Bombay High Court
20Th Century Finance Corporation Ltd. vs Maegaware Computers Ltd. on 22 September, 1993
Equivalent citations: [1997]89COMPCAS487(BOM)
JUDGMENT M.S. Rane, J.
1. On behalf of the respondent-company draft judge's summons is tendered. Leave under rule 19(3) of the Companies (Court) Rules, 1959, granted to the applicants to take out judge's summons in terms of the draft judge's summons handed in judge's summons made returnable forthwith. The petitioners waive service. The respondents to get the same registered.
2. The petitioners are common petitioners in this group of petitions and are creditors of Maegaware Computers Ltd. (hereinafter referred to as "the company" for brevity's sake), the respondents herein. They have presented these petitions for winding up the respondent-company with a case that the said company is unable to pay the debts for the amounts mentioned in each petition. It may be stated that the liability is in respect of lease rentals of the appliances and instruments leased by the petitioners to the said company.
3. On filing of the petitions, but before their admissions, the parties arrived at settlement on March 22, 1993. The terms of settlement were reduced into writing and common consent terms embodying the terms of settlement were filed on the same day before the court. Under the said consent terms, the company agreed to pay to the petitioners an aggregate sum of Rs. 1,37,18,313 (rupees one crore thirty-seven lakhs eighteen thousand three hundred and thirteen only) plus balance of lease rentals and other charges payable under four lease agreements, by instalments payable on stipulated due dates as mentioned in the said consent terms. The relevant clauses are reproduced hereinbelow :
1. The company, Maegaware Computers Limited, admits its liability of Rs. 1,37,18,313 (rupees one crore thirty-seven lakhs eighteen thousand three hundred and thirteen only) and balance lease rentals and delayed payments/other charges payable under four lease agreements bearing Nos. TCFC/233/89, TCF/32/89, TCFC/204/89 and TCF/31/89 (hereinafter collectively referred to as "the said four lease agreements") particulars whereof are more particularly set out respectively in exhibits "A" (being particulars of the petitioners' claim) to the above petition as also the other petitions mentioned above. The company hereby admits the correctness of the aforesaid particulars of claim as on the date of each petition and the company's liability for the same to the petitioners.
5(iii) If for any reason the company should fail to make payment of any one instalment in accordance with the terms hereof or upon breaching any conditions hereof, it will forthwith hand over to the petitioners possession of the entire leased equipment in good order and condition.
5(vi) The company agrees and undertakes not to apply to this court for any extension of time for payment of the amounts due hereunder.
4. In the event the company fails to pay anyone of the aforesaid two instalments on their respective due dates, the petitions Nos. 49, 50, 51, 52, 501, 502, 503 and 504 of 1992, do stand admitted forthwith without any further orders and the petitioners do advertise the admission of the petition in Loksatta, Times of India and/or Economic Times and Maharashtra Government Gazette and the petitions be made returnable after four weeks from the date of first advertisement.
5. The company committed default in the payment of the amount in accordance with said consent terms, inasmuch as it had not paid a single instalment as per the consent terms.
6. The petitioners, therefore, as provided in clause 6 of the consent terms reproduced above caused publication of advertisements in the following newspapers :
1. Loksatta, Bombay, on June 22, 1993.
2. Loksatta, Pune, on June 24, 1993.
3. Loksatta, Nagpur, on June 25, 1993.
4. Economic Times, Bombay, on June 24, 1993.
5. Times of India, Bombay, on June 22, 1993.
6. Maharashtra Government Gazette, Part II, on June 24, 1993.
7. The petitioners have filed an affidavit dated July 14, 1993, annexing relevant cuttings of the advertisements.
8. The petitions as a consequence have been brought before the court for further hearing.
9. The respondent-company appeared before the court and has made the application herein for enlargement of time for payment till May, 1994, and for stay of further proceedings in the petitions. It may be stated that such application is made under rule 7 of the Companies (Court) Rules, 1959.
10. Naturally, the petitioners have vehemently opposed the said applications of the respondent-company. Two other creditors (i) Hope Leasing and Finance Ltd. (petitioners in Company Petition No. 435 of 1992), and (ii) Delight Electronics and Engineering Pvt. Ltd., decree holder in Summary Suit No. 3576 of 1990 against the respondent-company, have also appeared before the court in response to publication of advertisements who are also supporting the petitioners in the opposition of the application herein. Across, extensive arguments were advanced by both the sides.
11. It would be convenient to notice the grounds in support as also against the respondent's application.
12. As far as the respondent-company is concerned, it admits its liability and states that it has every intention to pay the same. It does not dispute the filing of the consent terms. That there is default in payment is also not disputed or denied. It pleads that on account of recession in the computer industry which is their principal and sole business that they could not arrange payment within the agreed and specified time. However, it is in the process of raising the requisite finance to meet its debt liability. In the process, the company depicts, to say, an optimistic picture of its business ventures and new deals it has struck, in association with it parent concern the Maegabyte group of companies in securing a business offer for the middle east sector for a value of USD 1 million. This is what, in para 6 of the affidavit dated September 1, 1993, filed by Ilesh Shah, the general manager, it states :
"6. In their efforts, Maegabyte met with success in tying up a deal with a master franchisor for the Middle East sector, for a value of USD 1 million. For this deal, Maegabyte will procure the Maegacards and encoding system from Maegaware Computers Ltd. The agreement has an initial validity period of two years and execution of orders would commence in about six months. This order will be backed by a confirmed, irrevocable letter of credit from the master franchisor to Maegabyte. In view of the above export order, Maegaware's order would show a healthy look and enable it to liquidate its liabilities. I crave leave to refer to and rely upon the documents concerning the said contract at the time of hearing."
13. The company has also filed further affidavits annexing certain documents in respect of said new transfer, and relying upon them, it states that on execution of the offer within six months, it would be in a position to liquidate its liability. The company has also given the details of its employment potentiality and the consequences if ordered to be would up.
14. The points of opposition be summarised as under :
(1) That the default committed by the company is clear proof of its liability to pay the admitted debt.
(2) That the application lacks bona fides. Inasmuch as, having filed the consent terms and agreed to make payment on specified dates, it has not approached the court for enlargement of time, but only after publication of advertisements in the newspapers and when petitions appeared before the court.
(3) The advertisements in the newspapers were published in the last week of June, 1993, still the company did not move the court.
(4) That the company has undertaken as per clause 5(vi), reproduced above, that it would not apply for extension of time for payment.
(5) The order dated March 22, 1993, is a consent order and cannot be varied in the manner sought.
(6) That no clear evidence is made available as far as new business deal referred to.
(7) That the court has no power to enlarge the time and no case has been made out for the same.
(8) That the respondent-company has been using the leased appliances, without any payment.
15. Rule No. 7 of the Companies (Court) Rules, 1959, is as under :
"7. Power of court to enlarge or abridge time. - The court may, in any case in which it shall deem fit, extend or abridge the time appointed by these rules or fixed by an order of the court for doing any act or taking any proceeding, upon such terms (if any) as the justice of the case may require and any such enlargement may be ordered although the application for the same is not made until after the expiration of the time appointed or allowed."
16. The plain meaning of the said rule makes it manifestly clear that it empowers the court to extend or abridge the time appointed by or fixed by an order of the court, for doing any act... etc. It also gives power to the court to enlarge time notwithstanding the fact that the application for the purpose is made after the expiry of the stipulated time.
17. In the matter in hand, it is true that the company has not been diligent or prompt enough to approach the court even after publication of the advertisements in the newspapers as noticed earlier. It has also not paid any amount in accordance with the consent terms. To that effect, the opposition from the petitioners would the justified.
18. Various decisions were referred to on the point of power of the court to enlarge the time as in the instant cases, most of which related to the provisions of the Civil Procedure Code, like sections 148, 151, Order 21, rule 92 read with rules 89, 90 and 91, etc. However, as far as proceedings under the Companies Act, as in the case in hand, are concerned, where the company judge exercises the jurisdiction under the said Act, various circumstances and factors require to be seriously considered in the light of various other provisions contained in the said Act, including the consequences of any order that any be passed in the long run. The matter does not rest on considerations between the creditor and debtor. The court has to consider and take into account the circumstances to find out whether the company is reverted or driven to such a situation that it would be, in all probability, absolutely impossible for it to discharge its liability to its creditors. The power thus exercised under the said rule 7 is much wider.
19. As stated earlier, the company has admitted, without any denial, its liability in entering into consent terms at the threshold of the proceedings. Even now it reiterates and reaffirms its commitment. However, what it needs and that is what it pleads is further breathing time to fulfil its commitment. It has been endeavouring its best to tide over the situation. It has, as stated, procured a substantial business deal. This court is of the view that the company should be given one more chance by enlarging the time to pay the debts, on providing adequate safeguards to the leased assets of the petitioners.
20. It is unnecessary to consider the legal issues raised by and on behalf of the petitioners in opposing the reliefs of this application, since, in somewhat identical facts and circumstances, the Division Bench of this court, after reviewing various decisions including that of the apex court, in the light and context of provisions as contained in rule 7 of the Companies (Court) Rules, 1959, has proceeded to hold that the company court exercising the powers under the Companies Act, has power and discretion to grant such reliefs as claimed in the instant case. The case in question is Marketing and Advertising Associates Pvt. Ltd. v. Telerad Pvt. Ltd. [1969] 39 Comp Cas 436 (Bom), which contains the judgments of the company judge and also in appeal therefrom of the Division Bench, luminously discussing the legal provisions directly on the point, needing no further elaboration, and which lend support to the view I have disposed to take in this case.
21. Hence, the following order.
(1) Judge's summons made absolute in terms of prayers (a), (b) and (c) which read :
(a) that the delay in taking out the present application be condoned;
(b) that the time for making payments of the petitioners' dues under the consent terms dated March 22, 1993, be extended to May, 1994;
(c) pending the hearing and final disposal of the application, the hearing and final disposal of the petition be stayed.
(2) The above reliefs are subject to the following :
(i) That the terms embodies in the consent terms dated March 22, 1993, and filed in the court will not affect in any manner whatsoever save and except the extension of time for the payment in terms of prayer (b) above, from the date of this order. It is made expressly explicit that time extended in terms of prayer (b) above is for the payment of entire dues as mentioned in clause 5 if the consent terms.
(ii) It is made further distinctly clear and understood that the various provisions as contained in the respective clauses of the said consent terms providing safeguards to the computer equipment remain unaltered including as provided in clause 5(iii) thereof.
(iii) That the company shall pay the lease rental as per and at the rate mentioned in the contracts to the petitioners for the extended period over and above the amount agreed upon in the consent terms.
(3) The company shall deposit in the court a sum of Rs. 1 lakh for meeting the expenses incurred by the petitioners towards advertisements within a week from this order. Liberty is granted to the petitioners to apply for the withdrawal of the amount from the court towards such expenses on satisfactory proof thereof, i.e., on submitting the original bills before the prothonotary and senior master and on furnishing the xerox copies of the relevant bills, duly certified by the petitioner's advocates to the respondent-company. On such compliance, the prothonotary and senior master shall pay the amount of bills to the petitioners and for such payment he is authorised to act on the certified copy of the minutes of order. In the event of the amount so deposited being insufficient to cover the bills of the petitioners, then the respondent-company shall deposit the difference in the court, within a week from the intimation to that effect from the petitioner's advocate. If the amount so deposited is in excess of the amount of the bills of the petitioners, the prothonotary and senior master to retain the amount in court till further orders, with liberty to the parties to apply.
(4) As far as other two creditors are concerned, named above, it is clarified that this order would not affect their independent remedy available.
(5) The respondent-company shall pay the costs of this application to the petitioners, in separate sets in each petition.
(6) The respondent-company's advocate to get the judge's summons duly registered.
(7) Issuance of certified copy is expedited.