Karnataka High Court
P.Y. Parry vs M/S. Cynotech Bioproducts Private ... on 24 February, 1999
Equivalent citations: [2001]103COMPCAS113(KAR), 1999(3)KARLJ68, AIR 1999 KARNATAKA 331, (1999) 34 CORLA 173, (1999) 3 KANT LJ 68, (2000) 3 COMLJ 78, (2001) 103 COMCAS 113
ORDER
1. The petitioners before me have presented this petition for winding up of the respondent-company and the effective dispute centres around a recovery of Rs. 10,00,000/-. According to the petitioner, pursuant to an agreement dated 15-5-1994 which has been produced, the respondent-company was required to discharge this liability of Rs. 10,00,000/- by way of monthly instalments starting from July, 1994, aggregating to Rs. 1,00,000/- per month. The record in the case shows that no payments have made pursuant to this agreement. The petitioner contends that despite the lapse of time and the service of a statutory notice, that the respondents have still not discharged the debt. The statutory notice was issued on 1-9-1995 and has been replied on 6-10-1995. In the reply, a contention has been raised that some amount of the live culture had become unusable and that certain products have been disposed off by the petitioner and the respondents therefore contend that the aggregate value of these items comes to Rs. 2.5 lakhs, and this amount is deductible from the amounts payable. The contention taken up is also that the amount was agreed upon in order to secure the release of the land in question. The petition was earlier heard by the learned Single Judge who passed a short order admitting the petition. The respondents filed an appeal against that order and the contention was that the Court had not evaluated the facts carefully and passed a speaking order, which contention was upheld and the earlier order was set aside and the case has been remanded to this Court.
2. I have heard the learned Advocates on both sides. The petitioners' learned Advocate submits that the liability to pay the amount of Rs. 10,00,000/- is an admission in writing and that the undisputed position is that no payments have been made in discharge of that liability. As regards the plea that is taken up with regard to the reduction of the amount of Rs. 3,00,000/-, the petitioners' learned Advocate states that the first time a reference to this contention has been made is in letter dated 20-3-1994 which is produced at Ex. R. 1. Petitioners' learned Advocate points out something very significant namely the fact that this letter Ex. R. 1, which is disputed by the petitioners, is supposed to have been written in March, 1994. This letter makes out the defence that was sought to be pleaded in reply to the statutory notice on 6th October, 1995. There is a direct charge against the respondents that the letter in question is a total fabrication and that it has been fabricated for the sole purpose of trying to make out a defence that was non-existent. The reason for the submission canvassed by the learned Advocate is that the agreement between the parties is dated 15-5-1994 and the learned Advocate submits that had the dispute been raised with regard to the so-called losses of nearly Rs. 3,00,000/- which is now being disputed, that there is no conceivable reason why the respondents would have recorded in writing in an agreement on stamp paper, two months after this date that the amount of Rs. 10,00,000/- is outstanding. Furthermore, the learned Advocate has pointed out to me the significant fact that a reading of the document Ex. R. 1 clearly indicates that it pertains to the liability of Rs. 10,00,000/- which means that it is obviously a document that has seen the light of day after the agreement was executed and that it could never have been on record prior to the execution of the document.
3. Mr. Krishnamurthy who represents the respondents contended that the document Ex. R. 1 is of significance because it disputes the quantum of the liability. He relies on the well-settled position in law which is to the effect that if there is a serious dispute which requires adjudication, that it would not be permissible to maintain a winding up petition and his contention is that in view of the fact that this dispute namely the question as to whether an amount of Rs. 3,00,000/- is to be deducted or not, will have to be adjudicated, that the winding up petition has to be dismissed on this ground alone.
4. It is well-settled law that if the debt that is pleaded is a disputed debt, that a winding up petition will not be maintainable. It is equally well-settled law that merely because a dispute is pleaded that the Court is not required to treat the debt as disputed unless the Court is prime facie satisfied that the dispute in question requires adjudication. There is a category of cases where an untenable dispute is raised and where a defence is pleaded which is of no substance whatsoever and the Courts have held that such a defence which is of no consequence, is not something which can come in the way of maintainability of a winding up petition. It would therefore be necessary for me to examine the question as to whether there is any substance in the dispute that has been raised with regard to the amount of Rs. 3,00,000/-. As far as this aspect is concerned, the dates of the documents are significant. The fact that Ex. R. 1 is dated 20-3-1994 itself, is more than sufficient to establish beyond all reasonable doubt that it is a total and complete fabrication. A reading of that document will indicate that it clearly refers to the outstanding amount of Rs. 10,00,000/- and this outstanding amount was recorded for the first time in the agreement dated 15-5-1994. Furthermore, if what the respondents state is true, namely that the outstanding amount was to stand reduced by as much as Rs. 3 lakhs because of the facts set out by them, that it is totally inconceivable that this aspect of the matter would have been brushed aside and that the respondents would have still agreed to the liability of Rs. 10,00,000/-. Viewed at from any angle, it is very clear that the document Ex. R. 1 is a fabricated document and furthermore, that the defence that is pleaded is also a sham defence. What is significant is the fact that the loss that is alleged is to the extent of Rs. 3,00,000/- which is not a small amount and it is very clear that the parties were not on the best of terms, despite which the respondents have not taken any steps to recover this amount from the petitioner. All these factors conclusively indicate that there is no substance in the plea that is put forward that there is a genuine dispute with regard to the amount of Rs. 3,00,000/-.
5. Another way of looking at the case is to ascertain as to what would be the effect in a given situation if there is a substantial outstanding and there is a dispute in respect of a part of the debt. It is well-settled law that the doctrine of severability clearly postulates, that in a given case, it is open to the Court to exclude the disputed question and if there is no defence with regard to the grounds made out for winding up as regards the balance, the petition would still be perfectly maintainable as far as the reduced amount is concerned. Mr. Krishnamurthy's submission is that the debt is an integrated whole and that if there is a dispute with regard to the quantum, then the parties must be referred to the Civil Court. This is not the correct position in law because in a given situation where the disputed aspect can be eliminated, the Court can proceed on the basic of the balance amount. In this case, however, that question does not arise because the defence that is pleaded is not only sham but is also absolutely and totally devoid of honesty and substance and in these circumstances, the winding up petition would certainly be maintainable.
6. There is another aspect to the case namely that Mr. Krishnamur-thy draws my attention to the second last clause in the agreement which states that the land in question which stands in the name of the petitioner is required to be registered in the name of the respondents on the debt being discharged. His submission is that since the petitioner has not registered the land in question in the name of the respondents, that there is no obligation on the part of the respondents to make any payment to the petitioner either of Rs. 10,00,000/- or of Rs. 7,00,000/-. As far as this aspect of the matter goes, I see no difficulty whatsoever because the respondents have not, at any time in the course or the last five years, tendered the amount outstanding nor have they even offered to pay it and the obligation to complete the registration is a corresponding obligation which only arises on receipt of the amount. The obligation to discharge the debt remains undisputed and the record also indicates that the petitioner has not, at any time, stated that he will not register the land in the name of the company on receipt of the amount. I do not see how this particular clause can come to the assistance of the respondents and there is no dispute whatsoever with regard to this aspect of the case.
7. As the law stands, if a company, on being called upon to discharge a debt after the lapse of considerable period of time, does not discharge the debt, a presumption arises that the company is commercially insolvent. The liabilities are outstanding since the year 1994 and the record indicates that the respondents have not paid up the amount. Mr. Krish-namurthy submits that the respondents are a solvent company and that there are no grounds on which the company should be wound up. The first test of solvency is, ability to discharge the debts and liabilities within a reasonable period of time and if as the record indicates conclusively, that this is not done, then the presumption of commercial insolvency is complete. Apart from this aspect of the matter, I also notice that this is not a case in which, apart from a bald averment, any material has been placed before the Court to indicate the financial solvency of the respondents and to merely state that the respondents are solvent in the face of the present record, would not be permissible.
8. Viewed at from any angle, both on facts and on law, the petitioners have made out a ground for a prima facie case which deserves admission. The petition is accordingly admitted. As a necessary consequence of the admission, the petitioners are directed to advertise in the local edition of 'The Times of India' within a period of two weeks from today and to file a copy of the advertisement with the office thereafter. The returnable date be indicated as 7-4-1999. Petition to be relisted for further orders on 7-4-1999.