they have categorically requested some time limit which is required for payment. In the meanwhile, the arbitrators passed the award and now after the filing of the company petition, the said award is challenged.
8. From the facts of the case, we are satisfied that this petition is not filed on the basis of the arbitral award complaining that the arbitration award is not -9- satisfied. In narrating the facts, they also pointed out that the matter was referred to arbitration and now the arbitrator has passed an exparte award. But basically the claim is based on the amount due under a contract and admission of liability prior to issue of legal notice and in reply to legal notice. The learned Company Judge has not committed any error in admitting the petition on the ground that a prima facie case for admission is made out. Therefore, there is no merit in the appeal and accordingly, the appeal is dismissed. However, the learned Company Judge shall take further steps in the matter after expiry of four weeks from today.
Sd/-
JUDGE Sd/-
JUDGE nvj