AI Structured Summary
Not yet generated for this judgment
Judgment
,
M. S. Sonak, J",
Heard learned counsel for the parties.,
The challenge in this appeal is to the order dated 27th September, 2017 made by the learned Company Judge in",
Company Petition No. 192 of 2016 in the following terms :-,
“(i) The respondent shall deposit a sum of Rs. 1,45,79,032/- Prothonotary and Senior Master of this Court within a period of 8 weeks from today.",
(ii) In the event deposit is made and if a suit is filed by the Petitioner, the amounts so deposited will be transferred to the suit account and thereafter the company petition will stand dismissed.",
(iii) If the amount is not so deposited, the petition shall revive and shall stand admitted, returnable within six weeks from the date of default and be advertised in two local newspapers i.e. Free Press Journal (in English) and Navshakti (in",
Marathi) and in the Maharashtra Government Gazette. Delay in publication of the advertisement in the Maharashtra Government Gazette shall not invalidate the advertisement and shall not constitute non-compliance of this direction or of the,
Company (Court) Rules, 1959.",
(iv) The Petitioner shall deposit an amount of Rs.10,000/- with the Prothonotary and Senior Master of this Court towards publication charges, within two weeks from the date of default, with intimation to the Company Registrar failing which",
the Petition shall stand dismissed for non prosecution.,
(v) The learned Counsel for the Respondent Company waives service of the Petition under Rule 28 of the Companies Court Rules, 1959.",
 (iv) Petition is disposed of in the above terms.â€,
Mr. Sancheti, the learned Senior Counsel for the",
appellant submits that this is not a case where any 'debt' can be said to be due and payable by the appellant to the respondent. In the absence of any debt due and payable by the appellant, no petition was maintainable for winding up of the",
appellant.,
Mr. Sancheti, by way of elaboration submits that the appellant was only a broker through whom the respondent traded at the National Spot Exchange Limited (NSEL). The appellant has nowhere denied receipt of an amount of Rs.",
1,45,79,032/- from the respondent for the purposes of the transaction involving a paired contract concerning purchase and sale of White Refined Sugar-M Grade ('Sugar') at the NSEL. The appellant, consistent with the instructions received",
from the respondent carried out the transaction and even issued contract notes for purchase and sale of sugar. In terms of transaction which was described as T+2 (purchase segment) and T+25 (sale segment), the respondent after a period of",
about 25 days from the date of the transactions i.e. 15th July, 2013, was to receive an amount of Rs.1,47,94,679/towards the sale of sugar under the T+25 segment of the transaction. However, on 30th July, 2013, all transactions and operations",
at NSEL were suspended and therefore, the appellant upon receipt of proportionate amounts from NSEL, has paid the same over to the respondent.",
Mr. Sancheti submits that it is not even the case of the respondent that it is the appellant which is liable to pay this amount, unless such amount is paid by the NSEL to the appellant. The appellant has nowhere denied the liability to pay such",
amount to the respondent once the same is,
received from the NSEL. In fact, from out of the proportionate payments received from NSEL, the appellant has made and respondent has received without demur, proportionate payments in respect of the transactions.",
Mr. Sancheti submits that in such a situation, it cannot be said that there existed any debt due and payable by the appellant to the respondents, which the appellant can be said to be a failed or neglected to pay to the respondent. Mr. Sancheti",
relies upon M/s. Greenhills Exports (P) Ltd., and others Vs. Coffee Board â€" ILR 2001 KAR 2950 and E-City",
Media Private Limited Vs. Sadhrta Retail Limited â€" 2009 SCC OnLine Bom 1813 in support of such,
submissions.,
Mr. Sancheti, in the alternate submits that a winding up petition on the basis of allegations of misrepresentation and fraud is not at all maintainable, particularly because such allegations cannot be adjudicated in a summary jurisdiction under",
the Companies Act. Further, until such allegations are adjudicated upon, there can be no question of determining any liability to pay. He submits that there are no proper pleadings in support of allegations of fraud or",
misrepresentation. In any case, he submits that there is no material on record to sustain any findings of fraud or misrepresentation.",
Mr. Sancheti submits that the learned Company Judge has inferred fraud or misrepresentation on the basis of alleged discrepancies in the timings at which the trades were transacted at the NSEL. He submits that there were no pleadings in,
the company petition on the aspect of any alleged time discrepancy. Therefore, the appellant was deprived of opportunity to explain the same. In any case, such a time discrepancy, which even according to the learned Company Judge applies",
only to the second segment of the transaction i.e. T+25 (sale segment), is certainly not sufficient to infer any fraud.",
Mr. Sancheti submits that the very institution of the winding up petition was an abuse of the process of law since such institution was for exerting undue pressures upon the appellant. He submits that it is evident that the respondent is trying,
to take undue advantage of some bonafide mistake in punching the correct client codes at the time the subject trades were transacted on the NSEL on 15th July, 2013. Mr. Sancheti submits that substantial and bonafide defenses have been",
raised by the appellant and therefore, the impugned order warrants interference.",
Mr. Venkatesh Dhond, the learned Senior Counsel for respondent and Mr. Shyam Kapadia, defended the impugned order on the basis of reasoning reflected therein. They pointed out that there is no dispute whatsoever that the respondent",
had advanced through the regular banking channels an amount of Rs.1,45,79,032/- with instructions to transact the trades in question at the NSEL in the name of the respondent. However, the records very clearly bear out that the appellant",
utilised this amount to trade in the name of Sujana Sudini (Sujana). Thus, it is clear that the appellant is due and payable the sum of Rs. 1,45,79,032/- to the respondent, since such amount was never utilised by the appellant for trading on behalf",
of the respondent at the NSEL.,
The learned Counsel for the respondent submit that the defense that there was some error on the part of the appellant's dealer in punching the correct client code when the trades were transacted on 15th July, 2013 and that such error was",
corrected on the same day or on the next date beyond transaction hours was neither a substantial or bonafide defense. There is absolutely no material produced on record to demonstrate that this was a case of some inadvertent error, which",
was immediately rectified. Such alleged inadvertent error was never even acknowledged by the appellant at the earliest instance, but rather, attempts were made to forward contract notes in the name of the respondent, so as to create an",
impression that the subject trades, in fact stand recorded in the name of the respondent in the NSEL records.",
Mr. Dhond and Mr. Kapadia pointed out that the communication dated 29th September, 2014 issued by the NSEL very clearly states that the subject trades recorded in the name of Sujana and not the respondent in the records of the",
NSEL. They submit that all this material very clearly establishes that the appellant is due and payable an amount of Rs.1,45,79,032/- to the respondent and that the so called defense is raised by the appellant are nothing but moonshine, not to",
mention that it is lacking in bona-fides.,
To the query from the Bench, as to whether the",
appellant was raising the contention that the paired contracts which the respondent had instructed the appellant to transact at the NSEL were contrary to public policy or in breach of the mandate for which the NSEL had been established,",
Mr. Sancheti, the learned Senior Counsel for the appellant made it clear that the appellant was not raising any such plea, since, such a plea might affect several other trading clients of the appellant who may have transacted paired contracts at",
the NSEL. However, Mr. Sancheti stated that it is for the Court to consider this aspect in the light of certain observations in 63,",
Moons Technologies Limited (formerly Financial Technologies (India) Ltd. & others vs. The Union of India and others â€" 2017 SCC OnLine Bom 9297.,
Mr. Dhond, learned Senior Counsel for the respondent however responded by stating that the issue of paired contracts being contrary to public policy or not does not arise",
in this matter, because the material on record",
overwhelmingly establishes that the amount advanced by the respondent to the appellant was never utilised for transacting any contracts, much less any paired contracts. He points out that this is not the case where the respondent is seeking to",
enforce any paired contracts but rather this is case where the respondent only points out that the amount which was admittedly advanced by the respondent to the appellant was never utilised for transacting any contracts at all on behalf of the,
respondent and therefore, the appellant cannot hold on to such amounts. Secondly and what prejudice, Mr. Dhond submits that the claim of the respondent for the amount of Rs.1,45,79,032/- at the highest relates to the T+2 (purchase segment)",
of the transaction, which was absolutely legal and valid. Therefore, even assuming that there was some issue concerning the T+25(sale segment) of the transaction, the same was clearly severable and consequently there could be legal issue",
whatsoever to the recovery of amounts paid by the respondent to the appellant towards the T+2 (purchase segment) of the transaction. In this regard, Mr. Dhond relies on the ruling in B.O.I. Finance Ltd. Vs. Custodian and others â€" (1997)",
10 SCC 488.,
The rival contentions now fall for determination.,
The principles on the basis on which the Company Court exercises discretion in matters of this nature, are fairly well settled. The first principle is that if a debt is bonafide disputed",
Â,
and the defense is a substantial one, the Court will not wind up the company. Secondly, where the debt is undisputed, the court will not act upon a defense that the company has the ability to pay the debt but the company chooses not to pay",
that particular debt. Thirdly, where there is no doubt that the company owes the creditor debt entitling him to a winding up order but the exact amount of the debt is disputed, the Court will make a winding up order without requiring the creditor",
to quantify the debt precisely so long as the debt in question is in excess of the statutorily prescribed limits. Fourthly, and perhaps most importantly, the Company Court will not wind up a company where the defense raised by the company is in",
good faith, one of substance, is likely to succeed in point of law and the company adduces prima-facie proof of the fact on which the defense is based. [See â€" M/s. Madhusudan Gordhandas & Co. Vs. Madhu Woollen Industries Pvt. Ltd. -",
1971(3) SCC 632].,
The aforesaid principles have been elaborated in IBA Health (India) Private Limited Vs. Info-Drive Systems SDN. BHD â€" (2010) 10 SCC 553 where the Apex Court has,
held that it is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the winding-up petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of",
winding-up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding-up petition as a means of forcing the company to pay a bona fide disputed debt. A dispute",
would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at the stage of a winding-up petition is not expected to hold a full trial of the matter. It must decide whether the",
grounds appear to be substantial. The grounds of dispute must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. If the debt is bona fide disputed, there cannot be",
“neglect to pay†within the meaning of Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not",
substantiated and non-payment of the amount of such a bona fide disputed debt cannot be termed as “neglect to pay†so as to incur the liability under Section 433(e) read with Section,
434(1)(a) of the Companies Act, 1956.",
The Apex Court in IBA Health (India) Private Limited (supra) has also held that where the company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the company for the purpose of winding up. “Bona fide",
dispute†implies the existence of a substantial ground for the dispute raised. Where the Company Court is satisfied that a debt upon which a petition is founded is a hotly contested debt and also doubtful, the Company Court should not",
entertain such a petition. The Company Court is expected to go into the causes of refusal by the company-to-pay before coming to that conclusion and ascertain that the company's refusal is supported by a reasonable cause or a bona fide,
dispute in which the dispute can only be adjudicated by a trial in a civil court.,
The rival contentions in the present case will therefore, have to be evaluated on the touchstone of the aforesaid well settled principles in matters of the present nature.",
There is absolutely no dispute in the present case that the respondent had instructed the appellant who is a broker to carry out trades in paired contracts offered by the NSEL for purchase and sale of sugar on 15th July, 2013 in the name of",
the respondent. On the same date i.e. on 15th July, 2013, the appellant in purported compliance with the instructions, represented to the respondent that such trades in a total sum of Rs. 1,45,63,473.06 had in fact transacted by the appellant for",
and on behalf of the respondent. This representation was in the form of issue of contract note Nos. 0012335(NSEL contract No. SM30AMBL2) in respect of the T+2 (purchase segment) and contract Note No. 0012334 (NSEL contract No.,
SM30AMBL25) in respect of the T+25 (sale segment). There were e-mails forwarded by the appellant on 16th July, 2013 confirming that the appellant had indeed transacted such trades in the name of the respondent. On 16th July, 2013 the",
appellant also e-mailed the digitally signed contract notes, again confirming the position that the subject trades had indeed been transacted by the appellant in the name of the respondent on 15th July, 2013. Based upon all such representations,",
there is no dispute whatsoever that the respondent paid an amount of Rs. 1,45,79,032/- towards the T+2(purchase segment) of the transaction vide RTGS. Even the appellant has never disputed the receipt of the amount of",
Rs.1,45,79,032/- from the respondent.",
Since there is no dispute whatsoever that the,
respondent had advanced and the appellant had received the amount of Rs. 1,45,79,032/- to carry out subject trades at the NSEL platform on 15th July, 2013, the onus was obviously on the appellant to at least prima-facie establish that such",
trades were indeed transacted by the appellant in the name of the respondent. In fact, as will be noted hereafter, it has been the specific defense of the appellant that such trades were indeed carried out in the name of the respondent though,",
after correction/modification of client code on the platform of NSEL.,
The communication dated 29th September, 2014 addressed by the NSEL however maintains that the subject trades stand in the name of Sujana and not in the name of the respondent. Therefore, the onus of at least prima-facie explaining",
as to how the subject trades stand recorded in the name of Sujana in the NSEL records, when the appellant has time and again insisted that the subject trades, consequent upon modification/correction stand in the name of the respondent, is",
clearly upon the appellant.,
If the specific defense raised by the appellant, both in response to the statutory notice under Section 433 of the Companies Act as well as the averments in the company petition is found to be a bona-fide defense, a defense of substantial",
nature, likely to succeed in point of law and further, if the appellant produces even prima-facie proof of the fact on which such defense is based, then, certainly as contended by Mr. Sancheti, the impugned order may warrant interference.",
However, if the defense is not bona-fide but speculative, illusory or misconceived, then there would be no case made out to warrant interference to the impugned order.",
In IBA Health (India) Private Limited (supra) upon which reliance is placed by Mr. Sancheti, it is made clear that the Company Court at the stage of consideration of a winding up petition is not expected to hold a full trial in the matter. It",
Contact Trading Timing,Client Code Modification Timing
10:00 AM 4:00 PM,10:00 AM 4:00 PM
10:30 AM 4:30 PM,10:30 AM 4:40 PM
10:00 AM 6:00 PM,10:00 AM 6:10 PM
10:00 AM 11:30 PM,10:00 AM 11:40 PM