Patna High Court
Mangal Finance Limited vs Express Confectioners Pvt. Ltd. on 15 February, 2000
Equivalent citations: [2000]100COMPCAS399(PATNA)
Author: G.S. Chaube
Bench: G.S. Chaube
JUDGMENT G.S. Chaube, J.
1. This application by a petition under sections 433, 434 and 439 of the Companies Act, 1956 (hereinafter to be referred to as "the Act") is presented for an order for winding up M/s. Express Confectioners Pvt. Ltd., a company registered under the Act having its registered office at 55, Baralal Street, Ranchi, which shall hereinafter be referred to as "the respondent". The petitioner is M/s. Mangal Finance Ltd., a company registered under the Act having its registered office at Calcutta in West Bengal.
2. The case of the petitioner-company is that the respondent required a certain loan from Small Scale Industries Development Bank of India (in short SIDBI), to the tune of Rs. 80,00,000 for their Bread Project at Ranchi. For the purposes of syndication, etc., of the said loan from the SIDBI, the respondent took the services of the petitioner-company under an oral agreement and agreed to pay a sum of Rs. 1,60,000 in the following manner :
(a) Rs. 64,000 for preparation of project and filing of papers for loan syndication,
(b) Rs. 56,000 for processing of final loan documents for SIDBI, H.O. approval,
(c) Rs. 24,000 on receipt of sanction letter for loan ; and
(d) Rs. 16,000 on disbursement of loan.
It is stated that the loan was sanctioned by SIDBI under their letter dated September 25, 1996. Out of the said amount of Rs. 1,60,000 a sum of Rs. 9,000 was paid in advance and a balance of Rs. 1,51,000 remained to be paid by the respondent to the petitioner-company. Consequently, the petitioner-company raised a bill dated September 27, 1996, for the above-mentioned amount of Rs. 1,51,000. The bill is annexure 1. The case of the petitioner-company is that under their letter dated April 16, 1997 (annexure 2), the respondents admitted their claim for Rs. 1,51,000 and agreed to pay the same in two instalments of Rs. 1,35,000 and Rs. 16,000 by issuing two post-dated cheques. Rs. 1,35,000 was to be paid before the disbursement of the loan ; whereas the other sum of Rs. 16,000 was to be paid after disbursement. Post-dated cheques were undertaken to be despatched on April 1, 1997. However, the respondents made payment of Rs. 31,000 only and did not pay the remaining amount in spite of repeated demands and requests made in this behalf. Consequently, the petitioner served the respondent with a demand notice dated July 12, 1997 (annexure 3) in accordance with the provisions of Clause (a) of Sub-section (1) of Section 434 of the Act claiming a sum of Rs. 1,42,645 including interest at 24 per cent, per annum amounting to Rs. 22,645 till date. Under the demand notice, the respondents were required to make payment within 21 days from the date of receipt thereof. The demand notice was received by the respondents on July 17, 1997. Instead of making payment as demanded, the respondents sent a reply dated August 2, 1997 (annexure 4), taking a plea that there was a settlement between the parties in respect of the claim and pursuant to that settlement, they had paid a sum of Rs. 31,000 to the petitioner-company. Therefore, in view of the payment of Rs. 31,000 by way of full and final satisfaction of their claim, the petitioner-company was entitled to nothing. Consequently, this company petition was presented in this court on April 22, 1998, seeking winding up of the respondent-company.
3. The respondent has contested the petition asserting, inter alia, that simply because a demand notice claiming Rs. 1,42,645 was served on them and they have not paid the same for the reasons stated in annexure 4 to the petition, an order for their winding up cannot be passed on the ground that they are unable to pay the debt of the petitioner-company. According to them, they are a solvent company meeting all their liabilities and are capable of meeting their contingent and prospective liabilities.
The petitioner-company having failed to show to the satisfaction of the court that the respondent-company is unable to pay their debt, the prayer for winding up cannot be granted. The respondent have also contended in their counter-affidavit that in view of their stand from the very beginning that there was a settlement and in consequence of such settlement, a sum of Rs. 31,000 was paid by them to the petitioner-company, the debt of the latter due to non-payment of which the order for winding up is sought, becomes a disputed one. Once the debt is found to be bona fide disputed by the respondent, the remedy of the alleged creditor lies in the civil court and not by way of a winding up proceeding. Therefore, it has been contended on behalf of the respondent that this petition for winding up be dismissed and the petitioner-company directed to seek the remedy in the appropriate forum by instituting a suit.
4. It is not disputed that the petitioner-company had rendered services to the respondent in the matter of syndication for sanction of loan to the latter by the SIDBI. It is also not disputed that by way of fees at 2 per cent, of the amount of loan was receivable by the petitioner-company from the respondent. The fact also remains admitted that out of the total amount of Rs. 1,60,000 being 2 per cent, of the loan of Rs. 80,00,000, a sum of Rs. 9,000 had already been paid by the respondents through demand draft dated July 17, 1996. Annexure 1 is bill dated September 27, 1996, raised by the petitioner-company on the respondent. The bill is in respect of Rs. 1,60,000 on account of syndication fee for the bread project of the respondent at Ranchi at 2 per cent, of the loan of Rs. 80,00,000 sanctioned by the SIDBI under letter No. PFS 165, dated September, 25, 1996. In the bill, payment of Rs. 9,000 as advance is adjusted. Thus, a sum of Rs. 1,51,000 was shown to be payable by the respondent. Annexure 2 is a letter dated April 15, 1997 of the respondent to the petitioner-company in reply to letters dated August 23, 1996, and September 24, 1996, and other reminders sent by the petitioner-company in respect of payment of their outstanding fees for syndication of the term loan from the SIDBI. In the letter, the respondent specifically stated that they "are agreeable to the payment of the balance fees for project preparation and syndication of loan as mentioned in your letters dated August 23, 1996, and September 24, 1996, in the manner detailed therein". The amount payable was on account of preparation of project and filing of papers for loan syndication (Rs. 64,000) ; for Filing loan document for the SIDBI H. O. approval (Rs. 56,000) ; on receipt of sanction letter for loan (Rs. 24,000) and on disbursement of loan (Rs. 16,000). The letter had taken note of the advance of Rs. 9,000 already paid. Out of the total amount of Rs. 1,51,000 which had remained to be paid, the payment was undertaken to be made in two instalments; one of Rs. 1,35,000 before disbursement and another of Rs. 16,000 after disbursement. The respondent had undertaken to issue two post-dated cheques for the purpose, which were, probably, never issued.
5. It has been submitted by Mr. Mehta, learned counsel for the petitioner-company, that under letter dated April 16, 1997 (annexure 2), the respondents did admit the claim of the petitioner-company to the tune of Rs.1,51,000 and had agreed to pay in the manner stated above. Out of that amount, they paid only Rs. 31,000 keeping in balance a sum of Rs.1,20,000. Therefore, the respondents are liable to pay the same with interest. Since the respondent neglected to pay the above-mentioned debt, in spite of a demand notice being served in accordance with the provision of Clause (a) of Sub-section (1) of Section 434 of the Act, an order for winding up of the respondent is the only consequence.
6. On the other hand, Mr. Poddar appearing for the respondents submitted that the company petition is liable to be rejected on two grounds; first, that the respondent are a solvent company capable of meeting all their liabilities and obligations. Therefore, they cannot be taken to be unable to pay the debt within the meaning of Clause (e) of Section 433 and Sub-section (1) of Section 434, particularly, Clause (c) of the Act. Secondly, it is the consistent case of the respondent that there was a settlement between the parties and in consequence of such settlement Rs. 31,000 was paid to the petitioner-company. Therefore, there is nothing to be paid.
7. As regards the plea on behalf of the respondent that they are solvent and capable of meeting all their liabilities, contingent and prospective, the settled law is that if a demand notice is served on the debtor-company in accordance with the provisions of Clause (a) of Sub-section (1) of Section 434 of the Act and the latter does not make payment or neglects to pay the debt stated in the notice, a presumption regarding its insolvency is raised. Therefore, the onus shifts on the debtor-company to show that it is solvent. Be that as it may, the fact remains that it is nowhere the case of the petitioner-company that the respondent has become insolvent and, thus, incapable of honouring its liabilities including payment of the debt. What the petitioner-company has alleged and insists is that in spite of the fact that the respondent admitted the claim for Rs. 1,60,000, it has neglected to pay the same except Rs. 40,000 (Rs. 9,000 as advance and Rs.31,000 at a later stage) in spite of demand notice. Therefore, if it is shown by the petitioner-company that the respondent has neglected to make payment of the debt mentioned in the demand notice (annexure 3) without any just excuse, an order for winding up of the respondent may be made. The respondent, however, disputes the debt as claimed by the petitioner-company. Their case is that the petitioner-company did not complete the work of syndication properly as entrusted to them, inasmuch as they omitted and refused to furnish a personal bond in the SIDBI. Even when the respondent brought this deficiency to the notice of the petitioner-company, they remained silent over the issue. As a result, they requested the petitioner-company to call back or recall the bill submitted by them (annexure 1). It was in this background that a settlement was arrived at between the parties and towards satisfaction of the claim of the petitioner-company, a sum of Rs. 31,000 more was paid.
8. That the petitioner-company received Rs. 31,000 from the respondent after the issuance of letter dated April 16, 1997, by the respondent (annexure 2) and before issuance of the demand notice (annexure 3) is not disputed. Incidentally, there is no mention in the demand notice about receipt of Rs. 31,000 except that a sum of Rs. 1,20,000 was shown to be outstanding. It has been urged on behalf of the petitioner-company that the story of settlement between the parties as propounded by the respondent is a hoax and mere pretence of dispute to the admitted debt. Therefore, it cannot be taken to be a bona fide dispute so as to deprive the petitioner-company of an order for winding up of the respondent. It is stated that no detail of settlement is given in the counter-affidavit, such as, when that settlement was arrived at and between whom.
9. However, the fact remains that the story of settlement and payment of Rs. 31,000 pursuant thereto was not taken by the respondent for the first time after presentation of this company petition. Soon after receiving the demand notice (annexure 3), the respondent sent a reply dated August 2, 1997, Asserting that there had already been a settlement of the account and in pursuance thereof, the respondent had paid Rs. 31,000. In the circumstance, the story of settlement between the parties cannot, probably, be taken to be a bogey intended to defeat the claim of the petitioner-company and consequent winding up of the respondent due to neglect to pay the same in spite of demand notice. In this connection it may be mentioned that both the parties have not brought to this court the real facts. The petitioner have stated in their demand notice that they had made "repeated demands and requests" for payment of the dues after adjusting the advance of Rs. 9,000 and subsequent payment of Rs. 31,000. Not a chit of paper in support of such "repeated demand and request" has been produced by the petitioner-company. It appears that a sum of Rs. 31,000 was paid to the petitioner-company through a demand draft dated April 30, 1997. One infers that such demand draft would have been sent to the petitioner-company with a forwarding or covering letter. That letter could have shown the nature of payment. Neither the petitioner-company has produced that letter nor the respondent a copy thereof.
10. The respondent says that payment as agreed under annexure 2 could not be made in view of some deficiency in the service rendered by the petitioner-company and the latter denies it. There is oath against oath. Whether or not actually there was a deficiency in services rendered by the petitioner-company necessitating settlement of account between the parties, as alleged by the respondent is a question of fact which can be fully and fairly determined by a civil court in a properly instituted suit and not by this court exercising powers under the Companies Act on undisputed facts.
11. In the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Put Ltd., AIR 1971 SC 2600 ; [1972] 42 Comp Cas 125, the apex court has held that if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. On the facts stated above, it is difficult to agree with learned counsel for the petitioner-company that the dispute raised by the respondent respecting the debt of the petitioner-company is not bona fide and substantial. The respondent had already indicated to the petitioner-company soon after receiving the demand notice that nothing was due on account of the services rendered by the petitioner-company as there was a settlement of accounts between them and in pursuance thereof a sum of Rs. 31,000 was paid and received through demand draft dated April 30, 1997. In between the petitioner-company did not protest. For the first time, after about a year of such payment of Rs. 31,000 they presented this petition for winding up of the respondent.
12. Sections 433, 434 and 439 of the Act do not confer on any person a right to seek an order that the company be wound up. It only confers power on the court to pass an order of winding up in appropriate cases. The interest of the company and its members, shareholders and creditors as a whole is one of the considerations that weighs with the court while making an order on a petition for winding up. Such a petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order, but really to exert pressure has to be dismissed by the court because a winding up proceeding cannot be permitted to be a device for claiming disputed debts. The proper remedy to the aggrieved creditor is in a civil court and not by way of order for winding up of the debtor who disputes the existence of the debt. If the respondent had disputed the very existence of the debt of the petitioner-company in their letter dated August 2, 1997 (annexure 4), the petitioner-company would have been well advised to seek remedy in a civil court where the entire matter could have been thrashed out on evidence being led by the disputants and an appropriate order passed.
13. In the result, and for the reasons stated above, I see no reason to grant the prayer of the petitioner-company for winding up of the respondent. Therefore, this petition is dismissed. In the circumstances of the case, parties shall bear their respective costs.