Delhi High Court
Ambey Flour Mills Pvt. Ltd. vs Shri Vimal Chand Jain on 29 September, 1989
Equivalent citations: [1991]70COMPCAS561(DELHI), 40(1990)DLT78
JUDGMENT H.C. Goel, J.
1. Shri Vimal Chand Jain, the creditor-respondent, had filed a company petition under section 433 of the Companies Act, 1956 filed a company petition under section 433 of the Companies Act, 1956 (for short, "the Act"), against Ambey Flour Mills Pvt Ltd., the appellant, with the prayer that the appellant company may be wound up. The allegations of the respondent in the company petition are that he had advanced four sums of loan to the appellant, namely, Rs. 30,000 on January 24, 1980, and Rs. 15,000 on May 23, 1980, Rs. 27,500 on January 24, 1980, Rs. 15,000 on May 23, 1980, Rs. 30,000 on January 24, 1980, and Rs. 35,000 on August 7, 1980. The appellant repaid certain amounts against principle and interest, but the appellant-company was not paying the balance amount and that it had come to the knowledge of the respondent that the appellant-company which was replied to by the appellant. The appellant denied having received the alleged sum of Rs. 35,000 of loan about which only there is a dispute between the parties. The appellant made certain payments out of the three amounts of loans in question to the respondent during the preliminary enquiry on the company petition, By order dated August 4, 1987, the appellant was directed to file an affidavit giving the statement of account of the respondent in the books of account of the appellant relating to the date on which the payment of Rs. 35,000 in question was asserted to have been made. A certificate dated February 27, 1984, issued by Shri Vijay Gupta, managing director of the appellant-company, wherein the last entry of the receipt of Rs. 35,000 in question also appeared was shown to the learned judge on July 14, 1988. The learned judge, thereafter, passed the impugned order on that date admitting the company petition. A direction was also given to adverse about the petition having been admitted in two dailies and the Delhi Gazette. Against this order admitting the petition, the appellant in two dailies and the Delhi Gazette. Against this order admitting the petition, the appellant company preferred this appeal.
2. The respondent has opposed the appeal. We have heard arguments of learned counsel for the parties and were taken through the record of the case. The case of the respondent is that the sum of Rs. 35,000 was advanced by him to the appellant company as a loan. He served a notice in writing at the registered office of the appellant company demanding the refund of that amount together with interest thereon, but that the Appellant failed to pay the same or to secure or compound for that to his reasonable satisfaction for more than three weeks after the service of the demand notice on the appellant and that, as such , the appellant, company was unable to pay its debts within the meaning of section 433(e) read will section 434(a) of the Act ; that this was prima facie shown by the respondent of the learned company judge who, thereon, rightly admitted the winding up petition. Mr. Goyle, learned counsel for the appellant, i.e., Rs. 35,000 was taken as a loan by the appellant which question could only be decided by a civil curt and, under the circumstances, the question of any neglect by the appellant to repay the amount in question did not arise as the appellant bona fide disputed the factum of the alleged loan. It was submitted the the material as adduced by the parties on the record at the preliminary enquiry stage showed that the said plea of the appellant company was a bona fide plea and, as such, the learned judge grossly erred in admitting the winding up petition which has serious adverse repercussion on the appellant- company. It was contended that the moment the appellant company showed that there was a bona fide dispute regarding the existence of the amount of loan in question, the winding up petitioner's only remedy was to approach the civil court by filling a regular suit for the recovery of the alleged amount loan in question, if so advised.
3. We may say at the outset that we are of the considered view the no prima facie case whatsoever was made out by the respondent for the admission of the petition for winding up the appellant-company as it was not at all shown by the respondent that the appellant-company was unable to pay any debt owing form it as contemplated by section 433(e) of the Act. It is settled law and was not disputed by Mr. Rawal, learned counsel for the respondent, that the machinery of winding up is not to be allowed to be utilized simply as a means for realizing debts DUE from a company. A winding up petition is not the legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. However, if the debt is bona fide disputed, there cannot be 'neglect to pay' within the meaning of section 434(1)(a) of the Act. If there is no neglect, the deeming provision does not come into play and the ground of winding up,namely, that the company is unable to pay its debts, is not substantiated. A petition presented ostensibly for a winding up order but really to exercise pressure has to be dismissed and under such circumstances, may be stigmatised as scandalous abuse of the process of the court. With this legal proposition in view, we have to see if the appellant-company had raised a bona fide dispute regarding the existence of the loan in question and its liability to repay the same or the fact and circumstances brought out on the record went to show that the amount in question had been ADVANCED as a loan to the appellant company and the same was due tooth respondent and the plea of denial of the amount in question was raised by the appellant falsely and without any basis and was a mala fide plea with a view to defeat the petition for winding up of the company. Having regard to the facts and circumstances brought out on the record, we are of the clear opinion that it could not be said that the plea as raised by the appellant-company was not a bona fide plea and was a false or a designed plea. The respondent did not make any specific allegation that the appellant was unable to pay its debts, i.e., that it was unable to meet the current demands. As stated by us above already, the sole case of the respondent for seeking the winding up of the company is that the appellant-company has neglected to repay the sum of Rs. 35,000 together with interest thereon allegedly advanced as a loan to the appellant. The respondent had admittedly advanced the other three sums of loan during the period from January 24, 1980, to May 24, 1980. by cheques. The sum of Rs. 35,000 in question was, admittedly, not paid by any cheque. The respondent has taken contradictory stands as regards the mode of payment of the sum of Rs. 35,000 In para 4 of the petition, it was stated that this amount was paid in cash on August 7, 1980. In the very next para 5, this amount was shown as having been paid by pay order dated August 7, 1980. Two photo-copies of the certificate dated February 27, 1984, issued by Shri Vijay Kumar Gupta, a director of the appellant-company, giving the details of the loan as advanced by the respondent to the Appellant were placed on the record of the case. In one copy, there is on description given about the last item of Rs. 35,000 shown as one of the five amount of loans advanced by the respondent to the appellant were placed on the record of the case. In one copy, there is no description given about the last item of Rs. 35,000 shown as one of the five amounts of loan advanced by the respondent to the appellant. In th other copy, there is some description which is not quirt legible giving the date as August 7, 1988, Appearing against the entry relating to the sum of Rs. 35,000. This description, however, is clearly made with different hand and ink and is different from the entries appearing in the certificate prior thereto. No effort was made by the respondent to show before the learned company judge by summoning the record of the concerned bank or filing any certificate, etc., from the concerned bank to show that any such any order was issued by the respondent in favor of the appellant-company. Had the amount been paid order, there should have been no difficulty in filing such a document on the record, but no effort was made on behalf of the respondent get any such document produced on the record of the learned company judge.
4. Apart from all this, the appellant-company has alleged that the financial control of the appellant-company was in the hand of one Shri S. N. Bhandari who was the managing director of the appellant-company during the relevant period. Shri Bhandari is, admittedly, the real brother-in-law of Shri Vimal Chand Jain, respondent. It is averred by the appellant that although the Appellant never received th alleged sum of Rs. 35,000 from the respondent, however, Shri Bhandari had stated that Shri Vimal Chand Jain had told Shri Vijay Kumar Gupta,the present managing director of the appellant-company, that Shri Vimal KHAND Jain required a certificate urgently about his having advanced a loan of Rs. 35,00 to the Appellant company and that, at his instance, he (Shri Vijay Kumar Gupta0 issued the aforesaid certificate and as there were no particulars regarding the alleged payment of Rs. 356,00 he had left the space blank which was later on filled in by someone on behalf of the respondent as "Pay order dated August 7, 1980". It has also been pointed out on behalf of the appellant that whereas the appellant company issued regular receipts for the other three amounts of loan from the respondent, no receipt was admittedly issued by the appellant-company regarding the sum of Rs. 35,000. Keeping in view the facts and circumstances, the petition did not merit admission and deserved to be dismissed leaving the respondent to seek his remedy by way of a civil suit. The learned company judge observed that a book of account was produced before the court in terms of the order of the court dated April 29, 1988, read with the order passed on August 4, 1987, and that the learned judge was satisfied 9presumably by looking at the books of account as produced by the respondent) that a sum of Rs. 35,000 was paid out by the respondent to the Appellant-company. It was further observed that the appellant had already paid a sum of Rs. 1,07,000 to the respondent and only th sum of Rs. 35,000 had not been paid and in view of that the admitted the petition fro regular hearing. Firstly, the account book was produced by the respondent in pursuance of the order dated April 29, 1988, and the order dated August 4, 1987, also had any bearing n the matter of production of the books of accounts by the respondent. Then again, we fail to see how by the existence of an entry in the books of accounts of the respondent showing a debit of Rs. 35,00 tot the account of the appellant-company there was clinching evidence on which alone the court could be satisfied that the sum of Rs. 35,000 was, in fact, paid by the respondent to the Appellant-company. In fact,this was no stage for forming a final opinion so as to record satisfaction about the payment of the amount in question. All that the court was required to see at that stage was the prima facie state of things. The learned company judge thus misdirected himself and the impugned order is not sustainable. We, accordingly, accept the appeal, set aside the impugned order and dismiss the company petition with costs to the appellant throughout.