Calcutta High Court
Src Steel (P) Ltd. vs Bharat Industrial Corporation Ltd. on 11 August, 2004
Equivalent citations: 2005(4)CHN343, (2005)6COMPLJ401(CAL)
JUDGMENT Ajoy Nath Ray, A.C.J. 1. This is an appeal from a receiving order passed by the Company Court on the 22nd of July, 2004, whereby the respondent's petition for winding up of the appellant company was admitted and directions for advertisement were given. 2. The statutory notice dated 31st July, 2003 had been served on the appellant company for a debt of Rs. 52.33 lac approximately. The case of the respondent in the statutory notice as well as in the winding up petition was put very simply. According to them during the period October, 2001 and January, 2003 they had supplied the company diverse quantities of steel plates and H.R. Coils, and upon such supplies being made and received they also raised upon the company the corresponding bills from time to time, the bills representing separate supplies individually. In the petitioning creditor's chart the bills aggregate approximately Rs. 5.09 crore and they have given credit to the company for the payments made by it from time to time aggregating approximately Rs. 4.57 crore. 3. The petitioning creditor claimed the balance amount as price of goods sold and delivered. 4. The company filed an affidavit-in-opposition to which a reply was used by the petitioning creditor and thereafter the company used a supplementary affidavit also. Various documents of a very important nature were annexed to the supplementary affidavit. 5. The company made the case that the transactions were not so simply as to be called a price of goods sold and delivered situation. According to them the petitioning creditor only supplied delivery orders to the company from time to time. These delivery orders were utilised by the company for lifting the steel items from the Dankuni Steel Yard of the SAIL. The petitioning creditor enjoyed a quota of supplies from sail and they made full payment themselves to SAIL. After supplies were taken on the basis of the delivery orders, the petitioning creditor raised bills on the company adding 2% commission of theirs, which percentage was calculated both on the ex-stockyard price and the 4% sales tax added thereto. The bills raised on the company represented the aggregate amount, i.e., the stock-yard price, the 4% sales tax and the 2% commission. 6. The challans and the delivery orders, of which numerous copies were annexed to the supplementary affidavit of the company, show that this was actually what was happening. It was not that the petitioning creditor was itself making supplies to the company; the company was lifting the goods on its own and the petitioning creditor, so to speak, was a fully investing middleman with an agreed commission. 7. The other significant part of the company's case was that it hardly raised any direct dispute at all to the balance amount claimed by the petitioning creditor, i.e., Rs. 52.33 lac. However, the company's case was that it had suffered damage because of a breach of contract made by the petitioning creditor. According to the company the petitioning creditor had agreed to supply to it during the financial year 2002-03 3000 metric tonnes of steel plates and 1800 metric tonnes of H.R. Coils. However, the full supplies were not made. More than 1500 metric tonnes of steel coils agreed to be supplied, only 443 metric tonnes were actually obtained by the company. The company claimed damages at the rate of five rupees per kilogram for the unsupplied items. Needless to mention, 1000 kilograms made one metric tonne. 8. In the answer to the statutory notice which was given on the 16th of August, 2003 these details were not given in extenso but a reference was made by the company to a suit which it has filed more than two months before the date of the statutory notice, to be precise, on the 23rd of May, 2003, in the plaint of which the company had put forward the claim for damages as mentioned in its affidavit-in-opposition. 9. The petitioning creditor took, in that suit, the step of praying for an extension of time for filing a written statement and then on the 12th of August, 2003 delivered a counter-claim in its written statement, wherein it claimed the said identical amount of Rs. 52.33 lac and claimed for a decree. 10. Under Order 8 Rule 6 of the Code of Civil Procedure the counter-claim is almost identical to a plaint. 11. The position, therefore, is that both parties before the Company Court had approached the Suit Court for a determination of their rights and for reliefs before the judgment was delivered in the winding up petition. 12. In the judgment under appeal His Lordship has opined that there is not a single document produced by the company to show that there had been contemporaneous demands for supply by the company. The facts stated above will show that a large part of the financial year in question, namely 2002-03 had expired by January, 2003 when the supplies stopped. In fact the last date of supply and the last date of part payment is practically on the same date, i.e., 16/17.1.2003. The company's case was that 3000 metric tonnes of steel plates would have to be supplied within 31.3.2003. Only about half that quantity had been supplied. Yet there was not a single letter of demand. 13. His Lordship further held that although the company supposedly purchased materials from outside by paying five rupee per kilogram extra, not a single document was disclosed with regard to such purchase. Again, with respect, His Lordship's finding is wholly understandable. In fact His Lordship's decision in this regard gives the most beneficial construction possible to the plaint which is, to say the least, inartistically drafted. It might well be that the drafting flaws are not merely flaws of artistry but serious substantial flaws. In any event, in the schedule giving details of damages the company merely says that the particulars are "1526 M.T. Plate of SAIL not delivered thus suffered loss by itself in rate at the rate of Rs. 5/- per k.g." That risk purchase was made, even that is not stated with certainty. 14. Mr. Sen supporting the impugned judgment and appearing for the respondent petitioning creditor submitted with a lot of force that the figure of promised supply, i.e., 3000 metric tonnes of steel plates is a figure not based upon a single scrap of paper. Similarly the case that 1800 metric tonnes of H. R. Coils were promised to be supplied is lacking in any materials or credible evidence. There is no letter, no document, nothing at all. 15. Mr. Mukherjee appearing for the appellant company submitted in this regard that although the transactions were of the order of several crores of rupees, yet there are no papers, agreements or correspondence or any writing of any sort in respect of these transactions excepting of the challans, delivery orders and the bills. According to him all discussion was oral. He pointed out that there is not a single letter of demand from the petitioning creditor before the service of the statutory notice. 16. The fact of the case is that challans, delivery orders and bills apart, the first writing which, in the transactions of the parties, saw the light of the day was the plaint filed by the company. In these circumstances, Mr. Mukherjee invited us to opine that the suit is not a bogus suit, that oral evidence in the suit has to be given and what the result of oral evidence will be is not possible to predict on affidavit evidence. 17. On this short but sufficient description of the basic facts of the case, the legal position and the different legal points might be discussed. The first point which arose before us was whether the petitioning creditor was entitled to pursue the remedy in winding up, without in any manner having given up its choice of making a counter-claim before the suit Court. We are of the clear opinion that there is no bar either in the Companies Act or in the general body of our Civil Code governing and regulating suits in Court, that a person is to put to a strict choice, Whether to pursue the remedy by way of a winding up petition or to pursue the remedy for recovery of its debt by way of a suit. 18. The Supreme Court has opined in the case of Harinagore Sugar Mills, reported at 1966(36) Company Cases 426 (noted and applied in 66 Company Cases. 634, the S.T.C. Case) that although winding up is not a normal alternative for the realisation of debts yet it is a form of equitable execution. 19. It is well-settled law that a winding up petition is a perfectly proper remedy for enforcing payment of a just debt. 20. Mr. Sen rightly submitted that the presentation of a winding up petition for a just debt above the floor limit specified in Section 434(1)(a) of the Companies Act is an unconditionally given statutory right. Whether a suit or a counterclaim is filed by the company or not, this remedy can always be resorted to Mr. Mukherjee's submission was that although Section 10 of the Code of Civil Procedure does not apply, perhaps in terms, in a situation of this nature, yet the Company Court has ample jurisdiction to stay or adjourn the hearing of the winding up petition pending the disposal of the suit. He drew our attention to the Company Court Rules Nos. 6 and 9, which respectively provide that the practice of the Courts and the Code will apply as far as practicable to company matters and that the inherent powers of the Court are not affected by the rules at all, According to Mr. Mukherjee, proceeding in two forums is not to be encouraged. The petitioning creditor having chosen the remedy of filing a counter-claim, and having not abandoned such choice even until date, the petitioning creditor should be held to that choice. Mr. Mukherjee also showed us the provisions of Section 443 of the Companies Act which lays down the various powers of Court and the orders which might be passed by it on hearing a winding up petition. Not all these powers are exercisable at the stage at which we are to day, i.e. the receiving stage. For example the power to wind up a company finally is not exercisable at this stage, but will become exercisable, if at all, after advertisements have been duly published. But the various other powers, including the residuary powers given in Section 443 are quite sufficient for the Company Court, should it be of such opinion, to stay the hearing of the winding up petition until the suit is disposed of, even at this stage. 21. In our opinion, both Mr. Mukherjee and Mr. Sen are right in their submissions in this regard. It is both true that the petitioning creditor can file a winding up petition and at the same time present the counter-claim audit is also true that in fit and appropriate cases the Company Court has both the power and the duty not to proceed with the winding up application until the suit has been disposed of. Similarly, we are also of the opinion that the Company Court could, in appropriate cases, proceed with the winding up petition in preference to the suit and in that case, should it so think fit, restrain the parties from proceeding with the same claim or claims in the Suit Court. In short, the Company Court can stay its own proceedings which are pending before it, or, in the alternative, restrain the parties who are appearing before it from proceeding elsewhere. We do emphasise that it is, in general, not proper that the same claim be tried in parallel proceedings. Only in the most extraordinary and rare cases which exhibit special features like difference of parties of a substantial type, might the Courts feel helpless and thus permit identical claims to be adjudicated in two different forums. The normal rule is that the same claim which is pending adjudication between the same parties or substantially the same parties should be first finally adjudicated upon in one forum, and while that process is going on the proceedings before the other forum should either be stayed or the parties injuncted in such manner as practically to cause a stay of the proceedings to be made in any event. 22. In this regard, the inherent powers of the Court for granting stay for just and reasonable causes like the above is well-settled and beyond any doubt or dispute now. The case of Cotton Corporation, reported at might be referred to in that regard. The possibility of staying a winding up petition is most certainly envisaged there. That was also a case where the parties were involved both in a suit and in a winding up petition. Justice Desai speaking for the Supreme Court referred to the case of Monoharlal Chopra, reported at mentioning the judgment of Raghubar Dayal, J. and stating that His Lordship had held that the Court has inherent power to issue temporary injunction in cases which were not covered by the provisions of the Code. The Supreme Court refused to grant an injunction in the case before it and permitted, notwithstanding the pendency of the suit, the winding up petition to proceed. 23. The inherent power of the Court to grant injunctions in situations of this nature not covered exactly by the Code or by any other specific written enactment has long been recognised. In the case of Rameshwar Singh, reported at 23 CWN page 844 a Division Bench of our High Court opined to the same effect. That was also a case where there was a winding up petition and also claims in suits made by the company. It was said at page 856 of the report, right-hand column near the bottom, that there is no doubt that the Court has inherent jurisdiction to stay proceedings where they amount to an abuse of its process; the principle was even then i.e. in the year 1918/1919 said to have been a well-recognised principle. 24. The law being this, the question before us today would be, do we stay the winding up petition, or do we restrain the parties from proceeding with the suit ? In our opinion, the answer to this question, at least in our case, would be, as would also be in most of the other cases, answered by first answering the question, whether the winding up petition itself is a properly presented and a properly constituted one or not. If the Company Court is satisfied that the winding up petition should proceed, then and in that event, such satisfaction positively most arise upon the primary and preconditional finding of the Company Court that the nature of the debt put forward by the petitioning creditor is indisputable. Once that finding is reached it would be within the power and also the duty of the Company Court to restrain parties before it, in the very large majority of ordinary cases, from proceeding with any adjudication of that very claim, which has been found by the Company Court to be indisputable, in the Suit Court or practically before any other forum. The problem of whether to go up with the winding up application or with the suit, thus gets solved at the same time when the Company Court solves its primary and basic problem as to whether it should or should not entertain and receive the winding up application. 25. Even in the later stages of the proceeding, after it has assumed representative capacity after advertisement, the position is quite clear and there can be but only one course open. If the company ultimately happens to get-wound up and an order to that effect is passed all suits involving the company would automatically come within the purview of the Company Court and it might or might not grant leave under Section 446 of the Companies Act. If it has already opined about the genuine and indisputable nature of a debt owed by the company, needless to mention, it will, almost as a matter of course, refuse to give leave to any party to proceed with a suit involving that very same indisputable claim. 26. If, on the other hand the Company Court comes to the conclusion that the debt is not really of an indisputable nature, then again the problem, whether the winding up petition should go on or the suit should go on, does not arise. This is because in the case of a bona fide disputed debt the winding up petition itself would not be admitted and the problem of any party being restrained from proceeding with a suit would not present itself. 27. Accordingly, in our case if the winding up petition is not to be admitted both the claim of the company and the counter-claim of the petitioning creditor will naturally be adjudicated upon by the Suit Court. On the other hand, if we come to the conclusion that the winding up petition should be admitted, some sort of order would have to be passed by us to see to it that the Suit Court is not embarrassed by the suit being made ready or coming up for hearing before it, when the Company Court is already in seisin of the equitable execution of a debt found to be due as a result of consideration of both the claim and the counter-claim of the company upon the petitioning creditor. 28. The all important question, therefore, is whether the debt which is the subject-matter of the winding up notice is a bona fide disputed one or not. 29. The nature of the defence raised by the company is one of the type of confession and avoidance. It has admitted or practically admitted that the sum of Rs. 52.33 lakh is the aggregating balance of the bills which arc still outstanding. It has stated, however, that the said sum is not payable as it is entitled to recover more than that sum from the petitioning creditor by way of damages for non-supply. That this type of counter-claim by the company pertakes of the character of a bona fide defence in a winding up application is well-settled by law. It suffices for us to refer to only two cases, apart from the case of Rameshwar Singh already mentioned above which is also an authority for this proposition. The reference of Rameshwar's case is 23 CWN 844. 30. There are passages also to this effect, in the case of Federal Chemical reported at 34 Company Cases page 963 and also in the Single Bench judgment of our Court given in the case of Bhart Vegetable, reported at 56 CWN page 29. 31. The problem is not a problem of law, when we decide whether the counterclaim of the company is a valid defence in law or not. The problem is the problem of assessment and determination of the bona fide nature of the company's counter-claim, which happens really to be the claim in the suit. 32. The law as to how far the company has to go, to establish the bona fide nature of its defence, has been expounded in many cases. Some of the cases show what is not a bona fide defence and some other cases show what is a bona fide defence. A good starting point in this regard today in India would be the case of Meehalic, reported at . That dealt with a situation of a summary decree and in delivering the judgment for the Court, Beg, J. extracted five heads which were formulated by S.R. Das, J. (as His Lordship then was) in the case of Kiranmoyee, reported at 1945 (49) CWN 246 at page 253. We are of the opinion, that the situations of a Company Court admitting a winding up petition and of the Suit Court passing a summary decree are practically identical. Each has to decide whether an order causing final and irretrievable prejudice to the defendant or the company, as the case might be, is to be passed, there and then, and only upon affidavits. In the one case, the prejudice is caused by the passing of the decree and in the other case by giving directions for advertisements which affect in a serious manner the stability and financial credibility of the company in the market. Thus, these tests approved and used by the Supreme Court are, with respect important and excellent guidelines. 33. It is easy to see that our case is a borderline case. We are, therefore, concerned only with the third of these tests which runs as follows : "(c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he had a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiffs claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security." 34. Regarding furnishing of security, however, there is an extremely important distinction between the Suit Court passing a summary decree and the Company Court receiving the winding up petition. In passing a summary decree or refusing to pass it, the Court has express power under Order 37, and also usually express power given in other provisions for the passing of a summary decree, so as to allow the defendant to defend on terms. Even if such express conditions are absent, the practice of the Suit Court in passing summary decrees has now become too established to be questioned, and that practice is that in some of the appropriate cases, the Court calls upon the defendant to secure the claim of the plaintiff, sometimes even wholly, before it grants leave to defend. This is a way of the Suit Court for testing the bona fides of the defendant and its intention to put up a genuine defence which will naturally delay the suit for a long time. 35. The Company Courts position is different. A Division Bench of our Court has opined thus in the case of Dunlop India Ltd., reported at 1994(1) CHN 409. The decision in that case is that the Company Court has no jurisdiction to call for security; it can cither admit the winding up petition or not admit it. It has to come to a conclusion whether the debt is bona fide disputed or whether it is not bona fide disputed. Fine distinctions of more or less bona fide dispute or so, on the basis of which the Court calls for either full security or a large percentage of it, are not to be made by the Company Court. Security is an appropriate remedy which a plaintiff might obtain but which is not available to the petitioning creditor. 36. We are not concerned with the question of ordering any security here as, upon instructions, learned Counsel for the Company had submitted before the first Court that the company was not prepared to furnish security for the petitioning creditor's claim. We have not heard any contrary submission before us during the long arguments which have been made. 37. Our task is simply to see whether the company comes within the test quoted above, i.e. although it does not make out a positively good defence now, might it be able to make out one at the time of the trial of the suit ? 38. The case of Gordhandas, reported at also lays down, inter alia, in paragraph 21 the grounds upon which the company might be entitled to resist the admission of a winding up petition. It appears from here that if the company raises a defence in good faith, or has a defence in law which likely to succeed (fine distinctions of slightly likely or very likely are not to be made, just likely will do) or adduces sufficient prima facie proof of the defence it seeks to raise, then and in that event the winding up petition would not be admitted and advertisements would not be directed. 39. In the case of Amalgamated Commercial, a Supreme Court decision, reported at 35 Company Cases 456, a defence of a legal nature entitled the company to resist a winding up petition. The point of law arose whether the declared dividend had already become binding upon the company as a debt; an arguable point of law was found to exist. Apart from the cases mentioned above, we might also mention the case of J.N. Roychowdhury, where a counter-claim of a company being found bona fide, the winding up petition was held as not proper in the facts and circumstances. The case is reported at 1987(2) Co. LJ 82 and alternatively at 61 Company Cases 504. 40. On the other side of the picture there is a famour case of Imperial Hydropathic, reported at 49 Law Times 147 where Sir George Jessel, Master of the Rolls stated in a long and beautiful passage as to what is not a disputed debt. His Lordship opined that a debt does not become disputed merely the company states that the company disputes it. If the Company Court comes to the conclusion that the company is merely amusing itself by weaving some cobwebs than the winding up petition will be admitted, The case of the company must not be all nonsense but it must have some reasonable ground. 41. In our respectful opinion this is the final test. Does the company have some reasonable ground ? Is the company's defence or counter-claim, in any reasonable view of the matter, arguable ? 42. The same celebrated Judge in another root case again mentioned this criterion, i.e. whether the company has some reasonable ground for not paying the claimed debt of the petitioning creditor. This is the case of London and Paris Banking Corporation, reported at 19 Equity Cases 444 and an important passage of the Master of the Rolls is quoted in Rameswar Singh's case mentioned above; the passage would be found at page 446 of 19 Equity Cases. The quotation given in Rameswar Singh's case is at 23 CWN, at page 857 left column. 43. Sir George Jessel said that a company cannot be held to have failed and neglected to pay a debt, if it has a reasonable ground for not paying it. In such a case, no doubt the company fails to make the payment as claimed by the petitioning creditor, but it cannot be said that it has also neglected to pay it. There is no negligence in the company in not paying a debt, if it is withholding payment on a reasonable ground, such as a reasonsable counter-claim. The passage of the Master of the Rolls is fully applicable in India as Section 434(1)(a) raises the presumption of inability to pay debts only when the company has neglected to pay the sum. 44. The basic question accordingly is the company's suit a bogus suit or is there some reasonable ground, however thin, but still reasonable, on the basis of which the suit can be opined to be not really a bogus one ? 45. The arguments in favour of the suit being a bogus one have already been noted and acted upon by the learned Judge in the Court below. The company made no demands for the making up of the alleged short supply of goods, not a single document is disclosed. The company's damage suffered by reason of non-supply is similarly not substantiated by any documentary evidence. The rate of five rupees loss per kilogram is similarly without any documentary support. The plaintiff does not even mention that the company made any risk purchases. No documents were annexed either to the affidavit-in-opposition or to the supplementary affidavit filed by the company which would fill up these lacunae to any extent at all. The plaint is negligently drafted. In paragraph 7 it is stated that delivery orders for 1526 MT of steel plates were not forwarded by the petitioning creditor and the figure becomes 1536 in paragraph 9. There is not a scrap of paper to show that the petitioning creditor had finally undertaken to supply 3,000 MT of steel plates and 1800 MT. of H.R. Coils in the financial year 2002-03. The petitioning creditor's case before us was that the plaint is nothing but weaving cobwebs by the company Court-fees of Rs. 50,000/- have been paid on the plaint for the purpose of taking a calculated risk, thereby gambling to delay, if possible, the realisation of the just claim of more than Rs. 52,00,000/-. The company's plaint is all nonsense. It could also have written 3,500 MT or 2,900 MT instead of 3,000 MT. It is no more than a figment of imagination. Allowing the suit to proceed and staying, the winding up petition would work harshly and unjustly upon the petitioning creditor. 46. The company states, on the other hand, that the petitioning creditor has not made a fully reliable and consistent case. When the company raised the point that the petitioning creditor never made direct supplies or deliveries to it, these were denied by the petitioning creditor. The company had to annex to the supplementary affidavit numerous documents to show how it had lifted the steel items directly from SAIL ex the Dankuni Storeyard. The company makes the case that the assurance/for the supply of 3,000 and 1800 MT was an oral assurance. The rising steel prices and the non-supply in spite of assurances caused loss to the company. It is not that the balance debit of about Rs. 50,00,0007- arose for the first time in January, 2003 when the supplies stopped. Even in March, 2002 there was a debit balance to that extent. The lack of documentary evidence is there on both sides. There is no paper to substantiate that the petitioning creditor would be entitled to its 2% commission. It has to be worked out from the delivery orders by calculating that percentage on the aggregate of the ex-stockyard price sales tax thereon. The agreement being oral, evidence would also be oral. The suit cannot be said to be absolutely bogus just yet. 47. On the basis of the above arguments, we have thought out the matter in the following way. Although this thought process is short, it has proved to be of crucial importance to us in our own minds. We had also spoken this out aloud so that we had the advantage of hearing learned Counsel on this aspect also. Our thought process is this. It is not possible for lawyers and Judges to predict, on the basis of documents and pleadings available to them, what exactly the oral evidence is going to be, when the dramatis personae in flesh and blood walk into the witness box one by one and answer question in examination and cross-examination. 48. It might be that one Lohriwalla for the Company will go into the box on behalf of the plaintiff and one Gupta will go into the box on behalf of the defendant/petitioning creditor. We might imagine Lohriwalla being cross-examined on the lack of documents. We might imagine Gupta sticking to his guns and saying that there was no commitment for any supply beyond the supplies actually made. But one is not entitled to make out the result of examination and cross-examination from out of his head. That result will only be as shall be taken down in shorthand script in open Court examination. That some oral discussion was there, it is impossible to deny. Supplies could not have started without some sort of understanding. Supplies could not have ended without some sort of communication. What these are, we do not yet know. We cannot say, on this basis, that the suit is bound to fail because the witnesses are bound to say this, this and this on behalf of the company and that, that and that on behalf of the petitioning creditor. It would be a theoretical way of dismissing the suit. That is not reasonable. 49. On this basis the conclusions is that although the case is a borderline case, and although the superexcellent arguments of Mr. S.B. Mookherjee (in no manner detracting from the equally able arguments of Mr. Sen) certainly played a lot of part in our forming this conclusion, the defence of the company cannot be ruled to be not bona fide at this stage. It comes within the third test of S.R. Das, J. as His Lordship then was, i.e., although the defence of the Company cannot be said to be positively good now, we cannot say that it shall never be pronounced to be positively good at any time in future either. 50. One last point of Mr. Sen has to be discussed as there is sometimes a confusion on this point. Mr. Sen's submission was that the receiving order passed by the Company Court is a discretionary order and, therefore, the Appeal Court should not interfere with the exercise of that discretion unless some material fact has been left unconsidered by the first Court, or some extraneous matter has been given weight, or there has been a misdirection of oneself on a point of law. Mr. Sen submitted that none of these has occurred. We totally agree. All the material facts were considered by His Lordship, and the law on the subject was perfectly laid down and adverted to and His Lordship's short summary of the judgments cited is, with respect, a good model as to how a painstaking judgment should be written. 51. Should we then, not interfere with the exercise of His Lordship's discretion? The confusion which occurs, occurs at this stage. The admission of a winding up petition is a discretionary order no doubt, but the stage of exercise of that discretion comes, after and only after a finding of the bona fide nature of the company's defence has been arrived at. The finding of the bona fide nature of the defence is made on affidavits and although it is a mixed question of law and fact, it is primarily a fact finding and fact assessing procedure. That finding of fact is made by the Court not by examining witnesses or by looking at their demeanour and thus forming an opinion on their credibility, but by looking at affidavit evidence only. In such cases the Appeal Court re-assesses the fact itself and it can, perfectly properly, and in accordance with law, make a different assessment from the one made by the Trial Court. The Trial Court might find on affidavits that the defence is not bona fide. The Court of Appeal might find on the same affidavits that the defence is, or might be, bona fide. This is not like reversing the first Court on facts in a witness action. The Appeal Court is with the same advantage or disadvantage as the Trial Court itself and must, therefore, unhesitatingly perform the task of forming its own opinion whether the defence of the company is bona fide or mala fide. 52. The discretion of the Company Court in admitting a winding up petition is exercised after this bona fide nature is decided upon. It might be, that in a small handful of cases even though the petitioning creditor proves the indisputable nature of the debt, it would be inequitable for the petitioning creditor to present a petition for winding up. The Company Court is a Court of equity. Special fiduciary relationships or other relationships of trust or confidence might exist as between the company and the petitioning creditor which might make it inequitable for the petitioning creditor to commence a process which might result ultimately in the civil death of the company. We are not concerned with such situations, but we are concerned with emphasising this, that the discretion exercised by the Company Court in admitting a winding up petition is discretionary only in this sense, and not in the sense that the Company Court has a discretion in finding out whether the nature of the company's defence is bona fide or not. That is not a discretionary decision at all. 53. We have had to clarify this because no section of the Companies Act and no rule of the Company Court Rules throws any light on this aspect of the matter. Section 433 states that under certain circumstances the Court may wind up a company. That section is, therefore, clearly discretionary. Rule 95 states in what form the winding up petition shall be; rule 96, what will be done upon filing of the petition; rules 97 and 98 lay down certain steps to be taken in regard to a winding up petition; rule 99 is about advertisements. 54. There is no rule which states that upon proof of any indisputable debt of a sufficiently large amount and on proof of service of statutory notice the Company Court either shall, or may, receive a winding up petition and direct its advertisements. Section 433(1)(a) of the Companies Act only raises a compulsory presumption about the company's inability to pay debt, if a good statutory notice is not complied with. That the Company Court has a discretion in the matter of admission of the winding up petition even after the proof of debt and the proof of the company's neglect to pay is a law which is nonetheless a good and as well-settled as the express provisions of the Companies Act or the framed rules made by the Supreme Court. 55. There is yet another more point which is to be mentioned about the impugned judgment. It is a carefully and painstakingly written judgment but, with respect, it contains a certain view, which requires correction and clarification. It is quite a serious point in Company matters. 56. His Lordship proceeded to admit the company petition on the basis that His Lordship was forming a prima facie view as to whether the debt of the company was of an indisputable nature. However, various cases have already held, and His Lordship himself has also held, in other parts of the judgment, that for admission of a winding up petition, the debt owed by the company has to be indisputable, and not merely owing prima facie. In our considered opinion, something cannot both be prima facie as well as indisputable at the same time. 57. However, various decided authorities of our High Court have opined in Company Matters that the stage of admission of the winding up petition is a prima facie stage. There are dicta to the effect that the finding of the Company Court at this stage of admission is a prima facie finding. So, for example, in the case of Pandam Tea, the observations of Ghosh J., as His Lordship then was, in 45 Co. Cas. 67 at 72 and 75, and the affirming judgment of the Appeal Court, and its observation in 47 Co. Case 15 at page 19. 58. In the case of Bangasri Ice and Cold Storage, D.N. Sinha, J., as His Lordship then was, speaking for the Division Bench said in a single sentence at paragraph 8 that at the admission stage the matters are not conclusively decided. In the case of John Herbert, reported at 70 CWN 516, a Division Bench judgment, G.K. Mitter, J., when sitting in out Court said in paragraph 12 that at the admission stage the Court takes a prima facie view, and if does not and cannot then adjudicate upon the rights of the parties. 59. So, as per the authorities, the view formed at the stage of admission of the winding up petition is a prima facie view only. There is at least another Division Bench decision of the Calcutta High Court which was referred to by Mr. Sen, but not actually cited, as the point, although serious and important in itself, did not assume the place of primary importance in our case. It is the case Rangpur Tea, where, if we understood Mr. Sen correctly, a view was taken that the finding at the stage of admission is not binding upon the Company Court at the final stage of hearing of the winding up, just as an interlocutory decision in a suit is not binding at the time of passing of the final decree. 60. The general view and also our view that the formation of the opinion of the Single Judge at the admission stage that the debt of the Company is indisputable, and the binding and final nature of that opinion, docs not really come in conflict with these dicta of the Division Bench. The reason is this; at the stage of admission the parties present before the Court are the company and the petitioning creditor. The decision of the Court that the debt of the company is final and binding binds them, and all other Courts in the same manner as a summary decree does. This is putting the matter on a very high pedestal, but it is, both logically and as matter of law already placed on that high pedestal. 61. But at the stage of the hearing of the winding up petition, the company has already, to a certain extent split up into the creditors and the contributories who come and make representations on their own behalf and by themselves, even apart from the submission which might be made by the company. The parties are different and many more than were present at the stage of admission. After hearing all those parties the Company Court could, at the final stage, take different view as to the debt than it has taken at the stage of admission. The admission stage view bound the company and the petitioning creditor finally, but not the others, and therefore not the Company Court also, when hearing the matter finally. 62. But this is an exclusive and sole prerogative of the Company Court only. This is so, because before no other Court the creditors or contributories of the company have a locus standi to make separate representations about the binding nature of a debt alleged to be owed by the company. The rule in Foss V. Harbottle would prevent such a separate representation. Therefore, until the company comes up for the decision whether it is to be wound up or not, and excepting during the process of that decision only, the final nature of the debt pronounced upon at the stage of admission of the winding up petition will bind the company for all purposes and before all forums and Courts. 63. The rights of the parties decided at the final hearing of the winding up petition primarily mean the right of the company to stay alive. This is not finally decided at the admission stage, but only a prima facie view is taken, that it might have to die. We would thus respectfully interpret the above dicta of G.K. Mitter, J., in the John Herbert case, mentioned above. 64. The learned Single Judge was, as we respectfully read His Lordship's judgment, somewhat under the impression that His Lordship was forming a prima facie view as to the nature of the debt of the company. As we have explained, that is not so. His Lordship had to decide finally whether the debt owed by the company could there and then, as between the petitioning creditor and the company, be said to be final and binding, and thus advertisements directed to be issued. These advertisements are as prejudicial as a summary decree against the company. We have formed our opinion that the debt owed by the company cannot, just now, be pronounced as final, binding and indisputable, even as between the petitioning creditor and the company only. On this view, we have been unable to sustain the impugned judgment. 65. The order under appeal is also, and as discussed, in the right view of the matter, not a discretionary order. There is no fiduciary relationship here as between the company and the petitioning creditor. Were the proof of the debt made indisputable, the Court would be compelled to admit the winding up petition. That it has been admitted by the first Court is not because of use of any discretion in this regard; it could be admitted only upon a finding that the debt is indisputable and the defence of the company is bogus, mala fide or moonshine. These words are not used, and the purport of His Lordship's judgment is not exactly, but only nearly the same. For the reasons given above we are, with all due respect, unable to agree with His Lordship. The appeal is allowed. The order under appeal is set aside. The winding up petition shall stand and remain adjourned until the disposal of the suit, i.e., the company's claim and the petitioning creditor's counter-claim. 66. Costs both the Court below and before us will abide by the result of the suit. 67. Authenticated copies of the judgment may issue. Arun Kumar Mitra, J.
68. I agree.