Karnataka High Court
Esteem Estate vs M/S Upkar Developers (India) Pvt Ltd. on 28 June, 2013
Author: Aravind Kumar
Bench: Aravind Kumar
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IN THE HIGH COURT OF KARNATAKA AT
BANGALORE
DATED THIS THE 28th DAY OF JUNE, 2013
BEFORE
HON'BLE MR. JUSTICE ARAVIND KUMAR
Co.P.No.211/2011
BETWEEN:
Esteem Estate
Represented by
1. Sri. G.Manoharan,
Aged about 54 years,
S/o late Gangaraju,
Residing at No.2,
Venkataramanappa Road,
Jai Bharath Nagar,
Bangalore-560 033.
2. Sri. Suresh Menda,
Aged about 53 years,
S/o Mr. Shyamsundar,
residing at
Flat No.c-3, Sai Dwaraka,
Sriuen Aparts No.22,
3rd Cross, Sultan Palya,
Bangalore-560 032. ...Petitioners
(By Sri. Shivarudrappa Shetkar, Advocate)
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AND:
M/s Upkar Developers (India) Pvt. Ltd.,
A company incorporated under
the Companies Act, 1956
Having its Registered Office at
No.400, 9th Cross,
Off. R.V.Road,
Near Sonata Software,
II Block, Jayanagar,
Represented by its
Managing Director,
Sri. K.H.Khan. ....Respondent
(By Sri. Naganand, Sr. Counsel a/w Sri. Goutham and
Rajeswar, Advocates)
This Company Petition is filed under Sections
433(e) and 439 of the Companies Act, 1956 praying to
the Respondent Company may be wound up by this
Hon'ble Court under the provisions of the Companies
Act, 1956 and etc.,
This Company petition having been heard and
reserved, coming for pronouncement this day, the court
made the following:
ORDER
Petitioner is seeking for winding up of the respondent company contending interalia that it has failed to pay to the petitioner, its legitimate dues and 3 respondent Company has become insolvent and as such, it is just and equitable to pass an order of winding up.
2. Heard the arguments of learned Advocates appearing for the parties namely, Sri Shivarudrappa Shetkar for petitioner and Sri S S Naganand, learned Sr.counsel appearing on behalf of Sri Rajeshwar for respondent. Perused the averments made in the company petition, annexures appended thereto and the statement of objections filed by the respondent.
3. It is the contention of Mr.Shivarudrappa, learned Advocate appearing for petitioner that respondent company is in the business of developing lands and it owns a property measuring 36 acres 3 guntas of land at Kengeri, Mysore Main Road, Bangalore
-560 060 and it intended to develop the same by entering into a joint development agreement and was on 4 the look out for prospective and superior developer who could make huge investment and make proper use of the land and petitioners being professional agents/mediators in the field of real estate and development of land, their services came to be engaged by the respondent company. Petitioner using its long standing experience introduced M/s.Era Land Marks India Limited, New Delhi for entering into a joint development agreement in respect of the above said land with the petitioner and for the said purposes petitioners negotiated and mediated with said developer for a very good offer being given to the respondent Company which was the highest offer made by any developer during the said period. It is contended that pursuant to such negotiation, respondent company entered into a joint development agreement on 05.07.2008 with M/s.Era Land Marks India Limited, New Delhi and same was duly registered. 5
3.1. It is contended by the learned counsel that pursuant to the said joint development agreement entered into, it was agreed to by the respondent company to pay 1.25% of the agreed land value as on the date of joint development which was ` 200 crores, as professional fee to the petitioner namely, a sum of ` 2,50,00,000/- was agreed to be paid and accordingly an agreement was entered into between petitioners and respondent on 26.04.2008 vide Annexure-B. It is contended that out of said amount of ` 2,50,00,000/- a sum of ` 33,00,000/- was paid to one Sanjay Byanna and a sum of ` 28,00,000/- to one Sri Jeevaraj and ` 23,00,000/- was paid to each of the petitioners. Thus, the balance of ` 1,43,00,000/- was to be paid by the respondent company to the petitioner.
3.2. It is contended that out of 1.25% professional fee, 0.25% was to be paid soon after laying 6 of the first building foundation of the project and contend that the project operation is in full swing and newspaper advertisements have been published inviting prospective purchasers to book their flats. However, the respondent company was not intending to pay the above said amount though certificate issued by BMRDA indicated that project had commenced. It is contended by the learned counsel that only due to the efforts put in by the petitioner in solving all the differences between the respondent company and the developer and making the project to fall on the right track, the respondent company is enjoying its fruits without making the agreed payment of ` 1,43,00,000/- to the petitioner after having benefited by the professional services rendered by the petitioner in introducing the abovesaid developer.
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3.3. It is contended that repeated requests to the respondent to pay the said amount did not yield any result and as such, legal notice came to be issued on 17.01.2011 calling upon the respondent to pay the entire outstanding amount and untenable reply has been given on 01.02.2011 by the respondent. It is further contended that respondent company is unable to pay its debts and hence liable to be wound up. It is also contended that respondent company is deemed to be unable to pay its debt. Hence, petitioner seek for an order of winding up of the respondent company.
4. Per contra, Sri.Naganand, learned senior counsel appearing on behalf of Sri.Rajeshwar, for respondent would contend that petitioner has miserably failed to establish that on the date of issuance of statutory notice the registered office of the respondent company was located at the address mentioned in the 8 said notice dated 17.01.2011 or in the address mentioned in the cause title of the present petition, but on the other hand respondent has produced the extract of the master company details obtained from the website of the Ministry of Corporate Affairs as per Annexure-R-1 which would indicate the registered office of the respondent company is at 41/1, UIPAR Mansions, R.V.Road, Basavanagudi, Bangalore, Karnataka - 560 004, and not at the address either specified in the statutory notice or in the address depicted in the cause title of the petition. As such he contends that there is no substantial compliance of section 434(1)(a) of the Companies Act, 1956 and as such the petition is liable to be dismissed. Even otherwise on merits he would contend that present petition has been filed under section 433(e) and petitioner has to necessarily establish any one or all the ingredients of Section 434(1)(a) to (c) and contends that undisputedly petitioner has not been 9 able to demonstrate the alleged debt due having been admitted by the respondent or demand made by petitioners as contemplated under 434(1)(a) has not been complied by respondent enabling the petitioner to seek for winding up of respondent-Company under section 434(1)(a). He would further contend that even under Clause (c) of 434(1) petitioner has not been able to demonstrate that said provision is attracted and it has not been proved by the petitioner that respondent is not commercially solvent by producing any material to enable this court to arrive at a conclusion that respondent company is unable to pay its debt both contingent and prospective liabilities since it has become commercially insolvent and as such on this ground also petitioner is not entitled for the relief.
4.1. He would further elaborate his submission to contend that even on facts it can be noticed that 10 petitioner is basing its claim by virtue of an alleged agreement or memorandum which has been signed by the respondent company's Managing Director dated 26.04.2008 and by itself it has no legs to stand inasmuch as there are certain conditions which ought to have taken place even according to the petitioner and the said conditions stipulated therein having not taken place same cannot be enforced since it is term of the contract that what is agreed to is conditional. He would also submit that under clause 3.4(b) amount had to be paid to HUDCO by the developer M/s.Era Landmarks India Limited, New Delhi which has not been paid and as such there was no obligation on the part of the respondent to adhere to the terms stipulated in contract or agreement dated 26.04.2008.
4.2. He would submit that the dispute between the parties being a bonafide dispute and when there is 11 no obligation on the part of the respondent to pay any amount to the petitioner under the alleged contract or agreement dated 26.04.2008 and when there is a dispute with regard to entitlement of the petitioners to such payment, the defence raised in the statement of objections is to be construed as a `bonafide dispute', which cannot be resolved in the present petition and as such petitioners have to work out their remedy in appropriate proceedings before a jurisdictional forum. He would also submit that the limitation with regard to enforcement of alleged debt due by respondent to petitioner being in dispute same cannot be examined by this court in the present petition.
4.3. He would also contend that no presumption can be drawn under 434(1)(a) that respondent-company is unable to pay its debt for being ordered to be wound up, unless the petitioner - company has pleaded and 12 proved to the satisfaction of the Court that in the facts of the case, such a situation has arisen namely, the respondent - company is unable to pay its debt by taking into account the contingent or prospective liabilities of the respondent company. He draws the attention of the court in the instant case petitioner has neither pleaded nor proved these aspects and as such petitioner is not entitled for the relief sought for.
5. At the request of petitioner's counsel, the matter was listed on 21.06.2013 and a memo has been filed by the learned counsel for the petitioner enclosing the photocopy of the 'returned cover' which contains an endorsement 'no such company' which is claimed to have been despatched by the learned counsel for the petitioner through courier to the registered office of the respondent-company and the visiting cards of the tenants said to be in occupation of the said premises to 13 contend that registered office of the respondent- company is not located in the address available with the ROC depicting the registered office of the respondent- company as mentioned therein. He would also draw the attention of the Court to the reply notice dated 22.02.2012 issued by the respondent-company whereunder the respondent-company itself has admitted that its registered office is at the address to which the statutory notice has been issued and hence, it does lie in the mouth of the respondent-company to contend contrary to its own admission. Hence, he prays for rejecting the contention raised in this regard and prays for an order of winding up of the respondent-company be passed.
6. Having heard the learned Advocates appearing for the parties and on perusal of the pleadings as well as the documents appended thereto and after 14 bestowing my careful attention to the oral arguments advanced by the respective learned Advocates, I am of the considered view that following points would arise for my consideration:
(1) Whether the statutory notice dated 17.01.2011 - Annexure-E issued by petitioner is contrary to Section 434(1)(a) of the Companies Act, 1956?
(2) Whether the petitioner has made out a case for winding up of the respondent-company under Section 434(e) and 439 of the Companies Act, 1956?
OR Whether the defence set up by the respondent company is frivolous and not a bonafide dispute so as to reject the same and grant the prayer sought for by petitioner?
15FACTUAL MATRIX:
7. Petitioner and respondent-company represented by its Managing Director entered into an agreement on 26.04.2008 - Annexure-B whereunder it was agreed that respondent would pay to the petitioner a professional fee of 1.25% (exclusive of service tax) on the value of land agreed for joint development which was valued at ` 200 Crores. It was also agreed that 1% of the professional fee would be released on the same day in proportionate to release of funds towards advance of ` 35 Crores by the developer - M/s.Era Land Marks India Limited, New Delhi, which was agreed to be released after getting such advance payment from the developer. It was further agreed that respondent would pay the remaining 0.25% soon after the first building foundation of the project. In other words, the total professional fee agreed to be paid by respondent to 16 petitioner was Rs.2.50 Crores. The petitioner also agreed for the respondent making payment of ` 33,00,000/- directly to M/s.Sanjiv Bayana of Delhi from out of the total professional fee of ` 2.5 Crores.
8. The basis for entering into such contract between the parties was on account of the land measuring 36 acres 4 guntas situated at Kengeri village, Bangalore South Taluk which had been converted for residential purposes being available with the promoters/directors of the respondent-company and they were on the look out of a developer with repute and who was capable of investing huge amount and was approached by the petitioner who agreed to use their expertise in the field of real estate and secure a developer. In this direction, the petitioner has introduced M/s.Era Land Marks India Limited, New Delhi, to the respondent-company and after negotiation 17 and discussion, the offer made by the said developer to the respondent-company which was the highest offer by any developer made during the said period came to be accepted by the respondent - company and accordingly a joint development agreement came to be entered into between respondent-company and M/s.Era Land Marks India Limited, New Delhi on 5.07.2008 - Annexure-A which was duly registered in the office of Sub Registrar, Kengeri. Prior to the execution of said joint development agreement, agreement dated 26.04.2008 - Annexure-B referred to herein above came to be entered into between the petitioner and the respondent-company.
9. It is not in dispute that pursuant to the agreement dated 26.04.2008 - Annexure-B entered into by the respondent-company with the petitioner, the following amounts have been paid:
i) ` 33 lakhs paid to Sri Sanjiv Bayana 18
ii) ` 28 lakhs paid to Sri Jeevaraj
iii) ` 23 lakhs paid to each of the petitioners Thus, in all, ` 1,07,00,000/- was paid by the respondent-company under the agreement dated 26.04.2008 - Annexure-B. On these factual aspects, there is no dispute between the parties.
CONTENTIOUS ISSUE:
10. The claim of the petitioner is: under agreement dated 26.04.2008 - Annexure-B the respondent-company was required to pay to the petitioner the balance amount of `1,43,00,000/- immediately after laying of the first building foundation of the project to be constructed by the developer as per the joint development agreement and despite laying of the foundation to the first building of the project having 19 been completed as per the permission granted by the Bangalore Mysore Infrastructure Corridor Local Planning Authority and said amount has not been paid which was due to them despite demand made by petitioner. Thereafter petitioner issued statutory notice demanding payment of the balance amount and due to non compliance of said demand by the respondent-company, present petition seeking winding up of the respondent- company has been filed contending that respondent is unable to pay its admitted debt.
11. Respondent has contended that joint development agreement entered into between respondent and M/s.Era Land Marks Limited on 05.07.2008 came to be modified and an addendum (supplementary) agreement came to be executed between the parties on 28.10.2009 and the amount agreed to be paid by the said developer to HUDCO towards the 20 outstanding loan amount of the respondent, having not been complied with by the said developer there was improper fulfillment of the condition stipulated and in view of the same the petitioners would not be entitled to contend that all the conditions stipulated in the agreement entered into with them on 26.04.2008 - Annexure-B by respondent is to be complied and as such respondent-company contended that it is not liable to pay the professional fee of 1.25%. It was also contended that under the joint development agreement, developer was to get 37% undivided interest and on account of subsequent development, the said percentage got reduced to 29.5% and so also the security deposit to be paid by developer to respondent came to be reduced from ` 35 Crores to ` 25 crores and hence it is contended that payments made to the petitioner is itself a excess payment and as such, they are not entitled to any further payment.
21RE : POINT NO.(1):
12. The learned counsel for the petitioner has vehemently contended that respondent itself has admitted its registered office is at the address mentioned in cause title and as such, it cannot now turn around and contend that its registered office is not at that address but elsewhere.
13. The Division Bench of this Court in THE SUNDUR MANGANESE AND IRON ORES LIMITED, YESHWANTNAGAR, KARNATAKA V/S MANGANESE ORE (INDIA) LIMITED, NAGPUR reported in 2001(4) Kar.LJ 590 has held that when a petition is filed under Section 433 (e) the notice of demand if not sent to the registered office but to the administrative office cannot be held to be sufficient compliance with the statutory 22 requirement to raise a presumption that company is unable to pay its debts. It has been held as under:
"7. The language employed in Section 434(1)(a) of the Act is significant. While the section provides that the mode of service can be either by 'registered post or otherwise', it does not provide the place of service as 'at the registered office or other office', but specifically states as 'at its registered office'. Further, while the requirement 'a demand under his (creditor's) hand' is explained in sub-section (2) as including a demand signed by any agent or legal adviser duly authorise, there is no such explanation in regard to the requirement relating to service at 'registered office' by clarifying that service at an administrative office of branch office will also be service at registered office. In the absence of any explanation or further deeming provision enabling the interpretation of the words 'delivered at its registered office' as meaning 'delivery at the administrative office', it is not possible to hold that service of notice at an office other than registered office as sufficient compliance with Section 434(a)(a) requiring service at registered office.
8. It is well-settled that a legal fiction can be raised as provided under a statute, only when the conditions stipulated for raising such legal fiction are strictly and fully complied with. Where the specific 23 requirements are not complied with, no legal fiction will arise. A legal fiction cannot be raised, when the conditions specified do not exist, on the ground that there is substantial compliance or implied or inferred the ground that there is substantial compliance or implied or inferred compliance of the requirements to be fulfilled for raising the legal fiction, unless such lesser or alternative compliance is permitted by an explanation or another deeming provision. As observed by the Supreme Court in Commissioner of Income-tax, Bombay City-II v Shakuntala and Others, a legal fiction cannot be created by travelling beyond the language of the section by which it is created. Therefore if a creditor wants the benefit of the legal fiction under Section 434(1)(a) that a Company is unable to pay its debts, he has to strictly fulfil all the conditions stipulated therein for raising such legal fiction.
9. The Courts have consistently held that requirements of Section 434 should be strictly complied with and the service of the notice should be at the registered office of the Company (and not any other office), to raise the presumption under Section 434(1)(a)."
14. Though a valiant attempt has been made by the learned counsel for the petitioner to drive home the 24 point that respondent itself has in its reply notice admitted that its registered office is at the address reflected in the statutory notice and the memo filed on 21.06.2013 would also evidence this fact would not be a ground to accept the said plea, since consent does not confer jurisdiction.
15. The certificate of incorporation of respondent-company as per Extract produced at Annexure R-1 along with Statement of objection would indicate that registered office of the Respondent- Company is located at No.41/1, Uipar Mansion, R.V.Road, Basavanagudi, Bangalore and not at the address shown in the statutory notice. Hence, there is non-compliance of Mandatory requirement of Sec. 434 (1) (a) of Companies Act.
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16. In that view of the matter, point No.(1) has to be answered against the petitioner and in favour of the respondent.
RE: POINT No.2:
17. The petitioner is seeking for winding up of the respondent - company on the ground that it is unable to pay the debt due to the petitioner in a sum of ` 1.43 Crores due under the agreement dated 26.04.2008 - Annexure-B. Respondent to stave off such a claim has filed detailed statement of objections contending interalia that a bonafide dispute exists with regard to such payment and the basis for the petitioner to claim the said amount is based on the joint development agreement dated 05.07.2008 itself having encountered rough weather and litigation having arisen thereunder, the claim of the petitioner recedes to the 26 background and on that score and also on account of there being a serious dispute both with regard to limitation to make such a claim by the petitioner and there being no amount due by the respondent to the petitioner, proceedings for winding-up is not maintainable.
18. Respondent has contended that agreement dated 26.04.2008 entered into with the petitioner has ceased to be in operation on account of subsequent development namely, the respondent's undivided interest getting reduced from 37% (as per original agreement dated 05.07.2008) to 29.5% (as per Addendum agreement dated 28.10.2009), security deposit payable by developer to respondent being reduced from ` 35 Crores to ` 25 Crores and HUDCO loan which was to be cleared by the developer within 90 days not having being cleared as the prime reasons for 27 not paying the amount to the petitioner. In the light of this defence raised by the respondent, it requires to be examined as to whether the said defence is a substantial one, a bonafide dispute and it is not a moon shine defence to stave off the creditor namely, petitioner. In this background, before examining the facts on hand, let me state the law laid down by this Court and by the Hon'ble Apex Court in this regard.
19. It has been held in DIVYA EXPORT ENTERPRISES V/S PRODUCIN PRIVATE LTD., reported in ILR 1990 KAR 1610 that whenever respondent-company comes forward and sets forth its defence, company Court will have to examine the nature of respective cases pleaded by the parties and if a prima facie case is made out by the petitioner, then, the onus of disproving it by showing that the defence is in good 28 faith and one of substance would shift on such respondent. It has been held as under:
"17. If the respondent company pleads a defence in good faith and puts forth a substantial case against the petitioner's claim, the petition for winding up will be rejected. A mere assertion of a debt payable by the respondent company is not sufficient to attract the discretion of the Court in favour of the petitioner. The principle governing the exercise of Court's discretion is extracted in the decision of the Division Bench of this Court in HEGDE & GOLAY LIMITED vs STATE BANK OF INDIA.
"A basic question arises, does the Court have a discretion under Section 222(e) and 223? The general rule is that where a petitioning creditor can prove that his debt is unpaid and the company is insolvent it is the duty of the Court to direct a winding up and the creditor is entitled to an order ex debito justitiae. On the other hand, it has been said that the latter is phrase which means no more than that in accordance with settled practice the Court can only exercise its discretion in one way namely by granting the order. These statements can be reconciled on the 29 basis that although the matter is 'a complete and unfettered judicial discretion' the discretion is exercised in accordance with certain established principles, but the principles do not bind the Court in an all or nothing way. In accordance with these principles the creditor has a prima facie right to a winding up order which is subject to certain exceptions."
Again, Palmer is quoted, as to the exceptional circumstances under which discretion to wind up would not be exercised:-
"(1) Where the petitioner's debt is less than $ 200;
(2) The debt is bona fide disputed by the company;
(3) the company has paid or tendered
payment of the petitioner's debt;
(4) the winding up is opposed by other
creditors; and
(5) the company is in the process of being
wound up voluntarily."
Words of caution against invoking the Court's jurisdiction to pressurize a company are found in the decision of the Supreme Court in AMALGAMATED COMMERCIAL TRADERS P. LTD. vs. A.C.K. KRISHNASWAMI & ANOTHER:30
"It is well settled that a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bonafide 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 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."
18. The test applied by the Supreme Court in the above case was, whether the non-
payment of the claim by the respondent company was a cloak to hide its inability to pay its debts.
19. When a prima facie case is made out by the petitioner, the respondent may putforth a substantial defence against it; if 31 such a defence is bone fide, Court's discretion will be to dismiss the petition.
20. In M/s. MADHUSUDAN GORDHANDA & CO. V/S MADHU WOOLEN INDUSTRIES PRIVATE LTD., the principles are again stated (at 2605):
"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."
21. When can a dispute be termed as a bona fide one? When is it to be treated as substantial? These questions are difficult of a precise answer in abstract. These are in the realm of facts and each case would churn out different answers. But the Court can refer to certain tests envisaged in similar circumstances, though not exactly under the provisions of the Companies Act. In the case of a suit filed under Order 37 of the Code of Civil Procedure, the defendant has to seek leave of the Court to defend against the claim. It has been held that if the defence could be honest and bona fide, leave should be granted; a decision whether the defence pleaded is bona fide or honest at the initial 32 stage of a suit, can only be hazardous; but, still, the Court is called upon to apply its judicial mind on this question. Similarly is the situation when, the respondent company is asked to show cause against a winding up order, at the initial stage; the respondent, here, has to show cause as to why the petition filed should not be advertised; such an advertisement has adverse effects on the reputation of a company and therefore, it is given an opportunity to show cause against ordering the advertisement- (vide: THE NATIONAL CONDUCTS (P) LTD. V/S S.S. ARORA). Therefore, whenever the respondent company comes forward and sets forth its defence, this Court has to examine the nature of the respective cases pleaded by the parties and if a prima facie case is made out by the petitioner, the respondent should shoulder the onus of disproving it, by showing that its defence is in good faith and one of substance, and it is likely to succeed in point of law."
20. The Division Bench of this Court in the case of SHAKTI PRAKASH METAL FINISHERS PRIVATE LIMITED, BANGALORE V/S HINDUSTAN MACHINE TOOLS LIMITED (HMT LIMITED) BANGALORE AND ANOTHER Reported in 2001(6) KAR.L.J 467 has held 33 that violation of the terms of the contract cannot ipso facto come within the purview of Section 433 of the Companies Act for winding up and non payment of bill amount under a contractual agreement cannot be said to be an admitted debt even when it is disputed. It is held as under:
"7. On consideration, we find that as per the averments there is a contract between the appellant and the respondents and the same has to be dealt with as per the terms of the agreement. Any violation of the terms of the contract cannot ipso facto come within the purview of Section 433 of the Companies Act for winding up of the company. It is also seen that it is not the legislative intention that Company Court should be converted itself into an ordinary Civil Court and proceed to hold a trial at the instance of individual claiming to be a creditor of the company on the basis of a contract. Under the circumstances, no directions as prayed for can be issued. It is also seen that non-payment of bill amount under a contractual agreement cannot be said to be an admitted debt even when it is disputed. That apart, debt is something which is borrowed by a person on settled terms and conditions and settled rate of interest and it can also be resettled between 34 the parties. Be that as it may. In any view of the matter and in the facts of the given case, it cannot be invoked. As discussed, we do not find any error or illegality in the order of the learned Single Judge so as to call for any interference. This writ appeal is dismissed."
21. The Apex Court in M/S IBA HEALTH PVT. LTD., V/S INFOR-DRIVE SYSTEMS SDN. BHD Reported in 2010 AIR SCW 6282 has held that existence of 'bonafide dispute' implies the existence of substantial ground for the dispute raised and in such circumstances where it is found that contested debt is doubtful company Court should not entertain a petition for winding up . It has been held therein as follows:
"24. Reference was also made to another decision in Shailendra Dania & Ors. V/s S.P.Dubey & Ors. [(2007) 5 SCC 535]: (AIR 2007 SC (supp) 208: 2007 AIR SCW 3553), where a similar question arose in connection with the eligibility for promotion wherein differential service experience based on differential educational qualifications had been prescribed and longer period of service experience was prescribed for diploma holder 35 Junior Engineers in comparison to degree holder Junior Engineers for the post of Assistant Engineer. Explaining the rationale behind the permissibility of making such a distinction, this Court held that the difference between the service qualifications has been an essential criterion for promotion based on interest of an establishment. While considering the said question, this Court had also the occasion to consider the possibility of two views being taken while interpreting a particular set of service rules. In such a situation, this Court held that the rules should be interpreted in consonance with the practice followed by the department for a long time. In fact, while arriving at such a conclusion, this Court had also the occasion to consider the earlier case of N.Suresh Nathan (AIR 1992 SC 564: 1992 AIR SCW
181) (Supra)."
22. Section 433 of the Companies Act enables this Court to wind up a company if it is unable to pay its debts. Said exercise of power is discretionary and it has to be judiciously exercised. If the respondent pleads putting forth defence that claim of the petitioner is genuinely disputed and if it can be construed as a bonafide dispute, then, this Court would be loath in 36 exercising the said discretion for ordering winding up of the company.
23. In the light of what is stated above, let me examine the facts on hand to answer point No.(2) formulated herein above.
24. It is not in dispute that reason for respondent entering into a contract dated 26.04.2008 - Annexure-B with the petitioner and claiming the amount is the joint development agreement the respondent has entered into with M/s.Era Land Marks India Limited, New Delhi. Under the agreement dated 26.04.2008 (Annexure-B) respondent had agreed to pay to the petitioners a total sum of ` 2.50 Crores. The conditions stipulated therein which would entitle the petitioner to claim the said amount from respondent's are extracted herein below:
37
"1. We agree to pay your Professional fee of 1.25% (one & quarter percent plus service tax) on value of the land agreed for Joint Development. The lump sum value of the land is about ` 200.00 Cr. (Rupees Two hundred Crores only)
2. Necessary TDS shall be deducted from the Professional fee.
3. However we will release 1% (One percent) of the Professional fee on the same day in proportionate to release of funds towards advance of ` 35.00 r. (Rupees Thirty five Crores only) from M/s. ERA LANDMARKS INDIA LIMITED, New Delhi. The payment shall be released after getting advance payment from Developers. Remaining 0.25% (Quarter percent) shall be paid soon after the first building foundation of the project at Kengeri.
4. The total Professional fee payable is ` 2.50 Cr. (Rupees Two Crores fifty lakhs only).
This is in full and final settlement of your claim for the said deal as spelt in your above referred letter.
5. As per your above cited letter ` 33,00,000/-
(Rupees Thirty three lakhs only) shall be directly paid to M/s. Sanjiv Bayana of Delhi from the total professional fee of ` 2.5 Cr. (Rupees Two Crorers Fifty lakhs only) and the balance ` 2.17 Cr. (Rupees Two Crores 38 Seventeen lakhs only) shall be paid to you in full and final settlement of the deal."
25. It is not in dispute that petitioner was successful in ensuring that respondent - company enters into a joint development agreement with M/s.Era Land Marks India Limited on 05.07.2008 which is at Annexure-A. The said agreement stipulates the conditions required to be performed by each of the parties. All such reciprocal promises required to be performed as stipulated in the agreement is not required to be delved upon by this Court. However, some of the essential terms of the said contract which would have a bearing on the claim of petitioners are extracted hereinbelow:
(1) The developer was required to pay a security deposit of ` 35 Crores to the respondent.
(2) The undivided share to which the respondent-
company was entitled determined at 37%. 39 (3) Existing HUDCO loan raised by the respondent and its stake holders was agreed to be cleared by the said developer M/s.Era Land Marks India Limited within 90 days from the date of Joint-Development agreement.
Undisputedly, petitioner had participated, negotiated and mediated for the parties to enter into joint development agreement. In fact, petitioners themselves agree in the present petition that they used their long standing expertise in the real estate field and their good offices to persuade M/s.Era Land Marks India Limited enter into a joint development with the respondent- company which ultimately resulted in Joint- Development Agreement dated 05.07.2008 coming into existence on account of the negotiation and discussion made by the petitioner. It is because of this precise reason the agreement dated 26.04.2008 between 40 respondent and petitioner came into existence whereunder respondent agreed to pay to the petitioners a professional fee of `2.50 crores. The said contract is a contemporaneous contract entered into between respondent and petitioner. In other words, the performance of obligations under the said agreement was dependent on the performance of the obligations by the parties to the Joint-Development agreement dated 05.07.2008 - Annexure-A.
26. On account of various reasons, the parties namely, the respondent and the developer could not implement the Agreement dated 05.07.2008 in its entirety and as such they entered into an Addendum agreement on 28.10.2009 - Annexure-R2 under which it was agreed to between the parties that : 41
(1) Undivided share/interest of the respondent company would be reduced from 37% to 29.5%.
(2) Security deposit payable by developer to the respondent was reduced from ` 35 Crores to ` 25 Crores.
(3) The loan amount agreed to be paid to HUDCO is now agreed to be paid by the developer from out of the security deposit payable to the respondent.
These conditions agreed to between the parties would indicate that there was substantial modification amongst other conditions to the original agreement dated 05.07.2008 . This would also indicate that claim of the petitioner which was based on the Joint- Development Agreement dated 05.07.2008 got eclipsed by virtue of the Addendum agreement dated 28.10.2009 42 and thereby benefits which would have accrued to the respondent got substantially reduced. It is because of these subsequent developments, the respondent has attempted to stave off the claim made by petitioner contending that debt is not admitted and such a plea cannot be brushed aside as a false defence. It is to be further noticed that respondent - company and the developer are now at logger heads and they have ignited the arbitration proceedings and same is pending before the Arbitral Tribunal as admitted to by the learned Advocates appearing for the parties. In this background, it cannot be held or construed that the defence set up by the respondent- company to be either moon shine or a frivolous one to discard it or to construe the said defence raised by the respondent without any basis. In that view of the matter, I am of the considered view that the dispute raised by the respondent to deny the claim of petitioner is bonafide and one of substance and such 43 dispute cannot be construed as frivolous or brushed aside as a cloak to hide its inability to pay the debt and prima facie respondent has established that plea putforward by way of defence in the statement of objections is a bonafide plea. In that view of the matter, point No.(2) formulated herein has to be answered in favour of respondent and against petitioner.
27. In view of the fact that arbitration proceedings are pending between respondent-company and the developer M/s.Era Land Marks India Private Limited , New Delhi, petitioner would be at liberty to work out its remedies after conclusion of arbitration proceedings and liberty is reserved to the petitioner in this regard.
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28. For the reasons aforestated, Company petition is hereby dismissed. Parties are directed to bear their respective costs.
Sd/-
JUDGE *sp