Punjab-Haryana High Court
Bombay House vs New Model Industries (Pvt.) Ltd. on 2 April, 1992
Equivalent citations: [1995]82COMPCAS720(P&H)
JUDGMENT M.S. Liberhan, J.
1. The petitioner sought the winding up or the respondent-company, inter alia, contending that the respondent-company is unable to pay the debt amounting to Rs. 1,42,675.05 by way of this petition.
2. The brief facts averred in the petition are to the effect that the respondent-company is registered under the Companies Act. The company is running the business of fabrication of bus and car bodies. The petitioner claimed to be supplying the material used for the said purpose from time to time to the respondent-company and further reproduced the accounts up to 1984-85 as brought forward in 1985-86. The confirmation of the statement of accounts by the managing director was averred to be Rs. 1,98,783.05 on April 27, 1983. The confirmation of the balance amount claimed was vaguely alleged to be Rs. 1,82,675.05 on March 31, 1985, without disclosing as to who confirmed the same. The same amount was brought forward in 1985-86. The petitioner sent a statutory notice under Section 434 of the Companies Act on March 12, 1987. A petition for winding up was brought in 1987, which was dismissed as withdrawn with permission to file a fresh one, vide order dated November 19, 1987.
3. The respondents, on service of the notice of the petition, denied their liability. They put forth, as part of their defence, that the amount, if any, alleged to be recoverable from the answering respondents has become barred by time and, in accordance with the averments made in the petition, last payment being made on May 22, 1984, and the present petition having been filed on April 30, 1988, the amount of debt has become barred by time from the last date of payment. The period for recovery of the debt was never extended. Further, certain discrepancies in the accounts were pointed out. The confirmation of the accounts at any point of time by any authorised person on behalf of the respondent-company was denied. It was stated that the balance-sheet for the year ending March 31, 1983, contained an overall payment of sundry creditors to the extent of Rs. 24,69,106.72 odd but no specific amount has been shown in the said balance-sheet as payable to the petitioner. Similarly, no balance amount has been shown as payable to the petitioner in the subsequent balance-sheet either.
4. The petitioner, in its replication, refuted the defence raised and averred that the Limitation Act is not attracted to the present petition. It was further averred that, since the petitioner was prosecuting its earlier petition under a bona fide plea and since there was a defect in the verification, the same was withdrawn and the period spent in prosecuting the said petition in 1987 should not be taken note of. It was further averred that the respondent-company has admitted its liability earlier as well as in the balance-sheets submitted to the Registrar as well as to the income-tax authorities. It was further averred that the name of the petitioner also figures under the heading of sundry creditors, in the balance-sheets for the years 1983-84 to 1986-87. Further, an up to date account of the petitioner was filed. It may, however, be noticed that the replication is not accompanied by any affidavit in order to support the averments made in it.
5. On the very opening of the arguments, learned counsel for the petitioner urged that the main question involved in the petition is "whether the winding up petition is barred by time" which is a mixed question of law and fact and, therefore, the petitioner be allowed to lead evidence. Since no date for recording the evidence is given and the balance-sheets are in the possession of the respondents in which the debt of the petitioner is reflected, resultantly, the debt of the petitioner having been acknowledged by the respondent-company, the petition is not barred by time. In order to support his submission that the debt admitted in the balance-sheets of the petitioner is acknowledged, the petitioner relied on State Bank of India v. Hegde and Golay Ltd. [1987] 62 Comp Cas 239 (Kar). Lastly, the petitioner submitted that, in the eventuality of the relief of winding up the respondent-company being declined, he may be permitted to file a civil suit against the company.
6. Learned counsel for the respondents, while refuting the submissions made by learned counsel for the petitioner, put forth his case that the last transaction took place on May 24, 1984, even according to the averments made by learned counsel for the petitioner. The present petition was filed in the year 1988 and the remedy by way of a suit for recovery having become barred by time, the respondent-company has got a bona fide defence to deny tbeir liabilities as the present petition was filed after the expiry of three years. The alleged acknowledgment by the authorised agent was denied. The company is doing its business with Government and has got a sound financial base. Further, the petition for winding up of the company being not for the benefit of all the creditors of the company cannot be treated as an ordinary suit for the recovery of the disputed amount, no order of winding up can be passed. The respondents relied upon Raghunath and Son Pvt. Ltd. v. Pandam Tea. Co. Ltd. [1978] 48 Comp Cas 577 (Cal), A. C. K. Krishnaswami v. Stressed Concrete Constructions Pvt. Ltd. [1964] 34 Comp Cas 6 (Mad), Naveen General Store, v. Stepan Chemicals Ltd. [1988] 63 Comp Cas 147 (P & H), Sutlej Land Finance Pvt. Ltd v. Daulat Rom [1989] 66 Comp Cas 841 (P & H) and Company Petition No. 56 of 1990, decided on November 29, 1990, It was further urged that it is never the case of the petitioner that the petition for winding up is barred by time. The case of the respondent-company is that as the amount attributed to the petitioner being admittedly a debt of more than Rs. 500, as envisaged by Section 433(e) of the Act, is a ground for winding up, is barred by time. Thus the petitioner having lost the remedy to recover the amount in the ordinary course by way of a civil suit, there is no admitted liability of the respondent-company. The defence of limitation of the debt being barred by time is a bona fide defence and is in good faith and is likely to succeed. In the ordinary course of law, the company cannot be ordered to be wound up.
7. In my considered view, by judicial precedents, it has become axiomatic that the petition for winding up cannot be used as a pressure tactic for recovery of the amount due, if any. It is virtually, in a sense, a representative suit by the creditors for and in the interest of the body of creditors with an object that the company which is unable to do business and meet its day to day liabilities, should not be permitted to continue its business and defraud the people dealing with it. Once learned counsel for the petitioner has accepted that the question of limitation is a mixed question of law and fact, I fail to comprehend how the same can be dealt with in these summary proceedings particularly when prima facie, the defence put forth by the respondents is a bona fide one. The petitioner never even attempted to contend that the defence put forth by the respondents with respect to the debt being barred by limitation is not bona fide. Once, after recording evidence, the court comes to the conclusion that the debt is barred by limitation, the petitioner would have no right to recover the same. The petition does not fall within the four corners of creditors whose debt is admitted as defined by the Companies Act. Without expressing my opinion as to whether the submission of the balance-sheet, though it is again disputed that the debt of the petitioner was admitted, would be again a mixed question of law and fact which cannot be determined particularly in view of the fact that prima facie no material has been placed on record by the petitioner from 1988 onwards till 1992 to come to a conclusion that the debt was ever admitted by the respondent-company. The sequence of the interim orders leads to an inference that the case was adjourned from time to time, even after hearing arguments, but still no material has been placed on record to come to the conclusion that the debt, if any, of the petitioner was acknowledged in any form whatsoever. There is no gainsaying that the balance-sheets of the company are public documents and the petitioner was at liberty to take certified copies of the same and produce the same on record, but the petitioner has been taking it too casually. It would be too late in the day to keep the sword hanging over the head of the respondent even after a lapse of four years for winding up the respondent-company, when it has been doing business during all this period. In my considered view, it would adversely affect the other creditors of the company rather than protect their interest and for whose protection, the provisions under the Act are made. Further, I am not satisfied from the material placed on record nor has any substantial material been brought to my notice from which I can infer that relationship of debtor or creditor has been established or has not been bona fide disputed by the company. The defence put forth by the respondent-company appears to be bona fide and a legally tenable defence. There is no gainsaying that although the petition is ostensibly for winding up the respondent-company it is in reality an exercise to put pressure on the respondent-company to accede to the amount of debt of the petitioner and is liable to be dismissed. I am constrained to observe that, in the circumstances mentioned above, the petition for winding up is a scandulous abuse of the process of court. The company has adduced prima facie proof on the admitted facts of the petition that the debt is barred by time. The company court is not meant for settling civil disputes under powers of Section 433 read with Section 434 of the Act because it is not a court of original jurisdiction. There is no, dispute with the proposition of law laid down in the judgments cited by learned counsel for the parties but, in view of the finding arrived at on the merits, the law laid down is not attracted to the facts of the present case.
8. In view of the observations made above, I find no sufficient ground to order the winding up of the respondent-company.
9. Lastly, the prayer made by learned counsel for the petitioner to the effect that the petitioner should be permitted to file a civil suit if the remedy of the same is available to it in accordance with law, cannot be seriously opposed by learned counsel for the respondent. However, the defence of limitation and all other defences available to the respondent, would be available to it in the civil suit while determining the same. However, the observations made above on the basis of the prima facie material brought on the record of this petition shall not be taken note of in dealing the civil suit on the merits.
10. With the above observation, the petition is dismissed with costs.