Himachal Pradesh High Court
Essar Gujarat Ltd. (Steel Division) And ... vs Shree Kangra Steels Pvt. Ltd. on 22 October, 1997
Equivalent citations: [1999]97COMPCAS726(HP)
Author: P.K. Palli
Bench: P.K. Palli
JUDGMENT P.K. Palli, J.
1. Both the petitions (Company Petitions Nos. 8 of 1993 and 2 of 1995) are taken up together and are being disposed of by a common judgment as the points raised in both the petitions and the replies are almost common.
2. These petitions have been filed under Section 439 read with Sections 433 and 434 of the Companies Act, 1956, with the prayer that as the respondent-company has commercially gone insolvent and is unable to discharge its debts, it is just and equitable as well as necessary in the interest of the creditors that the company be wound up under the provisions of the Act.
3. Notices were issued by this court to show cause why the petitions be not advertised. Replies have been filed. A lot of time of this court was consumed by the parties to get the matter settled amicably but with no fruitful result.
4. Company Petition No. 8 has been filed by Essar Gujarat Ltd. (Steel Division) against Shree Kangra Steels Pvt. Ltd., on the allegations that the petitioner in pursuant to the orders, made supplies to the respondent which continued till March 1, 1993. Details of the supplies and the cheques received by the petitioner as well as those dishonoured are given in the statement of accounts placed as annexure PC.
5. It is stated in para. 10 that the respondent-company did not regularly pay the dues to the petitioner for the supplies made and the total amount of the dishonoured cheques along with the charges paid to the bank comes to Rs. 21,90,903.40. On this amount interest is claimed at the rate of 22 per cent. per annum from the date of dishonour of the cheques till payment is made. As on date, the interest has been calculated at Rs. 6,37,812.20.
6. In para. 11 it is said that the respondent-company on June 25, 1992, sent a draft of rupees one lakh in lieu of the cheque of the same amount which was earlier dishonoured. This letter is placed as annexure PD. It is stated that the company admitted its liability in respect of the amount due to the petitioner and expressed inability to settle the balance on account of financial crisis. Letter dated September 2, 1994, in this respect has been placed as annexure PE.
7. Though the company failed to make the payments, the petitioner, however, continued making supplies based on orders placed by the respondents. Some discussions were held between the parties on November 24, 1992, and the respondent-company undertook to pay the amount due. Rupees two lakhs were to be paid on November 25, 1992, rupees three lakhs on November 28, 1992, and balance on December 15, 1992. Letter dated November 24, 1992, in this respect is placed as annexure PF. It is said that the respondent-company admitted its liability in the clearest possible terms, but has failed to stick to their commitment to make payments and ultimately the petitioner served legal notice on April 29, 1993, calling upon the respondent company to make the payment. The notice and acknowledgment receipts are placed on record as annexure PG and annexure PH. Reply dated May 25, 1993, to this notice is annexure PI.
8. In reply to this petition, respondent-company has raised the defence that there is a lengthy dispute going on between the parties in respect of the payments claimed by the petitioner and since the goods supplied were substandard which resulted in huge losses to the company, there was a bona fide dispute which is to be finally settled and the present petition cannot be maintained till the dispute is settled finally and the company cannot be said to be unable to pay its debts.
9. It is further said that the cheques were issued by way of advance against the orders and not by way of payment of the value of the order. In para. 9 it is said that the material supplied besides being defective, was contaminated and mixed with water, moisture, mud, dust and other impurities and the matter was agitated by the company and brought to the notice of the petitioner.
10. In para. 10 it is said that in fact the company has a claim of Rs. 2,949.60 from the petitioner which is the debit balance as per the books of account. The account has been placed as annexure R-1. The letters relied upon by the petitioner are said to have been written entirely in a different context and these letters do not amount to acknowledgment of debt by the company.
11. In the rejoinder filed by the petitioner, the claim as put forth in the petition stands reiterated. It is denied that any lengthy dispute is pending between the parties or any substandard quality of goods were supplied. It is said that if the goods were substandard, the respondent-company would not have placed continued orders for the supply of goods nor would it have continued to issue cheques to make payments to the petitioner or issue substituted cheques for dishonoured ones. The stand taken by the respondent is said to be contradictory and an afterthought. The letters in respect of the supply of the material have been placed as annexures PK-1 to PK-4. Towards the end, it has been prayed that the petition is liable to be allowed and the respondent-company is liable to be wound up. These are the facts from Petition No. 8 of 1993.
12. In Company Petition No. 2 of 1995 filed by Shree Venkatesh Trades and Agencies against the same respondent, it is said that the respondent-company approached the petitioner for the supply of goods on credit and it was agreed to supply goods on credit against bills of exchange payable within a period of 90 days to be drawn on the invoice value with interest at the rate of 24 per cent. per annum. The respondent continued placing orders and the petitioner went on supplying the goods so ordered on the terms and conditions agreed upon between them. The details of the supplies, invoices and amounts are detailed in para. 8 of the petition. Deliveries have been made from time to time with effect from March 24, 1993, till April 10, 1993. The amount has been calculated at Rs. 8,46,246.28.
13. It is said that payments were received in respect of the first two consignments whereafter L.C. expired and was not extended. Bills of exchange in respect of the remaining consignment were not dishonoured and the amount remained outstanding. Copies of the bills of exchange with invoices and delivery challans are annexed collectively as annexure A. In para. 10 it is said that the banker of the company vide letter dated June 9, 1993, informed that the company has accepted the documents of payment on due date and payment would be remitted as and when made. This letter is annexed as annexure B.
14. Some payments are said to have been made by the company on April 12, 1993, October 22, 1993, and October 25, 1993, leaving a balance of Rs. 5,24,414.28. The statement of account has been placed as annexure C.
15. Notice dated December 2, 1994, was served on the respondent-company. No reply is said to have been given. Notice along with acknowledgment is placed on record as annexure D. It is said that since the company has gone commercially insolvent being unable to pay the debts, it is appropriate and in the interest of creditors that the company be wound up.
16. In reply by the respondent it is being said in defence that the petitioner is an agent of Essar Gujarat Ltd., and the company has been making purchases from Essar Gujarat Ltd., who are principals of the present petitioner and the petitioner has been dealing in the capacity of being an agent of the said company. It is also said that the present dispute is a part and parcel of the dispute existing between the respondent-company and Essar Gujarat Ltd., and Company Petition No. 8 of 1993 is already pending. It is further said that as there exists a dispute whether the payment is due or not, the remedy available to the petitioner lies before the civil court. It is also said that the respondent-company has sufficient means and funds to discharge its liabilities and there is no question of the company being unable to pay its debts.
17. The respondent has also stated that besides two consignments, subsequent ones were not supplied in time which has caused a loss of about rupees four lakhs and the bills issued by the petitioner are on higher rates. The present dispute is said to be linked with the dispute already pending between the respondent-company and Essar Gujarat Ltd.
18. Learned counsel for the petitioner has brought to my notice various cheques which were issued by the respondent-company and were dishonoured. This fact is not disputed and the details of the dishonoured cheques are in annexure PC at pages 30 onwards (in Petition No. 8 of 1993). It is also said by Mr. Deepak Gupta that as per details given in the statement of account, the goods continued to be supplied till April 3, 1993. At page 33 is the letter annexure PD, dated June 25, 1992, written by the respondent-company whereby a demand draft for rupees one lakh in lieu of the dishonoured cheque of the same amount was sent. Interestingly, in the letter it is said that the cheque was dishonoured on account of the unavoidable circumstances which were beyond their control. It was added that the respondent feels sorry for the inconvenience caused.
19. In letter annexure PE, dated September 2, 1993, it was stated by the respondent-company that the unit remained inoperational due to slump in the market and the payments could not be realised and the cheques for Rs. 24 lakhs issued in favour of the petitioner were returned by the bank and in lieu of these cheques, demand draft is being sent shortly. Yet in the next letter dated November 24, 1992, it is recorded that during discussions the respondent-company shall pay Rs. 2 lakhs on November 25, 1992, Rs. 3 lakhs on November 28, 1992, and the balance by December 15, 1992. A further request was made to the petitioner to co-operate as the market was very bad.
20. As there was no improvement, the petitioner sent a legal notice annexure PG on April 29, 1993. In reply to this notice, the respondent in annexure PL on May 25, 1993, disputed the correctness of the demand notice wherein it was said that the supplies were defective and the material was wet. The respondent rather claimed a debit of Rs. 2,949.60 from the petitioner and further made it clear that they are not liable to pay any amount by way of interest as there was no such agreement. Annexure P] is reply by the counsel for the petitioner to the counsel for the respondent in sequence of the reply sent by them.
21. Mr. Walia, learned counsel for the respondent urges that there is a running account between the parties and in view of the proposition of law as settled by various High Courts, the petition is incompetent and not maintainable. Learned counsel further highlights that the supplies made were defective as well as contaminated and there was no question of making payment to the petitioner.
22. Both the parties have cited a number of judgments in support of their respective pleas. This judgment need not be burdened with the case law cited at the Bar as it is well-settled that a winding up petition cannot be stressed to seek enforcement for the realisation of debt where there exists a bona fide dispute. The company court is required to judge whether the defence put up by the company is bona fide and is in good faith. It has further to be kept in view that the defence is one of substance and the defence taken is prima facie likely to succeed. Both learned counsel for the parties relied on the statement of account which they have appended to their pleadings. It may be noticed that the supplies by the petitioner continued till April 3, 1993. Till this date the respondent never made any grievance to the petitioner in respect of the late supplies or that the supplies were substandard and defective. The respondent-company in its reply to the notice as well as in the reply to the petition has raised a dispute which, on the face of it, can be said to be an afterthought.
23. Notice can also be taken of the fact that the respondent-company has taken a number of adjournments on the ground that the matter is being settled with the petitioner outside the court. At one point of time the petitioner came out with the offer that in case the respondent-company pays Rs. 12 lakhs, the petitioner would accept this payment in full and final satisfaction of the claim. The respondent-company though accepted the offer, yet prayed that the amount be spread over 36 instalments of Rs. 33,000 each, the last instalment being of Rs. 37,000. This, of course, was not acceptable to the petitioner. It, thus, follows that the respondent-company accepts its liability. It may also be seen that the respondent-company never disputed the correctness in respect of the rate of interest as claimed by the petitioner. A very important piece of evidence that needs to be noticed are letters annexures PD, PG and PF wherein the respondent has accepted its liability and promised to pay the amount as claimed by the petitioner. The defence raised by the respondent-company in their statement of account annexure R-1 is contradicted by their own act and conduct as projected by them earlier in their correspondence to the petitioner. There is, thus, no difficulty in holding that the dispute which is being raised, does not appear to be bona fide and the pleas raised in defence besides being afterthought, are vague.
24. It is a settled proposition that the company court while hearing a petition under Section 433(e) has a summary jurisdiction. It has no power to assess evidence. The respondent is, thus, unable to show that the contentions being raised by it have any sound basis.
25. From the discussion made above it follows that the respondent is unable to pay its debt and the petition deserves to be admitted. However, in the interest of justice, I deem it proper to direct the respondent to settle the claim of the petitioner. The principal amount is directed to be paid along with up to date interest on or before January 7, 1998, failing which the petition is ordered to be advertised in the Daily Tribune as well as in the Government Gazette of Himachal Pradesh. Case is ordered to be listed thereafter for further proceedings.