Andhra HC (Pre-Telangana)
Jumgo Cotton Enterprises vs Rayalseema Mills Limited on 15 June, 2007
Equivalent citations: [2007]138COMPCAS920(AP)
Author: Bilal Nazki
Bench: Bilal Nazki
JUDGMENT Bilal Nazki, J.
1. This appeal is filed against the order of learned Company Judge in CP No. 143 of 2002. The company petition was dismissed mainly on the ground that there was no ascertained or determined debt and the application of the petitioner firm related to the entries made in the petitioner's books of account prior to three years. Both the findings are challenged in this appeal by the petitioner/appellant.
2. It is pointed out by the learned Company Judge in para-10 of his judgment that E.A-61 was the running account, but it was for different periods. It gave the periods as 23.4.2001 to 304.2001, 28.5.2001 to 31.5.2001, 27.6.2001 to 6.7.2001, 27.7.2001 to 31.7.2001, 27.8.2001 to 31.8.2001, 18.9.2001 to 30.9.2001, 22.10.2001 to 31.10.2001, 22.11.2001 to 30.11.2001, 21.12.2001 to 31.12.2001, 23.1.2002 to 31.1.2002, 1.2.2002 to 28.2.2002 and 2.3.2002 to 23.3.2002. The learned Counsel for the petitioner/appellant submits that it was a running account and the last transaction was between 2.3.2002 to 23.3.2002. It is also contended by him that the learned Company Judge was not right in coming to the conclusion that there was no admitted liability, although Ex. A59, dt. 21.3.2001 was on record. Ex. A59 was not taken to be admitted liability by the learned Company Judge on the ground that the outstanding amount was subject to due reconciliation with the books of the respondent company. This is an agreement between the parties and it mentions, In agreement dated 16th December, 1997 both the parties have been confirmed outstanding as under:
M/s. Jumgo Cotton Enterprises - Rs. 5,89,157.00 M/s. Navyug Cotton Company - Rs. 11,30,509.00 Thereafter first party confirms that outstanding principle amount due on 30th July 1998 is Rs. 24,80,592/- as per the statement given by 2nd party, subject to due reconciliation with the books of The Rayalaseema Mills Ltd.
3. The learned Counsel for the appellant submits that the liability is accepted to the tune of Rs. 24,80,592/- and it was accepted subject to due reconciliation with the books of Rayalaseema Mills Limited, that does not mean that the liability is acknowledged. The dispute is not with regard to the liability, but there can be dispute with regard to the actual amount which was subject to reconciliation. In this connection he relies on a judgment of the Supreme Court reported in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. : 1972 (24) CC 125.
4. The Supreme Court in this case remarked that where there was no doubt that a company owes the creditor a debt entitling him to a winding up order, but the exact amount of the debt is disputed, the Court will make a winding up order without requiring the creditor to quantify the debt precisely. The Supreme Court said, Two rules are well settled. First if the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable See London and Paris Banking Corporation (1874) 19 Eq. 444. Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed. See Re. Brighton Club and Norfolk Hotel Co. Ltd. (1865) 35 Beav. 204.
Where the debt is undisputed the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt See In Re. A Co. 94 SJ 369. Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the Court will make a winding up order without requiring the creditor to quantify the debt precisely See In Re. Tweeds Garages Ltd. 1962 Ch. 406. 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.
5. Now coming to the other question on which the company petition was dismissed is the question of limitation, the learned Company Judge came to the conclusion that Ex. A59 was the last agreement which was entered into between the parties on 21.3.2002 and the running account came to an end by 23.3.2002. Taking these two dates into consideration, the learned Company Judge held, Therefore, it is contended that if the period of limitation is computed from the above dates, the competition is clearly barred by limitation and therefore the petition is liable to be dismissed.
6. Now if the date i.e., 21.3.2001 or 23.3.2002 is taken into consideration, the company petition was within the limitation and we fail to understand how the Company Court came to the conclusion that it was not within the period of limitation, if the dates were taken to be 21.3.2001 or 23.3.2002, as the period of limitation undoubtedly is three years. Perhaps the Company Court took the date 20.4.2005 for computing the period of limitation, but that was the date on which the company petition was decided. The company petition, as record reveals, was filed on 31.3.2002. Therefore, in our view, the company petition was within time as well.
7. For these reasons, we allow the appeal and admit the company petition. The company petition be now decided on merits. By setting aside the order of the learned Company Judge, we have not gone into the merits of the case as far as winding up is concerned. Therefore, the learned Company Judge may proceed in the matter and pass appropriate orders.