Karnataka High Court
Mr Anil Singhal vs M/S Alliance Infrastructure Projects on 14 July, 2022
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
-1-
COP No. 79 of 2010
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF JULY, 2022
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
COMPANY PETITION NO. 79 OF 2010
BETWEEN:
1. MR. ANIL SINGHAL
S/O MR. AMRIT LAL SINGHAL
AGED ABOUT 44 YEARS
449, LONDON PARK CT
SAN JOSE, CA 95136, USA
2. MR. BALDEV GUPTA
S/O GIRIDHARI LAL GUPTA
AGED ABOUT 63 YEARS
1139, HILLVIEW DRIVE
MILPITAS, SA 95035, USA
3. MR. DINESH GOYAL
S/O SITARAM GOYAL
AGED ABOUT 43 YEARS
1041, EAGLE RIDGE WAY
MILPITAS, CA 95035, USA
4. MR. MAYANK JAIN
Digitally signed
by POORNIMA S/O MR. VIRENDRA K JAIN
SHIVANNA
Location: HIGH
AGED ABOUT 44 YEARS
COURT OF R/A 190, OBISPO COURT
KARNATAKA
FREMONT, CA 94539, USA
5. MR. ATUL GUPTA
S/O DR. RAM KRISHNAN PAUL GUPTA
R/A NO.17712, ALEXANDER PLACE
CERRISTOS, CA-70703, USA
6. DR. ARUN JAIN
S/O MR. KAILASH C. JAIN
-2-
COP No. 79 of 2010
R/A 17018, LEAL AVENUE
CERRITOS, CA-90703
7. MRS. RAJ JAIN
W/O LATE MR. KAILASH JAIN
AGED ABOUT 78 YEARS
R/A FB-02, TRANS INDUS
BASAPANAPALYA, TATGUNI POST
BANGALORE-560062
(PETITIONERS 1 TO7 ARE REPTD. by
THEIR SPECIAL POWER ATTORNEY HOLDER
MR. ASHIM JAIN
R/A fb-02, TRANS INDUS
BASAPANAPALYA, TATGUNI POST
BANGALORE-560062
8. MR. ASHIM JAIN
S/O MR. KAILASH C. JAIN
AGED ABOUT 50 YEARS
R/A FB-02, TRANS INDUS
BASAPANAPALYA, TATGUNI POST
BANGALORE-560062
...PETITIONERS
(BY SRI. S.R. TEJAS, ADVOCATE)
AND:
M/S ALLIANCE INFRASTRUCTURE PROJECTS
PRIVATE LIMITED
REGISTERED OFFICE AT NO.85
KARTHIK NAGAR, MARATHALLI-K.R.PURAM
OUTER RING ROAD (NEXT TO KIDZEE)
BANGALORE-560037
... RESPONDENT
(BY SRI. P.B. APPAIAH, ADVOCATE)
THIS PETITION IS FILED UNDER SECTION 433(E) & (F) READ
WITH SECTION 434 OF THE COMPANIES ACT, 1956 PRAYING TO
WIND UP THE RESPONDENT-M/S ALLIANCE INFRASTRUCTURE
PROJECTS PRIVATE LIMITED HAVING ITS REGISTERED OFFICE AT
NO.85, KARTIK NAGAR, MARATHALLI-K.R.PURAM OUTER RING ROAD
(NEXT TO KIDZEE) BANGALORE-560037, IN ACCORDANCE WITH THE
-3-
COP No. 79 of 2010
PROVISIONS OF THE COMPANIES ACT, 1956 AND GRANT SUCH
OTHER AND FURTHER RELIEFS AS ARE JUST.
THIS PETITION COMING ON FOR HEARING AND HAVING BEEN
RESERVED FOR ORDERS ON 23.06.2022, THIS DAY, THE COURT
PRONOUNCE THE FOLLOWING:
ORDER
1. The petitioners are before this court seeking for the following relief:
"To wind up the Respondent-M/s Alliance Infrastructure Projects Private Limited having its registered office at No.85, Kartik Nagar, Marathalli-K.R.Puram Outer Ring Road (Next to Kidzee) Bangalore-560037, in accordance with the provisions of the Companies Act, 1956 and grant such other and further reliefs as are just".
2. The petitioners contended that they have executed agreements, for purchase of plots and for construction of villas, with respondent and its group of companies. The said plots were situated at Andhra Pradesh and Karnataka. The petitioners claiming that they have a joint action against the respondent have filed a common petition.
3. The respondent is a private limited company having its registered office at the address shown in the -4- COP No. 79 of 2010 cause title carrying on a business of real estate, development, and construction of residential properties and condominiums. M/s Alliance Springs Constructions Pvt. Ltd., a subsidiary company of Respondent and M/s Amoga Projects, a partnership firm is said to be part of the respondent's group.
4. It is contended that the M/s Amoga Projects is the owner of land in various survey Nos. in Lalgudi Maripet, Shamirpet Mandal, Rangareddy District, Near Biotech Park, Andhra Pradesh. The said land was developed by M/s Alliance Springs Constructions Pvt. Ltd. which as stated is a part of the respondent's group. It is also stated to have developed certain lands in Kannamangala Village, Bidarahalli Hobli, Bangalore East Taluk.
5. The Petitioners No.1 to 5 had entered into agreements to sell as well as construction agreements with M/s Amoga Projects represented by -5- COP No. 79 of 2010 its GPA holder M/s Alliance Springs Constructions Pvt. Ltd. for purchase of plot and construction of villas. In this regard there were certain payments made by the petitioners to the respondent.
Petitioners No.6, 7 and 8 had entered into agreements of sale with respondent as the vendor therein.
6. There is a "buy back offer" which is contemplated in the agreements, which essentially is a resale option where under said M/s Amoga Projects and M/s Alliance Springs Constructions Pvt. Ltd., agreed to buy back the plots within a period of 30 days after expiry of the period prescribed in the agreement. In order to enable the buyback, post dated cheques were also issued to each of the petitioners.
7. The petitioners exercised their right to resale/buy back of plots and presented the respective cheques which came to be dishonored with an endorsement -6- COP No. 79 of 2010 "funds insufficient", though certain payments were made thereon by the respondent, it is contended that it was towards principal amount and further amounts due to be paid to the petitioners amounts to Rs.3,76,27,753/-.
8. The petitioners claiming that the respondent have to make payment of the aforesaid amount along with interest of 24% got issued a legal notice under Section 434 of the Companies Act, 1956 on 12.01.2010. On receipt of the said notice, the respondent replied to the same stating that there was no liability to be discharged by the respondent, that all the amounts which are required to be paid have been paid with reference to each of the petitioners.
9. Upon service of notice, the respondent entered appearance and filed objections contending that the respondent group consists of several companies, the -7- COP No. 79 of 2010 transaction which the petitioners have complained of are regarding different entities who are not signatories to the agreements and hence the petition is not maintainable.
10. The respondent is a going concern which is commercially solvent and the present petition cannot be maintained.
11. It is further contended that, the development of plots could not be completed on account of various issues which were not in the control of the respondent and/or its companies.
12. Sri. S.R. Tejas, learned counsel for the petitioners would submit that;
12.1. Though the principal amount has been paid during the pendency of the above petition, the interest amount has not been paid, hence it can not be contended that the Respondent is a -8- COP No. 79 of 2010 going concern being commercially sound and therefore there is no reason to wind-up the respondent company.
12.2. During the pendency of the above matter, the respondent and/or group company made payment of amounts to the petitioners. Hence the petitioners filed an amendment application seeking to include the details of the amounts paid, date of receipt and the interest accrued thereon. The said amendment has been allowed and the relevant amendment has been carried out.
12.3. Though the principal amount has been paid, the interest amount on the principal has not been paid, which has been quantified, by way of amendment in para 16B of this petition, in respect of each of the petitioners and therefore -9- COP No. 79 of 2010 it is required that the respondent make payments of the interest amount.
12.4. The interest amounts are also a debt due and liable to be paid by the respondent and as such the petitioners can continue with the above petition despite the principal amount having been paid.
12.5. He relies upon the decision in Vijay Industries vs. NATL Technologies Limited in (2009) 3 SCC 527 more particularly paras 25, 34, 41 and 54 there of which are reproduced hereunder for the easy reference:
25. The learned Judge opined that the word "debt" refers to an ascertained and definite amount due to the creditor and not a disputed amount. However, it was furthermore held :
(Jyothi Ltd. case [(2001) 106 Comp Cas 380 : (2001) 3 Comp LJ 413 (Kant)] , Comp Cas p.
389 A-H) "(a) The term 'debt' refers to an ascertained and definite amount 'due' and does not refer to a claim for compensation/damages or a claim which requires assessment by a court before it becomes due and payable.
- 10 -
COP No. 79 of 2010(b) The term 'debt' may refer not only to 'principal' (value of goods or amount advanced) but also to interest due thereon, where there is a contract to pay interest. Where the contract specifically provides for payment of interest, or where there is an admission or promise to pay interest by the company or where in proceedings for recovery of money, a competent court or arbitrator has determined the liability to pay interest, then non-payment of interest (whether with principal or interest alone) may amount to inability to pay debts.
(c) Interest cannot be awarded merely on the basis of a term in a bill or invoice, unless the creditor proves that such provision is based on a contract or agreement on the part of the purchaser to pay interest. This is because a credit bill or an invoice is a unilateral demand by the supplier and is neither a bilateral agreement nor a promise by the purchaser to pay interest. Interest can be awarded on the basis of a provision in a bill/invoice, if it is supported by an agreement or promise to pay interest by the purchaser. Such agreement may be established with reference to correspondence, or by countersigning of the bill by the purchaser, or by acceptance by the purchaser of the term in the bill relating to interest. Where in the absence of an agreement or contract for payment of interest on the value of goods supplied, a notice of demand is sent by the supplier requiring payment of the value of goods supplied with interest thereon, and a reply is sent by the purchaser in general terms seeking time to pay the bill amount, such reply cannot be construed as an admission to pay interest. Either an agreement to pay interest or a
- 11 -
COP No. 79 of 2010specific admission or promise to pay interest or an order or decree granting interest by a court or tribunal empowered to award interest, is a condition precedent to hold that interest is a debt due, for the purpose of a winding-up petition. In the absence of a contractual or legal liability, mere omission to deny a demand made in a notice will not create a liability, nor act as an estoppel in regard to a subsequent denial by the company in legal proceedings.
(d) Where there is a bona fide dispute in regard to interest, the court considering a petition under Section 433(e) should not decide the issue, merely to avoid multiplicity of proceedings. The purpose of winding-up proceedings being completely different from the purpose of proceedings for recovery of a debt, winding-up proceedings are not a substitute for a civil suit and therefore relegating parties to a civil suit, cannot be considered as resulting in multiplicity of proceedings."
34. Section 433 of the Companies Act does not state that the debt must be precisely a definite sum. It has not been disputed before us that failure to pay the agreed interest or the statutory interest would come within the purview of the word "debt". It is one thing to say that the amount of debt is not definite or ascertainable because of the bona fide dispute raised thereabout or there exists a dispute as regards quantity or quality of supply or such other defences which are available to the purchaser; but it is another thing to say that although the dues as regards the principal amount resulting from the quantity or quality of supply of the goods stands admitted but a
- 12 -
COP No. 79 of 2010question is raised as to whether any agreement had been entered into for payment of interest or whether the rate of interest would be applicable or not. In the latter case, in our opinion, the application for winding up cannot be dismissed.
41. In the present case, on the date of filing of the application, dues in respect of at least a part of the debt which was more than the amount specified in Section 433 [sic Section 434(1)(a)] of the Companies Act was not denied. It is not a requirement of the law that the entire debt must be definite and certain. The Division Bench of the High Court proceeded on the basis that the entire sum covering both the principal and the interest must be undisputed, holding:
"Except making a bald allegation in the company petition that the petitioner had come to know that the respondent Company owes large sums of money to its creditors and it is not in a position to meet its debt obligations and as, therefore, become commercially insolvent, the petitioner has not taken necessary care to prima facie establish the same. The only piece of evidence available on the side of the petitioner is that the respondent is indebted to the petitioner a sum which is claimed towards interest on the delayed payment. Assuming for a moment that the respondent Company is liable to pay interest on the delayed payments and it has not paid the said amount to the petitioner, could it be said that the respondent neglected to pay the debt, particularly when the respondent is disputing the liability of payment of interest on the delayed payments and when
- 13 -COP No. 79 of 2010
there is no such written agreement in between the parties for such payment of interest."
54. We are of the opinion that interest of justice would be subserved if we in exercise of our jurisdiction under Article 142 of the Constitution of India direct that the respondent to pay simple interest on the admitted sum at the rate of 12% per annum on the balance amount instead of 24% per annum within eight weeks from the date the amount became due till it is paid failing which the consequences provided in law shall ensue.
12.6. He relies upon the decision in IBA Health (India) Private Limited vs. Info-Drove Systems SDN. BHD in (2010) 10 SCC 553 more particularly paras 20 and 24 which are reproduced hereunder for easy reference:
Substantial dispute -- As to liability
20. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding-up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial.
- 14 -
COP No. 79 of 2010The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding-up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding-up petition as a means of forcing the company to pay a bona fide disputed debt.
Commercially solvent
24. The appellant Company raised a contention that it is commercially solvent and, in such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the company's insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company's liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for
- 15 -
COP No. 79 of 2010liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation application to rebut that presumption.
12.7. Relying on the same, he submits that there is no substantial dispute in the matter, in as much as the respondent has made payment of principal amount, it is only the payment of interest which is required to be made. The principal having been admitted in the present proceedings, the interest would also have to be paid. Non-payment of the interest, would amount to the respondent being unable to pay its debts, requiring the respondent to be wound-up in terms of Section 433 (e) and (f) of the Companies Act, 1956.
12.8. He relies on Jyothi Limited vs. Boving Fouress Limited in 2000 SCC OnLine Kar 832, more particularly paras 21 and 22
- 16 -
COP No. 79 of 2010thereof, which are reproduced hereunder for the easy reference:
21. I may now summarise the legal position as to claims for "interest" in a proceeding for winding up under section 433(e) of the Act:
(a) The term "debt" refers to an ascertained and definite amount "due" and does not refer to a claim for compensation/damages or a claim which requires assessment by a court before it becomes due and payable.
(b) The term "debt" may refer not only to "principal" (value of goods or amount advanced) but also to interest due thereon, where there is a contract to pay interest.
Where the contract specifically provides for payment of interest, or where there is an admission or promise to pay interest by the company or where in proceedings for recovery of money, a competent court or arbitrator has determined the liability to pay interest, then non-payment of interest (whether with principal or interest alone) may amount to inability to pay debts.
12.9. Relying on the above, he submits that even the interest is a debt due and liable to be paid and therefore non-payment of the said interest would attract Section 433 (e) and (f) of the Companies Act, 1956.
- 17 -
COP No. 79 of 201013. Sri. P.B. Appaiah, learned counsel for the respondent would submit that;
13.1. Admittedly the principal amount has been paid, the demand which had been made in the statutory notice under Section 434 dated 12.01.2010 does not make any difference and distinction between principal amount and the interest amount. In the notice, interest of 24% is claimed, whereas in the memo which is filled by the petitioner dated 07.02.2015 the petitioners themselves have calculated the interest at 12% p.a. by way of amendment, the petitioners have clearly and categorically admitted the receipt of the principal amounts, the calculation of interest by way of amendment is now sought to be made at 24% p.a. in the amended company petition.
- 18 -
COP No. 79 of 201013.2. There is no crystallized debt due which is liable to be paid by the respondent to the petitioners, in as much as in the notice there is no distinction made between the principal amount and the interest amount. During the pendency of the petition, the principal amounts have been received. The petitioners claimed interest at 12% and thereafter, by way of amendment, they have claimed 24% interest. He therefore submits that, the only claim remaining is interest on principal amount, the same cannot be made a subject matter of the proceedings for winding up of the respondent. If at all the petitioners have any grievance, the petitioners could only file a Civil Suit, since this matter requires trial.
13.3. The decision in Vijay Industries Case (Supra) is not applicable in the present case for the reason that, there has to be a
- 19 -
COP No. 79 of 2010contractual or legal liability to make payment of interest as regard which a demand has to be made. In the present case there is no separate demand which has been made for the said interest, neither in the notice nor any averment in the petition has been made as regards the contractual liability. Furthermore, said decision is one which is rendered under Article 142 of the Constitution of India, which power this Court does not have, hence he submits that, the said decision is not applicable.
13.4. As regards the decision in IBA case (supra), he submits that there is a substantial dispute as regards the interest liable to be paid, in fact, the petitioners themselves are not aware of what is the interest to be paid, there being different claims made at different points of time. Respondent is commercially sound and is carrying on its business, the fact that the
- 20 -
COP No. 79 of 2010respondents had made payment of the principal amount would certainly establish the commercial soundness of the respondents.
13.5. He submits that the decision in Jyothi Limited case (supra) would help the respondent since the interest amount is not certain and determined, without the same being ascertained and without there being an acknowledgement of debt on the part of the respondent, the present proceedings cannot be continued. He relied upon para 21, (c), (d), (e),
(f) and 22 thereof which are reproduced hereunder for easy reference:
(c) Interest cannot be awarded merely on the basis of a term in a bill or invoice, unless the creditor proves that such provision is based on a contract or agreement on the part of the purchaser to pay interest. This is because a credit bill or an invoice is a unilateral demand by the supplier and is neither a bilateral agreement nor a promise by the purchaser to pay interest. Interest can be awarded on the basis of a provision in a bill/invoice, if it is supported by an agreement or promise to pay interest by the purchaser. Such agreement may be established with reference to
- 21 -COP No. 79 of 2010
correspondence, or by countersigning of the bill by the purchaser, or by acceptance by the purchaser of the term in the bill relating to interest. Where in the absence of an agreement or contract for payment of interest on the value of goods supplied, a notice of demand is sent by the supplier requiring payment of the value of goods supplied with interest thereon, and a reply is sent by the purchaser in general terms seeking time to pay the bill amount, such reply cannot be construed as an admission to pay interest. Either an agreement to pay interest or a specific admission or promise to pay interest or an order or decree granting interest by a court or Tribunal empowered to award interest, is a condition precedent to hold that interest is a debt due, for the purpose of a winding up petition. In the absence of a contractual or legal liability, mere omission to deny a demand made in a notice will not create a liability, nor act as an estoppel in regard to a subsequent denial by the company in legal proceeding's.
(d) Where there is bona fide dispute in regard to interest, the court considering a petition under section 433(e) should not decide the issue, merely to avoid multiplicity proceeding's. The purpose of winding up proceedings being completely different from the purpose of proceeding's for recovery of a debt, winding up proceeding's are not a substitute for a civil suit and therefore relegating parties to a civil suit, cannot be considered as resulting in multiplicity of proceeding's.
(e) Interest under section 61(2)(a) of the Sale of Goods Act, can be awarded by a court in a
- 22 -
COP No. 79 of 2010suit for recovery of the price of goods. Interest under section 3 of the Interest Act, can be awarded in any proceedings for recovery of any debt or damages or in any proceedings for interest (on any debt or damages already paid). Both these provisions specifically provide that interest can be awarded only in proceedings to recover money. They do not contemplate award of interest in proceedings which are not for recovery of money. Proceedings for winding up being proceedings not for recovery of money, no interest can be permitted or granted under section 61(2)(a) of the Sale of Goods Act, 1930, or section 3 of the Interest Act.
(f) Award of interest either under section 61(2)(a) of the Sale of Goods Act or under section 3 of the Interest Act, is by way of damages, that is, making good the loss suffered by the seller/creditor, by denial of the use of the money due to him by the purchaser/debtor, by wrongfully withholding the money. These provisions are invoked only when there is no contract to pay interest. Thus a claim for interest based on section 61(2)(a) of the Sale of Goods Act or under section 3 of the Interest Act, is not a claim for a "debt" which is an ascertained sum due. This court cannot therefore compute and award interest based on section 61(2)(a) of the Sale of Goods Act or section 3 of the Interest Act. Nor can this court hold that non-payment of such interest granted and computed in winding up proceedings amounts to inability to pay a "debt".
22. Let me consider whether non-payment of interest by the respondent, in this case, amounts to inability to pay its debts. The
- 23 -
COP No. 79 of 2010contracts in this case (purchase orders dated July 25, 1996 and September 11, 1996) do not provide for interest. The bills dated March 30, 1997 and March 31, 1997, under which the supplies are made are not produced to show that they contained any term regarding interest. It is not even the case of the petitioner that the bills provide for interest. The letter dated July 8, 1997, demanding payment of the bill amounts does not refer to interest. Interest is demanded for the first time in the letter dated July 10, 1997, by saying that "I will be constrained to charge you interest for the delayed payment", thereby making it clear that there was no earlier agreement for payment of interest. If that is so, the demand for interest is not in pursuance of any contract or agreement. There is no admission by the respondent to pay interest. On the other hand, the respondent has denied its liability to pay interest. Interest cannot be claimed or awarded under section 62(1)(a) of the Sale of Goods Act and/or section 3 of the Interest Act as these proceedings are not proceedings for recovery of money. Therefore, this court cannot hold in these proceedings that the respondent is due to the petitioner, any interest, nor quantify the same. There is also a bona fide dispute in regard to the liability to pay interest, the rate of interest and the date from which the interest is payable. While it may be open to the petitioner to establish a claim for interest in a civil suit, under section 61(2)(a) of the Sale of Goods Act and/or section 3 of the Interest Act, I am satisfied that the petitioner has not made out any admitted or undisputed liability to pay interest, in these proceedings. Having regard to the fact that the respondent has paid the entire principal amount during the pendency of
- 24 -
COP No. 79 of 2010this petition and thereby established its financial and commercial solvency and in view of the bona fide dispute regarding interest, there is no inability to pay any debt and consequently this petition for winding up is dismissed.
13.6. The very claim made by the petitioners in the statutory notice has been denied and debunked by the respondent. The entire claim is in dispute. There being a disputed question of fact requiring trial, it is but required for the petitioners to have filed a suit and hence, the above petition be dismissed.
14. Heard Sri. S.R.Tejas, learned counsel for the petitioners and Sri. P.B. Appaiah, learned counsel for the respondent. Perused the papers.
15. The points that would arise for determination are:
1. Whether on the payment of the principal amount can the proceeding under Section 433 (e) and (f) of the Companies Act, 1956 be continued on account of non-payment of interest?
- 25 -
COP No. 79 of 20102. When can non-payment of interest said to be a debt due and liable to be paid?
3. Whether in the present case the petitioners have made out any debt due and liable to be paid by the respondent and respondent not having paid, would power under Section 433 (e) and (f) be required to be exercised by this Court?
4. What order?
16. I answer the above questions as under:
17. Answer to point No.1:- Whether on the payment of the principal amount can the proceeding under Section 433 (e) and (f) of the Companies Act, 1956 be continued on account of non-payment of interest?
17.1. The aspect as relating to interest have been covered and explained in Jyothi Limited case (supra) wherein, the Court has held that a debt would also refer to interest when there is a contract to pay interest or where there is an admission or promise to pay interest by the company or where the quantum of interest has
- 26 -
COP No. 79 of 2010been already quantified in a proceeding or under a provision.
17.2. Thus, from the said decision in Jyothi Limited case (supra) which has also been considered and approved by the Apex Court in Vijay Industries Case (Supra), it is clear that whenever there is a contract to make payment of interest, mere payment of principal amount in a proceedings under Section 433 (e) and (f) would not put a stop to those proceedings and can be continued, even insofor as the interest amounts is concerned.
17.3. I answer point No.1 by holding that even on the payment of the principal amount the proceedings under Section 433 (e) and (f) of the Companies Act, 1956 can be continued on account of non-payment of interest, if the same
- 27 -
COP No. 79 of 2010is contractual, crystallised and/or admitted, if not it cannot be continued.
18. Answer to point No.2: When can non-payment of interest said to be debt due and liable to be paid?
18.1. Again as held by this Court in Jyothi Limited Case (Supra) and confirmed by the Apex Court in Vijay Industries Case (supra) the interest component can be regarded as a debt due and liable to be paid, that the said interest is a contractual interest. The contract envisages payment of such interest or if the same is determined in an appropriate proceedings by a competent court. Thus, in such cases interest also forms and constitutes debt within the meaning of Section 433 (e) and (f) of the Companies Act, 1956 and in the event of a company not paying the debt or is unable to pay the debt, the company could be wound-up for the said reasons.
- 28 -
COP No. 79 of 201019. Answer to point No.3: Whether in the present case the petitioners have made out any debt due and liable to be paid by the respondent and respondent not having paid, would power under Section 433 (e) and (f) be required to be exercised by this Court?
19.1. In the present case though in the buyback agreement there is an interest clause quantified at 24% p.a. the notice which has been issued by the petitioners makes a demand of a sum of Rs.3,76,27,753/- without even making any reference to the interest component or quantification of the interest. The demand raised is for a composite amount of Rs.3,76,27,753/- with interest. After the filing of the present proceedings, the petitioners have filed a memo dated 07.02.2015 claiming interest at 12% p.a. and the statement produced along with the said memo is a different calculation with a different amount due. Thereafter an amendment was made to
- 29 -
COP No. 79 of 2010the petition introducing para 16B and in the said paragraph the calculation has been made of interest from the date on which amount has been paid by the respondent company, thus there is no calculation of interest for the previous period i.e., prior to issuance of notice.
Thus, even though there is a contractual interest liable to be paid, the claim of the petitioners themselves is dehors the contact and contrary to the contact. The initial legal notice as stated above does not even refer to or distinguish the contractual interest. Thereafter the petitioners have reduced the claim of interest and subsequently have raised the claim of interest from the date of payment which is during the pendency of this proceedings.
19.2. There is no certainty of the principal amounts payable nor either certainty of interest amount payable. None of the documents produced by
- 30 -
COP No. 79 of 2010the petitioner establish any admitted liabilities on part of the respondents in this regard.
Applying the decision of this Court in Jyothi Limited Case (Supra) as also the Apex Court in Vijay Industries Case (supra), it is clear that a proceedings could be continued under Section 433 (e) and (f) only if the debt has been ascertained and crystallized including the interest component.
19.3. In the present case there is no such ascertainment made nor is there any crystallized debt, the petitioners themselves are not clear as to what the principal amount is and what the interest amount is or even the rate of interest. The petitioners having received the principal amount and the interest amount not having been quantified or crystallized. I'am of the considered opinion that, in the present case the petitioners have not made out any debt due
- 31 -
COP No. 79 of 2010and liable to be paid by the respondents for exercise of powers under Section 433 (e) and
(f) of the Companies Act, 1956.
20. Answer to point No.4: What order?
ORDER For all the aforesaid reasons, the petition stand dismissed.
Sd/-
JUDGE SR