Delhi High Court
Resham Singh & Co. P. Ltd. vs Daewoo Motors India Ltd. on 13 November, 2002
Equivalent citations: [2003]116COMPCAS529(DELHI), 2003(66)DRJ511, [2003]41SCL284(DELHI)
Author: Vikramajit Sen
Bench: Vikramajit Sen
JUDGMENT Vikramajit Sen, J.
1. This Winding-up Petition has been filed under Section 433(e) and 433(1)(a) of the Companies Act with the grievance that the Respondent is liable to pay the Petitioner a sum of Rs. 26,68,000/- (Rs. Twenty Six Lakhs Sixty Eight Thousands only) along with interest at the rate of 18% per annum. The Claim is premised on two Bills dated 31.12.1996 and 15.5.1997 for a sum of Rs. 9,73,500/- (Rs. Nine Lakhs Seventy Three Thousand Five Hundred only) and Rs. 16,95,000/- (Rs. Sixteen Lakhs Ninety Five Thousands only) respectively. It has been vehemently argued that despite several written reminders, payments in respect of these Bills have not been released. Despite its delivery the Statutory Notice dated 22nd March, 1999, has similarly failed to elicit any response. It is further contended that upon a perusal and consideration of the defense put forward, the present Petition deserves to be allowed.
2. On behalf of the Petitioner the following cases have been relied upon.
1. .
GKW. Ltd. v. Shriram Bearings Ltd.
2. 52 (1993) DLT 577.
Mayar Traders Ltd. v. Akhil Services Ltd.
3. .
Rishi Pal Gupta v. S.J. Knitting and Finishing Mills Pvt. Ltd.
4. 1982 (52) Company Cases 479.
Wastinghouse Saxby Farmer Ltd.
5. 1978 (48) Company Cases 378. (Bombay). United Western Bank Ltd.,
6. India Ltd. v.
P.S.B. Paper Mills Pvt. Ltd.
3. I shall first deal with the consequences of the Respondent's failure to send a Reply to the Statutory Notice. The reliance of Mr. Valmiki Mehta, Learned Senior Advocate appearing for the Petitioner on the above-mentioned decisions of my Learned Sister Usha Mehra, J. is somewhat exaggregated. The decisions do not inexorably lead to the conclusion that Winding-up orders must unvariably be passed where no response to a Statutory Notice has been made. From my understanding of the judgment my Learned Sister had taken the failure to reply to the notice as an important factor in determining whether a bona fide defense had been put forward. In the circumstances of both the cases, she preferred to view the defense as an afterthought and as being bereft bona fide. In CP 220/2001 entitled H.B. Stock Holdings Ltd. v. Associated Infotech Ltd. , I have favored the opinion that where no response had been made to the statutory notice the Respondent Company runs the risk of a winding-up petition being admitted for hearing at the threshold stage itself. Normally, the Company Judge consider it prudent in the first instance to issue notice to the Respondent so that its defense to the possible far-reaching and fatal winding-up orders can be considered. The admission of the Petition at its first hearing is possible because, by virtue of Section 434 of the Companies Act, a presumption of the indebtness can be legitimately drawn by the Court where no Reply to the statutory notice is forthcoming. The risk of the admission of the Petition, as well as the appointment of a Provisional Liquidator is thus broodingly and ominously present in all those cases where the Respondent Company neglects to send any Reply to the winding-up notice. But this is as far as the danger extends. My attention has been justifiably drawn to the decision of the Single Judge of this Court in Vimco Ltd. v. Sidvink Properties (P) Ltd. , 1996 Vol. 86 Company Cases 610, where it has been held by P.K. Bahri, J. that where a bona fide dispute had been shown to the Court, the question of applying the deeming provision should not automatically arise. I continue to be in respectful agreement with his view. Applying this ratio to the facts of the present case, without in any manner diluting or undermining the significance of the failure of the Respondent Company to respond to the statutory notice, this factor will be duly kept in perspective when the conspectus of facts is considered.
4. The law on the subject has been largely distilled in Pradeshiya Industrial and Investment Corporation of Uttar Pradesh v. North India Petro-Chemical Ltd. and Anr. , (1994) 2 Comp LJ 50. I have observed in NEPC India Limited v. Indian Airlines Limited, , that in winding-up proceedings it is necessary or keep the following conditions in perspective -
(i) If there is a bona fide dispute and the defense is a substantial one, the court will not wind-up the company.
(ii) Where the debt is undisputed the Court will not act upon a defense that the company has the ability to pay the debt but the company chooses not to pay it.
(iii) Where the defense of the company is in good faith and one of substance, and the defense is likely to succeed in point of law, and the company adduces prima facie proof of the facts on which the defense depends, the petition should be rejected.
(iv) The Court may consider the wishes of creditors so long as these appear to be justified.
(v) The machinery of winding-up should not be allowed to be utilised merely as a means of Realizing its debts.
[For the above propositions see Pradeshiya Industrial and Investment Corporation of Uttar Pradesh v. North India Petro-Chemical Ltd. and Anr., (1994) 2 Comp LJ 50 (SC) in which the observation in Amalgamated Commercial Traders (P) ltd. v. Krishnaswami, [1965] 35 Comp. Case 456 (SC) and Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P) Ltd., [1972] 42 Comp. Cas. 125 (SC) have been paraphrased].
(vi) If the stance of the adversaries hangs in balance it is always open to the Company Court to order the Respondent Company to deposit the disputed amount. This amount may be retained by the Court and be held to the credit of the suit, if any is pending, or likely to be filed in the immediate future. [see Civil Appeal No. 720 of 1999 arising out of SLP (C) No. 14096 of 1998 - Nishal Enterprises v. Apte Amalgamations Ltd., decided by the Hon'ble Supreme Court on February 5, 1999].
It appears to me that the following point may be added to the foregoing considerations.
(vii) Generally speaking, an admission of debt should be available and/or the defense that has been adopted should appear to the Court not to be dishonest and/or a moonshine, for proceedings to continue. If there is insufficient material in favor of the petitioners, such disputes can be properly adjudicated in a regular civil suit. It is extremely helpful to draw upon the analogy of a summary suit under Order xxxvII of the Code of Civil Procedure. If the Company Court reaches the conclusion that, had it been exercising ordinary original civil jurisdiction it would have granted unconditional leave to defend, it must dismiss the winding-up petition.
5. The parties had entered into a contract for the transportation of sundry material from Kandla/Bombay Docks to the Respondent's works at Surajpur, U.P. The rates of payment are contained in "Clause L and M" of the Terms and Conditions which are reproduced below:
"S.No. Max.Dimensions Max wt.
Charges(Per MT)
1. 12.5 x 2.5 x 2.5 up to 25 MI Rs.1,500.00(Bombay) Rs.1,200.00(Kandla)
2. 12.5 x 3.0 x 3.0 up to 30 MT Rs.2,000.00
3. 12.5 x 4.0 x 3.5 up to 35 MT Rs.2,350.00
4. 12.5 x 4.0 x 3.5 up to 50 MT Rs.3,500.00
5. 40 Ft Container Rs.26,000,00(Kandla) Rs.35,000.00(Bombay)
6. 20 Ft Container Rs.18,000.00(Kandla) Rs.25,000,00(Bombay) No escalation in prices are permitted in case of minor change in the dimension of the cargo.
Free Time: Following Free Time shall be provided by you:
(i) Loading at Port and Unloading at out Works in Surajpur.
(a) For Normal Trailor (12.5m x 2.5m x 2.5m) : 24 Hrs.
(b) For All Other Trailors : 48 Hrs."
6. There is some controversy as to whether the Bills have been drawn up strictly in conformity with the afore-mentioned Clauses, since the Respondent has contended that the Petitioners had made over charged. It has been explained by Learned Counsel for the Petitioners that the critical indici is the dimension, and not the weight as has been stressed by Shri Rajiv Shakhdhar, Learned Counsel for the Respondent.
7. As has already been briefly outlined, Mr. Mehta has drawn attention to the fact that the several letters dated 27.11.1996, March 4, 1996, May 2, 1998, 31.7.1998, 13.8.1998, 20.8.1998, 21.8.1998, 31.8.1998, 19.9.1998, 9.1.1999, 6.2.1999, 12.2.1999, 27.2.1999 and 19.8.1999 have not ben replied to. Particular emphasis has been placed on the letter dated 2.5.1998 in which the Petitioners have recorded that they had pursued the matter with Mr. E.C. Kim, G.M. and it had been given to understand that due to a severe cash crunch a percentage reduction in the claims had been asked for. In the letter dated 31.7.1998 it had been recorded that the job was completed to the Respondent's entire satisfaction and despite the threat for initiation of the legal proceedings contained in this letter, the Respondent Company remained resolutely implacable. In the letter dated 6.2.1999 the Petitioner had recorded that "on 29.1.99, our Brig Mohindra Singh had brought to the notice of Mr. Bahng that the working done by Mr. K.N. Datta (since retired) showing an excess payment of about 26 Lakhs by DMIL was incorrect and not acceptable to us. Please note that all payments released by DMIL in the past were duly cleared and vetted by Mr. Kim, GM and AGM Finance, and therefore when the transport Bills have been paid, the payment of the outstanding Detention Bills should also follows. Please expedite." While the first sentence has been relied upon by Mr. Shakhdhar, the second sentence has been relied by Mr. Mehta.
8. Considerable emphasis has also been laid on the fact that an F.I.R. had been lodged by the Respondent Company against the Director of the Petitioner Company and two employees of the Respondent Company. The complainant was that excess payment of Rs. 24,04,478/- had been made to the Petitioner as a consequence of the conspiracy between the Petitioners and one of the Respondent Company's staff. The matter was taken to the High Court of Allahabad which has quashed the F.I.R. Mr. Mehta's contention was that the factum of a false criminal complaint having been filed should weigh in the mind of the Court while assessing the bona fides of the defense put forwarded. To this extent, I am inclined to agree with the submission made.
9. It is not in dispute that the Petitioners have also filed a Suit for recovery of Rs. 39,81,625/- together with interests and costs. The Plaint is dated 15.12.1999. In reply thereto, in the Written Statement, not only have the averments of the Plaint been controverter but under the caption of 'Additional Pleas' a set-off/counter-claim appears to have been filed. There is an apparent ambivalence in the submission made by Mr. Shakhdhar as to whether a counter-claim or a set-off has been pleaded. The fact remains that court-fees has not been paid in accordance with Article 1 of the Court Fees Act. The claim of the Respondent Company is found encapsulated in the following paragraphs of the Written Statement.
"3. The Plaintiff has admittedly received a total amount of Rs. 81,19,000/- towards transportation charges. These amounts have been paid on the basis of the claim made by the Plaintiff. This bills were based on the load carrying capacity of the Trailer and not the actual weight of the consignments. The Plaintiff was entitled to only payments on the basis of actual weight of the consignment carried. The Defendant is producing herewith tabular statements giving the details of excess payments made to the Plaintiff as Annexure X, the same may be read as part of this Written Statement and Set Off Documents in support of the same would be produced at the appropriate stage.
4. From the afore-going facts, it is evident that on the basis of the contract itself and the bills submitted by the plaintiff, it has received excess payment in the tune of Rs. 21,64,434.20/-. The Defendant had also made a claim for the said amount against the plaintiff by its letter dated 4" August 1999. Apart from the same an amount of Rs. 6,65,000/- is also due to the defendant on account of the late deliveries and the same was also raised in the said Letter. Therefore, substantial amounts over and above the Claim in the present Suit is due to the defendant, along with interest accrued thereon at the same rates as claimed by the Plaintiff."
10. In fairness to Mr. Shakhdhar while he had greatly emphasised the pendency of the Civil suit he had only fleetingly contended that because of its existence the winding-up petition should be dismissed. It is now a firmly entrenched legal principle that the filing of a civil suit will not per se oust the jurisdiction of the Company Court. Mr. Shakhdhar's argument, however, was that because of the pleadings in the Written Statement, a bona fide and substantial defense had been disclosed and, therefore, the winding-up petition should be dismissed. it appears that the Learned Single Judge exercising seisin over the suit has granted the Respondent thirty days within which to pay the Court Fees. Even assuming that that will be done, I cannot help but perceive a flippancy in the manner in which the defense has been raised. Rather than being indicative of a bona fide defense having been disclosed, to the contrary, it shows a falsity in the Respondent's attitude. Furthermore, it is different to appreciate why the Respondent Company did not initiate any legal action even though it had allegedly discovered a over-payment, that too through a conspiracy having been hatched between two of its employees and the Directors of the Petitioner Company.
11. Apart from the above the claim of the Petitioner is in respect of only two bills, and the dispute pertains to alleged over-billing in respect of a number of previous bills. The defense and the controversy that had been raised by the Respondent is clearly habituated. There is also a distinction between the Petitioner's claim, which appears to be free time/tension charges, and the alleged over-payment which is in regard to the transportation charges. The Petitioners' statement in his letter that the Respondent had requested for some accommodation due to the financial crunch faced has not been controverter whereas the Petitioners' claim stands established by preponderance of probability, not only is the defense incredulous but has been belatedly raised.
12. In these circumstances, the Winding-Up Petition is admitted. The Respondent Company is directed to deposit a sum of Rs. 30,00,000/- (Fs. thirty lakhs only), being the principal sum of Rs. 26,68,000/- together with a small component of interest, with the Registrar General of this Court within thirty days from today. If this deposit is made the amount so deposited shall stand to the credit of the civil suit. This approach had been commended by the Hon'ble Supreme Court in Nishal Enterprises v. Apte Amalgamations Ltd. , Civil Appeal No. 720/1999 arising out of SLP (C) No. 14096/1998, decided on February 5, 1999.
13. If the deposit is not made within this specified time, Citation be published in "The Hindustan Times"
English Edition and "Vir Arjun" Hindi Edition as well as Delhi Gazette, returnable on 12.2.2003. The question of the propriety of appointing a Provisional Liquidator will be considered on the next date of hearing.
14. Renotify the matter for further proceedings on 12.2.2003.