Madras High Court
R.Manoharan vs M/S.Velan Textiles Private Limited on 20 March, 2013
Author: K.B.K.Vasuki
Bench: K.B.K.Vasuki
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 20.03.2013 CORAM THE HONOURABLE Ms. JUSTICE K.B.K.VASUKI C.P.No.109 and 132 to 134 of 2011 R.Manoharan ... Petitioner in CP.109/2011 M/s.Ankal Mills ... Petitioner in CP.132/2011 represented by its Proprietor R.Manoharan M/s.Ankal Fabrics ... Petitioner in CP.133/2011 represented by its Proprietor R.Manoharan M/s.Ankal Exports ... Petitioner in CP.134/2011 represented by its partner R.Manoharan v. M/s.Velan Textiles Private Limited No.577/1, Palladam Road, Tiruppur-641 605. ... Respondent in all CPs Petitions filed under Section 433(e) r/w sections 434(1)(a) and Section 439(1)(b) of the Companies Act, 1956 for winding up the respondent company. For Petitioners : Mr.K.Ramasamy. For Respondent : Mr.R.Venkatavaradan. COMMON ORDER
All the company petitions are filed by one Manoharan and his companies by names M/s.Ankal Mills, M/s.Ankal Fabrics and M/s.Ankal Exports, Tirupur against one M/s.Velan Textiles Private Limited, who is the respondent in all the company petitions, on the ground that the respondent is unable to pay its debts arising out of various loans given by the said R.Manoharan individually and also in his capacity as Proprietor of M/s.Ankal Mills, M/s.Ankal Fabrics and M/s.Ankal Exports, Tirupur.
2.According to the petitioner in all the petitions, the respondent company has approached the petitioner for providing financial assistance to them and out of the repeated requests made by the respondent, the petitioner has agreed to lend money to them on several occasions with interest at 18% p.a. on running account basis and accordingly, the petitioner has, on behalf of himself and also on behalf of his company, lent a sum of Rs.13,80,000/-, Rs.47,54,400/-, Rs.12,50,000/- and Rs.7,75,000/- respectively by way of various cheques to the respondent. Inspite of repeated requests and demands made by the petitioner, the respondent due to its financial crisis, sought time from time to time. But the respondent is by letter dated 3.4.2006, admitted its total outstanding liability to the tune of Rs.40,13,642/-, Rs.1,08,76,915/-, Rs.1,37,68,203/- and Rs.66,64,501/- respectively as on 31.3.2006 and sought time to settle the same, but failed to do so. Thereafter, the petitioner and the respondent in order to settle the loan amounts amicably, entered into a separate Memorandum of Undertaking at Tirupur on 9.4.2009, as per which, the respondent agreed to repay Rs.66,00,000/-, Rs.1,78,71,120/-, Rs.1,37,68,203/- and Rs.1,09,49,949/- respectively with interest at 18%p.a. from 1.4.2009 till date of payment. Even thereafter, the respondent failed and neglected to discharge their liability due to the petitioner, which compelled the petitioner to issue separate statutory notice to the respondent. Despite the same, the respondent neither issued reply nor made any payment either in part or in full towards outstanding due to the petitioner, which according to the petitioner, would go to show that the respondent company is unable to pay its debts, as such, the petitioner has approached this court for winding up the respondent company.
3.Whereas, the relief sought for in all the company petitions are seriously opposed by the respondent by denying their liability by filing separate counter. According to the respondent company, the petitioner R.Manoharan is none else than the son-in-law of one deceased Sivasubramanian, who was the former Managing Director of the respondent company and the shares of the respondent company are held by his family members and the entire business of the petitioner companies were provided to him only by the said Sivasubramanian. Due to some dispute arose between the relatives, the business was separated in the year 2001. There was some outstanding pending between the two companies during the course of business and the said Sivasubramaniam had transferred the property worth about Rs.1,90,00,000/- on 28.11.2001 to the petitioner for a consideration of Rs.2,00,000/- as settlement for the outstanding amounts between them and he suffered Parkinson disease during 2005 and died on 23.1.2011. It is the specific case of the respondent that they did not send any letter on 03.04.2006 either requesting time for repaying the amount or admitting their liability to the petitioner and they also disputed the alleged MOU dated 9.4.2009, on the strength of which, the petitioner claimed their right and according to the respondent, Sivasubramaniam, who is said to have signed the letter of acknowledgment of debt and the MOU, had been suffering from Parkinson disease and had not been actively involved in the company affairs and had signed only the balance sheet of the company during the relevant point of time, as such, letter of acknowledgment and MOU are forged and fraudulently created for the purpose of initiating the present proceedings. Thus, as the respondent company has no outstanding or dues payable to the petitioner, the filing of the present company petitions with forged, fabricated and concocted document and without concrete materials in support of the claim made by the petitioner, would amount to abuse of process of law and the same are liable to be rejected.
4.Heard the rival submissions made on both sides.
5.Before going into the merits of the case, the principles regarding scope and ambit of Section 433(e) of the Companies Act as laid down by the Hon'ble Apex Court are to be looked into. The Hon'ble Supreme Court in the decision reported in (2005) 7 SCC 42 (Mediqup Systems P Ltd v. Proxima Medical System GmbH, observed as follows:
"This Court in catena of decisions held that an order under Section 433(e) of the Companies Act is discretionary. There must be a debt due and the company must be unable to pay the same. A debt under this section must be a determined or a definite sum of money payable immediately or at a future date and that the inability referred to in the expression 'unable to pay its dues' in Section 433(e) of the Companies Act should be taken in the commercial sense and that the machinery for winding up will not be allowed to be utilised merely as a means for realising debts due from a company".
6.It is equally well settled in the decision reported in 2004 Vol. 120 Comp Cas 784 (Neg Micon v. NEPC India Ltd) (Division Bench of our High Court) that "invoking the provisions of the Companies Act and seeking a prayer for winding up will not be entertained if it is only in the nature of exercising pressure to enforce payment of a debt". It is further held in the same decision that "if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the Company. In determining whether a debt is disputed bona fide or mala fide, the conduct of the parties, the character of the pleas and the circumstances which will be peculiar to each case will be the contributing factors. The test is whether the dispute is raised only to avoid payment of the debt and not based on any substantial ground".
7.The Hon'ble Supreme Court in the decision reported in (1965) 35 Comp Cas 456 (SC) (Amalgamated Commercial Traders (P) Ltd v. A.C.K.Krishnaswami and another) held that "it is well settled that a winding up petition is not a legitimate means of seeking to enforce payment of the debt, which is bona fide disputed by the company. A petition presented ostensibly for a winding up order, but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the court".
8.Our High Court in para 11 of the judgment reported in (2008) 2 Comp LJ 209 Mad (Tata Iron and Steel Co. Ltd v. Omega Cables Ltd) observed that "in a company petition filed for winding up of a company, the petitioner has to first prove that the amount due is undisputed and admitted by the respondent company." The Division Bench of our High Court in the decision reported in Indian Kanoon-http://indiankanoon.org/doc/ 280659 (Sical SWT Distriparks Limited v. Besser Concrete Systems Limited) observed that when the respondent is able to show that there was a bonafide dispute with regard to liability in question, the winding up proceedings is not the proper remedy to resolve the dispute.
9.The particulars made available in all the petitions would reveal that the amounts borrowed from all the four petitioners were during 1991, 1992 to 1993, 2001-2002 and 2002. Whereas, all the Company petitions are filed in 2011. The petitioner sought to establish their case on the strength of the alleged letter dated 3.4.2006 and MOU dated 9.4.2009 and acknowledgment of debts in the balance sheet of the years 2003 and 2008. It may be true that in all these documents, the liability of the respondent for repayment of debts is admitted. However, the respondent denied the genuineness and due execution of the letter dated 3.4.2006 and MOU dated 9.4.2009 by late Sivasubramanian. It is the specific case of the respondent that during the relevant point of time, Sivasubramanian had been suffering from Parkinson disease and he was not in a position to involve himself in day today affairs of the company, except signing the balance sheets and the signature in these documents are forged and fraudulently created. It is also pointed out by the learned counsel for the respondent that the signatures found in the letter of confirmation, MOU and balance sheets do not appear to be similar.
10.The respondent, in support of such contention, also produced certain medical records. The reading of the same would reveal that Sivasubramanian was, during the relevant point of time, diagnosed by one Dr.Safinaaz, who was of the opinion that Sivasubramanian was suffering from Parkinson's disease, UTI, Hypothyroidism and systematic hypertension. Deep brain stimulation was done and pacemaker placement was made on him and he was partially depending on others for his routine activities. As a matter of fact, no mention of the letter of acknowledgment is made in the statutory notice issued on 3.3.2011. Further, the date and month of execution of MOU is also not mentioned in the statutory notice. There is absolutely no explanation forth coming on the side of the petitioner as to why date and month of MOU was not mentioned in the statutory notice. Though the amounts are due from 1991, 1992-93, 2001-02 and 2002, the first communication in writing demanding such amounts has been issued only on 14.3.2006. The failure to make any efforts till 14.3.2006 is not explained on the side of the petitioner. Even after the letter of acknowledgment of debt dated 3.4.2006, no further progress is made for three years and the memo of understanding came into existence only on 9.4.2009. Though the amounts were due for more than one decade, the statutory notice was issued only on 3.3.2011 after the demise of Sivasubramanian.
11.It may be true that the respondent company has mentioned their liability to make payment to the petitioner company in their balance sheet of the years 2003 and 2008. In the balance sheet of the year 2003, the amounts due to Ankal Fabrics, Ankal Mills and R.Manoharan as individual capacity are mentioned under the head 'Unsecured Loans'. It is also mentioned so in the balance sheet of the year 2008 under the head 'Unsecured Loans', but the amounts mentioned in both the balance sheets do not tally with each other. The petitioner has not produced the balance sheet for the subsequent years 2009 and 2010. Further, it is also not mentioned so in the balance sheet of the years 2004 to 2007. The learned counsel for the petitioner also produced the decision of Calcutta High Court in (1983) Vol.54 Comp. Cases 814 (Darjeeling Commercial Co. Ltd. v. Pandam Tea Co. Ltd.) regarding the legal proposition that the liability shown in the balance sheet year after year is acknowledgment within Section 19 of the Limitation Act, 1908. Whereas, in the present case, the liability is shown in the balance sheet of the year 2003 and thereafter in 2008 and not in previous or subsequent years. Further, no liability is shown in respect of M/s.Ankal Exports, which is the petitioner in CP.134/2011.
12.When that being the factual state of affairs, the denial and genuineness and due execution of the documents and voluntary nature of the same appear to be bonafide and substantial one. Even otherwise, the same is a matter for appreciation of evidence before the appropriate civil forum and the same cannot be decided in this section 433 (e) petition, which is summary in nature and it is not a proper forum for adjudication upon the truth of the debt as upheld by our High court in the decision reported in 1971 Vol. 41 Comp. Cas 94 (C.R.Chandra v. Tirupati Cotton Mills Ltd), as such, the winding up petition is liable to be dismissed.
13.In the result, all the company petitions are dismissed.
20.03.2013 Index : Yes/No Internet : Yes/No rk K.B.K.VASUKI, J., rK C.P.Nos.109, 132 to 134 of 2011 20.03.2013