500 003 And Zonal Office At Unit No. 5 vs Atcom Technologies Ltd on 26 March, 2014

[Cites 18, Cited by 0]

Bombay High Court

500 003 And Zonal Office At Unit No. 5 vs Atcom Technologies Ltd on 26 March, 2014

1. The petitioner, Gati Limited ("Gati") seeks winding up of the respondent-company, Atcom Technologies Limited ("Atcom") under Sections 433 and 434 of the Companies Act, 1956, on the ground that Atcom has failed to pay a decretal debt obtained by Gati against Atcom in the principal sum of Rs.8,00,217/- plus further interest, aggregating to Rs.27,52,746.48.

2. On 5th November 1988, Atcom and Gati entered into a contract, under which Gati was required to transport Atcom's good to different destinations in India. The contract required payment to be made by Atcom within 15 days of Gati submitting its bills or invoices. There was also a contractual provision for interest at 2% per mensem on unpaid bills.

3. Gati claims that Atcom did not pay several of its bills. Gati filed a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 against Atcom (Suit No.55 of 2000) in the court of the 1st Additional Chief Judge, City Civil Court, Secunderabad, for recovery of Rs.8,00,217/- and interest. Atcom contested the action. It sought leave to defend. This was granted, but Atcom did not file its written statement. The suit was thus decreed ex-parte in favour of Gati on 29th August 2002. Costs of Rs.25,824/- were also decreed in favour of Gati.

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4. No appeal was filed. Gati put the decree into execution. It filed a Special Execution Application No.4 of 2007 before the Court of the Civil Judge, Senior Division, Daman. Here, too, a summons was issued to and received by Atcom.

5. At this stage, some five years after the ex-parte decree, Atcom filed a petition before the Chief Judge, City Civil Court, Secunderabad, to set aside the ex-parte decree under Order IX, Rule 13 of the Code of Civil Procedure, 1908. This was accompanied by an application for condonation of the delay of 1902 days. The application was dismissed on 19th October 2010.

6. Gati's advocate, Ms Kapil, then sent a statutory notice under sections 433 and 434 of the Companies Act, 1956 to Atcom at its registered office demanding payment of the decretal debt in 21 days. Atcom replied on 12 November 2012. It claimed that there was some settlement agreement, that it was in a poor financial condition, and that it had no business or income. Atcom did not claim to have made any payment to Gati, but only that under the alleged settlement or memorandum Gati was to withdraw its legal proceedings. Other than this, there was no denial of its actual liability to Gati. This petition was then filed and served in 2013, and Atcom filed its affidavit in reply.

7. Mr. Jumani, learned advocate for Atcom, now canvasses the defences taken in the affidavit in reply. This petition, he submits, is not maintainable as the Gati has put the decree into execution, and since the decree has not yet been returned unsatisfied, the petition must be dismissed in limine. Ms. Kapil is correct in her response 3 of 8 ::: Downloaded on - 29/03/2014 19:00:44 ::: CP160-2013-F.DOC that this submission is entirely without merit. A petitioning-creditor with a decree need not put it into execution before bringing a winding up petition. He can proceed either under Section 434(1)(b) or, having served a notice, move against the debtor-company under Section 434(1)(a).1

8. I am unable to see how Mr. Jumani's reliance on In Re: Steel Equipment and Construction Co. (P.) Ltd; Om Prakash Mohta v Steel Equipment and Construction Co. (P.) Ltd.2 is of the slightest assistance to him. There, the issue was of competence to contract, and whether a decree that was void or a nullity for that reason could ever be invoked to sustain a winding up petition. Similarly, his proposition that Gati must "prove" its debt in this court, the decree in its favour notwithstanding, and that this is what the Supreme Court decision in Official Receiver, Kanpur and Anr. v Abdul Shakur and Ors.3 requires is clearly incorrect. That was a decision under the Provincial Insolvency Act. The provisions of that statute cannot be read into the Companies Act, 1956 in this fashion.

9. Mr. Jumani's next submission is that Gati's claim is now time-barred. He relies on the decision of a learned single Judge of the Calcutta High Court in Rameswar Prosad Kejriwal & Sons v 1 All India General Transport Corporation Ltd v Raj Kumar Mittal, [1978] 48 Com Cas 604 (Cal); Karpara Project Engineering v Ballarpur Industries Ltd., 2008 (Supp) Bom. C.R. 39; Madhuban Pvt. Ltd. v Narain Das, [1971] 41 Comp. Cas 685 (Del); Seethai Mills Ltd. v N. Perumalsamy & Anr, [1980] 50 Comp. Cas 422 (Madras); Suvarn Rajaram Bandekar v Rajaram Bandekar (Siringaon) Mines Pvt. Ltd., [1997] 88 Comp. Cas 673 (Bom) 2 [1968] 38 Comp Cas 82 (Cal) 3 AIR 1965 SC 920 4 of 8 ::: Downloaded on - 29/03/2014 19:00:44 ::: CP160-2013-F.DOC Garodia Hardware Stores4 to contend that the petition should have been brought within three years of the decree. This is a patent misreading of Rameswar Prosad, which suggests nothing of the sort.

The claim there appears to have been made on the underlying debt that merged into the decree, and the learned single Judge therefore held that the claim ought to have been made within three years of the debt becoming due under Article 137 of the Limitation Act:

It is an admitted position that the cause of action of the company arose in 1992. The suit was filed in 1994 and the decree was obtained in 1997. But on the basis of the said debt which is said to be merged in the decree, the winding up petition cannot be filed after the period of limitation that means after a period of three years.

It was undisputed before the Rameswar Prosad court that it was Article 137 of the Limitation Act that applied, and that the period of limitation was three years. This could only have been on the footing that the claim in that petition was based on the underlying debt, and not the decree.

10. That is not the case here. The petition is based entirely on the decretal debt, not the underlying cause of action. Limitation would be governed not by Article 137 but by Article 136, and that provides a period of 12 years from the date when the decree is enforceable. 5 It is also settled that winding up is an equitable mode of execution. 6 4 (2002) ILR 1 Cal 31 5 Techno Metals India (P) Ltd v Prem Nath Anand, [1973] 43 Comp Cas 556 (Cal) 6 Harinagar Sugar Mills Ltd. v M.W. Pradhan, [1966] 36 Comp Cas 426 (SC) : AIR 1966 SC 1707

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11. In any event, if 19th October 2010 is taken as the starting point of limitation, being the date on which Atcom's application under Order IX Rule 13 of the Code of Civil Procedure, 1908 to set aside the ex-parte decree was dismissed, this petition, as Ms. Kapil says, is within time.

12. Ms. Kapil is also correct in her submission that there is no manner of doubt that Atcom is commercially insolvent. Not only must it be deemed to be unable to pay its debts on account of its failure to comply with the demand in the statutory notice, but its reply contains vital admissions of financial inability, commercial insolvency, its lack of income and that it is doing no business. Gati has a valid decree in its favour. Atcom's attempt to have it set aside failed. It has not challenged that decree, one that is now final. It is impossible to say, in these circumstances, that Atcom has any defence at all to this petition, much less a bona fide or substantial defence. Such arguments as are taken are merely speculative and intended only to further attempt to delay and defeat the petitioning- creditor, Gati.

13. In these circumstances:

(a) The Company Petition is admitted and made returnable on 29th April 2014;

(b) Service of the Petition under Rule 28 of the Company (Court) Rules, 1959 is waived by Mr. Jumani;

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(c) The petition shall be advertised in two local newspapers, viz., (i) Free Press Journal (in English) and (ii) Navshakti (in Marathi); as also in (iii) the Maharashtra Government Gazette;

(d) On or before 7th April 2014, the petitioner shall deposit a sum of Rs. 10,000/- toward publication charges with the Prothonotary & Senior Master, with intimation to the Company Registrar, failing which the petition shall stand dismissed for non-prosecution. Upon the advertisements being issued, the balance of this deposit, if any, shall be refunded to the petitioner

14. Given the conduct of the respondent, there will also be an interim order in terms of prayer clause (c). The Official Liquidator is appointed Provisional Liquidator of the respondent company. He shall forthwith proceed to take charge of the assets and properties of the Company. The Official Liquidator shall, on or before 20th June 2014, make a report as to the status regarding taking charge of the company's assets and properties.

15. Further, pending the hearing and final disposal of the petition, the Company, by itself, its directors, officers, servants and agents is restrained from in any manner creating any dispositions whatsoever of any of its assets or properties without leave of this court except in the ordinary and regular course of its business.

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16. The petitioner shall also be entitled to costs quantified at Rs.1 lakh to be recovered in the course of winding up.

17. Mr. Jumani applies for a stay of this order. Ms. Kapil opposes the application most strenuously. The order of advertisement, appointment of a Provisional Liquidator and the grant of an injunction is stayed for a period of three weeks. The returnable date and time for depositing publication charges are correspondingly extended.

                       ig                                   (G.S. Patel, J.)
                     
      
   






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