Bombay High Court
I.C.D.S. Ltd. vs Asha Latex And Allied Industries Pvt. ... on 12 September, 2001
Equivalent citations: [2003]114COMPCAS581(BOM), [2004]50SCL241(BOM)
Author: R.J. Kochar
Bench: R.J. Kochar
JUDGMENT R.J. Kochar, J.
1. The petitioner-company has prayed for an order of winding up of the respondent-company under Sections 433, 434 and 439 of the Companies Act, 1956, alleging failure on the part of the respondent-company to pay its debt to the tune of Rs. 12,62,641 which comprises the amount of instalments due under the hire-purchase agreement and overdue compensation at the rate of 31 per cent per month as on November 6, 2000. It has also prayed for a direction to pay compensation at the same rate from November 7, 2000, till payment.
2. From the averments in the petition it appears that both the parties had entered into a hire-purchase agreement on October 23, 1997, whereunder certain equipment were given on hire basis to the respondent-company which was required to discharge the liability in 36 monthly instalments of Rs. 28,150 commencing from February 23, 1998. The petitioners have averred that there was default on the part of the respondent-company in making payment of the very first instalment and, therefore, the petitioners became entitled to get compensation at the rate of 31 per cent. per month from the due date. It is further alleged that in reply to the petitioner's letter requesting the company to clear the outstanding the company had assured payment of the outstanding in the letters dated June 12, 1998, and April 16, 1999. The company had requested the petitioners to bear with them as they were facing financial problems. By a letter dated June 10, 2000, it appears that the respondent-company had pointed out to the petitioners that an amount of Rs. 1,99,038 which was given by them to the petitioner as margin money before entering into the hire-purchase agreement was not adjusted. By a statutory notice dated August 10, 2000, the petitioners called upon the company to pay the outstanding or face the winding up petition under the Companies Act. The company had replied the said notice on September 4, 2000, disputing the claim of the petitioners. It was also pointed out that the petitioner had not accounted for a substantial amount paid by the respondent-company under the agreement. The respondent-company had also disputed that it had agreed to pay overdue compensation at the rate of 36 per cent. per month in the case of delay. According to the company, it was a false allegation. It was further alleged by the respondent-company that the hire-purchase agreement was kept blank and was filled up subsequently by the petitioner-company. It was also alleged by the company that material documents were suppressed by the petitioners and that it had paid an amount of Rs. 1,99,038 by cheque on September 25, 1997, which was not given credit. The respondent-company had asserted that it was financially solvent and that it had sufficient assets to meet the liabilities. The petitioner-company had sent a rejoinder denying various contentions of the respondent-company. Finally it appears that both the parties have landed before me.
3. The respondent-company on receipt of the notice of the petition has filed an affidavit in reply challenging all the contentions of the petitioners by raising several disputes in respect of the claim made by the petitioners. The petitioner-company has filed its rejoinder on August 8, 2001.
4. I have heard both the learned advocates for their respective parties. I have also carefully gone through the proceedings. Shri Bharati, the learned advocate for the petitioner has submitted that the respondent-company has failed and neglected to make payment of the debt arising under the hire-purchase agreement. He has pointed out that under the written hire-purchase agreement all the terms and conditions were stipulated and were agreed by the respondent-company. According to Shri Bharati the company is unable to meet the liability of its creditors and is financially not a solvent concern and that it should be ordered to be wound up in the interest of creditors at large. Shri Bharati has also denied the fact of receipt of Rs. 1,99/038 as margin money from the respondent-company. Shri Bharati has tried to explain that the said amount was received in a separate transaction with the sister concern of the respondent-company. Shri Bharati has fairly admitted the fact that the cheque was given by the respondent-company. He has also fairly admitted that there was no reply sent on behalf of his clients to the said effect that the said amount was received from the respondent-company and the same was credited to the account of the sister concern of the respondent-company. Shri Bharati has also admitted that while enforcing the agreement his clients had taken away the hire-purchase equipment from the premises of the respondent-company and they are in the custody of his clients. He has further admitted that while lifting the equipment his clients agents had also lifted and taken away other machinery and equipment from the premises of the company which did not belong to the petitioners. Shri Bharati has also made a submission that his clients had not returned the said equipment as the company had not made payment to the petitioners.
5. Shri Kedia, the learned advocate for the respondent-company has made a serious grievance about the conduct of the petitioner-company in respect of taking away of not only the hire-purchase equipment, but also other machinery which did not belong to the petitioner-company with the help of muscle ' power hired by the petitioner. On account of this the company has suffered a huge loss as its business had come to standstill. The value of the said machinery which did not form part of the hire-purchase agreement was Rs. 8 lakhs, says Shri Kedia. According to Shri Kedia there was no agreement to pay compensation at the rate of 36 per cent. per annum as claimed by the petitioners. He has also pointed out that the liability was not at all admitted or crystallised liability. He has submitted that his clients had paid an amount of Rs. 2 lakhs and Rs. 85,000 which the petitioners did not account for. He submitted that the aforesaid two payments were in addition to the amount of Rs. 1,99,038. The alleged principal amount of Rs. 8,56,772 includes interest/compensation and the petitioners have again claimed compensation on the said amount. He has pointed out that the hire-purchase agreement did not bear what amount was lent to the company. He has further pointed out that there was variance in the claim of the interest in the notice and the particulars of claim. Shri Kedia has further submitted that the petitioners have initiated arbitration proceedings under Clause 18(a) of the agreement. Shri Kedia has submitted that the arbitration proceedings have made a substantial progress and the arbitrator has recorded oral evidence of both the parties. He has therefore prayed for dismissal of the company petition which according to him is a coercive action against the respondent-company which is genuinely disputing the debt claimed by the petitioner-company.
6. I have no manner of doubt that not only from the affidavit in reply before this court but even earlier thereto the respondents have raised bona fide dispute in their letters. The company has specifically pointed out in its letter dated June 10, 2000, that it had issued a cheque of Rs. 1,99,038 on September 25, 1997, towards the margin money for the hire-purchase agreement but the same was not accounted for. It is significant to note that there was no mention or reply to the said allegation made by the company in the notice sent on behalf of the petitioners on August 10, 2000, wherein the whole claim is made on the company. The respondent-company has further reiterated the said contention in its reply dated September 4, 2000, that the aforesaid amount was not given on credit. In the said reply to the notice there are several specific disputes raised by the company in respect of the hire purchase agreement, in respect of the liability to pay compensation at the rate of 36 per cent. per annum and the correctness of the liability is seriously disputed, It is further pertinent to note that in the rejoinder reply sent on behalf of the petitioners a flat denial of receipt of the said amount is given. However, there is no explanation in this letter that the said amount was in respect of an independent transaction with the sister concern of the respondent-company as is contended before me. Shri Bharati was not able to explain why the fact of pendency of the arbitration proceedings was not disclosed in the petition. He has however submitted that the arbitration proceedings were in progress as an independent remedy available to his clients under the agreement. Shri Bharati has tried to submit that the said arbitration proceedings were required to be initiated to save the limitation. According to him, the present proceedings are independently filed for winding up of the company. However Shri Bharati did not point out from the petition how the respondent-company was not a commercially solvent company. There is absolutely no mention in respect of the solvency or insolvency of the company. There is no mention of the assets and liabilities of the company to show that it has lost its substratum to prove that the respondent-company was not able to pay to its creditors. It is also an admitted fact that there are no other creditors who are knocking at the doors of the respondent-company. In my opinion the petitioners have miserably failed to prove that the respondent-company was not a solvent company in reply to pay its debts. It is a running concern and profit-making concern. From the aforesaid facts it is clear that the debt is not at all an admitted, ascertained and liquidated amount. The counter allegation of the respondent-company that it has paid an amount of Rs. 2,85,000 would require evidence. The receipt of the amount of Rs. 1,99,038 is however not disputed and has also not been credited in the account of the respondent-company. The petitioners would have to prove that the said amount was received from the company on behalf of its sister concern in a separate transaction. Further, there is no dispute about the conduct in which the petitioner-company has lifted and taken away not only its hire purchase machinery but also the other machinery which did not belong to the petitioners. The value of the said machinery is said to be Rs. 8 lakhs. Some criminal proceedings are said to be pending in respect of the same. The last but not the least, the petitioners have resorted to Clause 18(a) of the agreement in respect of the arbitration proceedings in accordance with the provisions of the Indian Arbitration Act, 1940. The said clause begins as under :
"All disputes, differences and or claims arising out of this hire purchase agreement, shall be settled by arbitration . . ."
7. The petitioners ought to have disclosed this fact in the petition. It makes a great difference to the fact that the petitioners have resorted to an alternative legitimate arbitration remedy. Had the respondent-company not appeared in this proceeding the petitioners would perhaps have succeeded in getting an order of admission and advertising of the petition causing substantial injury to its standing and reputation. According to me it amounts to suppression of a material fact. The petitioners have not approached this court with clean hands but with an oblique motive to pressurise the respondent-company to recover the whole amount of debt which has been bona fide disputed by the respondent-company. The law is very well settled that the winding up proceedings cannot be resorted to by a creditor for recovery of a debt which is bona fide disputed. The respondents have disputed the said claim even prior to the filing of the petition in reply to the statutory notice. The petitioners have resorted to arbitration remedy which according to me, is the legitimate remedy available to them to resolve the differences and disputes which admittedly have arisen between the parties. There is no doubt in my mind that the petitioners want to be coercive and oppressive against the respondent-company with ulterior motives to pressurise the company to surrender to the dictates of the petitioners. The petitioners have also unlawfully taken away the property of the respondent-company worth Rs. 8 lakhs and have kept the same with it. Such a conduct of the petitioner-company has to be seriously viewed and deprecated. On top of everything the petitioners want this court to pass an order of winding up of the respondent-company without any further material and evidence in respect of the financial position of the company. I have no doubt in my mind that the petitioners have abused the process of the law and the court by filing this petition though the arbitration proceedings were in progress.
8. In these circumstances the company petition deserves to be dismissed and the same is dismissed with costs which are quantified as Rs. 15,000 to be paid by the petitioners to the respondent-company.