Karnataka High Court
Kjmc Financial Services Limited vs Flora Wall Coverings Limited on 9 October, 2012
Author: L.Narayana Swamy
Bench: L. Narayana Swamy
1
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 09TH DAY OF OCTOBER 2012
BEFORE
THE HON'BLE MR. JUSTICE L. NARAYANA SWAMY
COMPANY PETITION.NO. 32/1997
BETWEEN:
KJMC FINANCIAL SERVICES LIMITED
A COMPANY INCORPORATED
UNDER THE PROVISIONS
OF THE COMPANIES ACT, 1956
AND HAVING IT'S
REGISTERED OFFICE AT 168,
ATLANTA, NARIMAN POINT,
MUMBAI-400021.
... PETITIONER
(BY SRI. GOUTAM, RAJESWAR AND
SRI.H.R.NARAYANA RAO, ADVS.)
AND
FLORA WALL COVERINGS LIMITED
HAVING ITS REGISTERED
OFFICE AT 376/35,
6TH CROSS, WILSON GARDEN
BANGALORE - 560 027.
... RESPONDENT
(BY SRI.S.M.CHANDRASHEKAR, ADV.)
THIS COMPANY PETITION IS FILED UNDER
SECTIONS 433(E) & (F), 434 AND 439 OF THE
COMPANIES ACT, 1956, PRAYING THAT FOR THE
REASONS STATED THEREIN THIS HON'BLE COURT
MAY BE PLEASED TO WIND UP THE COMPANY M/S.
2
FLORA WALL COVERINGS LTD., UNDER THE
PROVISION OF THE COMPANIES ACT, 1956.
THIS PETITION COMING ON FOR DICTATING
JUDGMENT THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
This petition is filed against the respondent under Sections 433(E) & (F), 434 and 439 of the Companies Act, 1956 and a prayer has been made to liquidate the company by passing the winding up order by the respondent.
2. The Borrower-Company situates at 376/35, 6th Cross, Wilson Garden, Bangalore, for the purpose of jurisdiction. The Authorised Share Capital of the borrower-company, the respondent herein is Rs.10,00,00,000/- divided into 100 Lakhs Equity Shares of Rs.10/- each. The Issued, Subscribed and Paid up Share Capital of the company is Rs.7,90,80,000/- divided into Rs,79,08,000/- Equity Shares of Rs.10/- each. The main objects of the Borrower-Company are, the respondent herein is to 3 carry on business of manufacturers, wholesalers, retailers, import, export and agents of all kinds of paper backed Textile Wall. The respondent-borrower further carrying the business of manufacturers and importers and exporters of all kinds of chemicals, dyes, gumming agents, adhesives required for the manufacture of paper backed textile wall coverings.
3. It is the case of the petitioner that, the respondent-company due to the petitioner a sum of Rs.47, 11, 965/- as on 31.01.1997 and the copy of the statement showing the particulars of the amount due and payable to the petitioner-company is marked as Annexure-A, which discloses the total amount due to the petitioner, the registered office is at Atlanta, Nariman Point, Bombay.
4. The petitioners who are registered as Category-I Merchant Bankers and also in providing Financial services to their clients as such, the respondent-borrowers had approached and borrowed a 4 sum of Rs.37,50,000/-. On 15.01.1996, an agreement was signed between the petitioner and the respondent, the agreement has been signed on behalf of the borrowers namely M.S.A.Aleem, Floor International Limited and Ms.Anuradha, Flora Silks limited, and it is the guarantors of the Third party. It was agreed to 36% interest, agreement has been produced at Annexure-B in the petition. Since, the amount borrowed has not been paid as agreed in the agreement, a Legal Notice was issued on 28.10.1996 as per Annexure-E.
5. Statutory notice was issued as per Annexure-G dated 13.12.1996 for the purpose of Section 434 of the Companies Act, calling upon the respondent-borrower to make payment of the principal sum of Rs.37,50,000/- together with dishonored cheque of Rs.1,12,500/- with agreed interest at the rate of 36%. The acknowledgment served on the respondent is produced at Annexure-J. Respondent has not chosen to reply to the notice. Hence, this petition is filed. 5
6. It is submitted by the petitioner that the transactions between the petitioner and the respondent has not been disputed in the statement filed to the company petition. The objections has been filed on 06.08.1997, wherein at para-4 and para-9 admission has been made with regard to para-10 and para-15 of the company petition, the respondent borrower admitted the loan borrowed from the petitioner company by way of cheque drawn on Union Bank of India and further the respondent has not admitted the due total sum of Rs.47,11,965/- as per Annexure-R1. However, according to the respondent Rs.28,02,803/- is due as per calculation at Annexure-R1. The respondent has not placed before this Court documents for having repaid the amount. Thus proves the case of the petitioner that, the respondent has not paid the said amount. Hence, the learned counsel for the petitioner submits that he has filed the case and prays for winding up of the company holding that the respondent is unable to pay the due to the petitioner.
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7. On 26.09.2012, when it was heard in part by referring the admission at paragraph-2 of submission that the statement of objections filed dated 27.09.2008, wherein admission has been made that the amount has been repaid to the petitioner. Learned counsel Sri.S.M.Chnadrashekar, was directed to place the materials before this Court as to what was the mode of payment to the petitioner and on his request the matter was adjourned to 03.10.2012 and again matter is called today. On 03.10.2012, the respondent has filed a memo along with documents and submitted that there was only single transaction between the parties as per Ex.P1. The Directors of the respondent-company have executed the Letter of Guarantee as per Ex.P13 and the agreement dated 26.01.2000 entered into between the petitioner company and respondent for having settled the dispute between them amicably and the memo dated 11.01.2007 filed in C.C.No.1006/S/2002 before Special Metropolitan Magistrate, 25th Court at Small Causes Court, Mumbai. Hence, the entire dispute in 7 respect of the borrowed amount was settled in terms of the agreement dated: 26.01.2007. Copy of the original agreement dated 26.06.2006 is produced along with the memo. The learned counsel submits to dismiss the petition since, the matter has been compromised between the two parties.
8. This Court by order dated 28.06.2011 directed the petitioner to tender evidence before the Civil Judge, Leave Reserve. By order dated 26.03.2012, cross-examination of PW.2 was taken as nil. Thereafter, an application was made in Company Application No.492/2012, the same came to be allowed on 02.04.2012 and the order dated 26.03.2012 was recalled and the petitioner was permitted to cross- examine Mr.Swadesh Agarwal. As it was directed to record the evidence, documents have been marked on behalf of the petitioner as per Exs.P1 to P14, P20, P21 and on behalf of the respondent no documents have been produced and they have not marked any documents and petitioners have been examined as PW- 8 1 and PW-2. The respondents are not subjected to cross-examination and again filed a memo dated 28.02.2012, before the Civil Judge, Leave Reserve to discard the evidence of PW-1, on the ground of ill-health and sought permission to record evidence of company secretary and the same was accepted.
9. On behalf of the petitioner, PW2 has been examined and in his cross-examination he has deposed that he knows about the transaction on the basis of the records and has no personal knowledge. He was appointed as Company secretary on 05.10.2011 and he has identified the documents on behalf of the petitioner as per Ex.P.1-agreement dated 15.01.1996. The transaction between the parties is in respect of providing financial services and they have got money lending licence from RBI. As per Ex.P.1, agreement entered into between Flora Wall Coverings Ltd. on one part and M.S.A. Aleem, Anuradha, Flora Silk Ltd and Flora International Ltd on the other part and as per the transaction reflected in IT returns and company balance 9 sheet, the rate of interest was payable at 36%. A cheque was issued for Rs.38,50,000/- and another cheque for Rs.1,12,500/- which were dishonoured and under Section 138 of N.I. Act, proceedings were initiated and the accused was acquitted in the said criminal case. PW.2 examined on behalf of the petitioner, who identified the agreement entered into between the parties and the contents therein, has stated that the transaction as per Ex.P.1 has been reflected in the IT returns and the balance sheet. Hence, to that effect, the IT returns and balance sheet produced before this Court that itself is insufficient to disprove the claim made by the petitioner and all the corporate transaction as per Ex.P.1. The evidence of PW.2 has been considered, in the light of Ex.P.1 dated 15.01.1996. Ex.P.1 is the agreement between the parties, wherein both the parties agreed for borrowing and lending a sum of Rs.37,50,000/- and in para No.2, the borrower agreed to pay the principal sum on 14.07.1996. The terms for payment of interest and installments are incorporated 10 in the agreement. On behalf of the petitioner-company one I.C.Jain and Girish Jain have signed and on behalf of the respondent-Company Sri M.S.A.Aleem and Smt.Anuradha have signed. Ex.P.2 is the post-dated cheque i.e. dated 14.01.1996 for a sum of Rs.3,75,000/. Ex.P.3 another cheque dated 14.07.1991 for a sum of Rs.1,12,500/-. Ex.P.6 is the bank endorsement dated 16.10.1996 with an endorsement "payment stopped by drawer". Statutory notice was issued on 13.12.1996 for the purpose of Section 434 of Companies Act. Ex.P.13 is the letter of guarantee dated 15.01.1996, wherein the directors of the Flora Wall Coverings Ltd, M.S.A.Aleem and Anuradha stood as guarantors.
10. In the light of the evidence of PW2 and documents referred supra, the point that arise for my consideration is:
"Whether the respondent-company committed an error in repaying the debt agreed as per Ex.P.1-agreement?"
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11. In response to the order made by this Court on last occasion to make submission with regard to statement of objections filed on 06.08.1997 and with reference to the contentions taken at para Nos.4 and 9, and 10 viz. regarding borrowing a sum of Rs.37,50,000/- on 15.01.1996 by way of cheque No.001672 drawn on Union Bank of India issued by the lender Company in favour of the borrower company. The borrower has admitted the same and it is stated by the Respondent-company that "This respondent admits that a sum of Rs.37,50,000/- was paid by the petitioner". The admission is made by the Managing Director of the Company, M.S.A.Aleem and he has further stated in para 2 of the statement of objection that the statements made in para-1 of the statement of objection are true to the best of his knowledge. Further, the statement made in para 9 with regard to para 15 of the petition, the petitioner has stated that respondent-company is due a sum of Rs.47,11,965/- as on 31.01.1997 at the rate of 36% p.a. compounded monthly. The respondent- 12 company in the statement of objection at para 9 has stated that "as already stated, the claim of the petitioner that this respondent is due in a sum of Rs.47,11,965/- to the petitioner is not correct. On the contrary, this respondent is due in a sum of Rs.27,27,803/- as mentioned in Annexure-R1". The admission made in para 9 with regard to the money transaction and due amount payable to the petitioner on the basis of Annexure-R1 cannot be accepted. It is the case of the petitioner that the respondent had borrowed a loan of Rs.37,50,000/-. In Annexure-R1 it is stated that loan is availed with interest at the rate of 36%, So, Rs.75,00,000/-was the principal amount and interest portion was Rs.2,25,000/- as on 15.01.1996. This supports the case of the petitioner that on behalf of the company, it is the Directors who have borrowed the amount. Pursuant to the direction issued to the petitioner's counsel and in view of the admission made in the statement of objections admitting the money transactions, they have filed a Memo stating that the 13 dispute between the parties have been settled. The said submission is placed on record. The agreement of settlement dated 26.01.2000 indicates that the debt was not on behalf of the company. The settlement is concluded for Rs.10,00,000/- payable to the respondent. The said settlement is in respect of Crl.No.712/1998. Under these circumstances, the direction issued to the respondent by order dated 26.09.2012 is not to the satisfaction of the Court and a Memo produced along with statement dated 13.10.2012, which does not arise out of the agreement of the petitioner with the respondent-company.
12. By the evidence on behalf of PW2, in the light of Ex.P.2 referred to supra, this Court is convinced that the respondent-company has failed in repaying the debt because of its financial condition and that the respondent-company is due in debt.
13. The money transaction between the petitioner and the respondent is clear from the 14 suggestion to the petitioner in the cross-examination of PW.2 and that the respondent has not led any evidence. Under these circumstances, I hold that the petitioner succeeds in convincing the Court for passing the order of winding-up of the respondent-company. Accordingly, the petition is allowed. The respondent-company is ordered to be wound up.
The petitioner is directed to serve a copy of this order to the Registrar of Companies within two weeks from the date of receipt of a copy of this order. The petitioner is further directed to take out advertisement of this order in the "Hindu", English Daily Newspaper and in "Vijaya Karnataka", Kannada Daily Newspaper, within two weeks from the date of receipt of a copy of this order.
Sd/-
JUDGE Rms