Punjab-Haryana High Court
Munshi Ram Om Prakash, Bankers And ... vs Arti Food And Fats Pvt. Ltd. And Ors. on 19 June, 2007
Equivalent citations: [2008]142COMPCAS678(P&H), (2008)3COMPLJ252(P, H), (2007)4PLR47
JUDGMENT M.M. Kumar, J.
1. This petition filed under Section 439 read with Section 433 of the Companies Act, 1956, prays for winding up of the respondent-Company. The claim made by the petitioner-firm is that it is entitled to recover a sum of Rs. 17,33,082-34 paise, which included the amount of interest calculated as on 30.9.1999. The question which survives for consideration is as to what should be the rate of interest leviable on the principal amount.
2. The skeleton facts leading to the payment of principal amount and the survival of the controversy regarding rate of interest may be set out briefly.
3. The respondent-Company is engaged primarily in the manufacture/production of oil and its bye-products and it has a registered office at G-3, Lawrence Road, Industrial Area, Delhi. In the year 1998, its registered office was re-located at 617, Civil Lines, Moga.
4. The petitioner-firm is a Commission Agent having its work place at Julana Mandi (Jind) and is stated to have supplied wheat to the respondent-Company. During the financial year 1997-98, it had supplied to the respondent-Company 13,404.60 quintals of wheat in 14,117 bags for the value of Rs. 70,39,492.58 paise. There were similar transactions in respect of the year 1998-99. There are numerous payments made by the respondent-Company to the petitioner-firm but balance payment of Rs. 17,33,082.34 paise is claimed to be outstanding amount.
5. The petitioner-firm has claimed a sum of Rs. 17,33,082.34 paise as on 30.9.1999, as per the legal notice issued through counsel on 1.10.1999 (P-4). After the service of notice the petition came up for hearing before the learned company Judge, who passed an order on 25.1.2001 admitting the petition and also ordered its publication. Thereafter on 24.8.2001, an application under Order IX Rule 13 of the Code of Civil Procedure, 1908, was allowed subject to payment of Rs. 25,000/- as costs. Consequently, the respondent-company was allowed to file its written statement wherein the stand taken was that the control of the respondent-Company was earlier held by Late Shri Murari Lal and Late Shri Anil Kumar Garg and their family. Shri Murari Lal died on 19.9.1997 and Shri Anil Kumar Garg died on 7.10.1997. thereafter, the share holdings devolved in favour of Mrs. Minal Garg, wife of Late Shri Anil Kumar Garg and his children. The functioning of the respondent-Company came to a standstill as there was no regular management of the Company. The factory unit of the respondent-Company remained closed during the period from September, 1997 to May, 1998 till the new management took over. There was talk of settlement between the present management and the groups of creditors and the shareholders. There was some understanding reached between the parties to receive part payment of their dues by giving up certain portions, which was primarily based on the fact that records were not available to furnish details of all the transactions. Resultantly, an agreement was arrived at after elaborate discussions. It has further been disclosed that after the death of two active Directors-Shri Murari Lal and Anil Kumar Garg, the respondent-Company was not able to carry on its affairs in accordance with law and consequently Mrs. Minal Garg, the surviving shareholder moved an application before the Company Law Board, interalia, seeking to convene a meeting and for constituting the Board of Directors. The Company Law Board, vide its order dated 2.2.1998, appointed an independent Chairman to convene a meeting of the company to be held on 10.2.1998. In that meeting, Directors were elected which included nominees of the creditors. The object of this arrangement was to form a transparent Board of Directors which in turn could hand over the charge of the management to those persons who were ready and willing to take over the management of the company on such terms and conditions which were beneficial to all the shareholders and creditors. It is further pleaded that the meeting of the creditors took place on 15.1.1998 when the creditors jointly and severally agreed to accept any full and final settlement to the extent of half of the dues as mentioned in the statement circulated in die said meeting. The amount was worked out in every individual case. After taking over the control of all the affairs of the company by the management, a balance sheet was prepared. It has further been claimed that while preparing the balance sheet, it did not take into account that the arrangement and the settlement which had already been arrived at in respect of the petitioner-firm. Resultantly, the balance sheet prepared on 31.3.1998, erroneously and incorrectly referred to the outstanding of the petitioner-firm as Rs. 10,49,793.44 paise instead of Rs. 5,07,243.46 paise. Therefore, it was claimed that on account of inadvertent mistake committed by the respondent-Company, the petitioner-firm is trying to exploit the situation and there is a triable defence available.
6. However, the petition was admitted again on 5.10.2001 by recording the finding that it is a case of acknowledged liability and the respondent-Company has not been able to discharge its obligation and it was not in a position to pay its debts. It was further found on the basis of documents Annexures P-1 and P-2 that the goods worth Rs. 70,39,492.58 paise were supplied out of which the petitioner-firm received an amount of Rs. 60,25,000/- leaving a balance of Rs. 10,14,492.58 paise. The defence of settlement at 50% of the outstanding liability was rejected.
7. Feeling aggrieved, the respondent-Company filed Company Appeal No. 2 of 2002, which was dismissed by a Division Bench of this Court by recording the following order on 9.1.2002:
Heard at length.
On the basis of documents on record, interalia, Annexure P-1, Annexure P-2 and Annexure P-3, conclusion has been reached that this is a case of acknowledged liability of debt due. Reliance is also sought to be placed on the balance sheet of the company showing the outstanding balance due as on 31.3.1998. It is not the case of the company that the outstanding balance has been paid thereafter. The plea of settlement with the creditors has been turned down for reasons recorded in the impugned judgment. We find no error in it.
9. Finding no merit, in the appeal, we need not go into the question of condonation of delay in filing the same.
Dismissed.
8. The respondent-Company further challenged the order before Hon'ble the Supreme Court in S.L.P. (C) No. 4571 of 2004, which was dismissed on 23.2.2004. After dismissal of the appeal when the matter came up for consideration before the learned company Judge learned Counsel for the respondent-company expressed the desire to pay the entire amount due to the petitioner-firm by the end of March, 2003. It also offered payment of 50% of interest amount to be calculated @ 12% per annum within a period of six months from that date. The aforementioned offer was not accepted by the counsel for the petitioner-firm and the matter was adjourned for arguments. When the matter came up for further consideration on 31.3.2006, the following order was passed:
Both the learned Counsel have agreed that the principal outstanding amount is Rs. 10,14,486.92. It is undisputed that even a cheque has earlier been offered, which is not valid any longer. Mr. Chetan Mittal, learned Counsel for the respondent states that the cheque shall be prepared before the next date of hearing, clearing the whole principal amount. The controversy with regard to the rate of interest shall thereafter be taken up and settled.
List for arguments on 5.5.2006.
10. However, the payment of principal amount shall be without any prejudice to the rights of the petitioner.
9. On 7.7.2006, it was conceded by the learned Counsel for the petitioner-firm that principal amount of Rs. 10,14,486.92 paise has been paid and the question with regard to interest has to be decided. It is in this view of the matter that the question of interest survives for determination.
10. The aforementioned facts conclusively establish that an amount of Rs. 10,14,486.92 paise was the principal amount which was outstanding as on 31.3.1998 and the same was paid in April, 2006. Therefore, interest from 1.4.1998 to 31.3.2006 is payable and the dispute which survives for consideration is in respect of rate of interest alone.
11. Mr. B. Mohan, learned Counsel for the petitioner-firm has argued that the rate of interest has been agreed between the parties. In that regard he has placed reliance on a communication dated 28.2.1995 (Annexure P-6, at Page 147 of the paper book). The aforementioned communication has been addressed by the Manager of the respondent-Company, which is to the effect that after the expiry of 30 days of the purchase of wheat, interest @ Rs. l.50 per hundred per month was to be charged. The rate of interest was to go up to Rs. 1.60 per hundred per month after the expiry of 60 days. The aforementioned stipulation has been acknowledged and accepted by the respondent-Company. This letter is stated to have been written by the-Manager of the respondent-Company. When the matter came up for consideration on 12.12.2002, learned Counsel for the petitioner -firm was directed to produce evidence to substantiate that interest as stipulated in the letter dated 28.2.1995 (P-6) has earlier been paid by the respondent-Company at the same rates. In response thereto, C.A. No. 27 of 2003 was filed by brining on record statement of bank accounts (Annexure 'A', 'B' and 'C'), statement showing delivery of wheat (Annexure 'D'), copy of the balance sheet from 1.4.1996 to 31.3.1997 (Annexure 'E') (copy of the acknowledgement of Income-tax return (Annexure 'F'), copy of refund order (Annexure 'G'), statement of interest paid (Annexure 'H'), copy of the letter dated 24.11.1997 of T.D.S. Form for an amount of Rs. 1,12,500/- (Annexure T) and statement of interest of late payment for the year 1996-97 (Annexure 'J'). The application was allowed and the aforementioned documents were taken on record vide order dated 13.3.2003.
In addition to the above, Mr. B. Mohan, learned Counsel has emphasised that in respect of supplies made in the year 1996-97 by the petitioner-firm to the respondent-Company, interest as per the rate mentioned in the communication dated 28.2.1995 (P-6) was duly paid by the respondent-Company to the petitioner-firm, amounting to Rs. 1,25,000/- and that T.D.S. of Rs. 12,500/- was also got deducted. Referring to the aforementioned statement of accounts (Annexures 'A' & 'B', balance sheet as on 31.3.1997 (Annexure 'E') and the list of sundry debtors, learned Counsel for the petitioner-firm has argued that an amount of Rs. 1,12,500/- has been credited to the accounts of the petitioner-firm and the same amount has been shown to be due to the petitioner-firm from the respondent-Company, which is shown by perusing the details of T.D.S. account for the year 1996-97. Similar position is reflected from the list of sundry debtors where the name of the respondent-Company showing the dues of Rs. 1,12,500/- has been mentioned. He has also referred to a letter dated 24.11.1997, written by the lawyers of the petitioner-firm submitting T.D.S. form for Rs. 12,500/-. On the basis of the aforementioned documents, learned Counsel has submitted that the rate of interest as per the rates indicated in the letter dated 28.2.1995 (P-6) have been paid. Learned Counsel has emphasised that the balance sheet (P-2) for the aforementioned period is an admitted document as per the admission order dated 5.10.2001, passed by the learned Company Judge and the appellate order dated 9.1.2002, passed by the Appellate Bench in Company Appeal No. 2 of 2002. He has been referred to the legal notice, dated 10.11.2001, sent by the counsel for the respondent-Company which is to the effect that the petitioner-firm was claiming the full amount of Rs. 24.95 lacs as on 31.3.2001. Learned Counsel has maintained that all these documents were produced in pursuance to order dated 12.12.2002 and the claim of the petitioner-firm for payment of interest stand completely substantiated.
12. Mr. B. Mohan, learned Counsel for the petitioner-firm has also argued that once the money has been retained without any authority of law involving the petitioner-firm in series of litigation then the request of the respondent-Company for reduction of rate of interest as stipulated in letter dated 28.2.1995 (P-6), is liable to be rejected and the rate of interest could not be reduced. In support of his submission, learned Counsel has placed reliance on the observations made in para 8 of the judgment by Hon'ble the Supreme Court in the case of Aditya Mass Communications (P) Ltd. v. A.P.S.R.T.C. . He has then submitted that in cases of commercial transaction agreed rate of interest is leviable, especially keeping in view of the fact that the petitioner-firm has been driven into long drawn litigation. In support of his submission, he has placed reliance on Division Bench judgments of this Court in the case of Stephen Chemical Limited v. Innosearch Limited (1986) 60 Company Cases 702 and Jamna Auto Industries Ltd. v. Modern Steel Ltd. (2001) 104 Company cases 296, and argued that interest @ 18% and 19.2% per annum as stipulated in letter dated 28.2.1995 (P-6) is required to be awarded in favour of the petitioner-firm. He has then referred to a Division Bench judgment of Madras High Court in the case of Rashid Leathers (P) Ltd. v. Super Fine Skin Traders (1990) 68 Company Cases 684, and argued that in no case the rate of interest can be less than 12% per annum.
13. Mr. Chetan Mittal, learned Counsel for the respondent-Company has argued that there are no pleadings available with regard to agreed rate of interest. He has drawn my attention to the averments made in paras 6 and 7 of the petition to show that the petitioner-firm has pleaded only trade practice for the purposes of charging interest @ 18% per annum and, therefore, it cannot be claimed as a right that there was a mutually agreed rate of interest. He has also condemned reliance of the petitioner-firm on letter dated 28.2.1995 (P-6) by drawing my attention to the specimen signatures of the Manager-Shri Deepak Garg on letter dated 13.2.1997 (Annexure R-5 attached with C.A. No. 79 of 2002) and argued that a bare visual examination of aforementioned two documents would prove beyond doubt that the signatures of Shri Deepak Garg are entirely different from the documents admittedly signed by the same person. He has pointed out that in February, 1995 one Shri Ashok Goyal was the Manager of the respondent-Company but signature of Shri Deepak Garg has been introduced on the letter dated 28.2.1995 (P-6). According to the learned Counsel, there was no occasion for Shri Deepak Garg to write such a letter on 28.2.1995. Learned Counsel has then referred to the admission order dated 5.10.2001 to show that the petitioner-firm had never conceded the rate of interest of 18% or 19.2% and it had only agreed to pay the rate of interest as per the usage of the Mandi. Learned Counsel for the respondent-Company has then submitted that the balance sheet as on 31.3.1997 (Annexure 'E'), which is purported to be signed by the Proprietor, also raises a suspicion because the signatures do not match on the balance sheet, profit and loss account and trading account etc. He has emphasised that the letter dated 24.11.1997 with regard to submission of T.D.S. Form for an amount of Rs. 12,500/- (Annexure 'I') has not been pleaded nor any agreement with regard to mutual settlement of rate of interest has been pleaded.
14. Mr. Chetan Mittal, learned Counsel for the respondent-company has then submitted that in any case the rate of interest should not be more than prime lending rate because as per the facts and circumstances of this case the interest @ 18% or 19.2% cannot be charged. In that regard he has referred to the sudden death of Shri Murari Lal on 19.9.1997 followed by the death of his son Shri Anil Kumar Garg on 7.10.1997, which resulted in complete setback to the business of the respondent-Company. In support of his submission, he has placed reliance on two Division Bench judgments of Karnataka High Court in the cases of Smt Nagaveni Bhat v. Canara Leasing Ltd. (2002) 109 Company Cases 841 and Shakti Prakash Metal Finishers Pvt. Ltd. v. Hindustan Machine Tools Limited (2002) 108 Company Cases 310 and argued that any petition for claim of interest would not be maintainable under Section 433(e) because any violation of the terms of contract would not ipso facto come within the purview of the aforementioned provision. He has also referred to the view taken by the learned Single Judge of Andhra Pradesh High Court in the case of Bombay Glass Blowing Industries v. Bio Vaccines Pvt. Ltd. (1999) 98 Company Cases 174, taking the same view.
15. After hearing learned Counsel for the parties and perusing the record minutely, I am of the considered view that the petitioner-firm has been able to prove that interest amounting to Rs. 1,12,500/- was paid by the respondent-Company, as is evident from the balance sheet for the period 1.4.1997 to 31.3.1998 (P-2). It has further been proved that T.D.S. amount to Rs. 12,500/- was deducted from the aforementioned amount 10 %, which is evident from the letter dated 24.11.1997 written by the advocates of the petitioner-firm. The name of the respondent-Company also figures in the list of sundry debtors; as is evident from the Audit Report (Annexure SE') prepared under Section 44AB of the Income-tax, 1961, and an amount of Rs. 1,12,500/- is shown to be due to the respondent-Company. However, it could not be concluded from the aforementioned documents that the rate of interest was charged which was equivalent to the one stipulated in letter dated 28.2.1995 (P-6). Therefore, the question of rate of interest has to be decided independent of the aforementioned stipulation in the letter dated 28.2.1995 (P-6).
16. The question of awarding interest and its rates has been the subject matter of consideration of Hon'ble the Supreme Court in numerous judgments including the case of Aditya Mass Communications (P) Ltd. (supra). In para 8 of the judgment it has been laid down that the quantum of interest which a Court may allow is governed by the facts of the case and not by any precedent. The aforementioned view is discernible from para 8 of the judgment, which reads as under:
8. The facts narrated hereinabove clearly shows the respondent has retained the money belonging to the appellant without authority of law and has driven the appellant to series of litigations, therefore, this fact itself should have been sufficient to refuse the request of the respondent made before the High Court for reduction of rate of interest. The quantum of interest a Court may allow in a given case is governed by the facts of the case and not by any precedent law unless, of course, limited by a statute. If a Court comes to the conclusion on a given set of facts, a party has been wrongly denied the use of its own money, it is the duty of the Court to see that the said party is appropriately compensated. In the instant case, we are of the opinion that the respondent has deprived the appellant of its rightful use of the money....
17. On examining the facts of the present case it cannot be concluded that there was a mutually acceptable agreed rate of interest nor it could be accepted that interest has been paid in accordance with the prevalent Mandi practice. There are further factors which would weight in favour of the respondent-Company. The active directors of the respondent-Company, namely, Shri Murari Lal suddenly expired on 19.9.1997 and within less than one month his son Shri Anil Kumar Garg also expired on 7.10.1997. In such a situation one has to take a realistic view of the whole situation in awarding the rate of interest. There is indication in the subsequent events showing that settlement on! 31.3.1998 was reached and a large number of creditors settled their total dues by accepting 50% of the same. Therefore, there is ample evidence on record to show that the respondent-Company went into financial losses on account of two sudden deaths and then charge of management. These circumstances cannot be kept out of view while deciding the rate of interest. Applying the principle that the rate of interest should be decided in accordance with the facts of a particular case, as laid down by Hon'ble the Supreme Court in the case of Aditya Mass Communications (P) Ltd. (supra), I deem it just and appropriate to award interest @ 12% per annum from 1.4.1998 till 31.3.2006 on the total amount of Rs. 10,14,486.92 paise.
18. The argument of the learned Counsel for the respondent-Company that no petition under Sections 433 and 439 for realising interest from the respondent-Company would be maintainable, has to be rejected because it is well settled that once the Company Judge is seized of the matter with regard to payment of dues and for winding up then it is proper forum for determining as to whether the creditor is entitled to interest on the amount in question which is based on sound policy of law to avoid multiplicity of litigation. In that regard reliance may be placed on a Division Bench judgment of this Court in the case of Stephen Chemical Limited (supra), which has been followed by Delhi High Court in the case of Devendra Kumar Jain v. Polar Forgings & Tools Ltd. (1993) 1 Comp.L.J. 184 (Del). Similar view has been expressed by Madras High Court in Rashid Leathers (P) Ltd. (supra). Therefore, I have no hesitation to reject the argument raised.
19. In view of the above, this petition succeeds. The interest @ 12% per annum shall be calculated by the parties from 1.4.1998 to 31.3.2006 on total amount of Rs. 10,14,486.92 paise and the same shall be paid to the petitioner-Company within a period of two months from the date of receipt of copy of this order. It is made clear that if the payment as directed by this order is not made then it would be presumed that the respondent-Company is unable to pay and the respondent-Company shall be deemed to be wound up.
The petition stand disposed of in the above terms.