Andhra HC (Pre-Telangana)
Bombay Glass Blowing Industries vs Bio Vaccines Private Limited on 25 November, 1997
Equivalent citations: 1998(1)ALD390, [1999]98COMPCAS174(AP)
ORDER
1. This is a petition for compulsorily winding up the respondent-company under Sections 439(1)(b) and 433(e) read with Section 434(1)(a) of the Indian Companies Act, 1956.
2. The admitted facts of the case, in short, are that the petitioner-company had supplied on credit vials and ampoules etc., from time to time between the years 1990 to 1993 to the respondent-company through invoices which are at Ex.Pl to Ex.P12. As on 31-3-1994, an amount of Rs, 9,02,322/- was due to be paid by the respondent-company to the petitioner-company against supply of goods on credit. The respondent-company did not pay the said amount, therefore, the petitioner-company had sent notices as also the statutory notice, a copy of which is at Ex.P13. under Sections 433(e) and 434(l)(a) of the Indian Companies Act, 1956. After receipt of this notice, the respondent-company paid a sum of Rs.2,00,000/- leaving a" balance of Rs.7,02,322/-. The respondent-company paid the balance amount of Rs. 7,02,322/- during the pendency of these proceedings to the petitioner-company. The petitioner-company on 7-7-1995 filed this petition for compulsorily winding up alleging that the respondent-company is indebted to the petitioner-company to the extent of Rs.7,02,322/- with interest at the rate of 21 per cent per annum which debt the respondent-company did not pay inspite of the statutory notice and had neglected and failed to pay the same, therefore, it should be wound up.
3. The respondent-company through its written statement alleged that due to the imposition of restrictions in supply of electric power and illegal strikes of labourers, it could not pay the amount of Rs.9,02,322/- towards the goods supplied to it by the petitioner-company. However, it has paid Rs.2,00,000/-leaving a balance of Rs.7,02,322/- and undertook to discharge the remaining amount of Rs.7,02,322/- in instalments as per the undertanding reached between them.
4. As noted above, the respondent-company has paid the balance amount of Rs,7,02,322/- during the pendency of these proceedings.
5. The question that looms large for determination is whether the respondent-company is liable to pay interest on the value of the goods supplied by the petitioner-company and, therefore, is liable to be wound up for its inability to pay the interest amount ?
6. Mr J. Parekh, PW1 has testified that the respondent-company is also liable to pay the interest on the unpaid price of goods supplied to it at the rate of 21 per cent per annum. But, the respondent-company has claimed interest at the rale of 18 per cent per annum amounting to Rs. 10,92,477/-. As per the consolidated statement of invoices which is at Ex.PIG, he has stated lhat in all the invoices, that is credit memos, it has been printed that interest at the rate of 21 per cent per annum will be charged if the payment is kept unpaid for more than 45 days. He has further admitted that there is no written agreement with the respondent-company for payment of interest, except the interest clause printed in the invoices.
7. Relying on Stephen Chemical Limited v. Innosearch Limited, 1986 CC 702 and Rashid Leathers (P) Ltd. v. Super Fine Skin Traders, 1990 CC 684, it has been urged by the learned Counsel of the petitioner-company that, in the counter, the respondent-company has not specifically denied that the petitioner-company is not entitled to claim interest at the rate of 21 per cent per annum on the unpaid amount of goods supplied to it on credit and, therefore, no dispute has been raised regarding the liability to pay the principal amount with due interest. It is further urged that the liability of the respondent-company to pay interest is a matter which can be gone into in the winding up proceedings and, therefore, the Company Court is empowered to award interest on reasonable rate on the amount of price of goods sold on credit from the date the goods were supplied to the respondent-company upto the date of the petition and thereafter on the prevailing rate of interest on bank deposits.
8. In the case of Mulfimetals Limited v. Sutyatronics Private Limited, , S. Dasaradharama Reddy J. (as he then was), disagreeing with the views expressed by the Division Bench of the Punjab and Haryana High Court in the case of Stephen Chemical Limited (supra) and by the Division Bench of the Madras High Court in the case of Rashid Leathers (P) Ltd., (supra) has held that, it is well settled that a company can be wound up only when it is proved that the debt claimed against it is ascertained, definite and undisputed and lhat the Company has failed to pay the same and winding up cannot be ordered if there is bona fide and substantial defence denying the liability. It is further held that Section 61(2)(a) of the Sale of Goods Act gives discretion to the Civil Court to award interest in the absence of stipulation of interest in the contract, mat too in a suit for recovery of money, or damages and as the winding up proceedings are not in the nature of suit for recovery of money, the petitioner seeking winding up of a Company cannot invoke that Section. The winding up proceedings are not an alternative for recovery of the money for which civil suit is ordinarily the remedy. For claiming winding up, the creditor has to establish that the respondent owes a definite and ascertained amount to it and that it has failed to pay the same inspite of reminders. The Company Court cannot be used as forum by the creditor to establish its rights either regarding that debt or regarding the interest. Section 3 of the Interest Act (Act 14 of 1978) cannot be invoked in winding up proceedings for establishing claim for interest.
9. It is not disputed before me that there was no written agreement between the petitioner-company and the respondent-company for payment of interest on goods supplied on credit. True that the respondent-company has not specifically denied its liabilty to pay interest, but it is equally true that in Paragraph 13 of the counter, the respondent-company has specifically staled that, inspite of facing hurdles and financial troubles, it has discharged the liability partly by paying Rs.2,00,000/- leaving a balance of Rs.7,03!322/-and assured the respondent-company will discharge its remaining liability by way of instalments and the petitioner-company having accepted Rs. 2,00,000/- with the understanding that it would receive the rest of the balance amount in instalments. Thus, it is crystal clear that the respondent-company has owned its liability to the extent of Rs.9,02,322/-, out of which amount, it has paid Rs.2,00,000/- before the institution of the proceedings and the balance amount of Rs.7,02,322/- during the pendency of the proceedings. It has not at all accepted its liability to pay interest at any rate to the petitioner-company.
10. The relevant portion of Section 61(2)(a) of the Sales of Goods Act reads as under:
"Interest by way of damages and special damages:
(1) xxxx x (2) In the absence of contract to the contrary, the Court may award interest at such rate as it thinks fit on the amount of price -
(a) to the seller in a suit by him for the amount of the price -- from the date of the tender of the goods or from the date on which the price was payable;
(b) xxxxx"
And Section 3 of the Interest Act reads as follows:
"(1) in any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks lit, allow interest to the person entitled to the debt of damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say -
(a) if the proceedings relate to a de'bt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings.
(b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled to or the person making the claim lo the person liable that interest will be claimed to the date of institution of the proceedings:
Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings, interest shall not be allowed under this section for the peirod after such repayment.''
11. From a reading of Section 61 (2)(a) of the Sale of Goods Act, it is revealed that it is the discretion of the Court to award interest at such rate as it thinks fit on the amount of price to the seller from date of tender of goods or from the date on which the price was payable and under Section 3 of the Interest Act, at a rate not exceeding the current rate of interest. If the proceedings relate to a debt payable by virtue of a written "instrument at a certain time from the date when the debt is payable lo the dale of institution of the proceedings and if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in the written notice given by the person entitled to the dale of institution of the proceedings. These provisions refer to the sole discretion of the Civil Court to award interest in a suit for recovery of money. Therefore, the concerned creditor is not at all entitled to interest until the Court so orders. In other words, it cannot be said that the creditor is entitled to interest as a matter of right before the institution of the proceedings in the Court. Before that, the alleged amount of interest or damages is unascertained. The creditor cannot claim interest at any particular rate, in the absence of any agreement to pay the same, prior to the institution of the proceedings. He cannot claim that from the person liable to pay the price of goods he is entitled to, in addition to the unpaid price of goods, the interest claimed and calculated according to his-unilateral act and, therefore, the concerned person cannot be said to be indebted to a certain extent so far as the claim of interest is concerned. This being the position, how can it be said that at the time of issuance of the statutory notice, the respondent-company was indebted to the petitioner-company to pay the interest at any rate, much less at the rate of 21 per cent per annum ? and, therefore, on account of default in making payment of interest as claimed by the petitioner-company, it is liable to be declared as commercially insolvent The same position continues even during the pendency of the proceedings.
12. For the foregoing reasons, I respectfully agree with the view expressed by my learned Brother, 5. Dasaradhamma Reddy, J. (as he then was) that, a company can be wound up only when it is inter alia, proved that the debt claimed against it is ascertained and definite and that it had failed to pay the same, and therefore, has become commercially insolvent. The aforementioned provisions of Sale of Goods Act, the Interest Act as also Section 34 of the Code of Civil Procedure, refer to the discretion of the Civil Court to award interest in a suiti for recovery of money and cannot be invoked to establish the claim for interest in winding up proceedings. Claiming unascertained and indefinite amount falls within the purview of bonafide dispute. Even otherwise, the claim based on unascertained and indefinite amounts, is not a matter to be considered for dissolution of a company, because, the Company Court has either to allow or disallow the petition, but has no jurisdiction to pass an order directing to pay the claim amount including unasceratined and indefinite amount of interest because it is the function of aCivil Court to award interest and under these circumstances, on the mere ground of multiplicity of proceedings, it cannot be considered for issuing such a direction. The Punjab and Haryana and Madras High Courts have not considered the position of law from the aforesaid angles.
13. For the foregoing reasons, I reach the conclusion that there is no acceptable material on record to hold that the respondent company had become commercially insolvent and, therefore, it is liable to be wound up.
14. In result, the petition fails and is hereby dismissed. However, having regard to the facts and circumstances of the case, I direct the parties to bear their own costs.