Punjab-Haryana High Court
J.G. Finance Ltd. vs Jamna Auto Industries on 10 February, 1999
Equivalent citations: [2001]103COMPCAS107(P&H), (1999)121PLR527
Author: Swatanter Kumar
Bench: Swatanter Kumar
JUDGMENT Kumar, J.
1. J. G. Finance Ltd. have filed this petition under sections 433 and 434, read with section 439 of the Companies Act, 1956 (hereinafter 'the Act') praying for an order of winding up against Jamna Auto Industries Ltd. (hereinafter 'the respondent-company').
2. In order to examine the sustainability of the claim of the petitioner, reference to some basic facts would be necessary. The petitioner, which itself is a limited company duly incorporated under the provisions of the Act, has filed this petition through its managing director and constituted attorney in furtherance to the resolution of the Board of directors of the petitioner-company dated 28th February, 1997. A lease agreement dated 14th May, 1992 was entered into between the petitioner as lessor and the respondent-company as lessee. Under the terms of the said lease, list of equipment was granted in favour of the lessee in relation to the equipment, machinery, etc., described in the schedule of agreement. The period of lease being 48 months at the rate of Rs. 1,94,067 per quarter continuously for 12 quarters payable in advance at Delhi commencing from 14th May, 1993. The lease charges were in addition to the other charges and expenses payable in terms of the agreement between the parties. Initially the respondent-company was paying the amounts, but it is averred that it fell in default in relation to five quarters from November 1995 for the period May 1996 to February 1997 amounting to Rs. 9,70,335. It is averred in para 11 of the petition that the cheques issued by the respondent-company in relation to lease rent were dishonoured. For default thereto and on account of late charges, the petitioner-company claimed a sum of Rs. 12,09,814.00 as on 31st March, 1997. The petitioner served a statutory notice dated 14th May, 1997 through its counsel claiming the said amount. Copy of the notice is annexed hereto along with acknowledgement receipts ex. P.3 and ex. P.4 to this petition. Having failed to recover the amount, the petitioner filed the present winding up petition.
3. Upon notice, the respondent filed detailed reply, took preliminary objections in regard to maintainability of the petition and also repudiated the claim of the petitioner and any part thereof. The respondent-company stated that none of its cheques had been dishonoured and in fact all cheques have been honoured except for one cheque the payment of which was stopped because of default on the part of the petitioner-company. As such, the claim was without any merit.
4. The learned counsel appearing for the respondent-company firstly relied upon clause 10.8 of the lease agreement dated 14th May, 1992 to contend that there is an arbitration clause in the agreement itself and as such, the winding up petition is not maintainable as parties had agreed to refer their disputes to arbitration. Clause 10.8 of the agreement reads as under :
"1. The respondent submits that as per clause 10.8 of the lease agreement dated 14th May, 1992, it has been expressly agreed upon by and between the parties :
Any dispute or difference arising out or in relation to, or under this agreement shall be referred to the arbitration in accordance with the Arbitration Act, 1940. The seat of arbitration proceedings shall be in New Delhi."
5. No doubt the parties have entered into an arbitration agreement to refer their disputes to the arbitrator in accordance with the provisions of the Arbitration Act, 1940. An arbitration agreement per se would not oust the jurisdiction of the company court to entertain a petition for winding up. It is only upon examination of the dispute on merits that court would be required to decide whether such a petition should be entertained by the company court or the party should be directed to take recourse to the arbitration proceedings. This argument of the learned counsel for the petitioner need not detain me any further as this question is no more res integra as far as this court is concerned, as it stands settled by two different Division Benches of this court. A Division Bench of this court in the case of Goetze India Ltd. v. Pure Drinks (New Delhi) Ltd., [1993-2] 104 PLR 745, prior to the amendment, took this view while after the amendment of the Arbitration Act another Division Bench of this court in a recent judgment titled Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. [Company Appeal No. 1 of 1998 decided on 7th January, 1999] took the same view and held as under :
"Therefore, it must be treated as a settled proposition of law that the arbitration clause does not ipso facto oust the jurisdiction of the company court to entertain a winding up petition and the party invoking the arbitration clause for making a request to the company court to refer the matter to arbitration must satisfy the said court that there is a bona fide dispute between the parties to the agreement which requires reference to the arbitrator and it is not sufficient for the applicant to say that the court should refer the matter to the arbitration because there is a clause in the agreement for making reference to the arbitrator."
6. Secondly, the learned counsel for the respondent-company relied upon clause 10.9 of the agreement to contend that this court has no jurisdiction. As per this clause, the jurisdiction is vested in the civil courts in Delhi to the exclusion of other courts. This contention again is without any merits. The parties can elect the court by mutual agreement only amongst the courts which otherwise have jurisdiction to entertain and decide a particular proceeding. It is a settled rule of law that parties cannot vest jurisdiction in a court by consent if the court otherwise has no jurisdiction to entertain and decide the suit or other proceedings. A jurisdiction conferred by a statute on a specific court can neither be altered nor substituted by the consent of the parties. Under section 10 of the Act, a winding up petition can only lie to the court in whose jurisdiction the registered office of the respondent-company is located. Thus, clause 10.9 can no way affect the jurisdiction of this court vested by virtue of section 10 of the Act. Resultantly, this contention deserves nothing but rejection.
7. In regard to the merits of the case, at the outset I would like to notice the stand taken by the respondent-company in its reply. Para No. 4 of the reply, in fact, is the complete answer given by the respondent-company to the claim of the petitioner, which reads as under :
"The respondent submits that vide lease agreement dated 14th May, 1992, the lessor (petitioner-company herein) had agreed to finance equipment and machinery on behalf of the lessee (respondent herein) for an agreed purchase price of Rs. 16,40,000 (Rupees sixteen lakh and forty thousand only). The aforesaid lease agreement commenced from 14th May, 1992 and under the lease instalments at Rs. 1,94,067 (One lakh ninety-four thousand sixty-seven only) were to be paid for a total of 12 quarters with effect from 14th May, 1993 and thereafter on payment of the final 12th quarter instalments the agreement would expire by efflux of time. That as agreed upon by and between the parties, the total value of the assets was Rs. 16,40,000 (Rupees sixteen lakh and forty thousand only) which was the agreed purchase price by and between the parties in respect of the aforesaid transaction. It is pertinent to mention here that out of the aforesaid purchase price of Rs. 16,40,000 (Rupees sixteen lakh and forty thousand only) the petitioner-company financed an amount of only Rs. 14,65,000 (Rupees fourteen lakh sixty-five thousand only) which is a default on the part of the petitioner. It is further submitted that the short financing of the agreed purchase price of Rs. 16,40,000 (Rupees sixteen lakh forty thousand only) goes to the very root of the transaction and such default on the part of the petitioner "has resulted in the lease agreement becoming voidable at the option of the respondent-company. Since there was short financing of the agreed purchase price by the petitioner to the tune of Rs. 1,75,000 (Rupees one lakh seventy-five thousand only) the respondent-company withheld an amount of Rs. 1,94,067 (Rupees one lakh ninety-four thousand sixty-seven only) by not permitting encashment of cheque dated 14th November, 1995 amounting to Rs. 1,94,067 (Rupees one lakh ninety-four thousand sixty-seven only) which amount was the lease rental fee for the eleventh quarter which became due and payable on 14th November, 1995. Photocopy of letters dated 24th April, 1996 are annexed hereto and marked as annexures R/5 and R/6."
8. In order to substantiate its stand in the reply, the learned counsel for the respondent-company relied upon letter dated 6th May, 1996 (annexure R/6 to the reply). In this letter the respondent-company had written to the petitioner-company that the petitioner had not shown the entry of cheque No. 269131 dated 14th June, 1996 for Rs. 1,94,067 while the cheque had been encashed in the account of the petitioner-company. In regard to the stoppage of payment of the cheque due on 14th November, 1995, it was averred as under :
"Regarding instalment which had fallen due on 14th November, 1995, we had instructed our bankers to stop the payment against the said cheque because inspite of our numerous telephone calls, we were not paid Rs. 1,75,000 which are still recoverable from you as per our books of accounts, neither were we provided with any relevant details in this regard.
Kindly revert back on the matter with details of deduction, for needful action at your end."
The statement of ledger account showing the encashment of the cheques upto 31st March, 1996 was also enclosed to this letter (copy thereof annexure R/7).
9. It is strange enough that the petitioner-company did not react to annexures R/6 and R/7 and no reference was made to this letter in the statutory notice served upon the respondent-company on 14th May, 1997. It must be noticed that no joinder was filed on behalf of the petitioner-company to the written statement/reply filed by the respondent-company despite opportunities. The court, therefore, will be justified in drawing an inference that the petitioner-company does not deny the averments made in this reply.
10. As already noticed, a specific case has been pleaded by the petitioner that all the post-dated cheques issued by the respondent-company had been dishonoured on presentation. This fact was disputed in the reply and during the course of hearing the learned counsel for the respondent-company upon instructions from his clients reiterated the stand. According to them, all other cheques have been honoured on time except for cheque for a sum of Rs. 1,94,067 the payment of which was stopped for the reasons aforestated by the respondent-company itself. Keeping in view this controversy, on 14th May, 1998 court had granted opportunity to the petitioner to controvert this fact. The order dated 14th May, 1998 reads as under :
"Learned counsel for the petitioner may file on record photostat copy of dishonoured cheque. Authorised signatory of the respondent-company shall be present in court. List the matter on 16th July, 1998."
11. As the petitioner failed to comply with the directions contained in the order dated 14th May, 1998, another opportunity was granted for this purpose vide order dated 24th September, 1998, which reads as under :
"Learned counsel appearing for respondent prays for time to comply with the order dated 14th May, 1998. Let needful be done now positively before the next date of hearing.
List on 29th October, 1998.
No further lime for the said purpose would be granted."
12. After few dates on 2nd November, 1998 it was confirmed that the stand of the respondent-company was correct. The order dated 26th November, 1998 reads as under :
"Learned counsel appearing for the petitioner-company submits that except one cheque there is no photocopy or copy of the cheques which are alleged to have been dishonoured, available with the petitioner-company. List this matter for hearing on 3rd December, 1998."
13. From the above orders of the court, it is clear that there is a bona fide and genuine dispute raised by the respondent-company in relation to stoppage of payment of one cheque for Rs. 1,94,067, while all other payments have been made as per the terms of the agreement. As a result of alleged default on the part of the petitioner, whether respondent-company is entitled to claim damages or is entitled to the disbursement of the amount of Rs. 1,75,000, or whether the petitioner-company is entitled to the late charges as claimed in terms of the agreement, is not a question which would fall squarely within the scope of the winding up petition.
14. It is a settled principle of law that a petition for winding up cannot be permitted to be used as an ordinary mode of recovery of claims and counter-claims. The jurisdiction of the company court, while entertaining and deciding the company petition, is a limited one and the company court would normally be reluctant to go into disputed questions of facts requiring detailed evidence and investigation and more so when such claims are based upon the alleged breach of terms of an agreement. The petitioner-company has miserably failed to satisfy that their claim in the petition can be termed as an admitted debt or a debt which is apparently recoverable from the respondent-company. Furthermore, they have failed to show that the dispute raised by the respondent-company is not genuine and bona fide.
15. For the reasons aforestated, I am of the considered view that this winding up petition merits dismissal. Consequently, I dismiss this petition leaving the parties to take recourse to such other remedies as are permissible to them in law. However, in the facts and circumstances of the case, there shall he no order as to costs.
16. Petition dismissed.