Ishwar Industries Ltd. vs Lakshmi Machine Works Ltd. (No. 2)

M. Chockalingam

This intra-court appeal challenges the order dated January 12, 2009, passed by the learned single judge of this court, dismissing the Company

Petition No. 16 of 2009 along with Company Application No. 311 of 2009 (Ishivar Industries Ltd. v. Lakshmi Machine Works Ltd. (No. 1)

(2010) 156 Comp Cas 219), seeking winding up of the respondent-company.

The court heard learned Counsel appearing for the appellant and also for the caveator/respondent.

The appeal is arisen under the following facts and circumstances:

(i) The appellant/petitioner-company incorporated under the Companies Act, 1956, is having the object of doing the business of manufacturing and

dealing in machinery of all kinds. One Textool Co. Ltd., default company, was indebted to the petitioner/appellant, for a sum of Rs. 36,19,239.38

including the interest.

(ii) A suit was filed before the IX Additional District Court, Jabalpur, Madhya Pradesh in Civil Suit No. 242A of 1995 and the said suit came to

be decreed on June 29, 2000. After passing of the decree also, no payment was made. The defaulting company has to pay a sum of Rs. 7,45,313

and further sum of Rs. 7,27,944.60 towards damages along with interest.

(iii) Since the ascertained sum as per the decree could not be paid by the defaulting company, the entire assets and liabilities of the defaulting

company were taken over by the respondent-company herein. Thereafter, a notice was given by the appellant u/s 434 of the Companies Act,

1956, for which a reply was sent, stating that an appeal has been preferred against the judgment and decree passed in the suit referred to above.

Under the said circumstances, in view of the non compliance of the payment made in the notice issued u/s 434 of the Companies Act, 1956, it was

a fit case for ordering winding up of the company.

(iv) The application was resisted by the respondent stating that the claim was made in the said suit. It is also true, a decree has been passed. But,

challenging the said judgment, an appeal has been preferred in F.A. No. 145 of 2002 and the same is pending on the file of the High Court of

Madhya Pradesh and hence the liability remains unascertained. Necessary issues were framed. The grievance of the respondent-company before

the appellate forum was that they were not properly considered. Under such circumstances, it was also a continuation of the suit and hence, it is

not a case where the winding up could be ordered.

Advancing arguments on behalf of the appellant, learned Counsel would submit that so long as the respondent-company was successor-in-

interest of the default company and there was a suit originally filed before the IX Additional District Court, Jabalpur in C.S. No. 242A of 1995 and

a decree came to be passed for a sum of Rs. 7,45,313 and further sum of Rs. 7,27,944.60 towards damages along with interest, the liability has

become crystalised. Once a decree has been passed, from that time onwards, it becomes enforceable. It is true, an appeal has been preferred, but

no stay has been granted by the High Court of Madhya Pradesh.

Two courses were open for the appellant/petitioner, either to put the decree in execution or to make an application for winding up under the

Companies Act. In the instant case, so long as the liability was ascertained by the District Court and notice has been issued u/s 434 of the

Companies Act seeking payment and no payment was made, it is always open to the appellant to approach the company court, seeking winding

up. Under such circumstances, it was a fit case for ordering winding up. Since the same was not considered by the learned single judge, the order

of the learned single judge has got to be set aside.

In support of his submissions, learned Counsel appearing for the appellant/petitioner-company relied on the following decisions:

(i) Sarabhai Machinery Vs. Haryana Detergents Ltd., ;

(ii) Madhuban P. Ltd. v. Narain Dass Gokal Chand (1971) 41 Comp Cas 685 (Del); and

(iii) West Bengal Essential Commodities Supply Corporation Vs. Swadesh Agro Farming and Storage Pvt. Ltd. and Another, .

Learned Counsel appearing for the caveator/respondent-company made his sincere attempt for sustaining the order of the learned single judge.

The court paid its anxious considerations on the submissions made by either side. It is not in controversy that the respondent-company has taken

up the company in default. It was a claim made by the appellant that a sum of Rs. 36,19,239.38 was due from the defaulting company. It is also

true that a suit in C.S. No. 242A of 1995 was filed and a decree came to be passed on June 29, 2000. It is also brought to the notice of the court

that as against the said decree, an appeal has been preferred in F.A. No. 145 of 2002 and the same is pending on the file of the High Court of

Madhya Pradesh.

The contention put forth by learned Counsel appearing for the appellant is that once a decree has been passed and the liability has been

ascertained, it becomes enforceable and hence, two courses are open, i.e., either to approach the court for putting the decree in execution or

seeking the company court for winding up. In the ordinary course, the contention put forth by learned Counsel for the appellant could be accepted,

but in a given case like this, where a decree has been passed and the same is the subject-matter of challenge by way of filing an appeal and the

same is pending before the High Court of Madhya Pradesh, the court is afraid, whether the liabilities are ascertained and the appellant should be

allowed to file an application for winding up.

In the instant case, the contention put forth by learned Counsel for the appellant is that there is no stay on the decree passed by the Additional

District Court and hence it is open to the appellant to proceed with the matter for execution of the decree, but has not done so. On the contrary,

when the decree is being the subject-matter of challenge before the High Court of Madhya Pradesh by way of filing an appeal, the application for

winding up has been filed. Under such circumstances, the court is of the considered opinion that winding up application like this cannot be brought

forth.

This Court has come across such a situation in the decision reported in (2008) 145 Comp Cas 693 (Rediffusion-Dentsu, Young and Rubicam

P. Ltd. v. Solidaire India Ltd.), wherein it is held as follows (page 701):

Whenever a company petition is filed seeking winding up, the court must consider the circumstances in every case and come to a necessary

conclusion. Needless to say that granting of the relief of winding up is a discretionary relief; but, the court when exercise this discretionary power, it

must be governed by justice and equity. The court must exercise its discretion judiciously also. It is well-settled principle of law that if there is any

substantial defence put forth by the respondent, the same has got to be decided by the court only on appreciation of evidence. Having filed a suit

calling the respondent, the third defendant therein, as the agent of the first defendant and necessary issues having been framed touching the liability

of all the defendants, filing a company petition like this was nothing but a device to pressurise for payment of the said sum by the third defendant. It

is well-settled that the winding up petition cannot be made as a device to pressurise the respondent to make payment as per the demand. In view

of the pendency of the suit with the above said specific averments and seeking a decree for recovery of money against all defendants jointly and

severally, which is exactly the subject-matter in the company petition and the fact that pursuant to the substantial defence, necessary issues have

also been framed in that suit, this Court is of the considered opinion that at no stretch of imagination, an order of winding up could be made and

hence this Court is unable to see any reason to interfere in the order of the learned single judge.

In the instant case, a decree has been passed and the said decree is the subject-matter of appeal at the instance of the respondent. Till it is

over, winding up petition cannot be brought forth at this stage. As pointed out in the aforesaid decision, it is nothing but a device to pressurise the

respondent-company for payment. It is pertinent to point out that the appellant has not put the decree in execution, but has come forward with the

winding up petition. The appeal does not carry any merit whatsoever and the same is dismissed. Consequently, the connected M.P. is also

dismissed. No costs.