Delhi High Court
Nepc India Ltd. vs Indian Airlines Limited on 21 August, 2002
Equivalent citations: 100(2002)DLT14, [2003]44SCL212(DELHI)
Author: Vikramajit Sen
Bench: Vikramajit Sen
JUDGMENT
Vikramajit Sen, J.
1. This petition has been filed for the winding up of Indian Airlines Limited on the complaint that a sum of Rs. 54,24,625.96 remains outstanding towards transportation of passengers and luggage of persons holding tickets/airway bills of the Respondent. The Claims are predicated on an Interline Airlines Agreement dated 13th May, 1995. The Petitioner had drawn Bills on the Respondent commencing from February 1996 till May 1997. On the Petitioner's request for the clearance of outstandings bearing no fruition, the Petitioner caused a legal notice dated July 21, 1997 to issue to the Respondent. In reply thereto it was stated on behalf of the Respondent, inter alia, that in respect of the Respondent's claims against the Petitioner a sum of Rs. 103.53 lacs was due from the former to the latter. This sum was reduced by the Respondent to Rs. 77.65 lacs, and since the Petitioner `was still raising disputes', the Respondent finally offered to settle their claims at Rs. 55 lacs. However, even this offer was not accepted by the Petitioner as per their letter dated February16, 1997, in which they instead reiterated their proposal to settle the claims of Indian Airlines at Rs. 20 lakhs. These claims could not be settled amicably, and a consensus was not arrived at. Thereafter in Reply to the said Legal notice, it has been stated in the letter dated August 26, 1997 on behalf of Indian Airlines that -
"Even otherwise the claim of your client for an amount of Rs. 54,24,625.95 towards sale of tickets is not factually correct. It is with a view to pre-empt any action by our clients to seek recovery of money legitimate due to our clients that your clients have chosen to send a legal notice for winding up of our clients. You are requested to advise your clients not only to desist from resorting to any ill-advised and misconceived legal proceedings against our clients but also to make the payment of Rs. 103.53lacs with interest @ 24% on the said amount from the date of same became due till date of payment."
2. The Respondent's reply to the petition has been filed on 10th September, 1999. It has been averred that the petition is a misuse of the provisions of the Act. The claims of Indian Airlines have been reiterated in detail. It has been pleaded that on 31.3.1997 the Respondent sent an Invoice for Rs. 77,64,720/- to the Petitioner. The defense is found crystalised in paragraph (ix) of the reply and is reproduced verbatim.
"It is thus clear from the a foregoing that there was a dispute between Indian Airlines and NEPC in respect of their respective dues and to pre-emptany action on the part of Indian Airlines, NEPC caused a legal notice to be issued on 21.7.1997 which was suitably replied to by Indian Airlines on 26.08.1997. There is thus a bonafide dispute between the parties and there is therefore no question of any winding up order being passed. Moreover withholding of payment cannot mean inability of pay debt as contemplated under Sections 433 and 434 of the Companies Act. The respondent company is solvent and if necessary the balance sheet for the year ended 31.03.1998 can also be produced. Indian Airlines further reserves the right to initiate appropriate legal action against NEPC for the recovery of its dues towards Ground Handling services which are still due after adjusting the amount of Rs. 54.18lacs plus interest @ 24% p.a. Infact, besides this an amount of Rs. 21,15,398.50 is also recoverable on account of engineering repair services, rendered to NEPC up to February 1998. Indian Airlines reserves the right to take appropriate action for recovery of the dues as well."
3. In winding-up proceedings it is necessary to keep the following conditions in perspective -
(i) If there is a bona fide dispute and the defense is a substantial one, the Court will not wind-up the company.
(ii) Where the debt is undisputed the Court will not act upon a defense that the company has the ability to pay the debt but the company chooses not to pay it.
(iii) Where the defense of the company is in good faith and one of substance, and the defense is likely to succeed in point of law, and the company adduces prima facie proof of the facts on which the defense depends, the petition should be rejected.
(iv) The Court may consider the wishes of creditors so long as these appear to be justified.
(v) The machinery of winding-up should not be allowed to be utilised merely as a means of Realizing its debts.
[For the above propositions see Pradeshiya Industrial and Investment Corporation of Uttar Pradesh v. North India Petro-Chemical Ltd. and Another, (1994) 2 Comp LJ 50 (SC) in which the observation in Amalgamated Commercial Traders (P) Ltd. v. Krishnaswami, [1965] 35 Comp. Case 456 (SC) and Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P) Ltd., [1972] 42 Comp. Cas. 125 (SC) have been paraphrased].
(vi)If the stance of the adversaries hangs in balance it is always open to the Company Court to order the Respondent Company to deposit the disputed amount. This amount may be retained by the Court and be held to the credit of the suit, if any. [see Civil Appeal No. 720 of 1999 arising out of SLP (C)No. 14096 of1998 - M/s. Nishal Enterprises v. Apte Amalgamations Ltd., decided on February 5, 1999]. It appears to me that the following point may be added to the foregoing considerations.
(vii) Generally speaking, an admission of debt should be available and/or the defense that has been adopted should appear to the Court not to be dishonest and/or a moonshine, for proceedings to continue. If there is insufficient material in favor of the petitioners, such disputes can be properly adjudicated in a regular civil suit. It is extremely helpful to draw upon the analogy of a summary suit under Order xxxvII of the Code of Civil Procedure. If the Company Court reaches the conclusion that, had it been exercising ordinary original civil jurisdiction it would have granted unconditional leave to defend, it must dismiss the winding-up petition.
4. Mr. Sawhney, Learned Senior Counsel for the Respondent has contended that the petition ought to be dismissed since there has been material suppression of facts. It is his argument that the Petitioner was duty bound to disclose in detail the Respondent's claims against the Petitioner as is easily evident on a reading of the correspondence exchanged between them. He has meticulously mentioned that the Respondent had originally claimed over Rs. One crore and owing to protracted parleys, had brought its claims down by over Rs. 25 lakhs; yet the Petitioner did not settle the claims. Reliance was specially made on the Petitioner's letter dated 12.5.1997 in which it has been stated, inter alia, that -"We accept your handling charge of Rs. 9565/- per flight and request for a meeting with the concerned official to rework out the amount payable by us on the basis of Rs. 9565/-per flight handling to enable us to come to a final amount payable by us with further discount of 20% on the total bill." Mr. Sawhney has submitted that on a rough calculation on this formula, the amount payable by the Petitioner to the Respondent would be about Rs. 55 lakhs, without the discount, and that this offer was reduced to writing in terms of the Respondent's letter dated 11.6.1997. On these predications it is his contention that the petition should be dismissed since a bona-fide dispute has undeniably been disclosed which cannot be conceived as an after thought; that the existence of the Respondent's counter claim is palpably prevailing; and that the Respondent would have to make recoveries even after granting an adjustment for the Petitioner's admitted claims. He has placed reliance on a decision of the Division Bench of the Calcutta High Court in J.N. Roy Chowdhary (Traders) P. Ltd. vs. Jainti Enterprises, (Vol. 61 1987) Company Cases 504, in which it has been observed that "where there are claims and cross-claims between the creditor seeking the winding up and the company sought to be wound up, the debt can be said to be bona fide disputed and the court will not order the winding up of the company. Winding up proceedings are not intended to be exploited as a normal alternative to the ordinary mode of debt realisation." There can be no scope for any discussion on the proposition enunciated in this case, especially since the Division Bench had analysed and applied the decisions of the Apex Court in Amalgamated Traders Case (supra) and Madhusudan case (supra). However, as the factors culled out in paragraph 3 above have been substantially extracted from the views of the Hon'ble Supreme Court in the PIICUP case (supra) it is this decision rather than that the Division Bench which is in the nature of the Restatement of the law on the subject.
5. The exercise of jurisdiction under Sections 433/434 of the Act is discretionary and in instances where there has been material suppression of facts, which may have resulted in the Court issuing notice or admitting the winding-up petition, that may be sufficient cause to reject it. However, as pointed out by Mr. Vijay Kishan, Learned Counsel for the Petitioner, the factum of a Reply having been sent to the statutory notice has beenduly mentioned in paragraph8 of the petition; as also the rival claim of Rs. 103.53 lakhs. Therefore, I find no merit in the Respondent's accusation that material facts have been suppressed.
6. I shall now consider the Respondent's Claim as mentioned in its Reply. It needs to be underscored that in the Reply itself the Petitioner's Claim to the extent of Rs. 54.18 lakhs together with interest at the rate of 24% per annum stands admitted. The Respondent's case is that it intended to initiate appropriate legal action against the Petitioner for the recovery of its outstandings towards Ground Handling Services which are still due after adjusting the afore-mentioned sum of Rs. 54.18lakhs. In paragraph (ix) of the Reply the Respondents have mentioned that a further sum of Rs. 21,15,398.50 is also recoverable on account of Engineering Repair Services rendered to NEPC (the Respondent) up to February 1998. The Reply was filed on 10th September, 1999. Till date nothing has been placed on record to show that the Respondent has initiated any legal proceedings against the Petitioner. Mr. Sawhney has mentioned in the course of hearings that a suit has been filed on the Original Side of this Court to which Mr. Vijay Kishan's reply is that on a bare reading of the Plaint the Defendant is not present Petitioner, namely NEPC India Limited. For reasons which remain inexplicable, a copy of the Plaint has not been submitted for the Court's perusal. Mr. Vijay Kishan has further submitted that on a reading of the Plaint it at once evident that the Petitioner's admitted claim of Rs. 54.18 lakhs does not find any mention in the Plaint. If this is so, even if a Plaint has been filed against the Petitioner herein, the Claim raised in this winding-up petition is beyond the contemplation of the suit.
7. It would have been permissible for the Respondent, as the Plaintiff in the said suit, to set up its claim and thereafter plead a counter claim of the afore-mentioned sum of Rs. 54.18 lakhs. In the absence of such a position it is difficult to accept the contention that a bona fide dispute exists in respect of the sum of Rs. 54.18 lakhs. Furthermore, according to the Respondent's own showing, it terminated the Interline Agreement with the Petitioner in terms of the letter dated 4th August, 1997. The cause of action, therefore, would have arisen at least on this date, necessitating the filing of the suit for recovery on or before 3rd August, 2000 although since the Ground Handling arrangements stood discontinued with effect from January 1996, it could be much earlier. From the submissions made in the course of arguments I gather that the suit has been filed much after that date, thus making it prima facie barred by the prohibitive principles of Limitation. This observation should not be treated as definitive, since this issue will appropriately be decided on the Original Side of this Court in the afore-mentioned suit.
8. There is yet another obstacle to be crossed by the Respondent, inasmuch as a set-off is available only in respect of an ascertained sum of money. The Respondent's claim is in essence in the nature of a counter claim, for which the period of limitation does not have the same elasticity as in the case of a set-off. Reference need only be made to Order VIII Rule 6 of the Code of Civil Procedure. When bona fides are to be determined, it may be unreasonable for the Court to attribute them against the party who has not struck the first litigative blow. Persons do not rush to initiate legal actions; it is usually the last resort as it well should. However, once the Petitioner had filed the present petition there seems to me to be scant reason for the Respondent to have neglected to take timely action thereafter, especially since it is the Respondent's claim that it has to make recoveries against the Petitioner. Instead, it may have allowed time to run out. In such a situation, a defense which may have appeared to have legitimacy, would transform into sterility. The position is exacerbated when it is recalled that the Respondent's claim is yet to be ascertained through adjudication.
9. The present case, therefore, fulfills all the conditions mentioned in paragraph 3 above. The debt to the extent of Rs. 54.18 lakhs together with interest at the rate of 24 per cent per annum stands admitted. It will, therefore, make no difference that the Respondent has the ability to pay its debts. Although the defense may have been bona fide in nature and a substantial one, there is now only a very slender chance of its succeeding in law. There is no explanation forthcoming as to why the Respondent did not initiate its own legal claim for the amount mentioned by it in its Reply immediately in its filing. At this belated stage it would not be correct in law to keep them in contemplation even though the constraints of the law of Limitation have intervened. Since the debt stands admitted, the Petition would not fall in the genre of actions which have been preferred merely as a means of coercing payment and/or Realizing debts.
10. The winding-up petition is hence admitted.
11. As already mentioned, the Claim for Rs. 54.18 lakhs together with interest at the rate of 24%per annum stands admitted. However, keeping in view the rival claims, I do not think it appropriate to grant interest at the admitted rate. In my opinion, interest at the rate of 9 per cent per annum would meet the ends of justice so far as this winding-up petition is concerned. However, since the Petitioners had indicated their willingness to settle the claims of the Respondent at Rs. 20 lakhs, it would be equitable to permit this deduction from the afore-mentioned sum of Rs. 54.18 lakhs. Accordingly, the Respondent Company, Indian Airlines, is directed to tentatively deposit with the Registrar of this Court the sum of Rupees forty lakhs within four weeks from today. If there is a failure on its part to make this deposit within the time allowed, citation to be published in the Indian Express (English) Delhi Edition, Nav Bharat Times (Hindi) and Delhi Gazette, returnable on 7th November, 2002.
12. The Petition be renotified on 7th November, 2002.