Andhra HC (Pre-Telangana)
Glass And Ceramic Decorators vs Virat Crane Bottling Ltd. on 21 June, 2004
Equivalent citations: 2005(5)ALT113
ORDER V.V.S. Rao, J.
1. This petition is filed under Section 433 (e) and 439 of the Companies Act, 1956 (for short the Act) by M/s. Glass and Ceramic Decorators, a unit of Mahalakshmi Glass Works (P) Limited, Mumbai, seeking an order of winding up of M/s. Virat Crane Bottling Limited on the ground that the respondent is unable to pay its debts and therefore it is just and equitable that the Company to be wound up.
2. The respondent is registered as Public Limited Company under the provisions of the Companies Act, 1956 having its Registered Office at Hyderabad. The authorized capital of the Company is Rs. 1,00,00,000/- (Rupees one crore only) divided into 10,00,000 equity shares of Rs. 10/- (Rupees ten only) each, which was subsequently enhanced by a special resolution dated 4-8-1999 to Rs. 10,00,00,000/- (Rupees ten crore only) consisting of 1,00,00,000 equity shares of Rs. 10/- (Rupees ten only) each. The entire capital is paid up and fully subscribed. The respondent company was incorporated with main object of carrying on the business of manufacturing and marketing soft drinks, mineral water, aerated water and carbonated water and related packing material.
3. It is the case of the petitioner that on 25-11-1998, M/s. Parle (Exports) Limited, the respondent's business associates, placed an order by way of fax message to dispatch 2,40,000 numbers of 300 ml. 'BISLERI CLUB SODA' bottles to the respondent company at Hyderabad. By a further letter dated 3-12-1998, M/s. Parle (Exports) Limited asked the petitioner to dispatch fifteen (15) truck loads of Soda bottles to respondent with bills to be raised in the name of the Company. By another letter dated 31-12-1998, the petitioner was asked to send eight (8) truck loads of the soda bottles to the respondent company. The petitioner, by letter dated 28-12-1998, informed the conditions of supply. As per these conditions, forty days credit was given from the date of dispatch for making payments. Invoices were raised in respect of the consignment and the goods were dispatched on and from 26-11-1998, duly marking a copy of invoice to Mr. Karkare of M/s. Parle (Exports) Limited. By letter dated 13-3-1999, the respondent company sent a Demand Draft for an amount of Rs. 34,90,000/- (Rupees thirty four lakh ninety thousand only) informing that the balance amount would be clear later. The petitioner thereafter called upon to pay the balance amount of Rs. 10,00,649.28 ps (Rupees ten lakh six hundred and forty nine and paise twenty eight only) but the respondent company failed and neglected to make payment or reply to the letters dated 24-5-1999 and 30-8-1999. The petitioner also addressed letters dated 15-10-1999 and 13-1-2000 to Mr. Ramesh Chauhan of M/s. Parle (Exports) Limited requesting for due payment of balance amount of aforementioned. It is alleged that the respondent company by letter dated 2-5-2000 signed by the Company's Accounts Manager, Mr. Janibasha, Accounts Officer, confirmed the balance dues to the petitioner. But did not pay the amount. The petitioner deputed the Assistant Sales Manager Ms. S.B. Kulkarni to visit the company at Guntur to collect the balance amount when the respondent company handed over a Demand Draft for an amount of Rs. 1,00,000/-(Rupees one lakh only) by way of part payment. The respondent company also issued 'C' Form No. 0642829. The respondent company never protested about quality and quantity of the bottles supplied and also assured to pay the balance amount within three months. The petitioner's advocate issued a notice dated 2-8-2000 to the respondent company as well as M/s. Parle (Exports) Limited calling upon to pay the outstanding dues in respect of various invoices raised for consignments dispatched. In spite of receiving the letter, the respondent company failed and neglected to pay the amount of Rs. 9,00,649.28 ps (Rupees nine lakh six hundred forty nine and paise twenty eight only) along with interest.
4. This Court ordered Notice Before Admission. The matter is being listed for orders as to publication of petition since 16-3-2002. The respondent entered appearance through the counsel and a counter affidavit is filed before this Court opposing the company petition. In the counter affidavit, it is stated that the respondent company denies any debt due to the petitioner and allegation that the respondent is unable to clear off the debts, is denied. An objection is raised regarding maintainability of the company petition. When the matter was heard for admission, the learned counsel for the respondent raised preliminary objection that the company petition is not maintainable for want of a statutory notice under Section 434(1)(a) of the Companies Act, 1956.
5. Having regard to the submission and also having regard to the fact that a copy of such notice has not been annexed to the Company Petition, this Court adjourned the matter on 18-6-2004 to enable the learned counsel for the petitioner to produce a copy of the notice issued under Section 434(1)(a) of the Companies Act, 1956. On 21-6-2004, the learned counsel for the petitioner Sri Subrahmanyam Kurella submitted across the bar that the petitioner company is not in a position to file any acknowledgement of the notice dated 2-8-2000 allegedly issued by the advocate on behalf of the petitioner company and that the acknowledgement is lost. He, however, submits that even in the absence of a statutory notice, an inference can be drawn that the respondent company is unable to pay its debts. He vehemently contends that there is no dispute about the amount of debt due to the petitioner by the respondent and that the respondent company is financially crippled to pay its debts. He contends that even in the absence of a notice under Section 434(1) of the Act, a Company Petition for winding up would be maintainable. He relied on the judgments of Hyderabad Abrasives and Minerals Private Limited v. Andhra Cements Limited, 2003 (2) ALD 658, Color Coats, Hyderabad v. Venkataramana Hotels Limited, Hyderabad, 1998 (2) An.W.R.62, Devendra Kumar Jain v. Polar, Forgings and Tools Limited, 1995 (84) Company Cases 756, Tripura Administration v. Tripura State Bank Limited, 1960 (30) Company Cases 324 and Garodia Hardware v. Nimodia Plantations, 1999 (98) Company Cases 636.
6. The learned counsel for the respondents refutes the contentions and submits that the respondent company is not due to pay any amount to the petitioner company and that there is a dispute with regard to the amount claimed by the petitioner, after having received Rs. 34,90,000/- (Rupees thirty four lakh ninety thousand only). Therefore, the issue was corresponded with the officials of the petitioner company for seeking clarification and that Mr. Janibasha was never authorised to confirm the balance amount due to the petitioner. The amount paid by the company by way of Demand Draft for Rs. 1,00,000/- (Rupees one lakh only) is only a matter of 'on accounts dues' basis to avail certain tax exemptions and the same does not amount to admission of the debt. He also submits that respondent is ongoing concern and the allegation that it is a commercially insolvent is far from truth.
7. The point that would arise for consideration is whether a petition without there being any proof of service of notice as required under Section 434 (1) of the Companies Act, 1956 would be maintainable?
8. There is a dispute regarding the amount due by the respondent to the petitioner. The liability is not admitted. Therefore, it cannot be said that the respondent company is unable to pay its debts. In a situation of this nature, if a person approaches this Court for an order of winding up of the company, such person has to necessarily rely on Section 434 of the Companies Act, 1956. It reads:
434. Company when deemed unable to pay its debts.
(1) A Company shall be deemed to be unable to pay its debts-
(a) if a creditor, by assignment or otherwise, to whom the company is indebted on a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor;
(b) if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or
(c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and in determining whether a company is unable to pay debts, the Court shall take into account the contingent and prospective liabilities of the company.
(2) The demand referred to in Clause (a) of Sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm.
9. The above provision contains a rebuttable presumption. If a company fails to pay a sum exceeding five hundred rupees within a period of three weeks after receiving a demand by registered post delivered at registered office of the company, it may be presumed that a company is unable to pay its debts. The deemed provision only discharges the obligation of the creditor to make any further attempt to invoke provisions of Section 433(e) of the Act. Nonetheless the allegation that a company is unable to pay its debts has to be proved to the satisfaction of the Court. At the preliminary stage of ordering publication of a petition, for winding up as contemplated under Rule 99 of the Companies (Court) Rules, 1959, the condition precedent is whether the petitioner has issued the notice under Section 434 of the Act. In the absence of any such notice or proof that such notice has been delivered on the company as required under Sub-section (2) of Section 434 of the Act or otherwise, the presumption under Section 434 (1) cannot be drawn.
10. The various decisions relied on by the learned counsel for the petitioner have no relevance to the contentious issue raised before this Court. Therefore, I am not able to countenance the submission of the learned counsel for the petitioner that even in the absence of any notice, a Company Petition under Section 433 (e) of the Act would be maintainable. The acceptance of the submission would amount to ignoring Section 434 (1) of the Act, which the Court must avoid.
11. I see no merit in the case of the Company Petition and therefore the Company Petition is dismissed.