Karnataka High Court
Nagaveni Bhat And Ors. vs Canara Leasing Limited And Ors. on 2 November, 2001
Equivalent citations: ILR2001KAR5569, 2002(1)KARLJ177
Author: V.G. Sabhahit
Bench: V.G. Sabhahit
JUDGMENT N.K. Jain, C.J.
1. This O.S.A. is filed against the order of the learned Company Judge, dated 25-8-2000 passed in Co. P. No. 5 of 1996 whereby the learned Single Judge declined to issue a direction for winding up of the company.
2. According to the learned Counsel for appellants, the respective appellants deposited amounts in the company on various dates between 1989 and 1991 for specified periods. But the amounts so deposited were not repaid on respective maturity dates. The appellants issued notice and claimed interest at 14% per annum on the maturity value. It is alleged that as no reply was received, the company is deemed to have been unable to pay its debt and therefore the appellants filed this petition under Section 433 of the Companies Act for winding up. Pending company petition, the entire amount along with interest was paid. The learned Single Judge on consideration of the case-law has not interfered and observed that the petitioners will be free to sort out their grievance before the Civil Court by filing civil suits in accordance with law.
3. The grievance of the petitioners is that the learned Single Judge has erred in not allowing the petition and directing the winding up of the company on its failure to pay interest on delayed payment when there was no dispute regarding the liability for the payment of the principal amount. The learned Counsel relied on the decision of Madras High Court in Rashi Leathers (Private) Limited v Super Fine Skin Traders , and also the ruling of Delhi High Court in Devendra Kumar Jain v Polar Forgings and Tools Limited2, and another verdict of Punjab and Haryana High Court in Stephen Chemicals (Private) Limited v In-nosearch Limited.
4. On the other hand, learned Counsel for the company submits that as per the terms of the contract, the principal amount as well as interest on the maturity value has been paid and therefore merely on the ground of delayed payment the appellants are not entitled to seek winding up and to determine the interest amount. The order of the learned Single Judge cannot be interfered with and the appellants are not entitled to get interest on the delayed payment in the garb of this winding up petition and the cases relied upon are not helpful. The learned Counsel also submits that after maturity date without renewal or a fresh cause of action the appellants cannot claim any interest on delayed payment and interest so claimed is disputed. He also relied on the decision in Greenhills Exports (Private) Limited, Mangalore and Others v Coffee Board, Bangalore1, wherein it was held that unless interest portion is determined by a competent Court, the winding up cannot be ordered on the basis of mere pleadings. As such winding up cannot be ordered and interest cannot be determined.
5. In the rejoinder the learned Counsel for the appellants submits that the decision relied upon by the learned Counsel for the company is of no avail as it pertains to the claim for damages and not to the claim for interest.
6. We have heard the learned Counsel for the appellants and the learned Counsel for the respondents and perused the material on record and also the case-laws.
7. Under the Companies Act a special jurisdiction has been created for winding up which is entirely for a different purpose. That if admitted debt is not paid after expiry of the statutory notice and company is unable to pay the debt, winding up order can be passed. In other words, if any admitted debt is due, the provisions of Section 433 can be invoked, but the debt should be bona fide and whether it is bona fide depends upon the circumstances of each case. Whether the dispute is raised to avoid payment of debt and not based on substantial ground cannot be considered. It is also seen that it is not the legislative intention that Company Court should be converted itself into an ordinary Civil Court and proceed to hold a trial at the instance of individual creditor.
8. In the instant case as facts culled out, the entire principal amount along with interest due till the maturity date has been paid. As such the cause of action, if any, for winding up ceases to exist, as only those circumstances have to be seen which existed on the date of the petition. Therefore, no direction can be issued as prayed for. In our opinion, once the cause of action to seek winding up does not subsist, Section 433(e) cannot be invoked for awarding interest on the delayed payment which is also disputed in the facts of this case.
9. So far as the cases relied upon are concerned, in Devendra Kumar Jain's case, supra, because of the fact that the interest was not calculated, it was observed that the letter constituted a valid demand for interest at 18% per annum and the Company Judge has power to determine the interest and direct to pay interest at 12% per annum, failing which the company would be liable to be wound up. This is not helpful in the facts of the present case. In Stephen Chemicals Limited's case, supra, wherein the observation of the learned Single Judge that when a winding up petition has been filed on the ground that it is unable to repay its debt and the company admits its liability and in fact pays it up, the Company Judge is the appropriate forum for determining as to whether the creditor is entitled to interest on the amount in question or not, has not been interfered by the Division Bench on the ground that Punjab and Haryana High Court Rules do not provide for a company appeal and the point in issue regarding delayed payment was not there. As such this decision is also not helpful in the facts of the given case as stated. Lastly, in the case of Rashi Leathers (Private) Limited, supra, it is held that the liability to pay interest was never in dispute. It was also observed that in all its replies to the respondent's letters claiming principal and interest, the appellant had been assuring that it would settle the claim, but never disputed its liability to pay interest and therefore the Company Judge was right in holding that the liability of the appellant to pay interest is a matter which could be gone into in the winding up the petition. This ruling is also not helpful in the facts of this case as stated above. The ground urged for winding up on the delayed payment cannot be gone into nor this Court can determine the same invoking the provisions of Section 433(e) of the Companies Act.
10. In view of what has been discussed above and under the circumstances, we find no error, or illegality in the order of the learned Single Judge so as to call for any interference. Appeal is dismissed.