Gujarat High Court
Ambica Ginning Pressing Pvt Ltd vs Amazon Ceramics Limited on 5 February, 2025
Author: Biren Vaishnav
Bench: Biren Vaishnav
NEUTRAL CITATION
C/OJA/17/2014 JUDGMENT DATED: 05/02/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/O.J.APPEAL NO. 17 of 2014
In
R/COMPANY PETITION NO. 86 of 2010
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE DEVAN M. DESAI
==========================================================
Approved for Reporting Yes No
==========================================================
AMBICA GINNING PRESSING PVT LTD
Versus
AMAZON CERAMICS LIMITED
==========================================================
Appearance:
MR.PAVAN GODIAWALA, ADVOCATE for RC JANI & ASSOCIATE(6436) for
the Appellant(s) No. 1
MR.JAY KANSARA, ADVOCATE for M/S WADIAGHANDY AND CO(5679)
for the Opponent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE DEVAN M. DESAI
Date : 05/02/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This OJ Appeal has been filed by the original petitioner Ambica Ginning Pressing Pvt. Ltd.
challenging the oral order dated 15.10.2013 Page 1 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined passed by the learned Single Judge, by which, the Company Petition filed by the appellant was dismissed.
2. Facts in brief are as under:
2.1 The appellant company registered under the Companies Act, 1956, ('the Act' for short) approached this Court by filing a petition under Sections 433 and 434 of the Act. It was the case of the appellant company that since the respondent company was in need of financial help and as one of the directors of the petitioner company was also one of the directors of the respondent company, financial help of Rs.1.25 crores was given by way of seven different cheques on 01.04.2004 and 31.03.2005. It was a case of the appellant company that out of the said amount, only Rs.35 lakhs has been repaid by Page 2 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined the respondent company. According to the appellant therefore since the respondent company had not paid the outstanding dues, it was unable to pay its debts and the appellant filed the captioned company petition after giving a statutory notice under the provisions of the Act.
3. After hearing learned counsel for the respective parties, the learned Single Judge dismissed the petition holding that the legal notice dated 05.04.2010 as well as notice dated 19.04.2010 were not notices in compliance of provisions of Section 434 as the notices were defective and it was not the company who has given such notices but an individual Mr.N.P.Patel and similarly the recipient of the notice were also individuals who were described as Directors and it was not to the respondent company.Page 3 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
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4. On the second aspect, the learned Single Judge held that the petition involved disputed questions of facts and therefore it was not possible to reach to a conclusion that the amount which the appellant claims has, in any manner and in any terms become due and payable.
5. Mr.Godiawala learned counsel for R.C.Jani & Associate learned advocates for the appellant made the following submissions:
5.1 Taking us through the order of the learned Single Judge, and thereafter reading the notices dated 05.04.2010 and 19.04.2010, Mr.Godiawala learned counsel for the appellant would submit that the learned Single Judge committed an error in holding that the notices were issued by the individual and not the company. Mr.Godiawala would submit that reading the notice as a whole Page 4 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined clearly indicated that the notice in fact was issued after the resolution authorizing Shri Narsinhbhai Patel was passed by the company and the notice therefore categorically pointed out that amounts were due and payable to the company Ambica Ginning Pressing Pvt. Ltd. from the respondent Eureka Tiles Ltd. The notice was therefore in compliance with the statutory provision, particularly Section 434(1)(a), 434(1)(c) of the Act.
5.2 Mr.Godiawala would submit that the unjustified emphasis by the learned Single Judge on the language of the notice "My client Narshibhai Patel and such emphasis highlighted by the learned Single Judge to conclude that the notice was given by an individual Narshibhai Patel and not the petitioner company is clearly misconceived.Page 5 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined 5.3 Mr.Godiawala would further submit that the finding of the learned Single Judge that there was non-compliance as the notice was not served on the respondent company, but to the Directors of the company is misconceived and must therefore be set aside.
5.4 Mr.Godiawala would further submit that the learned Single Judge had inherently contradicted himself in ousting the petitioner from this preliminary ground and then while going into the merits held that even on merits the appellant had no case and the finding of the the learned Single Judge that since the disputed questions are involved, the petition be dismissed is a finding contrary to law and facts. He would submit that the transactions of loan advanced to the respondent was clearly admitted. He would take us to the affidavit where TDS certificate was Page 6 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined annexed showing tax deducted at source on the interest amount issued. The notes forming part of the account for the year ended 31.03.2009 also reflected the outstanding amount. Reading the MOU dated 25.08.2009, learned counsel Mr.Godiawala would submit that clause 4 of the agreement categorically stated that postdated cheques were issued in favour of the appellant.
There was no defense to the statutory notice and the only response that the appellant company received is that the respondent's directors were not in debt to the appellant company.
5.5 Mr.Godiawala would further submit that even otherwise if a notice was issued in the name of Narshibhai Patel, admittedly the individual work of the directors of the company and the notice is deemed to be issued by the appellant company and not an individual. There was full Page 7 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined compliance of the statutory mandate under Section 433 of the Act. There was also compliance of the provisions in as much as on demand being made and in absence of any defense, a statutory presumption did arise that the company was unable to pay its debts. The documents produced by the appellant company were overlooked.
5.6 Mr.Godiawala in support of his submissions would rely on the following decisions:
I. In case of Harinagar Sugar Mills Ltd. v.
M.W. Pradhan reported in AIR 1966 SC 1707.
This decision was relied upon in order to support his submission that when a demand has been made, it need not be made that the demand should specify that the creditor is entitled on amounts from the company and only the creditor should be paid.Page 8 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined II. In case of Luxmi Industrial Gases Private Limited v. Punjab Chemi Plant International Ltd. reported in [2001] 103 Comp Cas 429 (P&H), relying on head note he would submit that even if the notice is served through the directors, it satisfies the substantial compliance of the provisions of Section 434 of the Act.
III. He would rely on this judgement to support his case that there was no reasonable defense and the learned Single Judge committed an error in coming to the conclusion that the petition involved the disputed question of facts. Relying on para 25 of the aforesaid decision, Mr.Godiawala would submit that once indebtedness is proved, a petition cannot be thrown out on the preliminary issue.
IV. Relying on the said decision Mr.Godiawala Page 9 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined would submit that the learned Single Judge overlooked the documents on record which clearly demonstrated that the debt had become due and payable. He would submit that the learned Single Judge overlooked the contents of the notice as a whole. He would submit that the statutory demand notice fulfilled the mandatory criteria and a demand was unequivocally made in the notice and served on the registered premises of the company.
V. Relying on the observations of the Charlsworth's company law, Mr.Godiawala would submit that the creditor must prove that the demand notice was left at the company's registered office if it is put in post, it is properly served if delivery is accepted or proved. He would therefore submit that the learned Single Judge ought to have allowed the petition.Page 10 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
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6. Mr.Jay Kansara learned counsel for M/s Wadiaghandy and Co. learned advocates for the respondent would make the following submissions:
6.1 Mr.Kansara would submit that the learned Single Judge committed no error in dismissing the company petition. He would submit that, reading the notice dated 05.04.2010 and 19.04.2010 would apparently indicate that the mandate of Section 434 of the Indian Companies Act, 1956 was not complied with. Evidently, from reading the notices, it was clear that it was given by one Narshibhai Patel, an individual and not by the company. Moreover, the recipients of the notice to whom it was addressed were individual directors one amongst them being the Managing Director, the notice was not addressed to the company at registered office which was a Page 11 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined second breach of a mandatory nature. He would rely on the reply filed by the company-
respondent to make his submissions. He would submit that the proceedings were misconceived at the hands of one Shri J.B.Patel - a director who was removed from the company as he was working against the interest of the company and its shareholders and investors.
6.2 Mr.Kansara would further submit that reliance placed on the MOU is misconceived as the company has never entered into any MOU with the petitioner company. On merits, Mr.Kansara would submit that no legitimate debts are due and payable to the petitioner company. The entire amount received from the petitioner company had been paid and therefore there was no outstanding amount payable to the petitioner.
Page 12 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined 6.3 Mr.Kansara would also rely on the affidavit filed pursuant to an order dated 12.08.2011. He would submit that as per the order dated 12.08.2011 where the company was directed to produce the certificate issued by the bank, statements from Punjab National Bank, HDFC Bank, State Bank of India, Bank of India and Union Bank of India suggested that amount has already been paid.
6.4 In support of his submissions, Mr.Kansara would rely on the following decisions to submit that provisions of Section 434 are mandatory in nature. That when there is evidence on record to suggest that debt shall be paid, the learned Single Judge committed no error that there was a bona-fide dispute with regard to the liability and hence the appropriate forum to settle the dispute will be a Civil Court. Especially emphasizing on Page 13 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined a decision of the High Court of Delhi in case of Sanjiv Kumar Mittal v. Deputy Commissioner (TRC), CGST Commissionerate, Delhi South and others reported in (2021) 84 GSTR 124, Mr.Kansara would submit that it is well settled that a company is a distinct juristic entity and therefore the distinction between the company and the director cannot be jettisoned.
7. Having considered the submissions made by the learned counsel for the respective parties, the preliminary issue on which we are called upon to decide is a question whether the notice dated 05.04.2010 and 19.04.2010 issued by the appellant company can at all be said to be a notice given by the company-appellant herein.
7.1 In accordance with provisions of Section Page 14 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined 434(1a) of the Act, it is clear that if a creditor to whom is company is indebted has served on the company by causing to be delivered at its registered office a demand under his hand, requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, a company petition can be filed if there is no defense from the debtor company. Admittedly the case set out by the appellant is that the company viz. Ambica Ginning Pressing Pvt. Ltd. had advanced financial assistance to the respondent company through various cheques for the period from 1.4.04 to 31.3.05. Undisputably therefore it was a company therefore which has let out the assistance and not any individual. Though admittedly there is a resolution of the appellant company entitling Shri Narshibhai P. Patel a Director of the company auhtorizing him on Page 15 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined behalf of the company to present a petition for winding up of the respondent company, one needs to undertake the exercise of appreciating the language of two notices. We have the benefit of such dissection of the language of the notices which has been carried out by the learned Single Judge and it will be in the fitness of things to set out the extract of notice and the reasoning in that context by the learned Single Judge. Paras 7 to 9.5 read as under:
"7. In the notice dated 5.4.2010, it is mentioned, inter alia that:-
Under the instructions and documents supplied by my client Narsinhbhai Pathubhai Patel, aged 55 years, Director of Ambica Genning Pressing Pvt. Ltd. situated at Idar Himmatnagar Highway, Saparwada-383430 Tal: Idar, Dist.
S.K. (Gujarat) herein, I am addressing you as under.....
(emphasis supplied) 7.1 The said notice further recites, in paragraph No.1, that:-
1. My client being a Director of Ambica Genning Pressing Pvt. Ltd. had given an amount by way of a loan by 7 (seven) separate Page 16 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined cheques for which, the details are mentioned below.......... (emphasis supplied) 7.2 In the said notice it is further mentioned that:-
10. My client had issued a legal notice by RPAD on 7.10.2008 for calling upon you to discharge the account and you did not reply to the same and therefore my client was constrained to file a Company Petition No. 19/09 before the Hon'ble High Court under the provisions of Section 433 and 434 of the Companies Act, 1956. (emphasis supplied) 7.3 From the above mentioned averments in the notice dated 5.4.2010 it becomes clear that notice is given by and on behalf of and in the name of individual i.e. Narsinhbhai Pathubhai Patel and not by the petitioner company.
7.4 Therefore, the said notice dated 5.4.2010 cannot be said to have been issued and served by the petitioner company.
7.5 Furthermore, the said Mr.N.P. Patel has described himself as director of the company, however any resolution authorizing the said Mr. N.P. Patel to give financial help on behalf of and from the funds / accounts of the petitioner company in the sum of Rs.1.25 Crores to the respondent company is not placed on record.
7.6 Actually that is not even the case of the petitioner in the petition.Page 17 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined 7.7 There is no material to show that the said Mr. Patel was duly authorized by company to enter into the said transaction and the petitioner has not even made such case in the petition.
7.8 Moreover any resolution authorizing the said person Mr. N.P. Patel to issue notice on behalf of the petitioner company is also not placed on record.
8. Besides this, the averment made in paragraph No.1, 10 and 12 clearly demonstrate that the notice has been issued in the name of and on behalf of and by the said individual Mr. N.P. Patel and not by the petitioner company. It is pertinent that in paragraph No.12 it is averred that:-
12. My client Mr. N.P. Patel obtained a data from the ROC, Ministry of Corporate Affairs and came to know from the balance sheet dated 31.3.2009 that the funds and fixed assets were shown as Net block of Rs.23,91,23,297/- wherein the loan funds (secured loan and unsecured loan) were shown as Rs.28,11,28,748/- and current liability loan was shown as Rs.4,95,41,798/-. It also came to know from the records that since last 5 years, the company is not able to meet with the liabilities as you have submitted the income tax return to the ROC is shown as under:-
8.1 Then in paragraph No.13 it is further alleged that:-Page 18 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
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13. Hence, my client is calling upon by this notice that in view of the last demand for the year 2009-2010 of Rs.98,12,599/-
which is yet unpaid though three MOU were executed between the parties, you have sent 48 cheques of Rs.2,00,000/- each without signatures and which was sent to you for signature, you have engaged a lawyer who filed a reply but under the company law notice is required to be served to you at the registered office of my client has withdrew the earlier notice.
8.2 From the said averments it emerges that it was the said individual who claimed the amount and who issued the Notice and who called upon the respondent by Notice and not the petitioner company.
9. More important part of this defect is that from the title of the notice dated 5.4.2010 it also emerges that the notice is addressed to individual who are described as Directors. However, in the manner in which the notice is addressed, it cannot be said that the Notice is issued, to and against, the respondent company.
9.1 In paragraph No. 1 of the notice it is averred that My client being a Director of Ambica Genning Pressing Pvt. Ltd. had given an amount by way of a loan by 7 (seven) separate cheques for which, the details are mentioned below.
9.2 Thus, from plain reading of the said averement it emerges that it is clearly Page 19 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined claimed and asserted that it is Mr. Narsinhbhai Pathubhai Patel who had given the said cheques by way of loan.
9.3 Thereafter, in paragraph No. 10 it is averred that My client had issued a legal notice by RPAD on 7.10.2008...... It is also mentioned in the said notice dated 5.4.2010 that under the instructions and documents supplied by my client Mr. Narsinhbhai Pathubhai Patel..... When the said averments in paragraph No.10 are read conjointly with the submission made in preamble of the notice then it emerges that the expression my client is related to the name which is mentioned in the preamble of the notice i.e. Mr. Narsinhbhai Pathubhai Patel.
9.4 Thereafter from the averments in paragraph No.12, the aforesaid aspect becomes more clear because it is averred that My client Mr. Narsinhbhai Pathubhai Patel obtained data from ROC........"
9.5 Thus, it is clear that the notice is given by and on behalf of and in the name of said Mr. Narsinhbhai Pathubhai Patel."
7.2 On the first aspect on the company having issued a notice, what is evident is that what is perceived by the learned Single Judge and in our rightly so is that the notice was issued by the Page 20 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined individual Narshibhai Patel by and in his name and not by the company.
7.3 Mr.Godiawala learned counsel for the appellant would want us to accept his submission that though the notice was addressed by a company to a company on account of the title of the notices and expect us to accept his submission that the director issuing a notice and the recipient be addressed as the Managing Director being admitted his substantial compliance of the provisions of Section 431 of the Companies Act for which he has relied on the decision of Punjab and Haryana High Court in case of Luxmi Industrial Gases Private Limited (supra), one cannot loose sight of the fact that it is well settled that the company is a distinct juristic company separate from its director. The decision pressed into service by Page 21 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined Mr.Kansara of Sanjiv Kumar Mittal (supra).
Paras 20 and 21 of the judgement read as under:
"20. It is well-settled that a company is a distinct juristic entity, separate from its Directors. In Bacha F. Guzdar, Bombay vs. Commissioner of Income Tax, Bombay, AIR 1955 SC 74, the Supreme Court has held as under:- "9. It was argued that the position of shareholders in a company is analogous to that of partners inter se. This analogy is wholly inaccurate. Partnership is merely an association of persons for carrying on the business of partnership and in law the firm name is a compendious method of describing the partners. Such is, however, not the case of a company which stands as a separate juristic entity distinct from the shareholders. In Halsbury's Laws of England, Vol. 6 (3rd Edn.), p. 234, the law regarding the attributes of shares is thus stated: "A share is a right to a specified amount of the share capital of a company carrying with it certain rights and liabilities while the company is a going concern and in its winding up. The shares or other interest of any member in a company are personal estate transferable in the manner provided by its articles, and are not of the nature of real estate." (emphasis supplied)]
21. From the above extract, it is apparent that the distinction between a company and its Director cannot be jettisoned unless there is a specific statutory provision to the contrary or till a case for lifting of the Page 22 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined corporate veil is made out. Section 87(b)(i) of the Finance Act provides for a garnishee order only - i.e. provides for attachment of funds of an assessee lying with third parties. There is no provision in the Finance Act making an ex-director, even if having knowledge of affairs of the company, vicariously or jointly liable for the dues of the company."
7.4 Apparently therefore, when reading the statutory notice expressly indicates that it was by an individual to an individual and not from a company to a company, the mandate of Section 434 was not complied with.
7.5 It was in this background that the learned Single Judge, in our opinion, rightly so came to a conclusion that when the statutory notice was not in compliance from the mandate, it cannot be said to be a valid notice so as to trigger the filing of a winding up petition. In coming to this conclusion, we also have a benefit of the Page 23 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined judgement of the very same learned Single Judge in case of HBO+EMTB Private Limited v.
rendered in Company Petition No.120 of 2011, wherein, referring to Section 434 of Companies Act, the learned Single Judge held thus:
"13. So as to appreciate this aspect, it is necessary to take into account the provision under Section 434 of the Act, which reads thus:-
"Section 434. Company when deemed unable to pay its debts-
(1) A Company shall be deemed to be unable to pay its debts-
(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding (One Lakh Rupees) then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for to the reasonable satisfaction of the creditor; (Emphasis supplied)
14. On perusal of the provision, it becomes clear that the Section postulates, Page 24 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined as condition for maintaining petition for winding up, that the claimant-creditor
(a) must serve a demand to the debtor company, and;
(b) such demand must be made in writing/under his hand and the company must be asked to pay the dues, and;
(c) such demand, issued/made in aforesaid manner, must be served "On the company"
(i.e. not on any person like any Officer/Manager/Director/Employee etc. but only on the company), and;
(d) such demand must be delivered at the "Registered Office" of the company.
14.1 Thus, not only the demand must be made in the manner aforesaid by the claimant-creditor under his hand and it must be also served on the company and it must also served and delivered "on the company", but, it must be also served delivered only at its "registered office".
Now, so far as "Registered Office" is concerned, the provision under sub Section 3 of Section 10 of the Act defines the term "Registered Office" for the purpose of winding-up proceedings/petition. The relevant part of said section 10 reads thus:-
Section 10. Jurisdiction of Courts:-
(1) The Court having jurisdiction under this Act shall be -Page 25 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
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(a) .....
(b) .....
(2) ......
(a) .....
(b) .....
(3) For the purpose of jurisdiction to wind up companies, the expression "registered office"
means the place which the longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.
In the present case, even according to the petitioner, the registered office of the respondent company has always been at Ahmedabad at the address mentioned in the petition.
Thus, the notice-demand must have been served- delivered only at "Registered Office" i.e. at Ahmedabad.
14.2 Hence, for determining the issue about maintainability of petition seeking winding-up, it is necessary to ascertain whether the demand is made by the creditor in the manner contemplated under Section 434 or not and whether the demand was made "on the company" and whether it was duly delivered at its "Registered Office" (as defined under Section 10 of the Act) or not.Page 26 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined 14.3 This aspect is important also because even the territorial jurisdiction of the Court depends on the location of "Registered Office" (as per Section 10 of the Act).
14.4 The delivery of the demand i.e. the statutory notice at "Registered Office" (as defined under Section 10 of the Act) mandatory and service-delivery of the demand (i.e. the statutory notice) at any place-office other than "Registered Office" is not and can not be treated- termed as proper service-delivery and/or compliance of the statutory obligation-condition prescribed by law.
14.5 In view of specific requirement regarding "service-delivery" of statutory at "Registered Office" (as defined-contemplated under Section 10 of the Act) mandated by virtue of Section 434 of the Act as contemplated under Section 434 of the Act at any place-office other than the Registered Office (as defined and contemplated under Section 10 of the Act) can not be treated or even deemed as "proper service" as required by law.
14.6 In light of settled position that when the statute requires particular act to be done only in particular prescribed manner then it must be done only in that manner and not otherwise, when in present case, the provision (Section 434 of the Act) requires delivery of statutory notice and also requires such delivery service in particular manner and/or at particular place then the service-delivery must be effected only in that manner and not in any other manner. The defect cannot be treated as more irregularity and it can be cared only after service-delivery of the Page 27 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined statutory demand-Notice in prescribed and specified manner. A winding up petition can be maintained only thereafter.
15. So far as the issue about "Statutory Notice"
i.e. demand and its service delivery at "Registered Office" is concerned, it is also noticed that even the invoice nos. 7 & 8 dated 06.06.2008 and 25.08.2008 and the letter dated 19.06.2009 (Annexure-E, Page-45) were also forwarded at the Mumbai office. Besides this the Notice (styled as statutory notice under Section 434 of the Act) dated 03.08.2009 (Annexure-F Page-48) also was forwarded to Mumbai Office i.e. at Mumbai address and not at Registered Office. The C.C. was also sent to Mumbai even the invoice no.10 (dated 03.09.2009) was forwarded to Mumbai Office/at Mumbai address. Similar is the fact related to the Notice dated 23.09.2010 (Annexure-H, Page-52), which also was sent to Mumbai office/at Mumbai address. The letter dated 21.10.2010 was also forwarded to respondent's Mumbai office/at Mumbai address. Subsequently the Notice (which also was styled as Statutory Notice under Section 434 of the Act) dated 22.11.2010 (Annexure-J, Page-
56) also was forwarded at respondent's Mumbai office/Mumbai address. All the aforesaid correspondence, invoices and "Notice/s" were forwarded to respondent's address/at Mumbai office and not at the Registered Office and still for some undisclosed reasons, the petition is filed in in this Court. The Statutory Notice is not delivered-not even forwarded at the Registered Office of the respondent-company. Then comes the letter dated 20.12.2010 (Annexure-L, Page-
60) wherein at the end of the letter, it is stated Page 28 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined that it is "Notice" under Section 434 of the Act", which contains reference/mention of both addresses. However, the Notice which was forwarded at the address/premises (at Ahmedabad), which the petitioner claims to be the Registered Office of respondent-company (address of its Registered Office) has not been served and according to the petitioner, it is returned unserved. Only on the strength of the said letter dated 20.12.2010 (Pg.60) wherein at the end, it is stated that the said letter is notice under Section 434 of the Act, the petition is filed in this Court.
16. Learned advocate has, to assert that it is returned unserved, relied on the document at Page-62 (Annexure-M), which carries a remark "no such C/o." Whether the remark is put/made by postal person/authority or not, actually what is the meaning of the abbreviation/remark "C/o"
etc. are subject matter of evidence.
17. It is alleged and claimed that it is put by posted authorities however, the said remark does not bear or is not accompanied by any signature and/or date, thus, it cannot establish that "When" and "By Whom" such remark is made. Hence, it cannot be construed as "due service/delivery or "deemed service/delivery" as recognized by law.
18. In the present case the statutory notice is not duly served at respondent's Registered Office. Therefore, petition is not maintainable and does not deserve to be entertained. Actually it is not maintainable mainly on two counts.
Page 29 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined (A) Statutory notice is not served and delivered at the "Registered Office" of the Company.
(B) Respondent's reply in response to petitioner's notice gives out, and it transpires from respondent's reply that there is dispute about alleged dues and is raised contemporaneous and the dispute prima-facie does not appear to be sham and it also appears that the dispute would require evidence, oral and documentary, to establish the claim and to prove the defence.
19. So far as the reason at point number (A) above is concerned, as noted above, the learned advocate for petitioner is relying on the document at Page.62, which merely records the remark "No such C/o". The said remark by the courier does not indicate that and cannot be construed as the service nor does it indicated and cannot be construed that the delivery of notice was "refused". 19.1 The petitioner is unable to get the notice duly served cannot be treated as refusal or proper service. The petitioner has not come with the case that the Company has closed down its affairs and/or closed down its registered office, and therefore, notice was not served.
19.2 The petitioner has not asserted or averred that the respondent has shifted its Registered Office (as contemplated under and within the meaning of Section 10 of the Act) within last six months. There are neither sufficient averment and/or material Page 30 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined to warrant and justify inference of refusal, which would tantamount service. Thus, the fact remains that the notice is not served and cannot be treated or deemed to have been served as required and contemplated by Act.
20. Beside aforesaid aspects, so far as the reason at point number (B) is concerned, it is relevant to note that in response to the rd petitioner's letter dated 23 September,2010, the Respondent-Company appears to have given reply vide its th communication dated 9 December,2010, wherein the respondent-Company has, interalia, stated that :-
"At the very outset, we are shocked and surprised to receive your notice under reference as after various meetings and negotiations regarding the pending payments to your client. We had mutually agreed and arrived at an amount of Rs.39,21,345 as full and final payment to your client; and the same was recorded by your client st vide their letter dated 21 October,2010, and its attached claim no.10. Please note that we have paid AUD$ 86078.30, which is equivalent to Rs.39,21,345 at current exchange rate and which is already agreed by your client.Page 31 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined The said amount of Rs.39,21,354 st was paid by us on 21 October,2010, the copy of the proof of the payment made to your client is attached herewith for your ready reference.
In the circumstances, we deny that we are liable to make any payment to your client, as alleged by you in your Notice. We are not replying to your notice paragraph wise but nothing contained in your Notice under reference be deemed to be admitted or accepted by us."
(Emphasis Supplied) 20.1. Upon consideration of the above noted response by the Opponent-Company, it prima-facie appears that there is an existing dispute between the parties, which would necessitate evidence, oral as well as documentary by both the contesting parties to establish the claim and to prove the defence, in as much as the respondent- company has, interalia, claimed that amount of Rs.39,21,345/- i.e. AUD$ 86,078.30/- was the amount, which was agreed between the parties as the amount to be paid in full and final settlement of claim whereas it is the case of the respondent that the said amount has been paid by it, and therefore, the payment has to be considered as full and final payment.
20.2 The fact that the opponent has paid the said sum of Rs.39,21,345/- is admitted by the petitioner.
Page 32 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined 20.3 Now that therefore, whether the Opponent-Company was required to pay the said amount of Rs.39,21,345/- in foreign currency i.e. Australian Dollars or in Indian Currency and if in Forex then whether the equivalent Australian Dollors (i.e. equal to Rs.39,21,345) was agreed to be calculated for the purpose of payment at the exchange rate, which was prevailing on the actual date of payment or at the rate prevailing on the date on which the agreement was arrived at between the parties, do not come out clearly from the material placed on record by Petitioner-Company. However, the petitioner Company seeks to claim that (a) the balance of amount was to be paid in Forex and that the petitioner is short paid. Whereas the respondent company has claimed that the amount agreed to be paid in full and fixed payment of pending claim, has been paid by it pursuant to and as per the agreement hence, the allegation about the pending claim is incorrect. Thus, (a) the said aspects-details are matter of evidence; and (b) The said issues constitute bonafide dispute and consequently a triable defence."
7.6 That brings us to the second aspect on which the learned Single Judge has opined that the notice was also not delivered to the registered office of the company. Reading the Page 33 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined notice dated 19.04.2010, it becomes expressly clear that the notice was addressed to the individuals and it was C/o M/s.Eureka Tiles Ltd.) Apparently therefore the notice was not addressed to the company at the registered office. In this context, we have the benefit of the reasoning set out by the learned Single Judge.
Paras 9.6 to 9.21 read as under:
"9.6 Besides this, as mentioned earlier the said notice is addressed to individual and not to the respondent company. 9.7 Meaning thereby, the statutory requirement of issuing and serving Notice to the debtor defendant company is not complied. Notice to the directors cannot be termed as Notice to the company.
9.8 Similarly a Notice by an individual director and that too without proper authorization by the company cannot be said to be notice by the company.
9.9 Likewise advance / loan given by an individual / a director without authorization by the company cannot be said to be loan / advance given by the company.Page 34 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined 9.10 It appears that the respondent replied the said notice vide communication dated 26.4.2010 which reads thus:-
Dear Sir, We are in receipt of your legal notice given through Mr. Rashmin Jani, Advocate thereby requiring us to pay an amount of Rs.98,12,599/- alleged to have been given as loan to us.
In this connection, please be informed that as per our record no amount as loan or otherwise has ever been received from Mr. Narsinhbhai Pathubhai Patel. Therefore, your notice is illegal and we request you to withdraw the same forthwith to avoid legal action that may be taken against you in the matter for demanding an amount which was never due and payable to you from us.
9.11 From the said communication it emerges that even the respondent considered the said notice as having been given on behalf of the said individual i.e. Mr. Narsinhbhai Pathubhai Patel.
9.12 It appears that subsequently another notice dated 19.4.2010 came to be issued. The description of the said notice dated 19.4.2010 read thus:
To, Eureka Tiles Ltd.
(Having its registered office Registered under the Companies Act, 1956) At:208 Sharthik-II, Opp. Rajpath Club, S.G. Highway, Ahmedabad-54 9.13 The said notice is issued to the respondent company however, the said Page 35 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined notice dated 19.4.2010 is also issued in the name of and on behalf of Mr. Narsinhbhai Pathubhai Patel i.e. individual and not the petitioner company.
9.14 If the Notice is issued in name of and by an individual, then he who issued and serve the Notice can be the petitioner and not the company which has not issued any notice and has not made any claim.
9.15 In the opening part of preamble of the said notice dated 19.4.2010 it is mentioned that:
Under the instructions and documents supplied by my client Mr. Narsinhbhai Pathubhai Patel....... (emphasis supplied) 9.16 Thus, even the said notice dated 19.4.2010 cannot be construed as notice issued by the petitioner company. 9.17 Like in the previous notice, in the notice dated 19.4.2010 also, in paragraph No.10 it is averred that:-
10. My client had issued a legal notice by RPAD on 7.10.2008...... (emphasis supplied) 9.18 Thereafter in paragraph No.12 of the notice dated 19.4.2010 again it is mentioned that My client Mr. Narsinhbhai Pathubhai Patel obtained a data from the ROC..... (emphasis supplied) 9.19 Said averments are followed by averment in paragraph No.13 which reads thus:-Page 36 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined
13. Hence, my client is calling upon by this notice that in view of the last demand for the year 2009-2010 of Rs.98,12,599/- which is yet unpaid though three MOU were executed between the parties, you have sent 48 cheques of Rs.2,00,000/- each without signatures and which was sent to you for signature, you have engaged a lawyer who filed a reply but under the company law notice is required to be served to you at the registered office of my client has withdrew the earlier notice.
(emphasis supplied) 9.20 In the last paragraph i.e. paragraph No.14 of the said Notice dated 19.4.2010 again it is mentioned that:-
Therefore, in view of the above mentioned facts my client is giving this notice.... (emphasis supplied) 9.21 Thus, from the notice dated 19.4.2010, it becomes clear that the term my client refers to Narsinhbhai Pathubhai Patel and not the petitioner company and that therefore said notice cannot be said to have been issued by the petitioner company.
The aforesaid aspect is one of the major defects in the petition."
7.7 The learned Single Judge, on the submission of Mr.Godiawala, apart from dismissing the petition on this preliminary ground, has contradicted inasmuch as considered the merits of the case. We with respect do not agree with Page 37 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined the submission of Mr.Godiawala for the appellant. As is evident from para 15.1 of the decision of the learned Single Judge, it is very categorically stated by the learned Single Judge and in the words of the learned Single Judge we say so. Para 15.1 of the judgement of the learned Single Judge reads as under:
"15.1 It is also clarified that the Court has not entered into merits of the petition and the observations made in this order are only for the purpose of ascertaining the issue about maintainability of the petition in light of the provisions under the Act and not about the maintainability or otherwise of the petitioner's claim."
7.8 It is therefore evident on reading the said para that the merits have only been considered for the purposes ascertaining about the maintainability of the petition. We have been taken through the record and having perused the same extensively when it is the case of the Page 38 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined appellant company that an amount is outstanding from the respondent company towards the financial assistance that is extended to the respondent company, a counter has been filed by the respondent company before the learned Single Judge. Reading of the affidavit in reply would indicate that apart from denying the insistence of the MOU it is the case of the respondent that by account statements produced before the learned Single Judge it has been pointed out that no legitimate dues have been paid by the respondent company. We have also been taken through the additional affidavit filed pursuant to the order dated 12.08.2011 where account statements have been produced to indicate payments made by cheque to the appellant company and discharge of the so called financial assistance. It is therefore clear case in which the amount of debt cannot be said to be Page 39 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined undisputed. This very defense has been set out by the respondent company and though Mr.Godiawala would want us to accept his submission in light of the decision of the Gujarat High Court (sr. No.4), it is not a case where it was a petition for enforcing a payment of a just debt. When a valid defense has been raised by a company and material is produced on record to indicate full discharge, we do not find any error in the learned Single Judge holding that it was not a case befitting interference in a company petition. In the case of B. Viswanathan v.
Seshasayee Paper and Boards Ltd. reported in 1991 SCC OnLine Mad 525, we need to reproduce paras 18 to 29 which read as under:
"18. It is also well-settled that, in a summary proceeding like winding up, a detailed investigation and adjudication of the dispute should be avoided. This principle has been laid down in the case of G. Loganayaki v. Moolangudi Chit Funds P. Page 40 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined Ltd [1979] 49 Comp Cas 644 (Mad) as extracted above.
19. It is also equally well-settled that a winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by a company. A petition presented ostensibly for a winding up order but really to exercise pressure will have to be dismissed. This principle has also been laid down in Amalgamated Commercial Traders P. Ltd. v. A. C. K. Krishnaswami [1965] 35 Comp Cas 456 (SC) as extracted above.
20. Therefore, I am of the opinion that the debt is bona fide disputed by the respondent and, therefore, it is not a fit case for ordering winding up of the respondent- company.
21. The notice dated September 9, 1989, marked as exhibit P-9, issued by the petitioner through his lawyer is addressed to the managing director of the respondent- company. The following is the address given in the said notice:
"To The Managing Director, Seshasayee Paper and Boards Ltd. Erode 638 007."
22. In this context, it is useful to reproduce section 434 of the Act, which is as under :
"434. Company when deemed unable to pay its debts. - (1) A company shall be Page 41 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined deemed to be unable to pay its debts -
(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor;
(b) if execution or other process issued on a decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part;
or
(c) if it is proved to the satisfaction of the court that the company is unable to pay its debts and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.
23. Under section 434 of the Act, the deemed inability to pay the debts will arise when a creditor to whom the company is indebted in a sum exceeding Rs. 500 has served on the company by causing it to be delivered at its registered office a demand notice requiring the company to pay the sum so due, and the company has, for three Page 42 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined weeks thereafter, neglected to pay the sum or to secure or compound it to the reasonable satisfaction of the creditor. Unless the statutory notice is in conformity with the mandatory requirements of section 434(1)(a) of the Act, the presumption of inability cannot be raised. In the present case, the notice is addressed only to the managing director and not to the company. The registered office of the company is at Pallipalayam, Salem District, as can be seen from the postal index number code of delivery post offices in Tamil Nadu circle, marked as exhibit R-6; the pin code number of Pallipalayam is 638 006. The notice purporting to have been issued under section 434 is not only one addressed to the managing director, but also the pin code number given is 638 007. Therefore, the statutory exhibit P-9 notice does not conform to the mandatory requirements of section 434(1)(a) of the Act. The consequences of the statutory notice not being in accordance with the mandatory requirements of section 434 of the Act is that the presumption contemplated under the said section cannot be raised against the respondent. But the does not preclude the petitioner from still proving by other evidence that the company is unable to pay its debts. That appears to be the view taken in Bukhtiarpur Bihar Light Railway Co. Ltd. v. Union of India [1954] 24 Comp Cas 507 (Cal) which is as follows (headnote) :
"The appellant-company which was formed for constructing and maintaining a railway established a railway. The Page 43 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined railway line was connected with the East Indian Railway and there was interchange of coaching and goods traffic between the two railways. The Union of India representing the East Indian Railway served a notice of demand addressed to the Patna office of the company on June 6, 1950, claiming the sum of Rs. 5,22,313 due as a result of interchange of coaching and goods traffic. The company replied giving reasons as to why it was not liable, in any event, for the whole of the demand. Another notice dated June 30, addressed to the registered office of the company, was served claiming payment of two sums of Rs. 5,23,203 and Rs. 61,530. On July 18, the Union of India made an application for winding up the company alleging that in spite of the two letters of demand, no payment had been made; that the railway had been taken over by a local authority and that a sum of about Rs. 10 lakhs had been paid by that authority as compensation. Winding up was asked for on the grounds that the company was unable to pay its debts and that the substratum of the company was gone;
Held, (i) that the first notice was not a valid notice of demand inasmuch as it was not addressed to the company's registered office; and that because the interval between the second notice and the making of the winding up petition was less than three weeks there was no valid statutory demand."Page 44 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025
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24. And in Tripura Administration v. Tripura State Bank Ltd. AIR 1959 Tripura 41; [1960] 30 Comp Cas 324, which is as follows (headnote of AIR);
"A proper demand made in accordance with the provisions of section 434(a) only gives the benefit of the presumption that arises under it, but if the demand is found to be invalid for any reason then it is still open to the creditor to fall back upon section 434(c) and prove that the company cannot pay its debts. Indian Companies Act, 1913, In re, AIR 1948 Cal 335; [1949] 19 Comp Cas 1 and Bukhtiarpur Bihar Light Railway Co. Ltd. v. Union of India, relied on."
25. In the present case, there is no evidence at all to establish that the respondent-company is unable to pay its debts. Hence, the present petition is also liable to be dismissed on the ground that the statutory notice issued by the petitioner does not meet the requirements of section 434 of the Act.
26. It is a settled principle of law that the relief of winding up is a discretionary relief and the court has to find out whether winding up would be in the interest of justice and also in the public interest. The following principle has been laid down in the case of Bhalchandra Dharmajee Makaji's case [1972] 42 Comp Cas 190, 195) as has been extracted above.
27. The decision in Nopany and Sons P. Page 45 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined Ltd. In re [1991] 70 Comp Cas 262 (Cal) can also be usefully applied to the facts of the present case, wherein the learned single judge of the Calcutta High Court held as under (headnote) :
"The basic requirement of the provisions of section 434 of the Companies Act, 1956, is the existence of a debt due and payable by the company to the petitioning creditor. Where the petitioning creditor establishes such a claim though prima facie, the question of the maintainability of the petition under the provisions of the Companies Act for winding up of the company cannot be doubted. The burden lies on the company to satisfy the court as to the existence of a bona fide dispute in regard to the matter in issue and where a debt is bona fide disputed, the proper course would be for the law courts not to proceed with the winding up proceedings further and give leave to the petitioning creditor to file a suit for the adjudication of the disputes in the matter in issue. Where a debt is disputed, it is the duty of the court to go into the question of the genuineness or otherwise of the dispute and, in the event the court is primarily satisfied as regards its genuineness and bona fides, the court ought not itself to embark upon a detailed adjudication of the disputes between the parties. Conversely, however, in the event the dispute raised by the company does not seem to be genuine, it is a plain exercise of the Page 46 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined judicial power to direct winding up of the company."
28. In the present case, the respondent has discharged its burden and satisfied the court as to the existence of a bona fide dispute in regard to the matter in issue. Under these circumstances, the proper course, in my opinion, would be for the law courts not to proceed with the winding up proceedings further and give leave to the petitioning creditor to file a suit for the adjudication of disputes in the matter in issue. Hence, it is open to the petitioning creditor to file a suit for the adjudication of disputes in the matter in issue, if he so desires. Learned counsel for the petitioner invited my attention to the decision in Of Lynx Ltd. v. Simon Carves India Ltd. [1971] 41 Comp Cas 174 (Cal). The passage extracted hereunder has been relied on for the purpose of this case by learned counsel for the petitioner (headnote) :
"Whether the disputes which are raised or sought to be raised are bona fide or not and whether the same have been manufactured for the purpose of resisting a case for winding up of the company will have to be considered and determined by the court on the basis of the facts of each particular case and on the basis of the materials that may be available to the court at the time the court is called upon to decide the question."
29. There is no dispute with regard to the Page 47 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined proposition laid down by the Calcutta High Court. But, however, as rightly held by the Calcutta High Court, each case will have to be considered and determined by the court on the basis of the facts of each particular case and on the basis of the materials that may be available to the court at the time the court is called upon to decide the question. As already observed by me on the facts and circumstances of the present case, there is a bona fide dispute with regard to the debt which forms part of the subject-matter of the winding up proceedings. This court will not entertain any winding up petition on the basis of the said disputed debt and hence, the only option left to this court is to grant leave to the parties to resolve the disputes in appropriate proceedings in the appropriate forum. Mr. Jayachandran, learned counsel for the petitioner, has next relied on the recent judgment of the Punjab and Haryana High Court in Northern India Iron and Steel Co. Ltd. v. Haryana Ispat (P.) Ltd. [1990] 68 Comp Cas 42 for the purpose of showing that the respondent company has not produced the extracts from its ledgers, account books, balance-sheets, etc. As has been already observed by me, the respondent-company has filed the necessary documents in this court and it is not for this court to express any opinion at this stage, when both parties are granted leave to agitate their respective claims before the appropriate forum."
8. In light of the aforesaid, we see no other reason Page 48 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025 NEUTRAL CITATION C/OJA/17/2014 JUDGMENT DATED: 05/02/2025 undefined to take a view different than the one taken by the learned Single Judge and the OJ Appeal is accordingly dismissed.
(BIREN VAISHNAV, J) (D. M. DESAI,J) ANKIT SHAH Page 49 of 49 Uploaded by ANKIT SHAH(HC01063) on Wed Feb 12 2025 Downloaded on : Wed Feb 12 21:20:15 IST 2025