Karnataka High Court
Srinivasa (T.) vs Flemming (India) Apotheke P. Ltd. on 24 July, 1987
Equivalent citations: [1990]68COMPCAS506(KAR)
JUDGMENT M.P. Chandrakantharaj Urs, J.
1. This is a petition under section 433 of the Companies Act, 1956. The petitioner claims that by virtue of an agreement entered into with the respondent-company, viz. Flemming (India) Apotheke P. Ltd., he is entitled to receive a sum of Rs. 2,000 per mensem for the use of certain electrical fittings and taps and shower in the house that belongs to his mother under whom respondent- company is a tenant. It is further alleged that the respondent- company paid the said charges up to February, 1984, and defaulted in payments subsequently. As a result thereof, a sum of Rs. 24,000 was due up to February, 1985. Despite a notice sent by registered post and duly served on the respondent, the amount claimed under the said bail agreement for use of electrical fittings, taps and shower has not been paid nor have the subsequent amounts due after notice, been paid. Therefore, the company which is indebted to the petitioner in not having paid the amount demanded which is in excess of Rs. 500 is liable to be wound up.
2. The company has entered appearance and filed its statement of objections. In the objections, it has stated the circumstances stated by the petitioner as to the manner in which it was inducted as a tenant is admitted to be true. In regard to the bailment agreement, it has contended that the father of the petitioner, one Dr. S. Thimmappa, induced the respondent-company to sign an agreement of bailment assuring that the amount so obtained would be used for furnishing the house and they not having furnished after receiving Rs. 24,000 as advance, petitioner has not paid any amount and he is not liable to pay any amount because the furniture was not given (sic).
3. With those pleadings, the learned company judge, who heard this matter earlier, directed enquiry and recorded the evidence of the petitioner and his mother as well as the managing director of the respondent- company. Certain documents were marked, but suffice it to make reference only to exhibit P-1 and the oral evidence of the petitioner as well as the oral evidence of RW 1, the managing director of the company.
4. It is well-settled that a creditor may seek assistance of the company court under section 433 to compel payment of moneys due to him. But, where a debt is bona fide disputed and where it appears to the court that the claim is not just, it is open to the court to refuse the request for a winding up order and the parties to have their claims adjudicated in a competent civil court having jurisdiction. The number of cases supporting the above view are too many to be referred to. It suffices to refer to a decision of the Supreme Court in the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd. [1972] 42 Comp Cas 125 to which a more detailed reference will be made later in this order.
5. The point for determination is whether the respondent-company is a debtor within the meaning of that expression and in that sense, whether the petitioner is a creditor to whom a sum of Rs. 24,000 is due as bailment charges under exhibit P-1 for the period March 1, 1984, to February 28, 1985. The oral evidence of the petitioner is highly imaginative and does not inspire the court to place any confidence on the veracity of the assertions made. In examination-in- chief, he has stated that exhibit P-1 is the agreement of bailment and it relates to 8 ceiling fans, 12 tube lights, 4 fancy fittings, 16 stainless steel taps and 1 shower. He has asserted that he has been assessed for rents given by the assessment notices for payment of advance tax. He says monthly hire is Rs. 2,000. He has stated that these fixtures were given to respondents on hire on May 1, 1983. He has also stated that he did not get any advance from the respondent under the agreement. He says the bailment rent is exclusive of the rent payable to the building. He refers to exhibit P-6 as the last receipt issued by the respondent. In cross-examination, however, he has stated that the building does not belong to him and that the understanding between him and his parents was that the income derived from the suing of the fittings and fixtures would be given to him and the fixtures were bought by his parents and the cost of the fixtures was Rs. 28,000 in 1973. He admits that in 1973 he was only a minor. He does not know from where his parents got the money to purchase those fittings. It is unnecessary to refer to the other statements made in the course of cross-examination.
6. In support of the oral evidence of the petitioner, his mother was examined as PW 2. She states that the house was constructed by her and that her husband was running a nursing home there. It was thereafter that the company was inducted as a tenant and during the time of such induction, bailment agreement was got executed. As the money utilised for purchase of those articles was out of the funds gifted to the petitioner by his sisters who were residing abroad and his grandparents, she says that her husband purchased the fittings at a cost of Rs. 28,000 in 1973. This statement of the gift as source of funds has come for the first time from PW 2. There was nothing in the pleading about the petitioner having made available the funds to his parents for purchase of the fittings for the use of which he is entitled to charge rent not from his parents, but from their tenants. When his father was admittedly running a nursing home, there is no indication either in the pleading or in evidence that his father was paying rent for the fittings - 8 ceiling fans, 12 tube lights, 4 fancy fittings, 16 stainless taps, 1 shower and 1 table. That the income from the funds supplied to purchase those fittings should enure to the benefit of their son is not supported by any evidence. No such understanding or an agreement in writing is produced nor pleaded except while giving oral evidence in this court. It is obvious that it is an after-thought. At the time the purchases were made and fitted on to the building constructed by PW 2 , the petitioner was a minor, and, therefore, not competent to contract nor has he made any attempt to get a contract after he attained majority between himself and his parents in regard to his entitlement to receive the benefits of the gifts from his sisters and grandparents. To me, the entire evidence appears to be self-serving testimony of the son and the mother.
7. That the rent was for furniture which the landlord was to supply has been pleaded and spoken to by the managing director-respondent. It his evidence, he has supported his pleading as to the circumstances under which exhibit P-1 the bailment agreement came into being. It may be so or may not be so. But it is not for this court to assess that evidence and refuse a decree or draw up a decree in favour of the petitioner and then proceed to wind up the company. In summary procedure which this court, as a company court must follow, these things cannot be investigated in depth. The court is satisfied that the defence raised in the circumstances of the case is bona fide and likely to succeed in a civil court. If that prima facie case is found, that would constitute sufficient reason for this court to reject the petition relegating the parties to the civil court. In this connection, it is useful to extract a passage from the decision of the Supreme Court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. [1972] 42 Comp Cas 125. The Supreme Court has observed that (at page 131) :
"Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed, the court will make a winding up order without requiring the creditor to quantify the debt precisely. The principle on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends." (underlining Here printed in italics. is mine)
8. The ruling of the Supreme Court squarely applies to the defence pleaded by the respondent-company here.
9. Therefore, this court must reject this petition. But the question as to whether money is owed on account of the bailment agreement to the petitioner or not is left open to be agitated and decided by a civil court if the petitioner filed a suit. But respondent here is entitled to costs and Rs. 100 shall be the advocate's fee.