Madhya Pradesh High Court
M/S Bell Finvest (India) Ltd. vs M/S M.P. Proteins Pvt. Ltd. on 24 July, 2014
1
HIGH COURT OF MADHYA PRADESH
BENCH AT INDORE
(SB: HON. SHRI JUSTICE PRAKASH SHRIVASTAVA)
Company Petition No.19/2013
In the matter of Companies Act, 1956;
AND
In the matter of
M/s Bell Finvest (India) Limited
Having its registered office at
1107, 11th Floor Maker Chamber V,
Nariman Point, Mumbai-400021
Through its authorized representative
Milind Satpute ..... Petitioner
Versus
M/s M.P. Proteins Private Limited
Having its registered office at
26, Ganesh Chowk, Pipliya Mandi,
Mandsaur, M.P.-458664
And Factory at 10/2 and 11/2, Kanghatti Road,
PipliyaPanth, Mandsaur (M.P.) .... Respondent
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Shri R.C. Sinhal with Shri D.S. Panwar, learned counsel
for the petitioner.
Shri Rishi Tiwari, learned counsel for the respondent.
The Assistant OL also present in person.
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Whether approved for reporting :
ORDER
(Passed on 24/7/2014) Counsel for the parties have been heard on the question of admission as also on I.A. No.6018/2013 for appointment of the provisional liquidator and on I.A. No.3113/2014 questioning the maintainability of the petition.
1/ This petition under Section 433 read with Section 434(1)(a) of the Companies Act, 1956 (for short "the Act") has 2 been filed by the petitioner seeking winding up of the respondent-company.
2/ In brief, the case of the petitioner-company is that it is a Non Banking Financial Company incorporated under the Companies Act and that the respondent-company for the purpose of establishing and running an industrial unit, had obtained financial facilities from the State Bank of Bikaner and Jaipur and had committed default in repayment of loan and the outstanding amount was work out as Rs.3.45 Crores in the One Time Settlement proposal. The respondent-company had approached the petitioner to provide financial facilities by taking over the Non Performing Account from State Bank of Bikaner and Jaipur and to take possession of all securities and title deeds/documents lying with the said bank. The petitioner then, vide letter dated 20.12.2011, had sanctioned 5 secured business loans (NPA revival) of different account and the said loan amounts were disbursed from time to time in terms of the loan agreements. The respondent had committed default in payment of the monthly installments and no payments were made after October 2012. The outstanding amount is incurring interest. According to the petitioner, the admitted liability as on 7.2.2013 is Rs.22,36,94,438/-. On 7.2.2013, the petitioner- company had given statutory notice for winding up under Section 434(1)(a) of the Companies Act which was duly received by the respondent-company but neither the notice was replied, nor any amount was paid, therefore, the petitioner had filed the present company petition.
3/ The respondent has filed the reply disputing the liability of Rs.22,36,94,438/- by raising the plea that the petitioner has not adjusted the sum of Rs.6,21,73,155/- paid by the petitioner towards the repayment and advance interest and 3 that a sum of Rs.3,15,000/- paid to Mr. Milind Satpute has also not been accounted and a sum of Rs.14,65,378/- deposited in various accounts at the direction of the petitioner-company, have also not been taken into account. The loan of Rs.23.155 Crores is disputed and it has been pleaded that Civil Suit No.005A/2013 dated 8.5.2013 has already been filed by the petitioner for recovery of a sum of Rs.26,34,81,521/- and that the petitioner has, in the Email dated 8.1.2013, mentioned the outstanding amount of Rs.19.884 Crores which within one month has increased by Rs.2.485 Crores, which is not possible and that the petitioner in the Email dated 11.8.2012 had admitted that loan amount was of Rs.11.93 Crores and in the Email dated 23.8.2012 had admitted that the loan amount for Loan No.124 disbursed to the respondent was Rs.7.98 Crores and that directors and guarantors of respondent-company were forced to sign agreement of exaggerated amount of Rs.23.155 Crores with an assurance that it was merely for security purposes and will not be used against them and to support the disbursement of term loan amount mentioned in the agreement, Rs.17.955 Crores were transferred in the Bank account of the respondent-company as term loan and an amount of Rs.5.2 Crore of working capital loan was also transferred. Out of the amount so transferred, the respondent-company was asked to return Rs.7.403 Crores in cash to the petitioner-Company's agent and the said returned amount has not been accounted for. It has further been pleaded that the respondent-company was functioning properly till January 2013 but due to the intervention of the petitioner and non disbursement of the loan amount, the respondent-Company's business was ruined and that the respondent-company has large assets and is capable of functioning and producing marketable quality of refined oil.
44/ In rejoinder, the petitioner-company has stated that as on 8.1.2013 the proposed amount of settlement was Rs.16,76,51,159/-. They have disclosed the outstanding amount on different dates and have stated that the Civil Suit has been subsequently filed after filing the present winding up petition and that the One Time Settlement was submitted by the respondent-company on 7.9.2013 offering a sum of Rs.8 Crores which belies the stand taken by the respondent- company in the reply.
5/ I have heard the learned counsel for the parties and perused the record.
6/ Before proceeding further in the matter, the legal position in respect of the scope of consideration of such a petition and the necessary requirements need to be examined. Under Section 433(e) of the Act, a company may be wound up by the tribunal if the company is unable to pay its debt. Section 434 contains a deeming provision as to when the company is deemed to be unable to pay its debt and provides that if the company is indebted in a sum specified in Clause a of Sub- section 1 and is served by the creditor a demand in terms of the said Clause and within the stipulated period, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor, a company shall be deemed to be unable to pay its debt.
7/ On the other hand it is also the settled position in law that if debt is bonafide disputed on substantial grounds, petition for winding up shall not be entertained. In such a case party seeking winding up can not be regarded as creditor of company for purpose of winding up. If the debt is bonafide disputed, there can not be "neglect to pay" within the meaning of Section 433(1)(a) of the Companies Act and if there is no 5 neglect, the deeming provision does not come into play.
8/ The Supreme Court in the matter of IBA Health (India) Private Limited Vs. Info-Drive Systems SDN. BHD. reported in (2010) 10 SCC 553 has held that if the creditor's debt is bonafide disputed on substantial grounds, the Court should dismiss winding up petition and that a dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory and misconceived. The winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company and a party to the dispute should not be allowed to use the threat of winding up petition as a means of enforcing the company to pay the bona fide disputed debt and that a Company Court should act with circumspection, care and caution and examine as to whether an attempt is made to pressurise the company to pay a debt which is substantially disputed.
9/ The Supreme Court in the matter of M/s Madhusudan Gordhandas & Co. Vs. Madhu Woolen Industries Pvt. Ltd. reported in AIR 1971 SC 2600 has held that where there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of debt is disputed, the Court will make a winding up order without requiring the creditor to quantify the debt precisely. It has further been held that 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. In the matter of M/s Vijay Industries Vs. M/s Natal Technologies Ltd. reported in AIR 2009 SC 1695, the Supreme Court has held that Section 433 of the Companies Act does not state that 6 the debt must be precisely a definite sum. The Supreme Court in that matter had set aside the judgment of the High Court noting that on the date of filing of the application, dues in respect of at least a part of the debt which was more than the amount specified in Section 433 of the Companies Act was not denied and it is not the requirement of law that the entire debt must be definite and certain. The Supreme Court in the matter of M/s Vijay Industries (Supra) has held as under :-
"33. Section 433 of the Companies Act does not state that the debt must be precisely a definite sum. It has not been disputed before us that failure to pay agreed interest or the statutory interest would come within the purview of the word 'debt'. It is one thing to say that the amount of debt is not definite or ascertainable because of the bona fide dispute raised thereabout or there exists a dispute as regards quantity or quality of supply or such other defences which are available to the purchaser; but it is another thing to say that although the due as regards the principal amount resulting from the quantity or quality of supply of the goods stands admitted but a question is raised as to whether any agreement had been entered into for payment of interest or whether the rate of interest would be applicable or not. In the latter case, in our opinion, the application for winding up cannot be dismissed.
34. In M/s. Madhusudan Gordhandas & Co. (supra) [AIR 1971 SC 2600], this Court referred to the decision of the Chancery Division in Re. Tweeds Garages Ltd. [1962 Ch 406], holding :
"From those sections it appears that the only qualification which is required of the petitioners in this case is that they are creditors and about that, as I have said, there is really no dispute. Moreover, it seems to me that it would, in many cases, be quite unjust to refuse a winding up order to a petitioner who is admittedly owed moneys which have not been paid merely because there is a dispute as to the precise amount owing. If I may refer to an example which I suggested in the course 7 of argument, suppose that a creditor obtains judgment against a company for €€ 10,000 and after the date of the judgment something is paid off. There is a genuine bona fide dispute whether the sum paid off is €10 or €20. The creditor then presents a petition to have the company wound up. Is the company to be entitled to say: "It is not disputed that you are a creditor but "the amount of your debt is disputed and you are not, therefore, "entitled to an order"? I think not. In my judgment, where there is no doubt (and there is none here) that the petitioner is a creditor for a sum which would otherwise entitle him to a winding up order, a dispute as to the precise sum which is owed to him is not of itself a sufficient answer to his petition."
Re. Tweeds Garages Ltd. (supra), apart from M/s. Madhusudan Gordhandas & Co.
(supra), has inter alia been followed by the Bombay High Court in Pfizer Ltd. v. Usan Laboratories P. Ltd. [(1985) 57 CC 236] holding that only because there is a dispute in regard to the rate of interest, the winding up petition cannot be thrown out on that ground alone. Pfizer Ltd. (supra) has been followed by the Bombay High Court in Ispat Industries Ltd., in Re [(2005) 2 Comp LJ 235]. Pfizer Ltd. (supra) was a case of principal plus interest.
37. In this case, on the date of filing of the application, dues in respect of at least a part of the debt which was more than the amount specified in Section 433 of the Companies Act was not defined. It is not a requirement of the law that the entire debt must be definite and certain."
10/ This Court also in the matter of Sungrace Finvest Pvt. Ltd., Kolkata Vs. Maikaal Fibres Ltd., Bheelgaon reported in 2010(2) MPLJ 333 after taking note of the various judgments, specially the judgment of the Supreme Court in the case of M/s Madhusudan Gordhandas and Co. (supra), had passed the order of winding up.
11/ In the present case, the debt is not in dispute. It is 8 not in dispute that the respondent had signed the loan agreement for a sum of Rs.23.155 Crores and a sum of Rs.17.955 Crores was transferred in the Bank account of the respondent-company as term loan and an amount of Rs.5.20 Crore for Working Capital Loan was also transferred in terms of the agreement, but the claim of the respondent-company is that out of this amount, a sum of Rs.7.403 Crores was returned in cash which has not been accounted for. The respondent- company has further raised the plea that certain other amounts were also repaid which have not been adjusted while arriving at the final figure of the liability. Such a defence of the Company can not be held to be bonafide dispute on substantial ground for want of cogent material. That apart, one Time Settlement proposal dated 7.9.2013 (Annexure P/20) sent by the respondent to the petitioner reveals that the respondent as on 7.9.2013 was ready to pay Rs. 8 Crores, therefore, the liability of the respondent at least to that extent is undisputed. The said amount is more than the amount mentioned in Section 434(1)
(a) of the Act and inspite of receipt of the demand notice in terms of the said Clause, the respondent had neglected to pay the sum and there is also nothing on record to contravene the petitioner's plea that after October 2012 no repayments have been made, therefore, the respondent had apparently neglected to pay the sum and the deeming provision of Section 434(1)(a) is attracted and it can be held that the respondent- company is unable to pay its debt.
12/ Even otherwise the respondent-company is not disputing the debt but it is only disputing the quantum of debt and this aspect is squarely covered by the judgment of the Supreme Court in the matter of M/s Vijay Industries (supra), wherein it has been held that it is not the requirement of law 9 that the entire debt must be definite and certain and Section 433 is attracted if at least a part of the debt which is more than the amount specified in Section 433 of the Act, is not denied which is also the position in the present case.
13/ It is also worth noting that even as per the respondent's own showing the plant is not functioning and lying closed. It was operational from November 2012 to January 2013 i.e. only for about 3 months. No reliable material has been produced by the respondent to show how the debts of the petitioner will be paid by the respondent.
14/ In view of the above, I am of the view that it is a fit case for passing an order of winding up of the respondent-
company
15/ Accordingly it is directed that :-
(1) In view of the above analysis, Company Petition is admitted. Let the petition be advertised in accordance with the Rules.
(2) Considering the above circumstances, it is found that the petition has been presented on the ground that is just and equitable for passing an appropriate order of winding up. Accordingly I order winding up of the respondent-Company in accordance with the provisions of the Act read with the Company Court Rules, 1949.
(3) Accordingly and with a view to enable this Court to pass a final winding up order as contemplated under Rule 282 of the Rules, Official Liquidator of this Court who becomes a Liquidator of the Company by virtue of Section 449 of the Act, is appointed as Liquidator of the Company. The Registrar of this Court to take steps as provided 10 under Rule 109 of the Rules so that necessary orders as required under Rule 112 onwards can be passed by this Court, on the next date of hearing.
16/ In view of the above, I.A. No.2678/2014 for dismissal of the petition is found to be devoid of any merit. The I.A. is accordingly rejected.
List on 8/9/2014.
(PRAKASH SHRIVASTAVA) Company Judge Trilok.