Integra vs Vedavaag Systems Ltd.

C.V. Nagarjuna Reddy, J.—This company petition is filed for an order to wind up the respondent for non-payment of debt due to the petitioner. The petitioner pleaded that it is engaged in the business of sales and supply of computers and their peripherals and that the respondent, a pubic limited company, which was earlier known as M/s. SARK Systems India Ltd., was its customer since the year 2006 and used to purchase computers and their peripherals on credit basis. That M/s. SARK Systems India Ltd., assured the petitioner of prompt payment and that it induced and lured the petitioner to supply computers and their peripherals to it on credit basis under a running account. That the petitioner used to supply material under invoice, which was acknowledged by M/s. SARK Systems India Ltd., upon receiving the goods and that several cheques were issued by the said company, which were dishonoured for want of sufficient funds. The petitioner has referred to as many as 15 cheques for a total sum of Rs. 1,30,70,000 which were allegedly dishonoured for want of sufficient funds in the account of the respondent, and pleaded that whenever the same was intimated to SARK Systems India Ltd., it used to request the petitioner not to initiate any proceedings under the Negotiable Instruments Act, 1881 (for short "the N.I. Act") with a promise to pay the due amounts. That M/s. SARK Systems India Ltd., vide its letter dated December 29, 2009, admitted its liability to an extent of Rs. 1.5 crores and orally promised the petitioner to pay the said amount within a short time. That Mr. J.S.R. Durga Prasad, who was the chairman of M/s. SARK Systems India Ltd., has also addressed a letter dated December 30, 2009, to the proprietor of the petitioner, wherein he has personally agreed to pay an additional sum of Rs. 1.50 crores as compensation for delayed payments. That in July 2011, there was a meeting between the petitioner and M/s. SARK Systems India Ltd., and its chairman Mr. J.S.R. Durga Prasad, in which the respondent agreed to pay the outstanding amount with interest at the rate of 21 per cent, and also issued a cheque dated July 20, 2011, for Rs. 2,18,64,235 which includes interest also, and that the said cheque was dishonoured by the bank with the endorsement "account closed". That on enquiries, the petitioner came to know that the name of M/s. SARK Systems India Ltd., is changed as M/s. VEDAVAAG Systems Ltd., and that its registered office is also changed to the address given in the cause title of the petition. That after service of notice dated December 7, 2011, under section 138 of the N.I. Act, to which no reply was received from the respondent, the petitioner has filed C.C. No. 17 of 2012 in the court of the XI Additional Chief Metropolitan Magistrate, Secunderabad, against the respondent, under section 138 of the N.I. Act, for dishonouring the cheque and that it has also got statutory notice dated December 4, 2011, issued to the respondent and also M/s. SARK Systems India Ltd., demanding payment of Rs. 2,35,72,083 with interest at the rate of 21 per cent per annum from December 1, 2011, till the date of payment within three weeks from the date of receipt of notice and that failing which action will be taken up for winding up of the respondent. That the respondent has received the said notice, but failed to reply or pay the amount. Therefore, the petitioner has filed this petition.

On behalf of the respondent, its managing director filed a counter-affidavit, wherein the respondent has admitted the purchases under running account. While admitting the letter dated December 29, 2009, the deponent has stated that the amount due is subject to reconciliation, which fact is suppressed by the petitioner. The counter-affidavit also averred that as per its statement of account, the respondent has overpaid the petitioner a sum of Rs. 25,59,240 which amount is payable by the petitioner to the respondent. The counter-affidavit denied reconciliation between the parties and issuance of cheque for Rs. 2,18,64,325 by the respondent, by describing the same as a concocted and false story. The counter-affidavit has also pointed out issue of a second legal notice for a sum of Rs. 3,85,72,083 as against the sum of Rs. 2,35,72,083 demanded under the first legal notice and the discrepancy between the amounts demanded in the two legal notices. It is further averred in the counter-affidavit that the e-mail dated November 18, 2011, of the petitioner, wherein it is stated that the petitioner is ready for reconciliation of accounts, itself shows that even by that time, there was no crystallised amount due. It is further stated that as a security, the respondent used to give undated cheques to the petitioner on trust, that the petitioner has played fraud by supplying damaged goods to the respondent, which has requested the petitioner to replace the same with proper quality goods and that in view of the poor quality of goods supplied by the petitioner, the respondent has stopped purchasing computers with effect from October 2008. Along with the counter-affidavit, the respondent has filed annexure showing that a sum of Rs. 25,59,240 was paid in excess to the petitioner.

The respondent has also filed additional counter-affidavit, wherein it has pleaded that as per the statement enclosed to the additional counter-affidavit, the petitioner is liable to pay Rs. 25.60 lakhs for supplies under the running account apart from an unsecured advance of Rs. 2 crores. As regards letters dated December 29, 2009 and December 30, 2009, wherein the debt was purportedly admitted, it is averred that the proprietor of the petitioner was sending SMSs from his mobile to the director of the respondent Mr. J.S.R. Durga Prasad threatening him with involvement of media and also his going on fast unto-death, that he has even threatened to commit suicide in front of the office of the respondent and that under coercion and threat, letter dated December 29, 2009, of the managing director on the company letterhead and letter dated December 30, 2009, by the managing director in his personal capacity were issued at midnight between 12.00 a.m. and 1.00 a.m. on the intervening night of December 29/30, 2009. The additional counter-affidavit also relied upon the tax audit undertaken by the State Government of Andhra Pradesh and pleaded that nowhere in the said tax audit, invoice dated July 12, 2008, for Rs. 2.47 crores and invoice dated August 14, 2008, for Rs. 1.36 crores were reflected.

I have heard Mr. Vedula Srinivas, learned counsel for the petitioner, and Mr. Amancharla V. Gopala Rao, learned counsel for respondent, in detail.

The following facts are admitted:

That the petitioner has supplied computers and peripherals to the respondent between 2006 and October 2008. That the respondent used to issue cheques from time to time, but they were dishonoured. That on behalf of the respondent, its managing director has issued letter dated December 29, 2009, on the company letterhead, wherein he has admitted the company''s liability of Rs. 1.50 crores subject to reconciliation and similar letter was issued by the chairman of the respondent-company on December 30, 2009. That cheque dated July 20, 2011, for a sum of Rs. 2,18,64,235 purportedly issued by the chairman of the respondent has been dishonoured, for which the petitioner has filed a criminal complaint under section 138 of the N.I. Act, which is pending. That the respondent has received legal notice issued under the provisions of the N.I. Act and also the statutory notice under the Companies Act, 1956 (for short "the Act"), to which it has not given any reply. It is also not in dispute that except claiming that the respondent has overpaid to the tune of Rs. 25,59,240 neither any notice was issued to the petitioner for payment of the said money nor any proceedings have been initiated for recovery of the same.

The substratum of the case of the respondent is that though it has acknowledged the debt subject to reconciliation, no reconciliation has taken place as the petitioner did not come forward for such reconciliation and that the petitioner''s plea that cheque dated July 20, 2011, was issued is a concocted story. The respondent has also sought to overcome the letters dated December 29, 2009 and December 30, 2009, by stating that they were issued under coercion.

Under section 433(e) read with section 434(1)(a) of the Act, an application for winding up can be made if the company, which has borrowed the money, is unable to pay its debt within 21 days of receipt of statutory notice. The right of a creditor to seek winding up of a debtor company conferred under these provisions is in addition to and not in derogation of his right to recover the debt through any other means. While the law is well-settled that the jurisdiction under section 433 read with section 434 of the Act cannot be invoked to coerce a company to pay a disputed debt, a creditor is entitled to exercise a statutory right conferred on him by these provisions to seek winding up of a company, which is unable to pay a debt in respect of which there is no bona fide dispute. The law is further well-settled that mere solvency of the debtor is not a stand alone criterion to refuse winding up if the creditor is able to prove to the court that the debtor, despite its capacity to pay, has not been paying the debt (see Amalgamated Commercial Traders (P.) Ltd. Vs. A.C.K. Krishnaswami and Another, , IBA Health (I) Pvt. Ltd. Vs. Info-Drive Systems Sdn. Bhd., and Indiabulls Housing Finance Limited Vs. South Asian Agro Industries Ltd., .

For considering admission of the company petition, this court has to primarily examine whether the debt is a bona fide disputed one or not. It needs to be pointed in the first place that the respondent has been improving its case from stage to stage. It has failed to issue any reply to the two statutory notices received by it. No explanation whatsoever is forthcoming from the respondent for its failure to reply. Any prudent company, which is not liable to pay the debt, is not expected to remain silent to a statutory notice. With respect to admission of debt under two letters dated December 29, 2009 and December 30, 2009, the counter-affidavit has raised vague pleas by stating that the said admission was made subject to reconciliation. However, in the additional counter-affidavit, the respondent has come out for the first time with the plea that the said two letters were issued under coercion. If the said stand bears any truth, the respondent was expected to have issued a notice to the petitioner immediately after issuing the said two letters. The theory of coercion was not put forth at any point of time anterior to the filing of the additional counter-affidavit. The respondent has come out with a vague plea that it used to issue undated cheques as security. There is no specific plea that the petitioner has misused one such cheque by presenting the same in bank for a sum of Rs. 2,18,64,235 putting July 20, 2011, as the date on which the cheque was issued. Admittedly, a criminal case under section 138 of the N.I. Act following the dishonour of the said cheque is filed and the same is pending before a criminal court. The plea of the respondent raised for the first time in the additional counter-affidavit that it has made overpayment of Rs. 25,59,240 was not supported by any correspondence exchanged between the parties. For the first time, the respondent has disputed the two invoices dated July 12, 2008, for Rs. 2.47 crores and August 14, 2008, for Rs. 1.36 crores in the additional counter-affidavit only on the ground that they were not reflected in the VAT audit conducted by the State Government. It has not come out with any specific plea that those invoices were either fabricated or concocted.

In the above facts and circumstances of the case, this court is of the opinion that the denial of debt by the respondent is not bona fide and that the same is a cloak or moonshine to evade payment of an admitted debt. Having admitted in categorical terms that it is liable to pay Rs. 1.50 crores subject, however, to reconciliation, the respondent cannot resile from the said admission and seek to deny the debt. The law is well-settled that where the debt is liable to be paid, a petition for winding up is maintainable even in the absence of precise quantification (see: Madhusudan Gordhandas and Co. Vs. Madhu Wollen Industries Pvt. Ltd., and Tweeds Garages Ltd., In re [1962] 32 Comp Cas 795 (Ch D) : [1962] 1 Ch. D 406). Though the respondent claims to be in good financial health, as it has failed to pay the admitted debt to the petitioner. The company petition therefore deserves to be admitted.

Accordingly, the company petition is admitted. However, in order to give an opportunity to the respondent to pay the admitted debt, the publication of advertisement is deferred for one month. Post on September 2, 2014.