Calcutta High Court
Sss Loha Marketing Pvt. Ltd vs Bibby Financial Service India Pvt. Ltd on 13 May, 2014
Author: Patherya
Bench: Patherya
ORDER SHEET
CP NO.552 OF 2013
CP NO.592 OF 2011
IN THE HIGH COURT AT CALCUTTA
Original Jurisdiction
ORIGINAL SIDE
IN THE MATTER OF :
SSS LOHA MARKETING PVT. LTD.
AND
BIBBY FINANCIAL SERVICE INDIA PVT. LTD.
BEFORE:
The Hon'ble JUSTICE PATHERYA
Date : 13th May, 2014.
MR.M.S.VINAIK, MR.S.BANERJEE, MR.D.BASHTA,ADVOCATES FOR THE
PETITIONER
MR.SAMIT TALUKDAR, MR.SUMAN DUTT, MS.H.CHAKRABORTY, MR.A.PODDAR,
ADVOCATES FOR THE COMPANY
The Court : In this winding petition, the claim arises out
of a factoring agreement entered into between the petitioning creditor
and the borrower, Ramsarup Industries Limited.
The case of the petitioning creditor is that for goods
supplied to the company herein by Ramsarup Industries, the borrower
sums became due and payable. As the supplier was in immediate need
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of funds an agreement was entered into between Ramsarup Industries
and the petitioning creditor herein on the understanding that the
petitioning creditor would make immediate payment to the borrower
Ramsarup Industries on behalf of the buyer that is the company herein.
On the basis of such agreement the petitioning creditor paid sums due
and payable by the company herein to Ramsarup Industries. In the
agreement between the Ramsarup Industries and the petitioning
creditor SSS Loha Marketing Pvt. Ltd., the company herein has been
described as the debtor. Pursuant to the said agreement between the
petitioning creditor and Ramsarup Industries, Ramsarup Industries
informed the company that all payment in respect of all outstanding
invoices be made by the company to the petitioning creditor herein.
Alongwith the letters dated 19th November, 2009, the details of the
invoice numbers were also attached thereto. The said letters were also
accepted by the company and in respect thereof letters were issued to
the petitioning creditor on 19th November, 2009. By the said letters the
company accepted and confirmed supplies of material by Ramsarup
Industries to itself and also acknowledged and agreed to make payment
directly to the petitioning creditor. Subsequently Ramsarup Industries
transferred the receivables by letter dated 20th November, 2009 in
favour of the petitioning creditor. Therefore, as payments were made by
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the petitioning creditor to Ramsarup Industries on behalf of the
company and in view of the company accepting and agreeing to make
payment to the petitioning creditor, the company became indebted to
make such payment to the petitioning creditor. In fact a cheque drawn
on Bank of Baroda replaced an earlier cheque issued by Allahabad
Bank. This was an act performed by the company on 22nd February,
2010. A request was, however, made to deposit the said cheque drawn
on Bank of Baroda on 13th March, 2010 due to financial stringency
faced by the company. The request was complied with but in spite
thereof the cheque was dishonoured for insufficient funds. As the
liability of the company to make payment to the petitioning creditor
exists and for non-payment a statutory notice was issued on 5th March,
2013. On receipt of the said statutory notice, a reply was given on 25th
March, 2013 by the company. An earlier statutory notice was issued on
20th May, 2010 and proceedings initiated in respect thereof. As such
statutory notice was held not to be valid by the order dated 5th
February, 2013, therefore, a statutory notice was once again issued on
5th March, 2013. As sums remain due and payable this winding up
application has been filed and reliefs sought.
Proceedings were initiated under section 138 of the
1881 Act for dishonour of cheque before the Judicial Magistrate 1st
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Class, Gurgaon, Haryana. In the said proceedings, the director of the
company surrendered in court and expressed his readiness and
willingness to effect compromise of the matter. After admitting the
liability on behalf of the company a sum of Rs.30 lakhs was paid by
demand draft as mentioned in the said order. It was also recorded in the
order of the Judicial Magistrate that the director was ready to make
payment of the cheque amount within three months. The said order was
not challenged before any forum. It was the order by which summons
was issued which was challenged in criminal revision. Such criminal
revision has also been dismissed by the Punjab and Haryana High
Court. The claim though of 2009 finds acknowledgement in the letter of
19th February, 2010 so also on 27th September 2010 before the Judicial
Magistrate, 1st Class, Gurgaon, Haryana. This evidences that the
company has no defence more so, in view of the cheques dishonoured
for insufficient funds and acknowledgement of liability, the relief sought
be granted.
Counsel for the company submits that the factoring
agreement is nothing but a bill of exchange executed by the parties.
Clause 4.2 of the said agreement permits the borrower
Ramsarup to realise monies directly from the debtor and on receipt of
said sums the borrower is required to deposit the sum with the
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petitioning creditor. In case no sums are deposit with the petitioning
creditor the borrower shall hold such sums in trust for the petitioning
creditor.
Clause 9.1(xvii) also contemplates the holding of sums
received by Ramswaroop Industries, the borrower in trust for the
petitioning creditor.
Clause 10.3 also entitles the borrower to re-purchase
the receivables on request made to it by the petitioning creditor.
Clause 11.2 entitles the petitioning creditor to exercise
recourse in respect of receivables. In fact in March 2010 so also April
2010 sums have been paid by the company to Ramsarup, the borrower
and the borrower, therefore, is holding such sums as a trustee for the
petitioning creditor. Claim, if any, should be made with the borrower in
terms of Clause 4.2 of the agreement between the parties. In fact, the
petitioning creditor was entitled to re-purchase the receivables from the
borrower which right has not been exercised by the petitioning creditor.
C.P.No.592 of 2011 has been filed against Ramsarup
Industries, the borrower on the self-same cause of action by the
petitioning creditor. This finds no mention in the instant winding up
petition. Therefore, there is suppression of material facts. Subsequent to
the cheques issued on 23rd February, 2010 in favour of the company
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payments have been made by the company to the borrower Ramsarup
on 18th March, 2010, 27th March, 2010, 10th April, 2010 and 26th April,
2010. In view of such payments made it is for the petitioning creditor to
proceed against the borrower Ramsarup. In fact, by letter dated 2nd
June, 2010 the company has informed Ramsarup of the 138 notice
issued to it under the 1881 Act by the petitioning creditor. In the said
letter it was categorically recorded by the company that payments had
been made to Ramsarup for the price of goods sold and delivered to the
company. In reply, the borrower Ramsarup Industries has also
undertaken to make payments to the petitioning creditor and has
accepted that the company is not liable to pay such sums to the
petitioning creditor. In fact, an instruction was also issued by the
borrower Ramsarup to the petitioning creditor not to deposit the cheque
handed to it. Therefore, in view of the said correspondence the deposit of
cheque by the petitioning creditor was uncalled for. In 2013 Ramsarup
Industries filed a reference before the Board for Industrial and Financial
Reconstruction under the 1985 Act and proceedings in respect thereof
are at present lying before the Appellate Authority under the 1985 Act.
As the petitioning creditor was entitled to exercise recourse in respect of
the receivables and in not doing so cannot maintain this winding up
application. In the order dated 5th February, 2013 it has been
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categorically recorded that the company's inability to pay its debt has
not been borne out nor do the facts warrant consideration of the petition
for winding up on just an equitable ground. Therefore, the company
petition was rejected. Circumstance remains unchanged and as the
company's inability to pay its debt is not borne out from this application
too, the application be dismissed.
Having considered the submissions of the parties the company
purchased goods from one Ramsarup Industries. Ramsarup therefore
became entitled to receive sums from the company on account of price of
goods sold and delivered. As Ramsarup was in urgent need of sums an
agreement was entered into between Ramsarup and the petitioning creditor
herein whereby the petitioning creditor agreed to purchase the invoices
raised by Ramsarup on the company and for such purchase of invoice the
petitioning creditor made payments to Ramsarup. It was for this reason
that an agreement was entered into between Ramsarup and the petitioning
creditor. In the said agreement Ramsarup has been described as the
borrower and the company as a debtor because the company continued to
remain a debtor whether to Ramsarup or to the petitioning creditor for it
had purchased goods from Ramsarup but due to the agreement between
Ramsarup, the borrower and the petitioning creditor the company now
became liable to make payment to the petitioning creditor. This agreement
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has been referred to by the petitioning creditor as a factoring agreement
while the company describes this agreement as nothing but a bill of
exchange. Be that as it may, but what is important to note is that under
the agreement the petitioning creditor was to receive moneys from the
company. By the said agreement Ramsarup assigned its rights in favour of
the petitioning creditor and it was on the basis of this understanding that
certain documents were executed. The first in the line of documents was
the letter of assignment to which the list of invoices assigned was
appended. This was followed by a letter issued by the company accepting
the agreement between the borrower and the petitioning creditor and also
agreeing to act in terms thereof by making payment to the petitioning
creditor for the invoices assigned. A third document was also executed
which is referred to as transfer of receivables dated 20th November, 2010.
In Clause 4 of the said document which has been issued by the borrower
Ramsarup it has categorically stated as follows :
"The invoice/s offered for factoring to you have not been
included in the statement of book debts submitted to our
Bankers."
From a reading of Clause 4 of the document by which the receivable has
been transferred by Ramsarup Industries in favour of the petitioning
creditor, the assigned invoices have been removed from the book debts
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submitted to the bankers of Ramsarup Industries. There is no document
to evidence inclusion of the said invoices in its book debts nor any
intimation to its bank by Ramsarup Industries for realisation of such
sums. Therefore, by virtue of the aforesaid clause the invoices mentioned
in the said letter stood excluded from the statement of book debts which
document has been submitted to the bankers of Ramsarup. The said
agreement has also been acted upon by the company as by two several
demand drafts payment of Rs.1 crore has been made by it on 5th March,
2010 and 31st March, 2010 to the petitioning creditor. A confusion has
been sought to be created by the company in respect of payment of Rs.25
lakhs. According to the company the said sum of Rs.25 lakhs was paid by
Ramsarup on 5th March, 2010 through Ramsarup Udyog which is a unit of
Ramsarup Industries, the borrower but there can be no reason for a
payment to be made twice over. On the other hand a demand draft has
also been issued for the sum of Rs.25 lacs by the company. In fact, the
said sums paid has been accepted as part payment against invoices
assigned by the borrower in favour of the petitioning creditor. This has not
been disputed by the company. The company has filed a supplementary
affidavit wherein it has given details of the payments made to Ramsarup
Industries. The document which has been annexed is a bank statement,
whose bank statement it is cannot be deciphered from the annexed
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document. The amount which has also been shown as payment is an ad
hoc payment. No particulars of the invoice against which the payments
have been made is given in the supplementary affidavit. At the time of filing
the supplementary affidavit the reply of the petitioning creditor was known
to the company and the details of the invoice against which payment has
been received was also known to it. Therefore, it was a duty cast on the
company to give details of the invoice in respect of which payment had
been made by it to Ramsarup but no such detail has been given and
rightly so as no payment against such invoice was made by the company to
Ramsarup. Therefore the case made by the company regarding payment of
Rs.25 lacs by Ramsarup cannot be accepted in the light of the demand
draft issued by the company and its covering letter. It is unbelievable that
a businessman belonging to the commercial world will not scream foul play
when payment is sought twice over. In fact, payment to Ramsarup is belied
by the recording in the order of the Judicial Magistrate, First Class,
Gurgaon, Haryana dated 27th September, 2010. It may be true that to
escape proceedings under Section 138 of the 1881 Act an admission to
make payment of the liability may have been made so also the readiness
and willingness to make payment within three months but the said order
could have been challenged or an application could also have been made
by the Director of the company in the 138 proceedings stating therein that
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he had been coerced into admitting the liability so also expressing its
readiness and willingness to make payment but neither has any
application been filed nor the order challenged in any forum. It is only the
order by which summons was directed to be issued that was challenged
before the Punjab and Haryana High Court which proceeding as on date
stands dismissed. Certain correspondence exchanged between the
borrower and the company has been annexed to the affidavit-in-opposition
filed by the company. From a reading thereof it appears that a security was
deposited by the company with Ramsarup on account of goods sold and
delivered. A cheque was also issued by the company in favour of the
petitioning creditor and payment was also made by the company to
Ramsarup for the goods supplied. Therefore, three instruments had been
executed by the company in respect of the goods sold and delivered to it.
Any prudent businessman on payment of sums would request non-
encashment of the other instrument. Admittedly, the instrument issued in
favour of the petitioning creditor is in February, 2010 while payment made
to Ramsarup, the borrower was in March and April, 2010. The security
undoubtedly was given prior to February, 2010 but the company even on
making payment to Ram Swarup, the borrower did not address any letter
to the petitioning creditor for non-encashment of the instrument given to
it. The instrument issued in favour of the petitioning creditor was
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deposited in May, 2010 and was returned on 19th May, 2010 by the
Indusind Bank for insufficient funds and not for stop payment. Therefore,
the defence of the company in view of the aforesaid cannot be accepted.
The acknowledgement of liability is clear on replacement of the cheque
issued by Allahabad Bank by the cheque drawn on Bank of Baroda.
Liability to make payment is also evident from the letter dated 19th
February, 2010 which precedes the replacement of cheque. The demand
drafts dated 5th March, 2010 and 31st March, 2010 are proof in itself that
payments were made by the company to the petitioning creditor and it is
not known against which invoice the payment was made to Ramsarup. As
payment of a crore has been made and accepted against invoices 401554,
401557, 401561 and 401564 so also 401562 and 401563 let credit be
given for the said sum to the company and C.P.552 of 2013 be admitted for
the sum of Rs.3,00,06,655/-. An opportunity is given to the company to
make payment of the said sum in three equal monthly instalments. The
first of such instalment be paid by 27th May, 2014 and the 27th day of each
succeeding month. Needless to mention that the said sum shall carry
interest at 8% per annum on and from the date of issuance of the statutory
notice till realisation.
An attempt was made by the company to take the plea of the
agreement being nothing more than a bill of exchange which needs to be
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stamped under the Indian Stamp Act. This plea was sought to be taken at
the reply stage and although a point of law would have been allowed but
for the submission of Counsel for the petitioning creditor who submits that
the document has been stamped and the original can be produced in
Court, if so required. In fact, the company was entitled to take inspection
of the document but no step in respect thereof either by letter or during
the course of hearing which has continued for several days was
undertaken by calling upon the petitioning creditor to produce such
document. Therefore, the said plea seems nothing but a desperate one
taken in defence. C.P. 592 of 2011 has been filed by the petitioning
creditor against Ramsarup Industries and it is quite possible that the
amount which has been admitted in this winding up petition also forms a
part of its claim therein. From a reading of the affidavit in opposition filed
by the company the petitioning creditor's claim in C.P. 592 of 2011 is for
the sum of Rs. 10,35,000/-. This is definitely an amount higher than the
amount claimed in this winding up petition and in the event the said
amount is included therein, the same be excluded therefrom. This however
will be subject to payment made by the company to the petitioning
creditor. In default of payment of any one instalment the petitioning
creditor will be entitled to advertise once in 'Ei Samay' and 'The Times of
India', Kolkata edition. Matter is made returnable eight weeks hence.
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Urgent photostat certified copy of this order, if applied for, be
supplied to the parties subject to compliance with all requisite formalities.
.
(PATHERYA, J.) sb/pa/TR