Madras High Court
Mr.Michael Hart vs M/S.Ninestars Information ... on 29 June, 2012
Author: R.S.Ramanathan
Bench: R.S.Ramanathan
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 29-06-2012 CORAM THE HONOURABLE MR.JUSTICE R.S.RAMANATHAN C.P.No.2 of 2009 Mr.Michael Hart, represented by his power of Attorney Mr.Sundhir Krishnaswamy : Petitioner vs. M/s.Ninestars Information Technologies Ltd., A Company registered under the Companies Act 1956, 72, Greams Road, Thousand Lights, Opposite Greams Road Post Office, Chennai-600 006. Represented by its Managing Director Mr.Gopal Krishnan : Respondent Prayer: Company Petition filed under section 433 (e) and (f) of the Companies Act 1956, to pass an order directing Ninestars Information Technologies Limited, be wound up by and to pass an order directing that the Official Liquidator attached to this court appointed as the Liquidator of the Company Ninestarts Information Technologies Limited with all the powers under the provisions of the Companies Act, 1956, including the power to take possession of all affairs, assets, management, book, papers and vouches and for costs. For Petitioner : Ms.Jayna Kothari for B.N.Suchindran For Respondent : Mr.P.Govindarajan O R D E R
This application is filed under section 433(e) and (f) of the Companies Act 1956 to wind up the respondent company on the ground that the respondent company is unable to pay its debt.
2.The case of the petitioner is that the respondent company engaged the petitioner as a consultant by entering into a consulting agreement, dated 21.05.2004 and as per the said agreement, the respondent company agreed to pay a sum of US$ 10,460 per month as compensation for the services to be rendered by the petitioner and the respondent company also agreed to pay to the petitioner other incidental expenses, such as work travel expenses, expenses related to the use of his cell phone, office phone, office supplies and health insurance cost of US$ 400 per month. The said agreement was for a period of six months and latter renewed for a period of six months through another consulting agreement, dated 19.11.2004 and the said agreement was in force till May 2005. As per the 2nd agreement also, the remuneration agreed to be paid to the petitioner was US$ 10,460 (US Dollars) per month and other expenses as stated above.
3.It is stated by the petitioner that he sent invoices every month for his consultation fee of US $10,460 and the respondent company was making incomplete and irregular payments of the fees and as on March 2005, the respondent company was liable to pay a sum of US $164,500 (US Dollars) to the petitioner towards his consultation fees and despite efforts taken by the petitioner requesting the respondent to release the payment, the respondent company did not make the payment and therefore, the petitioner tendered his resignation on 28.03.2005 and thereafter, the respondent company negotiated with the petitioner and finally the petitioner agreed to receive US$ 140,000 (US dollars) as full and final settlement towards his compensation and the respondent company also executed a promissory note in favour of the petitioner on 31.03.2005 for the said amount of US$140,000 and sent the same through fax to the petitioner and thereafter, the respondent company did not make any payment, as per the said promissory note and the respondent company agreed to pay the said sum without interest on or before 31.10.2005 and as the respondent company did not make the payment as promised as per the promissory note, the petitioner sent a notice, dated 22.02.2008 to the respondent company demanding the payment due under the promissory note with interest at the rate of of 1.5% per month and after receiving the notice, the respondent company sent an E-mail, dated 01.04.2008 and requested the petitioner to settle for a sum of US$ 100,000 payable in three or four installments and that the promissory note was issued in good faith and the respondent company was not able to make the payment due to financial crisis and requested the petitioner to accept the sum of US$ 100,000 in full quit. Even after that, no payment was made by the respondent company. Therefore, the petitioner issued a statutory notice under section 434 of the Companies Act 1956, dated 15.09.2008 addressed to the respondent company at its Registered office in Chennai and its office in Bangalore requesting the respondent company to make the payment and there was no reply and as the respondent company is not able to make the payment due and payable to the petitioner, despite notice sent by the petitioner, the respondent company deemed to be unable to pay off its debts of US$ 217700 and hence, the respondent company is liable to be wound up and therefore, the petition is filed.
4.The respondent company filed a counter affidavit stating that the respondent's company is financially sound and there was no necessity for the respondent to deny the payment of any legitimate sum, if at all payable to the petitioner as claimed in the company petition and denied the promissory note executed by the respondent company. Further, in the counter affidavit, the respondent company elaborated the financial worthiness of the respondent company, its business and its number of employees to make it appear that the respondent company is a financially sound one and it cannot be wound up.
5.Further, the respondent company admitted that the petitioner was appointed as their agent to procure business for the respondent company and further stated that the petitioner has not procured a single business to the respondent company and therefore, the respondent company is not liable to make any payment and winding up proceedings cannot be used as a tool for collecting the money and the respondent company also denied the, E-mail, dated 01.04.2008 and also the liability payable by it to the petitioner.
6.Ms.Jayna Kothari, the learned counsel appearing for the petitioner submitted that though the respondent company denied the execution of the promissory note as well as the E-mail,dated 01.04.200, the respondent company admitted the consulting agreements entered into with the petitioner and the remuneration agreed under those agreements and having agreed to pay a sum US$ 10,460 per month, the respondent company is bound to pay the amount and the respondent company has also admitted their liability and agreed to pay a sum of US$ 140,000 in full quit towards remuneration payable and also executed a promissory note for the said amount on 31.03.2005 and sent the same through fax and the promissory note was only given as a security for the amount payable by the respondent company and latter, the respondent company also admitted its liability by its E-mail, dated 01.04.2008 wherein also the respondent company admitted the execution of the promissory note and having agreed to pay the sum, the respondent company is liable to make the payment to the petitioner. As the respondent company failed to make the payment, despite the statutory notice, it is deemed to be unable to pay its debts and therefore, the respondent company is liable to be wound up.
7.She further submitted that there is no question of claim of the petitioner, being time barred, as the respondent company by its E-mail, dated 01.04.2008 admitted and acknowledged the liability and the claim of the petitioner is not time barred and therefore, the claim is legally sustainable and the respondent company is liable to be wound up.
8.She further submitted that during the pendency of the petition, the respondent filed C.P.No.1722 of 2010 to stay the C.P.No.2 of 2009 till the arbitration between the petitioner and the respondent company is completed and also filed C.P.No.40 of 2011 for dismissal of C.P.No.2 of 2009 on the ground that the court has no territorial jurisdiction and there was no original cause of action for the petitioner to institute the petition before this court and those two petitions were dismissed by this court, by common order, dated 10.06.2011 and hence, this court has already given a finding that the E-mail, dated 01.04.2008 amounts to acknowledgment and it has become final and therefore, that cannot be re-agitated at this stage.
9.She further submitted that the learned Judge also found that the petition is not based on the promissory note and therefore, the contention of the respondent company that the promissory note is not sufficiently stamped is beyond the scope of company proceedings and having regard to the order passed in C.A.Nos.1722 of 2010 and 40 of 2011, the respondent company is also estopped from raising the plea that the promissory note is inadmissible evidence for want of sufficient stamp duty and the E-mail, dated 01.04.2008 will not amount to be an acknowledgment.
10.On the other hand, Mr.P.Govindarajan, the learned counsel appearing for the respondent company submitted that a reading of the company petition would make it clear that the petitioner relied upon the promissory note to make the respondent company liable to pay the said sum and even in the statutory notice, it has been specifically stated that the respondent company failed to pay the amount as per the promissory note and called up the respondent company to make the amount as per the promissory note and therefore, it cannot be contended that the petition is not based on the promissory note.
11.He further submitted that admittedly, the promissory note was not duly stamped and therefore, it cannot be relied upon to make a claim and even assuming that the petitioner is entitled to rely upon the consultation agreement for claiming consultation fee, that claim is also barred by limitation and admittedly, the 2nd consultation agreement expired on 18.05.2005 and even before that on 28.03.2005, the petitioner resigned his job and therefore, as on 28.03.2005, the amount was due and payable by the respondent company and the E-mail even assuming that the same was sent by the respondent company, it is dated 01.04.2008, which is beyond the period of limitation and therefore, even assuming that under the E-mail, dated 01.04.2008, there was an acknowledgment that will not save limitation as the acknowledgment was made after 3 years.
12.The learned counsel appearing for the respondent further contended that the E-mail does not contain the acknowledgment as per the provision of section 18 of the Limitation Act and there was no unconditional acknowledgment of liability of the respondent and it is only stated that the respondent company was prepared to pay US$ 100,000 in three or four installments and it was only an offer made by the respondent company and it will not amount to acknowledgment. He, therefore, submitted that the claim is barred by limitation and under section 433 and 434 of the Companies Act, the debt must be a legally enforceable debt and when the debt is barred by time, it is not legally enforceable debt and hence, a company cannot be wound up for non-payment of a debt, which is not legally enforceable and therefore, the petition is liable to be dismissed.
13.To appreciate the contention of both parties, we will have to see whether the claim of the petitioner is legally enforceable, whether the claim of the petitioner is not barred by time, whether the E-mail, dated 01.04.2008 amounts to an acknowledgment of liability and therefore, the petitioner claim is not barred by time and whether the promissory note relied upon by the petitioner can be construed as a promissory note and satisfies the requirement of promissory note and whether it can be acted upon.
14.Admittedly, there is no dispute about the engagement of the petitioner by the respondent company and the respondent company only stated that the petitioner has not provided any services. The respondent company nevertheless admitted the execution of the agreement with the petitioner, whereby the respondent company agreed to pay a sum of US$ 10,460 per month to the petitioner. Therefore, I hold that as per the agreement relied upon by the petitioner, the respondent company agreed to pay a sum US$ 10,460 per month. Admittedly, the petitioner tendered his resignation on 28.03.2005 and claimed the amount payable under two agreements and the respondent, after negotiation, agreed to pay a sum of US$ 140,000 and also executed a promissory note in favour of the petitioner, dated 31.03.2005. Admittedly, the original promissory note was not produced and according to the petitioner, the original promissory note was withheld by the respondent company and the respondent company only sent a fax massage, which is also not disputed.
15.It has been held by the Hon'ble Supreme Court in the judgment reported in AIR 1971 SC 1070 in the case of Jupudi Kesava Rao vs. Pulavarthi Venkata Subbarao that a copy of the promissory note cannot be validated and cannot be received in evidence. As per the above judgment, secondary evidence by way of oral evidence or copy of document insufficiently stamped is not admissible in a suit even though objection to its admissibility was not taken, when the document was marked. Therefore, the promissory note, dated 31.03.2005 cannot be relied upon by the petitioner to sustain his case that under the promissory note, the respondent company agreed to pay the remuneration of US$ 140,000. Hence, the promissory note cannot be looked into, as it was only a copy and insufficiently stamped. Admittedly, the promissory note does not contain the full bargain between the parties and admittedly, the respondent company is liable to pay consultation fee to the petitioner and the amount mentioned in the promissory note was arrived at only after the negotiation, which represents the consultation fee payable by the respondent company to the petitioner. Therefore, the petitioner is entitled to claim the remuneration as per the consulting agreement from the respondent company. In that event, we will have to see whether the claim is within time.
16.As stated supra, though the 2nd agreement came to an end on 18.05.2005, the petitioner tendered his resignation on 28.03.2005 and therefore, on the date of submitting his resignation, the amount payable by the respondent company towards the consultation fee became due and therefore, the claim ought to have been made within three years from the date of tendering his resignation, namely on or before 27.03.2008. Admittedly, the company petition was filed on 24.11.2008.
17.The case of the petitioner is that by reason of the E-mail, dated 01.04.2008, there was an acknowledgment by the respondent company within the scope of section 18 of the Limitation Act and therefore, within three years from that date, the company petition was filed and therefore, the claim is not barred by time.
18.I am unable to accept the contention of the learned counsel appearing for the petitioner. As per section 18 of the Limitation Act, an acknowledgment of liability shall be made before expiration of the prescribed period for a suit or application. As stated supra, the amount became due and payable by the respondent company on 28.03.2005 and therefore, three years period expired on 27.03.2008. The E-mail is dated 01.04.2008 and it was not sent before 27.03.2008 and it was sent after 27.03.2008 and therefore, there cannot be any acknowledgment of a time barred debt and the acknowledgment can be only in respect of a debt, which is alive.
19.Further, a reading of the E-mail, dated 01.04.2008 would also make it clear that there is no unconditional acknowledgment. As per section 18 of the Limitation Act, the acknowledgment must be an unconditional, in writing admitting the liability and as per the E-mail, dated 01.04.2008, the respondent company admitted the circumstances under which the promissory note was executed and offered to pay a sum of US$ 100,000 in two or three installments and requested the petitioner to agree for the same and in my opinion, a conditional offer was made by the respondent company in the E-mail, dated 01.04.2008 and it cannot be construed as an acknowledgment of liability and on that ground also, the claim is also barred by time.
20.As per the provisions of Companies Act, the debt must be a legally enforceable debt and the respondent company failed to make the payment, despite the receipt of statutory notice and in that case, a presumption can be drawn that the company is unable to pay its debts. Therefore, the main criteria is that the debt must be a legally enforceable debt. According to me, the claim of the petitioner, claiming consultation fee has become time barred and the E-mail, dated 01.04.2008 will not save the limitation as it was given after the three years period and therefore, the claim is time barred and hence, in respect of the time barred claim, the petition for winding up will not lie.
21.The contention of the learned counsel appearing for the petitioner is that in C.A.Nos.1722 of 2010 and C.A.No.40 of 2011, this court has held that the E-mail, dated 01.04.2008 amounts to an acknowledgment and therefore, the respondent company is estopped from stating that the E-mail, dated 01.04.2008 will not amount to acknowledgment is liable to be rejected.
22.Admittedly, those observations were made by the learned Judge while dismissing the applications filed by the respondent for rejection of C.P.No.2 of 2009 and those orders are interlocutory in nature and they did not dispose of the dispute between the parties finally and therefore, the order will not operate as res-judicata.
23.Further, in the judgment reported in AIR 1972 SC 1201, in the case of The United Provinces Electric Supply Co., Ltd. vs. T.N.Chatterjee, the Hon'ble Supreme Court held as follows:-
..Indeed the case which is more apposite is Satyadhyan Ghosal v. Smt.Deorajin Debi, (1960)3 SCR 590 = (AIR 1960 SC 941). There an order of remand had been made by the High Court while exercising powers under S.115 of the Code of Civil Procedure. It was observed, after referring to the various decisions of the Privy Council, that the order of remand was interlocutory and did not purport to dispose of the case. A party is not bound to appeal against every interlocutory order which is a step in the procedure that leads up to a final decision or award. The following observations from this case may be reproduced with advantage:
Interlocutory judgments which have the force of a decree must be distinguished from other interlocutory judgments which are a step towards the decision of the dispute between the parties by way of a decree or a final order. Hence, the earlier order will not operate as res-judicata.
24.Hence, I am of the opinion that the claim of the petitioner is time barred and the E-mail, dated 01.04.2008 will not amount to acknowledgment as it was given after the expiration of the period of limitation of claim of the petitioner and in respect of a legally unenforceable claim, a company cannot be wound up.
25.In the result, this petition is dismissed. No costs.
.06.2012 Index;Yes Internet:Yes er R.S.RAMANATHAN.J er order made in C.P.No.2 of 2009 29.06.2012