Punjab-Haryana High Court
National Aluminium Company Limited vs Sgn Telecoms Limited on 27 July, 2010
Author: Hemant Gupta
Bench: Hemant Gupta
C.P. No. 62 of 2009 [1]
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
C.P. No. 62 of 2009
Date of Decision: July 27, 2010
National Aluminium Company Limited ......... Petitioner
versus
SGN Telecoms Limited .......... Respondent
1.Whether Reporters of local papers may be allowed to see the judgment ?
2. Whether to be referred to the Reporters or not ?
3. Whether the judgment should be reported in the Digest?
Present:- Shri Ashok Gupta, Advocate and
Shri Adish Gupta, Advocate for the petitioner.
Shri Anil Khetarpal, Advocate and
Shri Tarun Khaira, Advocate for the respondent.
HEMANT GUPTA, J.
Present is the petition for winding up of respondent company, originally incorporated as SGN Cable Industries Pvt. Ltd on 16.04.1986. On 02.01.1993, the respondent company was subsequently converted into a Public Limited Company by deleting the word "Private" from its name. The name of the respondent company was further changed to M/s SGN Telecom Limited w.e.f. 18.04.2000.
The petitioner is a Govt. of India Undertaking duly registered under the Companies Act, 1956 ( for short "the Act"). It is averred that the petitioner filed a suit for recovery of Rs.16,52,957/-. The said suit was C.P. No. 62 of 2009 [2] decreed on 11.03.2005 along with future interest at the rate of 20.25 per cent per annum from the date of decree till payment. It has been further pleaded by the petitioner that in the suit the respondent company was proceeded ex parte though the transporter M/s East India Transport Agency contested the suit. The operative part of the decree dated 11.03.2005 reads as under: -
" This suit coming on this day for final disposal before Sri P.C. Dash 2nd Addl. Civil Judge (SD) BBSR in the presence of Advocate Sri Indrajit Mohanty and Associates of the plaintiff and Advocate Sri Abhaya Kumar Satapathy and Associates for the defendant, it is ordered that the suit is decreed on contest against defendant No.2 and ex parte against defendant No.1 in the circumstances with costs. Defendant No.1 is directed to pay a sum of Rs.16,52,957/- with pendente lite and future interest @ 20.25% per annum to the plaintiff from the date of filing of the suit along with defendant No.2 within three months, hence, failing which the plaintiff is at liberty to realize the same through process of court. Advocate Fee be assessed at the contested scale".
It is pointed out that, in fact, on 12.05.1992, the respondent placed an order for supply of 100 MTs of E.C. Grade wire rods. The said communication has been produced as Annexure P-6. It is mentioned therein that two full truck load of E.C. Grade Aluminium wire rod on credit basis be supplied and the respondent company undertook to make payment in due time. In pursuance of such request, the petitioner supplied 9.390 MTs of E.C. Grade wire rods on 17.06.1992 valued at Rs.5,54,133/- and 9.217 MTs of E.C. Grade wire rods on 16.07.1992 valued at Rs.5,43,924/-.
The respondent company was to nominate the transporter for lifting contract material from the petitioner's factory. M/s East India C.P. No. 62 of 2009 [3] Transport Agency was nominated by the respondent company. The said transporter being the agent of the respondent company collected the contracted goods from the warehouse of the petitioner and delivered the same to the respondent company. Since the petitioner did not receive the payment for the contracted goods from the respondent company within the stipulated period, the respondent company was called upon to make payment vide letter dated 19.11.992 and subsequently vide letter sent on 02.12.1992. The respondent company requested some time to clear the outstanding amount vide communication dated 1.4.1993 and again on 11.5.1993. The petitioner also communicated to M/s East India Transport Company vide letter dated 21/22.03.1994. In response thereto, the petitioner was informed vide letter dated 12.04.1994, Annexure P-17, that Rs.2 lac will be released within one month and the balance amount within three months. The petitioner was requested not to drag the transporter for recovery of the outstanding dues. The said communication reads as under:-
" With regard to the above Sh. Srichand, Deputy Regional Manager, Delhi along within Ludhiana Circle Manager visited our factory today i.e. 12.4.94 and in the meeting it was decided that Rs.2 lacs of the total outstanding will be released within this month and the balance payment within three months positively as our banking operations have become smooth and terrorist threats have also almost ceased. In view of this we request that the East India Transport Agency may not be dragged to IBA for recovery of the outstanding payment".
Subsequently on 27.06.1994, vide Annexure P-19, the respondent company promised part payment on receipt of payments from the Electricity Board and on 06.10.1994. A sum of Rs.50,000/- was paid to the petitioner as part payment. In fact, the respondents requested that they C.P. No. 62 of 2009 [4] be allowed to open Letter of Credit in future with the undertaking by them that they may retain Rs.50,000/- from each Letter of Credit.
The petitioner has averred that it has served a statutory notice on 02.02.2008. The respondent company sought negotiations which were held but on 18.09.2008, the petitioner received a letter from the respondent company offering Rs.4,47,586/- as full and final settlement. Since the said amount was not acceptable to the petitioner, the present petition for winding up was filed. It is pleaded that the petitioner has made efforts to ascertain the immovable property of the respondent company for filing of execution petition. It was found that land measuring 1075 sq. yards at E-59, Phase VIII, Eltop, SAS Nagar, Mohali, is mortgaged with Punjab Finance Corporation along with machinery and building. The aforesaid property is further mortgaged as 2nd charge to Punjab National Bank against working capital and cash credit facilities availed from the bank. Since the assets were not free from encumbrances, the petitioner could not file execution petition to execute the decree dated 11.03.2005. Therefore, it was pointed out that the respondent company is unable to pay its admitted debt and is commercially insolvent and, thus, it is liable to be wound up.
In the written statement, the respondent company, inter alia, pleaded that the petition involves disputed question of fact. It admitted that the respondent-company did receive some material but it was export rejected material and also out of the materials so received, respondent did keep certain amount of material and accordingly a due acknowledgment of the material received was given to the transporter i.e. M/s East India Transport Agency. A sum of Rs.4,47,586/- was outstanding and payable by the respondent company. It was further pleaded that the respondent C.P. No. 62 of 2009 [5] company is in a good financial health. It is owner of 4 plots of 1000 sq. yards each situated at Phase VIII, Industrial Area, Mohali. Due to recession, plant and machinery had to be closed and the Directors of the company are planning to restart the plant and machinery as market has started picking up. It is further stated that the petitioner has not disclosed as to what steps have been taken by it to recover the amount from the East India Transport Agency which is working as a transporter with the petitioner. On merit, it was stated as under: -
" 9-32. That in reply to Paras No. 9-32 of the petition, the answering respondent submits as under: -
EC Grade Aluminium wire rods were no doubt sent to the answering respondent company. However, the consignment was an export rejected material. The quality of EC Grade Aluminium wire rods was not up to the mark. Petitioner company had raised invoice No. CER-0746 dated 17.06.1992 and Invoice No. CER-1297 dated 16.07.1992 for Rs.5,54,133/- and Rs.5,43,924/- respectively. Only part of the material was found up to the required specifications. Balance material was lifted back by the same transporter i.e. M/s East India Transport Co. Hence it is for this reason that the petitioner is not producing copies of the material documents. As per books of accounts, there is a credit balance of Rs.4,47,586/- which the answering respondent company has offered to pay as full and final settlement, provided that all the litigation by the petitioner company is withdrawn. However, petitioner company appears to be stuck to the decree passed by the civil Court. Copy of communication addressed by the petitioner is attached as Annexure P-5. As per books of accounts of the answering respondent company, a sum of C.P. No. 62 of 2009 [6] Rs.4,47,586/- is due to the petitioner company which the respondent is ready and willing to pay provided the petitioner withdraws all the litigation".
The respondent company has attached its balance sheet as on 31.03.2009 to the effect that a sum of Rs.4,47,586/- is the only amount due and payable to the petitioner as per books of accounts of the respondent company. No other document has been produced on the record.
The petitioner company filed counter affidavit dated 19.02.2010 and produced numerous communications from the respondent company starting from 12.05.1992 till 06.10.1994. In none of the communications, there is any reference to the rejection of the material, return of the material or non receipt of the material. In none of the communications, the respondent company has disputed the amount raised or sending of material by the petitioner vide the two invoices mentioned above. It is only in communication Annexure P-5, received by the petitioner on 18.08.2008, consequent to the meeting held by the officers of the company with the General Manager (Marketing) of the petitioner company, it is pointed out that the material dispatched by the petitioner in two invoices was found to be defective and not up to required specification. It was mentioned that only part of material could be used and the balance material was lifted back by the same transporter from their works as he was insisting for the payment and thus they retained only part of the material.
Learned counsel for the petitioner has vehemently argued that dispatch of goods supplied by the petitioner and received by the respondent was not disputed in any of the communications appended by the petitioner with the rejoinder. In fact, such communication shows that the respondent company has sought time for making payments either on account of C.P. No. 62 of 2009 [7] financial constraint or on account of recession in the market and terrorism etc but there was not a whisper in respect of the quality of the material supplied by the petitioner or that only part of material was retained by the respondent. Apart from the said fact, the debt due to the petitioner stands merged in the civil Court decree. Such decree has remained unsatisfied and, therefore, the respondent company is deemed to be unable to pay the debt and is liable to be wound up. Reliance is placed upon M/s Madhuban Pvt. Ltd vs. M/s Narain Dass Gokal Chand, 1971(7) Delhi Law Times 371 and judgment of this Court reported as Sarabhai Machinery vs. Haryana Detergents Ltd, 1986(60) Company Cases 169. By referring to the aforesaid judgments, it was contended that it is not necessary that the decree should remain unexecuted in the execution petition filed but if the decree remains unsatisfied, the respondent company will be deemed to be unable to pay the debt and liable to be wound up.
On the other hand, learned counsel for the respondent company has argued that the decree passed by the civil Court is ex parte decree which is joint and several against the company as well as the transporter. Such decree was passed on March 11, 2005, whereas the petition for winding up has been filed before this court in May, 2009 i.e., after the expiry of three years. Therefore, such petition is beyond the period of limitation. Reliance is placed upon Single Bench judgment of Calcutta High Court inRameswar Prosad Kejriwal and Sons Ltd. vs. Garodia Hardware Stores, 2002 (108) Company Cases 187. It is further argued that the material supplied by the petitioner was defective which was returned. The evidence of return of goods is available with the transporter but without getting the documents from the transporter, the petitioner has sought to recover the amount from C.P. No. 62 of 2009 [8] the respondent company. The books of accounts shows liability of Rs. 4,47,586/- and the said amount has been paid to the petitioner vide Demand Draft bearing No.004071 dated 7.7.2010 on July 08, 2010 in the Court and, therefore, it cannot be said that the respondent company is unable to pay its admitted liability. In fact, the entire amount is disputed. The respondent company has four plots each measuring 1000 sq. yards and, therefore, the respondent company cannot be said to be unable to pay the debt.
I have heard learned counsel for the parties but find that the stand of the respondent company that the petition is barred by limitation or the amount is disputed is nor borne out from the record. The petitioner has filed documents with the rejoinder in February, 2010 which shows that from the year of purchase of goods in 1992, the commitment was made to make the outstanding payment. The communications further reflect that the company has communicated financial stringency on account of non receipt of payments from the Electricity Boards, recession in the market and on account of terrorism etc. There is not a single communication pointing out that the material was defective or that any part of the material was retained. In fact, in the communication Annexure P-17, reproduced above, the respondent company has communicated that the transporter be not involved with the demand of money. Such unrebutted communication shows that the stand of the respondent in Annexure P-5 that the material was defective or was returned is a made up ground with a view to avoid liability. Such defence lacks bona fide.
Even in the reply, as reproduced above, the respondent company has admitted the receipt of the material. It is the assertion of the respondent company that the material was sent back by the same transporter. C.P. No. 62 of 2009 [9] It is for the respondent to prima facie support such assertion. Having failed to produce any document of return of material, the stand that any material was returned has been raised with a view to avoid the liability and, thus, is untenable.
The debt due to the petitioner stands merged in the decree of the civil Court. It is not necessary to remain unsatisfied in the execution of the decree to seek winding up of the company for its inability to pay debt. In Sarabhai Machinery's case (supra), this Court has held to the following effect:-
"It is evident from the section that a company is deemed to be unable to pay its debts if any of the conditions in clauses (a) to (c ) is satisfied. The case of the petitioner squarely falls in clause (a) of sub-section (1) of section 434 as it has served a demand notice on the company. A contention has been raised by Mr. Talwar that the petitioner has obtained a decree of the amount after service of the notice and, therefore, the present case is not covered by clause (a) but is covered by clause (b). He argues, the petitioner cannot take the benefit of clause (b) as it did not execute the judgment of the Delhi High Court. I am not impressed with this submission. It is well settled that clause
(a) is a general clause and applies to all sorts of debts including a judgment debt. It is true that in the case of a judgment debt, the creditor can take the benefit of clause (b). But that does not mean that he cannot take the benefit of clause (a) as both the clauses are not exclusive of each other. Similarly, if a creditor after serving notice on the company, obtains a decree against it, he can still take the benefit of clause (a) as, after the decree, neither the character of the creditor nor that of the debt is changed. In the above view, I am fortified by the following observations of a Division Bench of the Madras High Court in Seethai Mills Ltd. vs. N. Perumalsamy [1980] 50 Comp.
Cases 422, 424 :
C.P. No. 62 of 2009 [10]
" A creditor, who has instituted a suit and obtained a decree against the company, will still be a creditor of the company to whom money is due by the company. It may be that the original debt had merged in the decree and the person who was originally a creditor had become a decree-holder afterwards, but that doe not in any way destroy his character as a creditor or the character of the money due to him from the company as a debt. As a matter of fact, section 434 (1) (a) does not even use the word 'debt' and it merely states to whom the company is indebted in a sum exceeding five hundred rupees then due. Consequently, all that is necessary to be satisfied under section 434 (1)(a) is that there must be a creditor and to that creditor the company must be indebted in a sum exceeding Rs.500 then due and that creditor must have served a notice on the company and the company had not complied with the demand within three weeks from the date of the service of the notice. Even a judgment debtor in respect of a money decree can be said to be indebted to the decree-holder, who would be a creditor. Consequently, in our opinion, there is no mutual exclusion between section 434(1)(a) and 434(1)(b) of the Act and there is a region common to both, which may be said to overlap. Hence we are of the opinion that even a decree-holder in respect of a money decree can institute proceedings under section 434(1)(a) if the other requirements of that provision are satisfied".
Consequently, the petitioner, without executing the judgment of the Delhi High Court, can claim the benefit of clause (a) as he had served the requisite notice under the said clause." Similar is the view taken by the Delhi High Court in another case i.e. M/s Madhuban Pvt. Ltd's case (supra), wherein it was held to the following effect: -
" The learned counsel submitted that it was not necessary in the C.P. No. 62 of 2009 [11] case of a creditor holding a decree against the company to serve a notice. Specific provision, on the other hand, was made for taking out execution of the decree in such a case, which was not done in this case. The argument of the learned counsel, however, is without any merits. Clauses (a) and (b) provide two alternative methods of showing that the company is unable to pay its debts. A creditor does not cease to be a creditor, if he obtains a decree in his favour against the company. Clause (a) becomes applicable when a creditor has served on the company a demand under his hand requiring it to pay the sum due and the company has neglected to pay the same. The provision in Clause (b) that if the creditor has a decree of a court in his favour and the execution is returned unsatisfied in whole or in part, the company shall be deemed to be unable to pay its debt, does not mean that the effect of clause (a) is negatived in the case of a decree-holder creditor. The object of the two clauses is the same, that is to show that the company concerned is unable to pay its debts. Action can be taken under either of them. The objection of the learned counsel, therefore, has no justification".
In view of the above, I am of the opinion that it is not necessary for the petitioner to file execution and on being unsatisfied in the execution petition, the petitioner could seek winding up of the respondent company.
Another argument raised by learned counsel for the petitioner that the petition for winding up is barred by limitation, again does not merit any consideration. Though the learned Single Judge of Calcutta High Court has held that winding up petition in 2001 cannot be filed in respect of a debt which has crystallized in a decree of 1997 but the said judgment referred to by learned counsel for the respondent company has been overruled by a larger Bench of Calcutta High Court in case reported as Bangur Foundation Limited vs. Esjey Corporation, 2004(1) CHN 621. It was C.P. No. 62 of 2009 [12] held therein that in a case of debt based upon a money decree, it is not Article 137 of the Limitation Act, 1963 which would be applicable but it would be Article 136 of the Limitation Act i.e., period of 12 years. It was held to the following effect: -
"23. It is now well-settled that a winding up petition is maintainable in respect of a money decree presented within thre years from the date of passing of the decree. Mr. Ghosh's submission that a winding up petition presented on the basis of a money decree after three years from the date of passing of the decree is barred by limitation, having regard to the provisions of Article 137 of the Limitation Act, 1963, appears to be attractive, but such submission is based on the proposition that the provisions of Article 137 of the Limitation Act, 1963 would apply even in respect of a money decree for which a specific period of 12 years for execution has been provided for in Article 136 of the said Act.
24. Section 434 of the Companies Act, 1956, makes provision in relation to recoverable debts. According to Mr. Ghosh, since Section 434 does not itself provide for any period of limitation, Article 137 of the Limitation Act, 1963, would apply uniformly and as a consequence would also cover a winding up petition made on the basis of a money decree.
25. We are unable to agree with Mr. Ghosh's said submission since a claim under a money decree does not stand barred after a period of three years from the date of passing of the decree, as in the case of a money claim, but can be put into execution within a period of 12 years from such date. Accordingly, a money decree as a recoverable debt is not covered by Article 137 but by Article 136 of the Limitation Act, 1963.
26. In our view, there lies the basic fallacy in Mr. Ghosh's submission and vindicates Mr. Utpal Basu's submission.
27. Consequently, we are also unable to agree with the views expressed by the learned Single Judge in the case of Rameswar Prosad Kejriwal & Sons (supra), relied upon by Mr. Ghosh, C.P. No. 62 of 2009 [13] since the learned Judge has proceeded on the basis that the recoverable debt had crystallised in a decree of 1997 and the winding up petition could not have been filed after a period of three years from the date of such decree, having regard to the period of limitation prescribed under Article 137 of the Limitation Act, 1963. We respectfully repeat that the recoverable debt in respect of a money decree is not barred by limitation after a period of three years from the date of decree and that the same is executable within a period of 12 years thereof, and as such can form the basis for a winding up petition under Section 434 (1)(a) and/ or 434(1)(b) of the Companies Act, 1956".
I respectfully agree with the view of the Division Bench judgment of Calcutta High Court referred to above. A debt cannot be said to be barred by limitation upon expiry of three years in terms of Article 137 of the Limitation Act, 1963. Such decree debts are executable under section 136 of the Limitation Act, 1963. Therefore, a winding up petition on the basis of decree would be maintainable within the period of execution of decree.
In view of the above, the petition for winding up is ordered to be admitted. The factum of admission be published in Indian Express, Chandigarh Edition, Dainik Bhaskar and official gazette of the Punjab Government.
List on 23.09.2010
July 27, 2010 ( HEMANT GUPTA )
ks JUDGE