Andhra HC (Pre-Telangana)
Jumgo Cotton Enterprises vs Rayalaseema Mills Ltd. on 20 April, 2005
Equivalent citations: 2005(4)ALD737, 2005(5)ALT88, II(2006)BC260, [2005]127COMPCAS199(AP), (2005)6COMPLJ355(AP), [2006]68SCL448(AP)
ORDER S. Ananda Reddy, J.
1. By this petition under Sections 433(e), 434(1)(a) and 439(1)(b) of the Companies Act, 1956 (for brevity 'the Act') the petitioner is seeking an order of winding up of the respondent company on the ground that the respondent company is unable to pay of its debts.
2. It is stated that the petitioner is a Partnership Firm in the name and style of 'M/s. Jumgo Cotton Enterprises', incorporated under the provisions of Indian Partnership Act with its office at 416, Navketan Building 62, S.D. Road, Secunderabad. The petitioner was engaged in the business of Ready Cotton Bales, Yarn and other related goods and conversion of cotton to yarn etc. It is stated that M/s. The Rayalaseema Mills Limited, the respondent herein was incorporated under the provisions of the Companies Act, with its registered office and the factory at Rayanagar, Adoni, Kurnool District, Andhra Pradesh. The respondent company had its issued, subscribed and paid up capital of Rs. 39,71,200/- divided into 3,97,120 Equity Shares of Rs. 10/- each. The respondent company was mainly engaged to carry on the business of purchase, sale and manufacture of cotton, yarn etc. It is stated that during the course of its business the respondent company approached the petitioner firm for the supply of cotton and accordingly the petitioner firm supplied cotton bales under various invoices during the period from 11-4-1997 to 14-6-1997 for different considerations. The respondent company made certain payments directly through Demand Drafts and certain payments through third parties. It is stated that after payment of Rs. 13,63,065/- till 15-7-1997, Rs. 3,00,000/- and Rs. 2,00,000/- on 30-11-1997 through Demand Drafts, left an unpaid outstanding balance of Rs. 5,89,157/- as on 30-11-1997.
3. The respondent company when failed to pay the balance consideration towards the value of the goods received by it and also failed to honour its promise, the petitioner firm addressed a letter dated 2-12-1997 bringing to its notice that the payments are overdue and requested to clear off the outstanding balance. The respondent company after receipt of the above letter, approached the petitioner firm with a scheme to liquidate its outstanding and that of M/s. Navyug Cotton Company, which is a sister-concern of the petitioner firm. Accordingly an understanding/agreement was made between the parties under Ex.A.12, dated 16-12-1997, wherein the respondent company has admitted and confirmed the payment due to the petitioner firm and M/s. Navyug Cotton Company in a sum of Rs. 5,89,157/- and Rs. 11,30,509/- respectively and also agreed to pay interest at 2% per month. It is stated that the respondent company purchased cotton under various contracts between 25-12-1997 to 14-3-1998 and got supplies for a total value of Rs. 67,00,269/-. The respondent company authorized its debtors to pay and clear its outstanding of Rs. 50,83,592/- as on 31-3-1998 towards the old and new dues and also to clear the liability of M/s. Navyug Cotton Company by transferring it to the petitioner account. A copy of the letter dated 10-2-1998 showing the transfer by M/s. Navyug Cotton Company to the respondent is also filed. It is stated that thereafter also there were transactions of purchase and supply of the goods. It is further stated that there was another agreement entered into between the parties under Ex.A.54 dated 19-1-2000 for conversion, utilizing the machinery of the respondent company by the petitioner. It is only after the said agreement, the mill was reopened which was closed till June, 2000. During the period of June, 2000 to 9-2-2001 no amounts were recovered or adjusted from the old dues though agreements provide for that. Again the mill was closed on 9-2-2001. It is stated that in spite of several demands for payment of the outstanding amount, the respondent company did not pay, but however, again suggested to enter into another agreement and accordingly Ex.A.59, dated 21-3-2001 was entered into between the parties under which it was agreed by the respondent to allow the petitioner to run a part of the mill for conversion of the cotton into yarn. It is stated that in the process a sum of Rs. 7,00,000/- was paid by the petitioner firm for getting reconnection of electricity in order to run the mill. The said payment was also acknowledged by the respondent. But, however, as promised by the respondent, the dues to the petitioner firm were neither adjusted nor discharged. It is further stated that as per the Books of Account as on 31-5-2002 the respondent company is liable to pay an amount of Rs. 95,15,697/-and the said amount is payable with interest at 24% per annum as is prevalent in the business transactions. As the respondent company did not pay the said amount, a statutory notice was issued on 10-7-2002. In response to the said notice the respondent company issued a reply deliberately denying the contents of the notice with false and incorrect facts. It is stated that the petitioner firm came to know that the respondent company has lost its substratum and in view of the above circumstances, it is unable to pay its debts and has become a fit case for winding up. The petitioner also came to know that even the banks have filed suits before the Debts Recovery Tribunal for the recovery of its debt. Hence sought for an order of winding up.
4. A counter is filed on behalf of the respondent company disputing and denying all the allegations. Though the relationship between the parties with reference to the transactions is admitted, however, it is disputed as to the liability of the respondent company to the petitioner firm. It is stated that the claim of the petitioner firm with reference to the invoices regarding the supplies made pertain to the transactions between the parties long prior and the same have been duly settled from time to time, and therefore, there is no liability. Even otherwise also the claim with reference to the said invoices is barred by limitation. Therefore, it is stated that the petitioner firm is not entitled to make a claim with reference to the said time barred claims. It is also stated that the respondent company never admitted the liability of the sister-concern of the petitioner i.e., M/s. Navyug Cotton Company to be transferred to the petitioner, and therefore, the petitioner firm is not entitled to seek or to enforce any claim on account of the said sister concern of the petitioner. The transactions between the petitioner and its sister concern are separate and independent, and therefore, the petitioner cannot make a claim against the respondent. It is stated that the claim with reference to the contracts of the year 1997-98 are wholly irrelevant to the other claims. It is further stated that the petitioner be put to strict proof of the authorization of the respondent to its debtors to pay and clear the outstanding amount of Rs. 50,83,592/- as on 31-3-1998. The respondent also denied and disputed the claim of the petitioner that it was due in a sum of Rs. 23.81 lakhs as on 31-7-1998. It is also stated that the petitioner be put to strict proof of the alleged confirmation letter and certificate said to have been issued by the respondent company. It is stated that the petitioner firm, taking advantage of the difficulties of the respondent company faced at that point of time, seeks to mulct some liability on the respondent company. It is also stated that after the factory was reopened in view of the settlement of the disputes between the workers, the petitioner and the respondent companies along with other converters, who came to a joint understanding that the factory would be worked on conversion basis, which is the normal trade practice in cotton milling industry. As per the said understanding, the respondent would act as a Conversion Agent for the goods of the petitioner firm as well as to the other firms, as described by the petitioner itself in the petition. It is stated that the petitioner firm alone did not adhere to the terms of the scheme and it neither fulfilled the terms in regard to the quality of supply, nor the timing of supply nor even the quantum of supply. While the other two companies for which the respondent was acting as Conversion Agent, did make the best use of the conversion facility available and at the end of the two years period as a Conversion Agent, not only the liabilities that were due to the said two companies were liquidated, but there was surplus funds generated which enable the respondent company to offset the losses that were being caused due to the inactivity of the petitioner firm. It is admitted that the mill again closed on 9-2-2001, which was reopened after negotiations. The claim of the petitioner that it paid Rs. 7,00,000/- on account of the respondent company is wholly incorrect and it was paid only towards the electrical charges for using the machinery for conversion. It is denied that as on 31-5-2002 the respondent company was liable to pay Rs. 95,15,697/-together with interest and stated that the said claim is baseless, untenable and barred by time. It is also stated that when statutory notice was issued on 10-7-2002, a suitable reply dated 7-8-2002 was issued. In fact, it is stated that the petitioner firm itself is due to the respondent on account of the loss caused. It is stated that the present petition is filed only to pressurize the respondent to get an undue advantage without even settling the accounts as was admitted by the petitioner firm. Therefore, it is stated that it is not a fit case even for admission, and as such, sought for dismissal of the company petition.
5. On behalf of the petitioner one of its partners, Mr. Naavin Jagu, was examined as PW. 1, who reiterated the petition averments. However, in the cross-examination, he admitted that as per Ex.A.59 it was agreed to draw reconciliation of the accounts for the outstanding amounts, but there is no such reconciliation so far. It was suggested that Ex.A.4 agreement dated 19-1-2000 does not refer for adjustment of the old dues of the petitioner firm. In the cross-examination PW.1 also admitted that each of the converter was making his proportionate electricity consumption charges to the respondent company. This witness also admitted that the mill was closed in the year 2002. He further admitted that the invoices issued for supplying the goods, does not contain the interest clause, as claimed.
6. On behalf of the respondent one Mr. L.V. Krishna Reddy, the Managing Director of the respondent company, was examined as RW. 1, who reiterated the averments made in the counter. However, in the counter he stated that he did not authorize Mr. Arunachalam, who is the Technical Member of the company, to write Ex.A.57 letter dated 9-1-2001. This witness admitted that Ex.A.61 dated 3-5-2001, which is stated to be a statement of account with effect from 23-4-2001 to 30-4-2001 and also continued upto 28-2-2002, was signed by one of the Directors of the company showing that a balance amount of Rs. 32,69,673/- is lying in the account of the petitioner firm. Ex.A.62 letter dated 9-5-2002, which was addressed by the petitioner firm to the respondent claiming payment of a sum of Rs. 12,82,000/-representing Rs. 7,00,000/- paid to APCPDCL for reconnection on 26-3-2001; and Rs. 4,00,000/- as per the payment letter dated 14-12-2004 and Rs. 1,82,000/-towards interest charges upto 30-4-2002. Thereafter Ex.A.63 statutory notice was issued on 10-7-2002.
7. At the time of hearing, learned Counsel for the petitioner contended that' there is a running account between the parties as there were continuous transactions of sale and purchase of the goods and also various agreements entered into between the parties where also the outstanding dues were confirmed and further the petitioner was also allowed by the respondent company to use the machinery for conversion of the cotton into yarn and the petitioner was liable to pay the conversion charges, which were supposed to be adjusted by way of repayment of the outstanding dues. But, however, at the end of the accounting period, the respondent was liable to pay a sum of Rs. 95,15,697/-along with interest. Hence the present petition.
8. The learned Counsel also contended that the respondent never raised the issue of limitation when letters were exchanged between the parties. It is only for the first time in the counter, the respondent had raised the issue that the claim of the petitioner is barred by limitation. According to the learned Counsel there is a running account between the parties upto 31-5-2002, therefore, the debt is not barred by limitation.
9. Learned Counsel for the petitioner relied upon the decision of the Apex Court in Food Corporation of India v. Assam State Co-operative Marketing and Consumers Federation Ltd., 2004(1) Decisions Today (SC) 944, and also the decision of the Kerala High Court in P.D. Pillai v. Kaliyanikutty Amma (FB), .
10. Learned Counsel for the respondent company, on the other hand, opposed the contentions of the petitioner. Though the liability is disputed as claimed by the petitioner, however, it was admitted that there were dealings between the petitioner and the respondent as per the agreements entered into between the parties. With reference to the dues relating to the period 1997-98, it is stated that they are barred by limitation and they cannot be clubbed with the subsequent transactions, as there was no ascertained liability. It is also contended that there were agreements between the petitioner and the respondent in connection with allowing the mill of the petitioner for conversion of the cotton into yarn and the petitioner was liable to pay the conversion charges to the respondent. It is also stated that though the petitioner claimed that basing on the statement, certain amounts are due, even as per the admission of PW. 1 the said statement of account and the claim of the petitioner is subject to reconciliation. As long as there is no reconciliation and ascertained liability, the petitioner is not entitled to claim that there is an admitted liability to the petitioner by the respondent, and as long as there is no admitted liability, the petitioner is not entitled to initiate proceedings under the Act for winding up of the respondent company. Alternatively, it is contended that the claims of the petitioner are clearly barred by limitation. It is contended that by its own version, the old liability relates to the year 1997-98 and there is no evidence showing such debts were admitted and were acknowledged by the petitioner on any subsequent date. Even assuming, without admitting, that there is a running account between the parties, and in fact, as is evidenced by Ex.A.61, the said running account is for different periods not even for continuous periods. The first one is for the period from 23-4-2001 to 30-4-2001 and the next one is for the period from 28-5-2001 to 31-5-2001; 27-6-2001 to 6-7-2001; 27-7-2001 to 31-7-2001; 27-8-2001 to 31-8-2001; 18-9-2001 to 30-9-2001; 22-10-2001 to 31-10-2001; 22-11-2001 to 30-11-2001; 21-12-2001 to 31-12-2001; 23-1-2002 to 31-1-2002; 1-2-2002 to 28-2-2002; and finally from 2-3-2002 to 23-3-2002. Therefore, it is contended by the learned Counsel that the so called running account between the parties, which is relied upon by the petitioner, is not a continuous running account and relied upon some broken statements. Apart from that it is stated that the statements which are relied upon by the petitioner are subject to reconciliation, which is admitted by PW. l that such reconciliation as stipulated under Ex.A.54 was not done and in the absence of such reconciliation, it is not open to the petitioner to rely upon certain accounts maintained by itself to fix up the liability on the respondent. It is contended by the learned Counsel that the petitioner could not rely upon any letter alleged to have been sent by the respondent to the petitioner, admitting the liability. Alternatively, it is contended that even if the running account is taken into account, the said running account came to an end by 23-3-2002 and the same is beyond three years. Apart from that there is absolutely no communication or correspondence from the respondent where an admission has been made regarding the liability of the respondent to the petitioner. The latest communication filed by the petitioner is Ex.A.60, dated 10-4-2001, under which the payment of Rs. 7,00,000/- to APCPDCL was acknowledged. Beyond that there is no other communication between the parties and Ex.A.59 was the last agreement, which was entered into between the parties on 21-3-2001. Therefore, it is contended that if the period of limitation is computed from the above dates, the company petition is clearly barred by limitation, and therefore, the petition is liable to be dismissed.
11. In support of his contentions, learned Counsel for the respondent relied upon the following decisions:
Amalgamated Commercial Traders (P) Limited v. Krishnaswami, 35 Company Cases 456; Multimetals Limited v. Suryatronics Pvt. Ltd., ; Pradeshiya Industrial and Investment Corporation v. North India Petrochemical Limited, (1994) 2 Company Law Journal 50 (SC); and Smt. Vijayalakshmi v. Hari Hara Ginning and Pressing, (DB).
12. From the above rival contentions, the issue to be considered is whether there is subsisting determined liability by the respondent company to the petitioner firm, which the respondent was unable to discharge and consequently the company petition is liable to be admitted.
13. The admitted facts are that both the petitioner and the respondent company were dealing with cotton and cotton related products. Primarily, the petitioner firm is carrying on the business of purchase and sale, while the respondent company owns a factory for the manufacture of yarn from cotton. The material also shows that the respondent company not only did conversion business on its own, later allowed the petitioner and some other firms also to use its conversion facility by collecting conversion charges. The documents filed by the petitioner firm clearly show that the petitioner supplied cotton bales to the respondent company under various invoices referred to during the period 1997-98. The petitioner also made a claim that a sum of Rs. 5,89,157/-is liable as an outstanding balance out of the said sale transactions. Subsequently, the parties have entered into an agreement under Ex.A.12, dated 16-12-1997, in which the respondent admitted the liability of a sum of Rs. 5,89,157/- and Rs. 11,30,509/- in favour of the petitioner's sister-concern M/s. Navyug Cotton Company. It was agreed that the petitioner shall supply cotton on account of first and second parties i.e., on account of itself and on account of its sister-concern to run 25 frames which require 13 loads of cotton (each load of 50 bales) per month. The price and quality of the cotton will be mutually discussed and agreed between both the parties and the total yarn produced from the above cotton supplies will be sold in mutual consultation and the authorization for total payment shall be done in first party's favour i.e., the petitioner firm. As per the said agreement, certain transactions had taken place between the parties. The said agreement was replaced by another agreement dated 19-1-2000 under Ex.A.54. As per this agreement, the petitioner firm was permitted to avail 20,000 spindles of the respondent company to enable to produce yarn from out of the cotton and the rate for conversion payable by the petitioner to the respondent is also stipulated. The said agreement also provides to recover the outstanding amounts from the mill and in the process, if any loss is caused to the company, the petitioner firm shall make good the loss, which shall be determined mutually by both the parties in finality. This was again replaced by another agreement under Ex.A.59, dated 21-3-2001. In this the respondent, however, confirmed the outstanding principle of Rs. 24,80,592/-as on 30-7-1998 as per the statement given by the petitioner firm. But the said outstanding is subject to the due reconciliation with the Books of the respondent company. It is admitted by PW. l that though it was stipulated that the dues are to be determined after reconciliation, no such reconciliation was ever made. Therefore, according to the respondent, as long as there was no reconciliation, it is not open to the petitioner to claim that certain amounts are due and payable and the respondent failed to pay such dues. Even with reference to the running account, the respondent disputed having such running account. In any case, the running accounts are for the broken periods and the last entry was on 23-3-2002.
14. The contention of the petitioner is that the running account between the parties were maintained upto 31-3-2001, and therefore, the claim is not barred by limitation as claimed by the respondent. Further as the claim of the petitioner is supported and substantiated by voluminous evidence under Exs.A. 1 to Article 62, which goes to show that the respondent company is liable to pay the sum as claimed, and therefore, as the respondent company failed to pay the same, it is liable to be wound up. Therefore, the company petition is liable to be admitted.
15. The contention of the respondent company, on the other hand, is that no doubt there were various transactions between the parties, as per which goods were supplied, payments were made, again the petitioner utilized the services of the factory of the respondent company for conversion of cotton into yarn and in the process certain payments were made. But as admitted and stipulated under Ex.A.59, there is no reconciliation of the liabilities claimed by the petitioner, and therefore, there is no admitted or determined liability from the respondent to the petitioner. In fact, according to the reply of the respondent company, the petitioner firm is liable to pay certain amount on account of the loss caused for not properly utilizing the machinery for conversion of the cotton into yarn on par with other parties, who have also utilized the machinery of the respondent for conversion of the cotton into yarn. In any case, it is stated that as there is no admission on the part of the respondent within a period of three years, the claim of liability is barred by limitation.
16. At this stage it would be appropriate to refer to the decisions relied upon by both the parties.
17. The petitioner relied upon the decision of the Apex Court in Food Corporation of India v. Assam State Cooperative Marketing and Consumers Federation Ltd. (supra) wherein Food Corporation of India filed a suit against the respondent-State Co-operative Marketing and Consumers Federation for recovery of a sum of Rs. 79,82,105-44 ps on the ground that it paid an advance of Rs. 2 crores towards the supply of paddy, the price of which was supposed to be fixed by the Government of India, which was not fixed as on the date of the date of transaction. According to the appellant-Corporation, on account of the supplies made by the Federation, the Corporation was liable to pay a sum of Rs. 1,60,63,190/- as against the advance of Rs. 2 crores, therefore, the Corporation is entitled for an amount of Rs. 39,36,810/-. Correspondence ensued between the parties regarding the claim of the Corporation and the respondent-Federation. The respondent-Federation admitted the receipt of advance by its letters dated 29-3-1977 and 30-7-1977 and stated that they have covered a sum of Rs. 1,77,64,923-89 leaving a balance of only Rs. 22,35,075-11 ps. In fact, the Federation made a claim against the Corporation. Therefore, the Corporation stated that the said letters amount to acknowledgement of the liability. Therefore, the suit was not barred by limitation. But however, the Trial Court as well as the High Court dismissed the suit as well as the appeal. In the appeal before the Supreme Court, the Apex Court held that as the receipt of the amount of Rs. 2 crores as an advance and also part of the amount covered by the supplies was admitted, the said communication would amount to acknowledgement, and therefore, the same is not barred by limitation, and accordingly allowed the appeal of the Corporation for the recovery of Rs. 39,36,810/-.
18. In P.D. Pillai v. Kaliyanikutty Amma (FB) (supra) the question that was referred to the Full Bench of the Kerala High Court was when a person makes admission of an acknowledgement without specifying the quantum of liability, whether it would operate as acknowledgement in respect of a specific sum. The Full Bench held that if the statement of accounts are proved by the plaintiff, the same would prove the jural relationship between the parties and the correspondence between the parties shows the acknowledgement of the debts demanded and if a suit is filed within three years from the said date of acknowledgement, the same would be within the limitation.
19. The learned Counsel for the respondent company, on the other hand, relied upon the decision of the Apex Court in Amalgamated Commercial Traders (P) Limited v. Krishnaswami (supra) wherein the Apex Court while considering the term 'neglect to pay' within the meaning of Section 434(1)(a) of the Act and the consequential winding up order to be passed, approved the following passage in the Companies Act (vide Buckley on the Companies Act, 13th Edition):
"A winding up petition is not a legitimate means of seeking to enforce payment of the 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 stigmatized 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, 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. But, of course, if the debt is not disputed on some substantial ground, the Court may decide it on the petition and make the order."
20. The learned Counsel also relied upon a decision of this Court in Multimetals Limited v. Suryatronics Pvt. Ltd. (supra) where a learned Single Judge of this Court observed in Para-4 of the judgment as under:
"It is well settled that a Company can be would up only when it is proved that the debt claimed against it is ascertained, definite and undisputed and that 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...."
Further, the Court while considering the provisions of Section 61(2)(a) of the Sale of Goods Act, which provides interest by way of damages and special damages, observed that the Civil Court had discretion to award interest in the absence of stipulation of interest in the contract, that too in a suit for recovery of money or damages and as the winding up proceedings are not in the nature of a suit for recovery of money, the petitioner cannot invoke that section.
21. In Pradeshiya Industrial and Investment Corporation v. North India Petrochemical Limited (supra) the Apex Court had an occasion to consider the scope of the provisions of Section 433 of the Act, while dealing with the appeal filed by the appellant company. In that there was an agreement between the parties for setting up of an industrial unit where four partners joined together. The first respondent company, according to it, invested an amount of Rs. 140-33 lakhs on the project, and therefore, the appellant company was liable to pay a sum of Rs. 72-50 lakhs towards its contribution under the terms of the Promoters agreement. As the said amount was not paid, the matter was referred for arbitration. Pending the decision of the arbitration proceedings, the first respondent issued a statutory notice under the Companies Act claiming payment and on the ground that the appellant company did not pay the said amount, filed a company petition seeking winding up order. The learned Single Judge of the Company Court admitted the company petition though objections have been raised by the appellant company. The appellant was also unsuccessful before the Division Bench and hence the appeal before the Apex Court. The claim of the appellant company was that there is no determined and definite liability, which the appellant company was liable to pay, more so when the dispute was referred to arbitration, and therefore, the appellant was not liable to pay any amount as a debtor. The Apex Court referred to its earlier decision in the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P) Ltd. [(1972) 42 Company Cases 125 (SC) where it was held:
"Two rules are well settled. First, if the bona fide dispute and the defence is a substantial one, the Court will not wind up the company. The Court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. (See In re London and Paris Banking Corporation (1874) L.R 19 Eq.444). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed. (See In re Brighton Club and Norfold Hotel Co. Ltd. (1865) 35 Beav.204) Where the debt is undisputed, the Court 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. (See In re A Company, (1894) 94 S.J. 369 : (1894) 2 Ch.349 (Ch.D.). Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the Court will make a winding up order without requiring the creditor to quantify the debt precisely. (See In re Tweeds Garages Ltd. (1962) Ch.406 : (1962) 62 Comp Cases 795 (Ch.D.). The principles on which the Court 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 point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends."
The Apex Court while referring to the passage from Buckley on the Companies Act, which was referred to by the Apex Court with approval in Amalgamated Commercial Traders (P) Limited v. Krishnaswami (supra), also observed:
'It is beyond dispute that the machinery for winding up will not be allowed to be utilized merely as a means for realising its debts due from a company'.
In view of the above stand taken by the Apex Court, the appeal of the appellant was allowed, setting aside the orders of admission of the company petition for winding up.
22. In Smt. Vijayalakshmi v. Hari Hara Ginning and Pressing (supra) a Division Bench of this Court held that the proceedings under Section 433 of the Act is not a substitute for a Civil Suit by a creditor against the company. The admission or a bona fide dispute about the debt has to be determined in appropriate civil forum. There is no gain-saying that the object of Section 433 of the Act is to provide a summary remedy and save the shareholders or creditors of the company where the company is unable to meet its admitted liability. No doubt, mere filing of a Civil Suit need not be an impediment to proceed with the company petition for winding up. Yet, it is a circumstance to be taken into consideration while arriving at the conclusion that the debt is admitted or there is a bona fide dispute with respect to the same and it has to be determined in appropriate civil forum.
23. If the rival contentions of the parties are examined, in the light of the above decisions, the petitioner claims that it is entitled to make a demand even with reference to its sister-concern with regard to the amount of liability from the respondent. Though there was a reference to the same in the earliest agreement Ex.A. 12, dated 16-2-1997, there is no subsequent reference to the same in Exs.A.54 and Article 59. With reference to the interest claimed by the petitioner firm, there is no specific provision under the later agreements entered into between the parties, and finally, according to the petitioner, the last agreement was entered on 21-3-2001 under Ex.A.59 and thereafter there was a running account, which was continued upto 31-5-2002. But no material was placed on record showing that there was any running account till 31-5-2002 between the parties. The copies of the accounts filed for broken periods show that the account continued till 23-3-2002 and thereafter there is only a letter of the petitioner firm dated 9-5-2002 under which the petitioner claimed only a sum of Rs. 12,82,000/- and not the amount of Rs. 95,15,697/-, which the petitioner had shown as liability in the statutory notice. Further, even during the alleged running account between the parties, there is no communication from the respondent admitting any liability. In addition, the agreements Exs.A.54 and Article 59 stipulate that the alleged claims of the petitioner firm are required reconciliation with the books of the respondent company. PW. l, who was examined on behalf of the petitioner firm, has admitted that there was no reconciliation. When once there is no reconciliation of the claims of the petitioner with the books of the respondent company, it is difficult to accept the claim of the petitioner that there is ascertained and determined debt. When there is no ascertained and determined debt, as held in various decisions referred to earlier, the petitioner cannot maintain a petition under Section 433 of the Act alleging that the respondent failed or unable to pay the alleged debt. In addition, even assuming that the running account continued upto 23-3-2002, if the said debt is taken into account even from that date also, the claim is barred by limitation, as three years period had elapsed by the date the company petition was taken up for hearing. As held in Benares Cotton and Silk Mills Ltd. v. Sulbha Devi, (1986) 60 Company Cases 639, the time continues to run against the creditor till a winding up order is passed. Since no winding up order is passed within a period of three years from the alleged date of running account between the petitioner and the respondent (even assuming it to be true), the present claim is barred by limitation.
24. Under the above circumstances, as there is no ascertained or determined debt and the claim of the petitioner firm relates to the entries made in the petitioner's Books of Account prior to three years, the petitioner firm is not entitled to seek an order of winding up. Therefore, the company petition is not liable to be admitted and the same is accordingly dismissed. No costs.