Calcast Ferrous Limited vs SRC Steels Pvt. Ltd.

I.P. Mukerji, J. - This is an application for winding up of the respondent company, on the ground that it is unable to pay its debts. It is appearing before me for admission, after exchange of affidavits.

By an order dated 13th July, 2011 passed by this court the steel division of SRC Udyog Limited was demerged from this company and merged with the petitioner. The demerger was effective from 1st April, 2010. As a result of this demerger the petitioner acquired all the assets, liabilities and actionable claims of SRC Udyog Limited.

SRC Udyog Limited had from time to time supplied goods like Plate cut from HR Coil to the company, under 15 invoices between 2009-2010 and 2010-2011. The value of the invoices was Rs. 1,88,47,732/-. According to the petitioner, between 10th June 2013 and 27th July, 2013 the company made part payments amounting to Rs. 30 lakhs by 4 cheques drawn on Punjab National Bank. After giving credit to the said payment a sum of Rs. 1,58,47,732 was due and owing from the company to the petitioner as on the date of filing of the winding up application.

A very simply worded statutory notice under Section 433, 434 and 439 of the Companies Act, 1956 was issued to the company on 30th January, 2014 by Mr. Sagnik Basu, advocate for the petitioner. On 21st February, 2014 the advocate for the petitioner corrected his letter dated 30th January, 2014 by stating that instead of Rs. 20 lakhs the part payment received ought to have been Rs. 30 lakhs.

Meanwhile, on 20th February, 2014 the company replying to the statutory notice merely referred to the earlier correspondence the company had with the petitioner. The claim of the petitioner was not explicitly denied.

Now, at this point of time it is very important to look at the correspondence referred to in the reply of the company.

The letter dated 1st April, 2013 was written on behalf of the petitioner asking for release of the outstanding payment. The letter dated 9th May, 2013 was a reminder by the petitioner. On 17th May, 2013 the company replied by saying that there were no dues. The denial was evasive without any particulars or explanation. So, also was the tenor of the letter dated 30th May, 2013.

Mr. Surajit Nath Mitra appearing for the company, basing his submission on the affidavit-in-opposition filed by his client submitted that neither there was neither any sale nor delivery of goods by the petitioner to the respondent-company. He argued that only invoices raised by the petitioner were annexed to the petition. Not a single receipt or challan evidencing the delivery of the goods had been appended to it. He also submitted that on the face of the documents, the claim of the petitioner was barred by the laws of limitation. He submitted that for the year 2010-2011 on the face of it, the claim in respect of five invoices of the value of worth Rs. 5,147,974 was within the period of limitation and that in respect of the other five amounting to Rs. 6,553,602 was beyond the period of limitation, relying on the chart being annexure-B at pg. 31 of the petition.

It was also submitted that on behalf of the company a loan of Rs. 30 lakhs was granted by it to the petitioner in five tranches of Rs.5 lakhs each between 10th June, 2013 and 27th November, 2013. This was outstanding.

If the above is taken as part payment then no part of the claim of the petitioner is barred by the laws of limitation.

Furthermore, the petitioner in their affidavit in reply has stated, that the sale of the goods in favour of the company was shown in their value added tax "VAT" returns.

In my opinion, the very tenor of the letter of the company dated 20th February, 2014 in reply to the petitioner''s statutory notice smacks of mala fide. In this letter the company referred to various correspondence between them and the petitioner. In this correspondence the company neither denied receipt of the goods nor disputed its liability to make payment. They may be taken to have said that the entire claim of the petitioner may not be payable. The correspondence referred to in the reply of the company dated 20th February, 2014, really do not disclose any defence. It was an evasive denial of the petitioner''s claim.

Thereafter, it was extremely dishonest on the part of the company in my view to take the defence in their affidavit-in-opposition that there was no transaction whatsoever between the petitioner and the respondent-company. It was highly contradictory of the above correspondence.

Throughout, from 2010 till 2014, whilst the parties were corresponding there was no whisper whatsoever of any loan advanced by the company to the petitioner. To my mind the assertion of the company in its letter dated 22nd May, 2014 that Rs. 30 lakhs was lent and advanced by the company to the petitioner is a preposterous and a most unbelievable stand. Is it not ridiculous that a creditor of much over Rs. 1 crore would ask a debtor to lend and advance Rs. 30 lakhs to him, when that debtor has made serious default in payment of his debt?

Astonishingly, this alleged loan was not even mentioned in the company''s letter of 20th February, 2014.

I prima facie accept the contention of the petitioner that VAT returns were filed by them in respect of the goods for which they claim payment.

The language used in their letter dated 17th May, 2013 is that which is tailor made for and routinely used in evasive denial: " please be informed that there is no outstanding dues of Rs. 1,88,47,732/- payable by us to you as alleged or at all."

When the statutory notice under Section 433, 434 and 439 of the Companies Act, 1956 dated 20th February, 2014 was sent on behalf of the petitioner the company simply said that they and the petitioner had corresponded and reiterated that no amount was due and payable by them. There was no expression of surprise by them that why the petitioner was claiming the amount. There was no attempt to explain why no amount was due and payable by them. The company felt no concern whatsoever that such a huge amount was being claimed from them by the petitioner.

Thereafter, on 22nd May, 2014 the company posted a most astonishing letter. The very amounts which the petitioner had claimed as part payments being made by the company to them towards the price of the goods were stated to be loans and advances of Rs. 30 lakhs made by the respondent-company to the petitioner. In my opinion, those payments were part payments and nothing else.

The principle of law is well-known that when the petitioner has been able to prove his case in a summary manner on the basis of affidavit evidence the winding up application is most readily admitted by the court and the debtor company sent to liquidation.

If the respondent-company tries to make out a defence which can be thrown out in a summary way described in the authorities as "moon shine" the winding up application is admitted.

If the respondent is able to present and prove a defence which is prima facie very strong or substantial and bona fide, the petitioner in the winding up application is immediately relegated to a civil form to prove his case, after dismissal of the winding up application see Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd. reported in AIR 1971 SC 2600. Sometimes, the respondent is able to present a defence which is not very strong at the stage of admission of the winding up but is capable of being made strong by discovery and production of evidence at the trial of a suit. Then also the petitioner is relegated to a civil suit and the winding up application is dismissed.

In a case where the defence the respondent presents is weak yet the court feels that a chance should be given to him to improve upon it then the petitioner is relegated to a civil remedy only upon the company furnishing such security as the court directs (see Mechalec Engg. & Manufacturing v. Basic Eq. Corporation reported in AIR 1977 SC 577).

Here, as noted above the petitioner has been able to make out a cast iron case of sale and delivery of goods. It has been made even stronger by reliance of documents showing that it had received part payments and paid value added taxes on the goods. The respondent has not been able to put up any defence at all. The defence it has tried to present is very contradictory, unbelievable and to say the least dishonest.

In those circumstances, the petitioner has been able to prima facie prove its claim for Rs. 1,58,47,732. The petitioner is also entitled to interest at the rate of 8% simple interest from the invoice date till payment as interest payable on sale of goods.

This winding up application is formally admitted. I direct advertisement of the petition once in the Telegraph and once in the Ananda Bazar Patrika by 15th February, 2017. Publication in the Official Gazette is dispensed with List this application for further direction on 20th March, 2017, as "Company matter new."

Certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.