Hoe Leong Corporation Ltd. vs Vaishnovi Infrastructure Engineering (P) Ltd.

Vinod K. Sharma, J.—Hoe Leong Corporation Ltd., a company registered under the Companies Act 1956 has filed this petition u/s 433(e),

(f) 434(1)(a) and 439 of the Companies act, 1956, for winding up of Vaishnovi Infrastructure Engineering (P) Ltd., a company registered under

the Companies Act, 1956.

The case pleaded by the Petitioner is that the Petitioner Company was engaged in the business of designing, manufacturing, sale and distribution

of machinery parts. During the course of the business, the Respondent Company approached the Petitioner by placing orders for supply of various

engineering components and materials like the machinery parts. The orders were duly executed and goods were delivered to the Respondents in

good condition and were utilized by the Respondent.

The Petitioner raised several invoices between August 2007 to September, 2009 for a sum of USD 9,50,988.37. The payment was not made

on the ground that the Respondent Company was going through some difficulties. Inspite of waiting for sometime, no payments were received, the

Petitioner reminded the Respondent for payment. However, the Respondent Company evaded payment of dues.

It is also the case of the Petitioner that instead of making payment for the goods supplied, the Respondent company mala fide disputed the

amount due on the plea that some of the material supplied was defective and further that some of the supplies were made in excess without order;

but subsequently the Respondent company promised and furnished the payment schedule commencing with effect from February, 2009. The

Respondent Company thereafter again expressed difficulty to make payment. On 16.02.2009 the Respondent Company was requested to confirm

the dues, as it was required by the auditors of the Petitioner at Singapore.

In response to the request made by the Petitioner, the chairman of the Respondent Company confirmed that a sum of USD 9,26,150.26 was

due and payable by the Respondent to the Petitioner. Thereafter, vide letter dated 17.2.2009, the Respondent company furnished fresh repayment

schedule, to clear the outstanding. The schedule of payment agreed to by the Respondent Company vide their letter dated 17.02.2009 reads as

under:

Month Amount (US$)

(a) 30.4.2009 100, 000.00

(b) 31.5.2009 100, 000.00

(c) 30.6.2009 100, 000.00

(d) 31.7.2009 100,000.00

(e) 31.8.2009 100,000.00

(e) 30.09.09 100, 000.00

(f) 31.10.2009 150,00.00

(g) 30.11.2009 163475.88

This schedule shows that by the end of November, 2009, sum of USD 9,13,475.88 (USD nine lakhs thirteen thousand four hundred and

seventy five and eighty eight only) was due and payable. The Respondent did not adhere to the repayment schedule. But when the payments were

demanded, it again raised a dispute with regard to oversupply, etc.

Thereafter, on 6.10.2009 a request was made by the Respondent to re-export of the goods from the Respondent''s warehouses. The Petitioner

also took a stand that the value of the spares which were to be shipped back was more than the actual amount due to the Petitioner. The stand of

the Respondent Company forced the Petitioner to issue a statutory notice on 22.10.2009.

The reply to the notice was submitted wherein several false pleas were made to deny the liability. The Petitioner submits that non-payment of the

dues amounting to Indian Rs. 4,51,34,179.13 (Rupees four crores fifty one lakhs thirty four thousand one hundred and seventy nine and paisa

thirteen only) though admitted would show that the Respondent company is unable to discharge its admitted liability.

It is also pleaded that it would be just, fair and equitable that the Respondent Company be ordered to be wound up, as it has lost its substratum.

On notice, the Respondent Company filed a counter denying the averments made in the company petition. The Respondent Company,

however, admitted that the Petitioner supplied various quantities of engineering items, spare parts of heavy equipments and industrial machinery,

but denied having placed any orders.

The stand is also taken that the goods supplied were not utilized by the Respondent as they were not as per the requirements of the

Respondent. The stand taken in the counter further is that this fact was duly conveyed to the Petitioner, through e-mail exchanged between the

parties.

The stand is also taken that the Respondent is a profit-making running company, which employs more than 1,100 employees; therefore, it is

wrong to say that the substratum of the company is lost.

The defense raised by the Respondent is that the amount claimed by the Petitioner is bona fide disputed.

The Learned Counsel for the Petitioner in support of the petition placed reliance on the various invoices showing the dispatch of materials, and

the letter dated 16.2.2009 addressed to the Respondent company wherein the managing director cum chairman of the Respondent company

confirmed the payments due to the Petitioner to be USD 9,26,150.26 (USD nine lakhs twenty six thousand one hundred and fifty and cents twenty

six only).

The reliance was also placed on letter dt.17.2.2009 of the Respondent company addressed to the Petitioner agreeing to pay a sum of USD

9,13,475.88 (USD nine lakhs thirteen thousand four hundred and seventy five and cents eighty eight only) in installments starting from 30.4.2009

and ending on 30.11.2009.

The reliance was also placed on the statutory notice and the reply submitted by the Respondent Company to contend that though the liabilities

were admitted by the Respondent, false and frivolous pleas were taken by the Respondent Company to deny the admitted liability.

It was also contended by the Learned Counsel for the Petitioner, that after admitting the liability on 6.10.2009, the defense was raised that

some spares were lying at customs warehouse which were worth more than the amount due to the Petitioner.

In order to prove that the defense raised was totally false, the Learned Counsel for the Petitioner referred to the fax message showing spares

said to be lying at customs warehouse wherein total goods lying were shown to be to the tune of USD 74,760 (USD seventy four thousand seven

hundred and sixty only).

It was contended by the Learned Counsel for the Petitioner, that even for the sake of arguments, though not admitted, if the dispute with

regard to return of goods, is taken to be correct, still more than USD 8,00,000 (USD eight lakhs only) are admittedly payable, which the

Respondent company has failed to pay inspite of statutory notice. This proves that the Respondent Company is unable to pay the admitted liability,

thus, is liable to be wound up.

In support of this contention, the Learned Counsel for the Petitioner placed reliance on the judgment of the Hon''ble Supreme Court in

Madhusudan Gordhandas and Co. Vs. Madhu Wollen Industries Pvt. Ltd., wherein the Hon''ble Supreme Court pleased to lay down as under:

Two rules well settled. First, if the debt is bona fide disputed and the defense is a substantial one, the court will not wind up the company. The

court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no

price had been agreed upon and the sum demanded by the creditor was infeasonable. Again, a petition for winding up by a creditor who claimed

payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not

allowed.

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 to

pay that particular debt. Where, however, there is no doubt that the company owes the creditor a debt entitling him 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 debt precisely. The principles on

which court acts are first that the defense of the company is in good faith and of substance, secondly, the defense is likely to succeed in pint of law,

thirdly, the company adduces prima facie proof of the facts on which defense depends.

Another rule which the court follows is that if there is opposition to the making of the winding up order by the creditors the court will consider their

wishes and may decline to make the winding up order. u/s of the Companies Act, 1956, in all matters relating to the winding up of the company the

court may ascertain the wishes of the creditors, wishes of the shareholders are also considered, though, perhaps, that may attach greater weigh to

the views of the creditors.

This right to a winding up order is, however, qualified by another rule, viz., that the court will regard the wishes of the majority in value of the

creditors, and if, for some good reason, they object to a winding up order, the court in its discretion may refuse the order.

20.1 The wishes of the creditors will however be tested by the court on the grounds as to whether the case of the persons opposing the winding up

reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding up order is made. It is also well settled

that a winding up order will not be made on a creditor''s petition if it was not benefit him or the company''s creditors generally. The grounds

furnished by the creditors opposing the winding up will have an important bearing on the reasonableness.

The Learned Counsel for the Respondent rebutted the contention raised by the Learned Counsel for the Petitioner, by placing reliance on the

balance sheet of the company showing that it was a profit making company, therefore it cannot be said that the substratum of the company is lost.

The contention of the Learned Counsel for the Respondent therefore was that keeping in view of the financial status of the company and bona

fide dispute raised with regard to claimed amount, it is not a fit case, to pass an order of winding up, as the remedy of the Petitioner is to recover

the money in accordance with law by proving supplies made, that too in pursuance to the order and of good quality.

It was vehemently contended by the Learned Counsel for the Respondent, that the stand of the Petitioner that the dispute was raised for the

first time after issuance of statutory notice cannot be sustained, as since May 2008, there was exchange of e-mails wherein a specific stand was

taken by the Respondent company that excess supplies of goods were made without any order, and that some of the materials were not of good

quality.

The reliance was also placed on the notice issued by the office of the Commissioner of Customs u/s 72(1) of the Customs Act, calling up the

Respondent Company to pay the damage on the goods imported along with interest to prove that the goods were lying in the warehouse for re-

export. Therefore, there exist bona fide dispute with regard to the claim raised.

In support of the contention that this is not a fit case to pass an order of winding up, the Learned Counsel for the Respondent placed reliance

on the judgment of the Hon''ble Supreme Court in the case of Mediquip Systems Pvt. Ltd. Vs. Proxima Medical System GMBH, wherein the

Hon''ble Supreme Court was pleased to lay down as under:

This Court in a catena of decisions has held that an order u/s 433(e) of the Companies Act is discretionary. There must be a debt due and the

company must be unable to pay the same. A debt under this section must be a determined or a definite sum of money payable immediately or at a

future date and that the inability referred to in the expression '' unable to pay its debts'' in Section 433(e) of the Companies Act should be taken in

the commercial sense and that the machinery for winding up will not be allowed to be utilized merely as a means for realizing debts due from the

company.

On consideration, I find force in the contention raised by the Learned Counsel for the Petitioner. In view of the clear admission by the

Respondent, in response to the fax dated 16.2.2009 admitting therein, that a sum of USD 9,26,150.26 (USD nine lakhs twenty six thousand one

hundred and fifty and cents twenty six only) was due and payable and further vide letter dated 17.2.2009 it agreed to pay USD 9,13,475.85

(USD nine lakhs thirteen thousand four hundred and seventy five and cents eighty five only) in installments, and also coupled with fact that the

exports offer was only for the goods worth USD 74,760 shows that amount claimed is admitted liability, which the Respondent company failed to

pay.

The factum that the Respondent company being a profit making company, cannot be a ground to dismiss the petition filed for winding up on the

ground of inability to pay debt, once it is proved that the admitted liability has not been discharged, and further that no offer is made to discharge

admitted liability.

The contention of the Learned Counsel for the Respondent that as substratum of the company is not lost, therefore there should be no order of

winding up, also cannot be sustained, in view of the proved fact that the Respondent Company is unable to pay its admitted liability.

The judgment of the Hon''ble Supreme Court in the case of Mediquip Systems Pvt. Ltd. Vs. Proxima Medical System GMBH, on which

reliance placed by the Learned Counsel for the Respondent, also cannot advance the case of the Respondent, as in the case in hand, it is proved

that the debt owed to the Petitioner is admitted and the Respondent company is unable to pay the debt. The dispute raised by the Respondent

Company cannot be said to be bona fide dispute, but merely an attempt to deny the admitted liability, on a false plea, which is not supported by

any document. On the other hand, documentary evidence on record shows that the liability is admitted liability.

For the reasons stated, this company petition is ordered to be advertised.

(i) Notice on the court notice board,

(ii) Notice to the Respondent,

(iii) Notice to the Registrar of Companies, Coimbatore,

(iv) Affixture of notice at the premises of the registered office of the Respondent Company.

(v) The Petitioner is directed to publish the company petition in one issue of Tamil daily ''Dina Malar '' English daily ''Indian Express '' and in the

Tamil Nadu Government Gazette fixing the date of hearing on,

(vi) The Petitioner is directed to publish the company petition giving at least fourteen days clear advance notice.

(vii) The official liquidator, High Court, Madras is appointed as provisional liquidator and he is also directed to take charge of the assets of the

Respondent company. The ex-directors of the Respondent company are directed to file their statement of affairs before the official liquidator within

a period of 21 days. The Petitioner shall deposit a sum of Rs. 10,000 (rupees ten thousand only) towards initial expenses before the official

liquidator in this matter.