Bombay High Court
M/S. Agrozan India Pvt. Ltd vs M/S. Agritrade India Services Pvt. Ltd. ... on 19 June, 2017
Author: M. S. Sonak
Bench: M. S. Sonak
skc 1 APP-675-16.sxw
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 675 OF 2016
IN
COMPANY PETITION NO. 916 OF 2014
M/s. Agrozan India Pvt. Ltd. ..Appellant
Vs
M/s. Agritrade India Services Pvt. Ltd. ..Respondent
Mr. Shreyas Jayasimha with Namit Oberoy i/b. Shivam Singh for
Appellant.
Mr. Zal Andhyarujina and Ms Shruti Sardesai, Mr. S. B. Rao i/b.
India Law for Respondent.
CORAM : SHANTANU S. KEMKAR &
M. S. SONAK, JJ.
DATE : JUNE 19, 2017
ORDER :(Per : M. S. Sonak, J.) Heard learned counsel for the parties.
2] The challenge in this Appeal is to the order dated 29 th August 2016 made by the learned Single Judge dismissing Company Petition No. 916 of 2014, seeking winding up of M/s. Agri Trade India Services Pvt. Ltd. ( Company).
3] Mr. Shreyas Jayasimha, learned counsel appearing for the Appellant very ably submits that the material on record was more 1/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 2 APP-675-16.sxw than sufficient to establish that the Company is due and payable to the Appellant (Petitioning Creditor) a sum of approximately Rs.3.92 Crores, towards the purchase of 11,637.203 MT of Yellow Peas. Mr. Jayasimha submits that there is acknowledgement that the cargo was duly supplied in a good condition and the outstanding balance towards such supply is approximately Rs.3.92 Crores. Mr. Jayasimha submits that the Company has raised false and frivolous defences, including, some defence by involving a third party. Mr. Jayasimha submits that such defences are really in the nature of "moonshine" and therefore, following the dictum of the Hon'ble Supreme Court in the case of Madhusudan Gordhandas & Co. vs. Madhu Wollen Industries Pvt. Ltd.1 and Karnataka High Court in the case of Hegde and Golay Limited vs. State Bank of India 2, the learned Single Judge ought to have admitted the winding up petition. 4] Mr. Jayasimha, learned counsel for the Appellant has submitted that the debit note received along with emails dated 11 th March 2014 and 13th March 2014 is a document of doubtful veracity and therefore, no reliance could have been placed upon the same. He points out that the debit note, records a debt in an amount of Rs.3,52,50,000/-
1 AIR 1971 SC 2600 2 ILR 1987 Karnataka 2673 2/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 3 APP-675-16.sxw as on 20th September 2013, whereas on the Company's own
showing, an amount of Rs.40,00,000/-, admittedly paid earlier finds no reflection in the said debit note. For this reason, as well, Mr. Jayasimha submits that the petition for winding up of the Company was required to be admitted.
5] Ms Shruti Sardesai, learned counsel for the Company, has also relied upon the dictum of the Hon'ble Supreme Court in the case of Madhusudan Gordhandas (supra) to submit that in this case, there are no dues payable to the Appellant or in any case, this is a case where there is a bona fide dispute. In such circumstances, Ms Sardesai submits that the petition seeking winding up of the Company was rightly dismissed. Further, Ms Sardesai points out that the debit note in question, was admittedly forwarded to the Appellant along with emails dated 11 th March 2014 and 13th March 2014. Ms Sardesai submits that therefore, it was the duty of the Appellant to have disclosed such factum in the petition seeking winding up of the Company. She submits that this is a case of suppression of relevant and vital documents and therefore, an order of winding up, which is, even otherwise a discretionary order was rightly denied to the Appellant. Ms Sardesai points out that the 3/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 4 APP-675-16.sxw Appellant has already instituted a suit to recover the amounts allegedly claimed as due from the Company. She points out that there is no material on record to establish that the Company is commercially insolvent or otherwise unable to pay its admitted dues. On these grounds, Ms Sardesai submits that the present Appeal may be dismissed.
6] Rival contentions now fall for our determination. 7] The legal position with regard to the winding up companies at the instance of the petitioning creditors is quite well settled. In Madhusudan Gordhandas (supra), the Hon'ble Supreme Court has held that two rules are well settled in this regard. First, if the debt is bona fide disputed and the defence is a substantial one, the Courts will not wind up the Company. The second is that where the debt is undisputed, the Courts will not act upon a defence that the Company has the ability to pay the debt but the Company chooses not to pay that particular debt. The principles on which the Courts acts are first that the defence of the Company is in good faith and one of substance, secondly, the defence is likely to succeed in a point of law and thirdly the Company adduces prima facie proof of the facts on 4/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 5 APP-675-16.sxw which the defence depends.
8] Besides, it is also well settled that an order of winding up is discretionary, in the sense, such order, cannot be insisted upon by a petitioning creditor as a matter of right. The discretion, is no doubt a judicial discretion which is to be exercised upon taking into consideration the host of relevant factors, including, inter alia, the conduct of the petitioning creditor and the nature of dispute raised. The machinery of winding up will not be allowed to be utilised merely as a means for realising debts said to be due from a Company. In Amalgamated Commercial Traders (P) Ltd. vs. Krishnaswami (A.C.K.)3, the Hon'ble Supreme Court has quoted with approval passage from Buckley on the Companies Acts (13 th Edition, Page
451) to the effect that a winding up petition is not a legitimate means for seeking to enforce payment of debt which is bona fide disputed by the Company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the Court. At one time petitions founded on disputed debt were directed to stand over till the debt was established by action. If, 3 (1965) 35 Com. Cases 456 (SC) 5/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 6 APP-675-16.sxw however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. If a debt is bona fide disputed, there cannot be 'neglect to pay' within meaning assigned to this expression under section 434(1) (a) of the Companies Act. If there is no neglect, the deeming provision does not come into play and the ground of winding up, namely, that the company is unable to pay its debts is not substantiated.
9] The petitioner, seeking winding up of a company is duty bound to make full and true disclosures of all facts and circumstances, in relation to the debt claimed. Where the petitioner concealed the fact that the Company had responded to the statutory notice and also made part payment, the refusal by the Company Judge in his discretion to pass a winding up order was held not to be suffering from any error in P & O Container Ltd. vs. Balwant Textile Mills Ltd.4 Further, in Agarwal Industries Ltd. vs. Golden Oil Industries P. Ltd.5, this Court held that it is not of excuse for a party practising concealment or misrepresentation of facts to say that it was not aware of the importance of the facts which it omitted from its 4 2000 (24) SCL 426 (Bom.) 5 2001 (106) Com. Cases 78 (Bom.) 6/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 7 APP-675-16.sxw pleadings. This was a case where the petitioner failed to disclose that he had filed a summary suit and an interim order in that suit had already secured his interest.
10] Applying such principles to the facts and circumstances of the present case, there is no case made out to interfere with the impugned order made by the learned Single Judge refusing to admit the petition for winding up of the Company.
11] In the first place, there is no dispute that debit note, recording a debit of Rs.3,52,50,000/- was in fact received by the Appellant along with emails dated 11th March 2014 and 13th March 2014. In paragraph 12 of the impugned order, the learned Single Judge has in fact recorded the statement made by the learned counsel appearing for the Appellant that such debit note was indeed received by the Appellant. There was however, no disclosure as regards such debit note in the petition seeking winding up of the Company. The learned Single Judge has rightly held that the explanations in the affidavit in rejoinder belatedly made, inspire no much confidence and the explanation is feeble. The learned Single Judge has also noted the contradictions in the affidavit in rejoinder. On the one hand, the 7/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 8 APP-675-16.sxw Appellant, denies suppression of material facts, but, in the same breath, admitted the commercial relationship between Tiryaki, Agrozan Dubai and Agrozan Singapore. Then again, there is a bare denial regards relevance of such commercial relationship to the transaction of supply of Yellow Peas.
12] Secondly, the Company along with its affidavit in reply as well as affidavit in sur rejoinder has produced documents which, prima facie suggest that the issues in relation to the supply of Yellow Peas, were required to be governed by such documents. In paragraphs 14 to 16 of the impugned order, the learned Single Judge has made brief reference to such documents and on the basis of the same, has held that this was not a case of any admitted liability, but rather, the alleged debt, is bona fide disputed.
13] In a petition seeking winding up of a Company, the Company Court will go into the question of genuineness or otherwise of the dispute raised. If the Company Court is satisfied that the dispute raised is bona fide, the Court will normally not embark upon a detailed examination of the disputes in a winding up petition. In that sense, the procedure involved in a petition seeking winding up of a 8/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 9 APP-675-16.sxw company, is of a summary nature. Accordingly, the learned Single Judge, exercised discretion based upon relevant considerations in declining to admit the petition for winding up of the Company. 14] Apart from the two decisions referred to earlier, Mr. Jayasimha, learned counsel for the Appellant has also relied upon the decisions in Pipe Distributors vs. Commercial Tax Officer & Ors. 6, Paharpur 3P vs. Dalmia Consumer Care Pvt. Ltd. 7, Nepa Ltd. vs. Jnanamandal Ltd.8, and National Small Industries Corporation Ltd. vs. Bassein Metals P. Ltd. 9 in support of the Appeal. All these decisions, besides turning on their own facts, reiterate the principle in Madhusudan Gordhandas (supra). Applying the said principles, there is really no case made out to interfere with the impugned order. As held by the learned Single Judge, this cannot be regarded as a case of undisputed debt. Rather, this is a case where the debt is bona fide disputed by the Company and in the facts and circumstances of the present case, it cannot be said that the defence raised by the Company is in the nature of a 'moonshine'.
6 2008 (1) KLT 303 7 (2008) 3 Comp.L.J 554 (Delhi) 8 (2001) 107 Company Cases 240 (Allahabad) 9 (2008) 143 Company Cases 194 (Bombay) 9/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 ::: skc 10 APP-675-16.sxw 15] Accordingly, we see no reason to interfere with the impugned order made by the learned Single Judge. However, we would only like to clarify that the observations in the impugned order, or for that matter the observations in the present order are for the limited purpose of deciding whether any case exists to order the winding up of the Company. Accordingly, the observations, need not influence the decision in the suit already instituted by the Appellant seeking recovery of the amounts, which form the subject matter of the petition seeking winding up.
16] With the aforesaid clarification, this Appeal is dismissed. There shall however be no order as to costs.
(M. S. SONAK, J.) (SHANTANU S. KEMKAR, J.) Chandka 10/10 ::: Uploaded on - 20/06/2017 ::: Downloaded on - 21/06/2017 00:51:35 :::