Bombay High Court
Maharashtra State Farming Corpn. Ltd. vs Belapur Sugar And Allied Industries ... on 16 February, 2004
Equivalent citations: IV(2005)BC545, 2004(3)BOMCR480, [2005]124COMPCAS382(BOM), (2004)2COMPLJ339(BOM), 2004(3)MHLJ414, [2004]52SCL389(BOM)
Author: R.M. Lodha
Bench: R.M. Lodha, Anoop V. Mohta
JUDGMENT R.M. Lodha, J.
1. This group of four appeals is directed against the order dated 28th June, 1995 passed by the learned Company Judge and accordingly, we heard all the four appeals together and dispose of them by this common judgment.
2. The Maharashtra State Farming Corporation Ltd. (for short the Corporation) filed two company petitions being Company Petition No. 200 of 1988 and Company Petition No. 307 of 1988 for winding up of the Belapur Sugar & Allied Industries Ltd. (for short 'the company'). The winding up of the company was sought under Sections 433 and 434 of the Companies Act on the ground that the company had become financially and commercially insolvent as it was unable to discharge its debts.
3. In the company petition No. 200 of 1988, the Corporation set up the plea that the company was indebted to it in the sum of Rs. 72,79,900.78 as on 13th March, 1987 alongwith the interest at the rate of 18% per annum. The Corporation averred in the said company petition that for the sugarcane supplied in the year 1985-86 (the rate of sugarcane having not been finalised by that time) an amount of Rs. 11,32,974.97 was due and payable by the company and for the sugarcane supplied in the year 1986-87 (first instalment), the principal amount of Rs. 59,57,905.90 was due and payable alongwith the interest of Rs. 4,673.75 upto 31-12-1986. The due amount also included an amount of Rs. 1,84,346.16 against the company for having falsely disputed the interest payable by them for the period from 1978-79 to 1982-83. The Corporation vide statutory notice dated 23rd June, 1987 called upon the company to pay to the Corporation the aforesaid amount together with interest thereon at the rate of 18% per annum, failing which the company was informed that it would be deemed that it was unable to pay its debts. The company responded to the said notice by its reply dated 15th July, 1987 and denied the claim of the Corporation. The Corporation vide its letter dated 3rd December, 1987 refuted the allegations made by the company in the reply dated 15th July, 1987.
4. By means of the company petition No. 307 of 1988, the Corporation set up the case that the company was indebted to the Corporation to a further sum of Rs. 23,45,299.11 as on 7th August, 1987 with interest thereon at the rate of 18% per annum. It was averred in this company petition that the amount of Rs. 11,32,974.97 for supply of sugarcane for the season 1985-86 was included in the statutory notice dated 23rd June, 1987 but at that time, the rate of sugarcane was not finalised. The total price towards supply of sugarcane for the season 1985-86 at the rate finalised was Rs. 33,68,226.25 and after excluding an amount of Rs. 11,32,974.97 which was part of statutory notice dated 23rd June, 1987 and the company petition No. 200/1988, the balance of the principal amount of Rs. 22,35,251.28 was due and payable by the company with interest in the sum of Rs. 1,10,047.83 as on 30th November, 1987. The Corporation, thus, set up the case by means of both company petitions that an aggregate sum exceeding rupees ninety six lakhs alongwith interest at the rate of 18% per annum was due and payable by the company but since the company was not in a position to pay its debts and unable to meet its liabilities, the company be wound up.
5. The company contested both the company petitions. It did not dispute the supply of sugarcane by the Corporation during the seasons 1985-86 and 1986-87 but raised diverse pleas inter alia, (a) that it was not liable to pay interest towards the false transactions for the years 1978-83; (b) that an amount of Rs. 17,63,015 in respect of the petitioner's bill dated July 9, 1986 having already been paid, it was not liable to pay an amount of Rs. 11,32,974.97 towards the sugarcane supplied in the year 1985-86; and (c) that the company has a counter-claim towards the rental charges of the lands and buildings given to the Corporation for housing their staff and the office premises. The rental charges being due in the Corporation since 1964.
6. Before the learned Company Judge, the Corporation did not press their claim of past interest in the sum of Rs. 1,84,346.16. The learned Company Judge was also of the view that there was genuine dispute with regard to the claim of Rs. 11,32,974.97 but there was no valid defence to the claim of the Corporation for a sum of Rs. 59,57,905.90 and Rs. 22,35,251.28 for the price of the surgarcane supplied to the company in the years 1985-86 and 1986-87. The learned Company Judge, however, observed that the company has some plausible defence insofar as the counter-claim for the three years prior to filing of the company petition was concerned.
7. The learned Company Judge, thus, passed the following order :--
"9. In my opinion, the Company has no valid defence against the Petitioners as far as claim of Rs. 59,73,348.75 and Rs. 22,35,251.28 are concerned though they have some plausible defence as far their counter-claim for a period of three years prior to the filing of the Petitions. In my opinion, the Petitions deserve to be admitted. However, in order to give one more opportunity to the Company, I propose to pass a conditional order. If the Company pays to the Petitioners a sum of Rs. 73,74,371 with 9% p.a. interest from the date of the petition within a period of six months from today, the Petitions to stand dismissed. However, in case the Company fails to make the payment, the Petitions to stand admitted and in that event, Petitions are made returnable on February 22, 1996. The Petitioners to advertise in the newspapers like Free Press Journal and Janmabhoomi as also in the Maharashtra Government Gazette. The Petitioners to deposit the amount of Rs. 1,000 by January 10, 1996 with the Prothonotary and Senior Master."
8. It is this order which is under challenge by the Corporation as well as by the company. The Appeal No. 54 of 1996 and Appeal No. 55 of 1996 are at the instance of the Corporation while Appeal No. 927 of 1995 and Appeal No. 928 of 1995 are at the instance of the company.
9. The short question before us is : whether the conditional order passed by the learned Company Judge calls for interference by us in the appeal.
10. The principal grievance of the Corporation is that there was no genuine dispute in so far as the Corporation's claim of Rs. 11,32,974.97 for the sugarcane supplied in the season 1985-86 was concerned. The Corporation is also aggrieved by the direction of the learned Company Judge awarding interest at the rate of 9% per annum and not at the rate of 18% per annum. On the other hand, the company is upset by the finding of the learned Company Judge that the company had no Valid defence in respect of the claim of Rs. 59,73,348.75 and Rs. 22,35,251.28 and that the counterclaim raised by the company was a plausible defence only insofar as it relates to a period of three years prior to the date of filing of the company petitions. The Company claim that the Corporation had been using their land and buildings and having not paid the rental charges, the company was entitled to the due amount of rental charges and were legally entitled to raise the plea of adjustment by way of set off and there was no question of limitation and, therefore, valid defence having been raised by the company, the impugned order directing the company to deposit the amount as per the order was uncalled for.
11. At this stage, we may notice that pursuant to the interim orders passed in the appeal, the company deposited and the Corporation has withdrawn a sum of Rs. 98.92 lakhs from this court after furnishing the Government guarantee in the sum of Rs. 65 lakhs being the principal amount.
12. Is the defence of the company claiming rent of their properties in possession of the Corporation from the year 1964 legally sustainable? It is not in dispute that the claim of rent is unconnected with the claim of the Corporation against the Company for non-payment of the sugarcane supplied during the seasons 1985-86 and 1986-87. The legal position is well settled that a plea in the nature of equitable set off is not available when the cross demands do not arise out of the same transaction. The law recognises the right of equitable set off provided the claim arises out of the same transaction which is the foundation of plaintiff's claim and so long as it has not become time barred; the underlying principle being that it would be inequitable to drive the defendant to separate suit for the purpose. In the present case, the condition precedent from claiming equitable set off is not made out and cannot be said to be available as the cross demands do not arise out of the same transaction. The learned counsel for the company sought to urge that in so far as the proceedings for winding up of the company is concerned, if a plea of equitable set off is raised by the company, that would furnish the reasonable excuse for non-payment and the company cannot be said to have neglected to pay the debt due to the petitioner despite service of the statutory notice. He placed reliance on C.A. Galiakotwala & Co. (P.) Ltd., In re [1984] 55 Comp. Cas. 746 (Bom.). The learned counsel for the Company would also urge that Section 3 of the Limitation Act only bars the remedy but does not destroy the right and therefore, it is lawful for the company to adjust even time barred claim of rent against the Corporation and thus, there was valid defence in opposition to the petition for winding up of the company.
In this regard, the learned counsel placed reliance on the judgment of the Supreme Court in Punjab National Bank v. Surendra Prasad Sinha .
13. When the claim of equitable set off does not arise out of the same transaction on which the Corporation's claim is founded, the prerequisite condition of equitable set off is not made out and such plea cannot be considered to be the plea of valid set off; much less in the facts and circumstances of the present case the plea of equitable set off can be said to be a bona fide defence to constitute reasonable excuse for nonpayment by the company in opposition to the petition for winding up. In this view of the matter the observation made by the learned Company Judge that the company has a plausible defence insofar as their counterclaim of rental charges for three years prior to the filing of the company petition was not justified. However, the fact of the matter is that the learned Company Judge has held in an unequivocal terms that the company has no valid defence against the Corporation in respect of the claim of Rs. 59,73,348.75 and Rs. 22,35,251.28. As regards the Corporation's claim in the sum of Rs. 11,32,974.97 in respect of the sugarcane supplied for the season 1985-86, the learned Company Judge cannot be said to have erred in observing that there was genuine dispute. The learned Company Judge in his order observed thus-
"It is the specific case of the Company that they had paid the said amount to the Petitioners under two separate cheques. It is not disputed by the petitioners that they had received the payment towards their bills dated December 16, 1986 and December 30, 1986. However, the Petitioners say that the said amount was appropriated by them towards their earlier bills and this was done with the consent of Mr. Maheshwari, Director of the Respondent Company. On perusal of the correspondence between the parties, it is clearly seen that by their letter dated January 20, 1987, the Respondent Company categorically disputed the case of adjustment sought to be made out by the petitioners. It was specifically averred in the said letter that Mr. Maheshwari has never agreed to such adjustment. In my opinion, the dispute raised by the Petitioners in that behalf cannot be said to be frivolous or without any substance."
14. Now coming to the grievance of the Corporation that the learned Company Judge ought to have awarded interest at the rate of 1896 per annum and not 9% per annum on the sum of Rs. 73,74,371 suffice it to say that winding up petition is not the recovery proceedings and therefore, the direction to the company to deposit the said amount with interest at the rate of 9% per annum cannot be faulted.
15. The learned Company Judge, though was of the view that company petitions deserved to be admitted, still he gave an opportunity to the company to pay a sum of Rs. 73,74,371 with 9% per annum interest from the date of petition within six months therefrom and upon compliance thereof, the petitions were to be dismissed. As already noticed above, under the interim orders in these appeals, the company deposited and the Corporation has withdrawn an amount of Rs. 98.92 lakhs. The said amount includes the principal amount of Rs. 65 lakhs. We are of the considered view, having taken all aspects into consideration, particularly the fact that the Corporation has received the amount of Rs. 98.92 lakhs, that the outstanding amount, if any, the Corporation must pursue ordinary remedy available in law. The learned counsel for the Corporation submitted that in that event the Corporation may be given benefit of Section 14 of the Limitation Act by excluding the time taken in the proceedings before this court. The learned counsel relied upon the judgment of the Supreme Court in Rameshwarlal v. Municipal Council .
16. In Rameshwarlal's case (supra) the Supreme Court held thus-
"2. It is not necessary for us go into the question of the legality of the order of the High Court in refusing to grant the relief. It is axiomatic that the exercise of the power under Article 226 being discretionary, the learned Single Judge as well as the Division Bench have not exercised the same to direct the respondent to pay the alleged arrears of salary alleged to be due and payable to the petitioner. Under these circumstances, the only remedy open to the petitioner is to avail of the action in the suit. Since the limitation has run out to file a civil suit by now, which was not so on the date of the filing of the writ petition, the civil court is required to exclude, under Section 14 of the Limitation Act, 1963, the entire time taken by the High Court in disposing of the matter from the date of the institution of the writ petition.
3. Normally for application of Section 14, the court dealing with the matter in the first instance, which is the subject of the issue in the later case, must be found to have lack of jurisdiction or other cause of like nature to entertain the matter. However, since the High Court expressly declined to grant relief relegating the petitioner to a suit in the civil court, the petitioner cannot be left remediless. Accordingly, the time taken in prosecuting the proceedings before the High Court and this Court, obviously pursued diligently and bona fide, needs to be excluded. The petitioner is permitted to issue notice to the Municipality within four weeks from today. After expiry thereof, he could file suit within two months thereafter. The trial court would consider and dispose of the matter in accordance with law on merits." (p. 100)
17. We are of the view that the Corporation having pursued winding up petitions and appeals before this court diligently and bona fide, the time taken in the said proceedings needs to be excluded.
18. Resultantly we dispose of the four appeals by the following order: The Maharashtra State Farming Corporation Ltd. is granted two months' time to file the suit for recovery of the due amount against the Company viz. Belapur Sugar & Allied Industries Ltd. The time taken by the Maharashtra State Farming Corporation Ltd. in prosecuting the winding up petition and the appeals before this court shall be excluded under Section 14 of the Limitation Act, 1963. The company, if advised and legally available, may also pursue appropriate remedy for its claim against the Corporation. Obviously claim of the parties shall be considered in accordance with law. For a period of two months, the Government guarantee furnished by the Maharashtra State Farming Corporation Ltd. shall remain operative and thereafter, the said Government guarantee shall stand discharged unless ordered otherwise.
19. The company petition No. 200/1988 and company petition No. 307/ 1988 stand disposed of. No costs.