Gujarat High Court
Essel Propack Ltd vs Ajanta India on 5 August, 2013
Author: K.M.Thaker
Bench: K.M.Thaker
ESSEL PROPACK LTD....Petitioner(s)V/SAJANTA INDIA LTD....Respondent(s) O/COMP/203/2012 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY PETITION NO. 203 of 2012 ================================================================ ESSEL PROPACK LTD....Petitioner(s) Versus AJANTA INDIA LTD....Respondent(s) ================================================================ Appearance: MS MEGHA JANI, ADVOCATE for the Petitioner(s) No. 1 MR MANAV A MEHTA, ADVOCATE for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE K.M.THAKER Date : 05/08/2013 ORAL ORDER
In this petition, under Sections 433 & 434 of the Companies Act, 1956 [hereinafter referred to as the Act ], the petitioner has prayed, inter alia, that:-
16(a) that the Respondent Company, Ajanta India Limited, be ordered to be wound up by and under the orders and directions of this Hon'ble Court under the provisions of the Companies Act 1956;
(b) that the Official Liquidator attached to Hon'ble High Court of Gujarat or some other fit or proper person be appointed by this Hon'ble Court as liquidator of the Respondent Company Ajanta India Limited with all powers under the provisions of the Companies Act, 1956;
(c) that pending the hearing and final disposal of the Petition the Official Liquidator attached to High Court of Gujarat be appointed as Provisional Liquidator of the Respondent Company, Ajanta India Limited, with all powers under the Companies Act, 1956, including the powers to take charge of the assets, affairs, books of accounts, records, documents, vouchers, bills, etc. of the Respondent Company and be directed to immediately take complete charge and control of the said Respondent Company.
(d) that pending the hearing and final disposal of the petition, the Respondent Company, Ajanta India Limited, its servants, agents and officers be restrained by an order of injunction of this Hon'ble Court from in any manner directly or indirectly selling, transferring, disposing off or alienating, encumbering, parting with possession of or creating any third party rights on or to its assets or properties, in any manner whatsoever.
(e) for ad-interim relief's in terms of prayer (c) and (d) hereinabove;
(f) for costs of the petition; and
2. The petitioner has taken out present petition on the premise that the respondent has failed and neglected to make payment of the amount of bills raised by the petitioner company after having supplied certain goods for which purchase orders were placed by the respondent company. The petitioner company has claimed that despite repeated requests, the respondent company failed and neglected to make the payment and that therefore, the petitioner company was constrained to issue statutory notice dated 9.3.2010 and 5.3.2012 (served on 7.3.2012) which were duly served at the respondent company's registered office. It is also claimed that the respondent company owes Rs.37,58,194=87 which it is obliged to pay with interest at the rate of 21% p.a. to the petitioner company. The petitioner has also alleged that despite service of statutory notice, the respondent company has not given any reply and has not made any payment and that therefore, the said action or inaction of the respondent company amounts to neglect to pay within the meaning of the term as contemplated under Section 434 of the Act. It is also claimed by the petitioner company that the respondent company has lost its capacity to pay and is unable to discharge its financial obligations and therefore, it is, even otherwise, equitable that the respondent company may be ordered to be wound up.
3. After hearing the petition, the Court issued notice to the respondent company in reply to which, the respondent company entered appearance and has opposed the petition by filing reply affidavit.
3.1 It is claimed and contended by the respondent company that the petitioner company has exaggerated the alleged dues. It is also claimed and contended that several disputed issues of facts are involved in the matter and that the respondent company is a going concern and that therefore also, there is no justification to pass the order as prayed for by the petitioner company.
4. Ms. Jani, learned counsel, has appeared for the petitioner and submitted that the respondent has failed and neglected to make payment of the invoice amount, despite repeated requests. She submitted that the invoice were raised for having supplied the goods / material to the respondent company in pursuance of the purchase orders placed by the respondent company. She submitted that according to the petitioner company, a sum of Rs.37,58,194=87 towards principal amount and Rs.30,66,856=00 towards interest, i.e. an aggregate sum of Rs.68,25,051=00 is due and payable by the respondent company, which has not been paid even after statutory notice. Ms. Jani, learned counsel, submitted that the respondent did not even reply the statutory notice and the claim made in the statutory notice was not disputed and denied by the respondent company within 21 days or within reasonable time after the service of statutory notice. Ms. Jani, learned counsel, further submitted that, actually, at one stage, the respondent vide their communication dated 4.10.2009 admitted their liability to the extent of Rs.26,92,937=00 and, then, subsequently, vide their communication dated 8.2.2012, the respondent company even offered to pay Rs.15,00,000=00 in 3 installments and for the balance amount, the respondent company submitted that it will suggest further schedule, during which time, the balance amount will be paid. Ms. Jani, learned counsel, submitted that despite such admission, the respondent company not only failed and neglected to pay the dues of the petitioner company, but also failed to pay any amount even as per their own admission, assurance and schedule. Ms. Jani, learned counsel, submitted that the default on the part of the respondent company in making payment of the petitioner's dues and, in any case, the amount as per their own admission, demonstrates that the respondent company has lost its capacity and ability to make payment and discharge its debts and that therefore, the petitioner is entitled for order of admission of the petition. Ms. Jani, learned counsel, relied on the decision by Hon'ble Apex Court in the case between M/S. MADHUSUDAN GORDHANDAS & CO. v. MADHU WOOLEN INDUSTRIES PVT. LTD. [AIR 1971 SC 2600], more particularly para 20 and 21 of the said decision, which read thus:-
20. 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..Brigton Club and Norfolk Hotel Co. Ltd., (1865) 35 Beav, 204).
21. 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 Re..A Company 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 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. Mr. Mehta, learned counsel for the respondent company, has opposed the petition and submitted that:-
[a] the alleged dues are not crystallized;
[b] the claim made in the petition is barred by limitation; and [c] the respondent-company has genuine/bonafide defence.
On the aforesaid three grounds, the respondent company has opposed the petition. As part of the 3rd ground of defence, learned advocate for the applicant company also claimed that the petition involves various disputed questions and facts and therefore also, the petition is not maintainable and deserves to be dismissed.
5.1 Mr. Mehta, learned advocate for the respondent company, referred to the reply affidavit filed by the respondent company. On the strength of the details mentioned by the respondent company, Mr. Mehta, learned counsel, submitted that the respondent company has raised dispute as regards (i) quality of the goods/material dispatched by the petitioner company; and (ii) also about quantity of goods/material;
and (iii) also with regard to the agreed rates; and (iv) freight charges.
5.2 Mr. Mehta, learned advocate for the respondent company, submitted that the said disputes/defence between the parties still survive and exist and therefore, the petition does not deserve to be entertained. Mr. Mehta, learned counsel, also submitted that the respondent company had not acknowledged in writing its liability to pay Rs.37,58,194=87. Mr. Mehta, learned counsel, relied on the documents annexed to the reply affidavit and submitted that, at the relevant time, the respondent company had raised debit notes, which demonstrate the fact that the respondent company had raised dispute as regards the quality, quantity and rates at the relevant time, which is evident from the debit notes, which are annexed to the reply affidavit. On such grounds, Mr. Mehta, learned counsel, opposed the petition and submitted that the petition is not maintainable and does not deserve to be entertained.
In support of his case, Mr. Mehta, learned advocate for the respondent company, relied on the decision in the case between MEDIQUIP SYSTEMS (P) LTD. v. PROXIMA MEDICAL SYSTEM GMBH [(2005) 7 SCC 42] and submitted that if the alleged dues are uncertain and are not crystallized, then, the company petition for such uncertain amount is not maintainable.
6. In rejoinder, learned advocate for the petitioner also submitted that the respondent is not right in contending that the amount claimed by the petitioner is not crystallized. She submitted that the principal amount claimed by the petitioner is Rs.37,58,194=87 and the interest payable by the respondent company, in the event of delay, is fixed at 21% and that therefore, it cannot be said that the petitioner's claim is not crystallized. Ms. Jani, learned counsel for the petitioner, further submitted that the defence and contentions raised by the respondent company are not genuine and bonafide and actually, the so-called defence raised by the respondent company is dishonest defence. To support and justify her submission, Ms. Jani, learned counsel, referred the debit notes on which the respondent company has placed reliance. She submitted that even a glance at the debit notes show that the debit notes are concocted and have been created subsequently. According to learned advocate for the petitioner, the period in question in present petition is the period during which the goods were supplied and invoice were raised, i.e. from 2004 to 2006. However, the new symbol for Indian currency which is reflected from the said debit notes is the symbol which came to be introduced for the first time vide notification dated 26.8.2010, which goes to show that the debit notes have been created after 26.8.2010 and that therefore, the inevitable conclusion is that the debit notes are fabricated only for the purpose of opposing present petition. She claimed that at the relevant time, the respondent company had never raised any debit notes and any debit notes were not received by the petitioner company.
7. Countering the said allegation, Mr. Mehta, learned advocate for the respondent company, submitted that, at the relevant time, when the purchase orders were placed and the goods / material was supplied, the respondent company was having its office and establishment at Haryana which, subsequently, came to be shifted to Gujarat and in the said process of transfer, the original debit notes have been lost and therefore, when the petitioner came out with the claim, the respondent company prepared the copies of the debit notes on the basis of available record, including its ledger accounts, etc. and that therefore, in the typed copies, the said symbol has appeared. However, that does not mean that, at the relevant time, the debit notes were not raised and/or were not forwarded to and served on the petitioner company. So as to support the said submission, Mr. Mehta, learned counsel, relied on the document (email) dated 12.10.2012 [Annexure-I, Page-170] and submitted that the said document is from the office of the petitioner company and in the said message also reference of debit notes is made which brings out that at the relevant time, the debit notes were raised and the officers of the petitioner company was aware about the said aspect.
8. I have considered the rival submissions made by learned counsel for the petitioner as well as the respondent. I have also considered the material placed on record by the petitioner and the respondent.
9. If the respondent has bonafide defence and genuine dispute, then, such dispute will have to be considered by the Court, and having regard to the nature of such bonafide defence, if it appears to the Court that the trial would be necessary, then, the Court may not entertain the petition. However, the said position will be applicable where the defence is genuine and bonafide, but not in cases where the defence is dishonest or a ruse only to defeat the petition. In present case, when all facts and material on record as well as the contentions and explanations of respondent are conjointly considered, then, the alleged debit notes which reflect newly introduced sign/symbol for Indian currency do case a shadow of doubt on respondent's defence and make it difficult to accept, acknowledge and digest it as bonafide defence or genuine explanation.
10. So as to consider the request made by the petitioner in the petition, the Court is required to keep in focus the legal position explained by the Hon'ble Apex Court that, if the defendant claims that he has sufficient fund to discharge the debts, but he does not pay the due amount, then, only because the defendant appears to have fund to discharge the debts, the order of admission may not be denied to the petitioner. Differently put, if the defendant claims that, and adopts a stand that, I have pocket full of money but I don't want to and I will not pay - you then such stand will not save the defendant from order of admission of petition under Section 433 r.w. Section 434 of the Act. It is also settled that the company petition under Section 433 of the Act is not a remedy or mode for enforcing recovery of money. Equally so, it is also settled that in cases where disputed questions of facts arise in light of the claim and defence and the issues are such which would oblige the parties to lead evidence, oral as well as documentary, then, the Court would ordinarily refrain from exercising discretionary jurisdiction available under Sections 433 and 434 of the Act.
10.1 In the present case, (1) it is not in dispute that, at the relevant time, the respondent company had placed purchase orders with the petitioner company for purchasing goods/material as mentioned in the purchase orders; and (2) it is also not in dispute that the rates at which the specified / described goods/material were to be supplied were agreed upon by and between the parties; and (3) it is also not in dispute that in accordance with the purchase orders, the petitioner supplied the requisite goods/material. Beyond this stage, the disputes surface, inasmuch as the respondent claims that part of the goods/material supplied by the petitioner were allegedly not as per the specification and/or were not matching with the agreed quality. Another dispute, which, as mentioned above, has surfaced is alleged shortfall in quantity and alleged upward revision in rates. The petitioner has claimed that the invoice raised by it in respect of the goods / material supplied to the respondent is as per the applicable rates at the time when the goods/material were supplied, whereas the respondent would claim that for the entire period, the rates of the goods/material in question were agreed and the invoice ought to have been raised as per the said agreed rates.
10.2 During the hearing, learned advocate for the respondent company, however, could not dispute or deny the document at Annexure D [page-19] and at Annexure F [page-25].
10.3 A conjoint reading of the said two documents give out that the respondent company agreed and accepted that even according to its own accounts, it has to pay a sum of Rs.26,92,937=00 to the petitioner. The respondent, vide communication dated 4.10.2009 invited petitioner's confirmation.
10.4 The petitioner has claimed that actually the due amount towards principal claim is Rs.37,58,194=87 and not Rs.26,92,937=00 as suggested by the respondent and the petitioner claims said amount Rs.37,58,194=87 with interest at the rate of 21%, however, despite the said dispute raised by the petitioner as regards the exact amount payable by the respondent towards principal claim, the fact remains that the respondent company itself claimed that a sum of Rs.26,92,937=00 is outstanding and the said amount is to be paid to the petitioner.
10.5 Subsequently, vide its communication dated 8.2.2012, the respondent also suggested a schedule for payment. The said communication dated 8.2.2012 reads thus:-
DEAR SIR AS PER DISCUSSION WE ARE INFORMING YOU THAT WE WILL PAY YOUR OUTSTANDING AS PER GIVEN DATED.
TILL 20TH FEBRUARY 5 LACS TILL 29TH FEBRUARY 5 LACS TILL 10TH MARCH 5 LACS REST WE WILL GIVE PLAN ACCORDINGLY IN MARCH 10.6 The said communication, particularly the clarification by the respondent company to the effect that REST WE WILL GIVE PLAN ACCORDINGLY IN MARCH brings out that the respondent company on its own volition suggested the schedule for payment of Rs.15 Lacs during the period from 20th February to 10th March and that the balance amount will be paid as per the plan which would be discussed in the following month.
From the said document, it emerges that the respondent company, in any case, has not disputed and has admitted the liability to pay Rs.26,92,937=00. It is also pertinent to note that the said communication is made by the respondent after rather much later than the disputed debit notes.
10.7 The petitioner has raised serious doubts with reference to the debit notes, which are relied on by the respondent company, and that therefore, it becomes relevant to consider the fact that the respondent company has not placed on record any communication or any material to demonstrate that it had contemporaneously returned the goods/material which according to it was of substandard quality or was not as per the agreed specification.
It is not even the case of the respondent company that it had returned the goods/material which according to it were of substandard quality.
It is also not the case of the respondent that it had asked the petitioner to take back those goods/material [i.e. the goods/material which (allegedly) were of substandard quality].
In such situation, prima facie, it would appear that the respondent company, in all probability, consumed the goods/material supplied by the petitioner and that therefore, it would also appear that the dispute raised by the respondent company in its reply affidavit is merely an afterthought.
A probability or possibility of such inference arises because the respondent has, [a] not produced even 2nd or 3rd copy of the debit notes and only subsequently, prepared (on computer) copies of debit notes and are placed on record; and [b] did not give any reply (raising any of the said contentions, which are now sought to be raised) in response to the statutory notice issued by the petitioner.
10.8 In light of these facts and in view of such circumstances, it appears appropriate to ascertain as to whether the respondent company is acting bonafide and is actually raising a bonafide defence and genuine dispute, or not, because is not enough to merely have a defence, but what is required, to convince the Court to not accept the petition and to not grant order of admission, is to demonstrate before and satisfy the Court that it, i.e. the respondent, has bonafide defence and dispute.
10.9 As mentioned above, in absence of any genuine and satisfactory material, it is difficult to accept, at this stage, the respondent's defence on the ground of allegations related to quality of the goods/material.
So far as the so-called dispute related to agreed rates is concerned, if the respondent company was acting bonafide, it would have atleast made the payment of the amount at the rates which according to it was settled, i.e. as per the agreed rates, however, the respondent company has not made payment even as per the rates which according to it was agreed upon with the petitioner.
Therefore, at this stage, it is difficult to, prima facie, accept the respondent's contention on the ground that there is dispute about the rates of the goods/material in question.
The reservation, which is applicable to the issue about the rates, is also applicable to the alleged dispute regarding quantity. It is undisputed that the respondent has not made payment even for the quantity received and consumed by it.
It is also pertinent to note that the claim relates to the period between 2004 to 2007 and for almost 6 to 7 years, the respondent has not made payment even in respect of the goods/ material for which there was no dispute regarding quality and/or quantity of goods/ material received and consumed by it.
10.10 In such circumstances, as mentioned above, it becomes crucial for the respondent company to satisfy the Court about its bonafide.
10.11 In this context, reference needs to be made to the decision of this Court in the case between FICOM ORGANICS LTD. v. LAFFANS PETROCHEMICALS LTD. [2000 (99) CC 471] wherein the Hon'ble Apex Court has observed in para 48 to 57 thus:-
Findings on factual controversy
48. Having heard the learned counsel for the parties, for the reasons recorded hereunder, it is clear that the defence raised by the respondent-company about the delay in delivery and about quantity, quality and price of the material supplied by the petitioner is not bona fide.
49. In the first place, as far as the dispute about the delay in delivery is concerned, from the material on record it is clear that although the respondent-company had purchased material from another company called Sunshield Chemicals Ltd., the company was not required to pay any higher price as the said party has supplied the material to the respondent-company at a lower price. From the material on record, it is also clear that the delay, if any, on the part of the petitioner in supplying the material was on account of the outstanding dues of the petitioner which the respondent-company had not cleared within the stipulated period of credit. Moreover, this ground was never mentioned by the respondent-company in any of its previous letters prior to its reply to the statutory notice under section 138 of the Negotiable Instruments Act, which the petitioner was constrained to give after dishonour of cheques.
50. As far as the dispute about the quantity is concerned, apart from the fact that such a defence was never pleaded earlier prior to the reply to the statutory notice under section 138, the company has not produced any material even to prima facie show that the quantity of the material supplied by the petitioner was less than the quantity mentioned in the invoices.
Except a bare assertion, even figures of the alleged shortfall in the quantity delivered are not given in the affidavit filed on behalf of the respondent-company.
51. As far as the disputes about the quality is concerned, here also apart from the fact that the respondent had not made any such complaint to the petitioner prior to the reply to the statutory notice under section 138 of the Negotiable Instrument Act, the company has not produced any material to show even prima facie that the company had made any complaint to the petitioner about the quality of the material or any other material in support of its defence.
52. The defence of the company that the company's representatives were making complaints to the petitioner's representatives orally cannot be accepted because even while writing letters dated 11th September, 1996 and 5th October, 1996, the respondent-company did not give any reason for requesting the company not to deposit the three cheques in question. There is considerable force in the contention of Mr. Soparkar for the petitioner that far from making complaint to the petitioner, the respondent-company was the one hand insisting for supply of the goods and was also requesting the on petitioner to reduce the price. Letters and fax messages are produced on record by the petitioner in support of the aforesaid averments and the respondent-company has not only not disputed the said documents but has admitted that it was on account of the market situation that the respondent-company was requesting the petitioner to reduce the prices. Hence, there is no substance in the complaint regarding price also.
53. The averment made on behalf of the petitioner-company in the affidavit dated 13th July, 1996 that a meeting took place between the petitioner's General Manager (Finance) and the executive director of the respondent-company, wherein the respondent requested the petitioner to continue to supply the goods and the petitioner was showing its unwillingness to supply the goods unless the respondent cleared an amount of Rs. 16,40,000 which was then overdue, is not denied in the affidavit dated 28th July, 1998 filed on behalf of the respondent-company, but it is merely stated that the minutes of the meeting dated 13th July, 1996 were not signed and that it would be a matter of evidence.
54. Even the statement made on behalf of the petitioner-company in the affidavit dated 17th July, 1998 that the respondent-company had furnished the statement of accounts showing that an amount of Rs. 12,89,608 was due from the respondent-company to the petitioner after adjustment of Rs. 3,50,000 towards the dues of the petitioner to Sunshield Chemicals Ltd. is not disputed by the respondent-company in the affidavit dated 28th July, 1998. The mere statement in the said affidavit that the unsigned statement of accounts was subject to the finalisation of the disputes cannot be accepted because after the petitioner served notice dated 2nd December, 1996 upon the respondent-company under section 138 of the Negotiable Instruments Act, the respondent-company had replied on 9th December, 1996 raising for the first time disputes as to the quality, delivery schedule and the price of the material and thereafter the aforesaid statement of accounts was given by the respondent-company to the petitioner on 20th February, 1997. The said statement of accounts refers to the credit for Rs. 3,50,000 being adjustment against the dues payable by the petitioner to Sun Star Chemicals, which is even borne out by the fax message dated 2nd January, 1997 from the respondent-company to the petitioner authorising the petitioner to debit the account of Sun Star Chemicals against the amount payable by the respondent. If as on that date, the amount was not payable by the respondent, question of the respondent giving any such authorisation to the petitioner would not arise.
55. In view of the aforesaid facts and circumstances which clearly stare in the face of the respondent-company, it must be held that the dispute raised by the respondent-company to the petitioner's claim is not bona fide. Even if the respondent-company has any defence in respect of the sum of Rs. 3,50,000 which, according to the respondent-company, is payable by the petitioner to Sun Star Chemicals and for which the respondent-company had wanted the petitioner to adjust the same against dues payable by the respondent-company to the petitioner, there is no defence to the petitioner's claim for the balance amount of Rs. 12,89,608 which is even the amount mentioned in the statement of accounts which the respondent-company had given to the petitioner on 20th February, 1997 as stated above.
56. In the result, the court grants time to the respondent-company to pay the petitioner a sum of Rs. 16,27,422.15 by demand draft on or before 30th November, 1998. However, if within one month from today, the respondent-company gives the petitioner an original letter from Sun Star Chemicals agreeing to the petitioner adjusting the sum of Rs. 3,50,000 payable by the petitioner to Sun Star Chemicals against the amount payable by the respondent-company to the petitioner, the respondent-company shall pay the petitioner a sum of Rs. 12,89,608 instead of the aforesaid sum of Rs. 16,27,422.15.
57. It is clarified that the payment of the amount by the respondent company to the petitioner as aforesaid shall not come in the way of the petitioner enforcing its claim for interest on the aforesaid amount in appropriate proceedings. In case the respondent-company fails to pay the petitioner the aforesaid sum by 30th November, 1998, the matter shall be placed before the court for passing appropriate orders regarding admission of the petition and for advertisement of the notice of the petition. Hence, SO 3rd December, 1998.
10.12 Applying the said observations by the Court to present case, it appears appropriate to ask the respondent company, so as to demonstrate and establish its bonafide, to deposit a sum of Rs.30,00,000=00 (Rupees:
Thirty Lacs Only) [having regard to the fact that the respondent company itself, in its communication dated 4.10.2009 admitted liability of Rs.26,92,937=00 and having regard to the fact that the said liability was admitted almost 4 years before, i.e. in 2009] with the registry of this Court.
Time till 3.9.2013 to deposit the said amount is granted to the respondent company.
If the respondent company fails to deposit the said amount, then, the Court will be obliged to accept the petitioner's submission that the respondent company is consciously and willfully neglecting to pay its dues and discharge its debts and it has lost its capacity to pay its dues and that it is equitable to order that the respondent company be wound up and therefore, the Court would be obliged to grant the order of admission of the petition.
In the event of failure by the respondent company to deposit the aforesaid amount, within aforesaid time limit, the order of admission and order of appointing Provisional Liquidator will be passed on the next date of hearing.
S.O. to 4.9.2013.
(K.M.THAKER, J.) kdc Page 17