Jai Enterprises vs Omega Cables Ltd.

M. Chockalingam, J.—This appeal challenges an order of dismissal made by the learned single judge in Company Petition No. 108 of 1994.

The court heard learned Counsel for the appellant. No representation on the side of the respondent, despite service.

Seeking an order of winding up under Sections 433(e), 434(1)(a) and 439(1)(b) of the Companies Act, the appellant herein/petitioner came

with specific allegations that the petitioner supplied PVC compound and other raw materials to the respondent under various invoices during May,

June and July, 1976 and in respect of the said supplies, a sum of Rs. 1,64,914.41 was due and payable by the respondent-company as detailed in

the petition ; that there was practice of payment of 18 per cent, interest per annum ; that again in the year 1984, there was supply made under

three invoices, amounting to Rs. 1,755.52, Rs. 2,100 and Rs. 3006.75 on May 10,1984, May 11,1984 and July 21, 1984, respectively ; that

many a reminder was made ; that the respondents unconditionally promised to pay the outstanding in 10 instalments and confirmed the same in its

letter, dated September 19, 1991 and paid a sum of Rs. 16,500 as first instalment and thus, total payment of Rs. 38,000 was made and the

balance was Rs. 1,26,914,41; that due to non payment, despite reminders, the petitioner was compelled to issue a statutory notice u/s 434 of the

Companies Act, which yielded no reply and under these circumstances, the petitioner was constrained to file the petition for winding up.

It was resisted by the respondent on three grounds. Firstly, he denied the transactions and further asked for production of original of the credit

bills with due acknowledgment made by the respondent-company and the delivery notes relating to the purchases. Secondly, payment of Rs.

38,000 was denied. Thirdly, the company was the sick unit till March 31, 2001 and thus, the claim was barred by limitation and therefore, the

company petition was not maintainable and was liable to be dismissed.

The learned single judge raised questions whether the respondent-company was liable to be wound up and whether the claim was barred by

time as pleaded by the respondent. The learned single judge heard the submissions made by either side and also looked into the available materials

and took the view that the petition was one which requires an order of dismissal. Accordingly, the learned single judge dismissed the petition.

Hence this appeal has arisen at the instance of the petitioner.

Learned Counsel, advancing arguments on behalf of the appellant, would submit that in the instant case, the liability of Rs. 1,26,914.41 was the

definite one and necessary details have been given in the annexure annexed to the petition. It is not the case where transactions were denied and

even payments have been made. There was payment of Rs. 38,000 made and there was acknowledgment of liability by letter, dated September

19, 1991 and thus, in the instant case, there was evidence for the transactions, which were not denied and liability was also acknowledged by a

communication from the general manager (F and A) on behalf of the company and it was sufficient to point out the liability, which was definite.

When statutory notice was issued, it was not replied and further, the non payment and non reply to the notice would be pointing to the inability of

the respondent-company in making payment of demands made under the notice and under these circumstances, winding up should have been

ordered. The learned single judge has taken into consideration Section 18 of the Limitation Act and acknowledgment should have been made

within a period of limitation. Section 25(3) of the Contract Act is applicable where necessary circumstances were placed before the learned single

judge to the effect that even acknowledgment made out of stipulated period would be well within time and under these circumstances, the findings

recorded by the learned single judge that it was time-barred is not correct.

Added further learned Counsel that letter was given by the general manager on September 19,1991; that it was found by learned single judge

that there was no evidence to show that the person, who had signed the letter dated September 19, 1991, was authorised to issue such a letter,

acknowledging the liability and in the absence of the same, the letter cannot be taken into consideration for saving the period of limitation; that

further, in the instant case, all the communications addressed were also filed before the learned single judge ; that all would go to show that they

have emanated from the respondent-company ; that it is pertinent to point out that the letter not only acknowledged the liability, but also there was

payment made ; that if payment has been made, that would point out that the person, who made payment, had the authority ; that once payment

was accompanied by the letter, the person, who issued the letter, was competent to acknowledge the liability and under these circumstances, the

view taken by the learned single judge is not correct and thus, the statutory requirements for winding up the company are actually satisfied and

under these circumstances, the appeal has got to be allowed, setting aside the order of the learned single judge.

Learned Counsel, in support of his contentions, has relied on the following decisions:

(a) Mrs. C. Simon v. Arogiasami AIR 1915 Mad 242.

(b) David Sutherland Clark v. Rose Grimshaw AIR 1923 Lah 481.

(c) Nathu Singh and Another Vs. Girwar Singh and Another .

(d) Kasturchand Jiwaji Vs. Manekchand Devchand, .

(e) AIR 1949 229 (Nagpur) .

(f) K.K. Rm. Muthayee Achi (died) and Another Vs. A.K. Rm. S. Rm. Sabbiah Chettiar and Another, .

(g) Kishan Singh v. Bachna AIR 1954 Pepsu 44.

(h) Mawaji Ramji and Others Vs. Premji Kumbhabhai Chanda, .

(i) N. Ethirajulu Naidu Vs. K.R. Chinnikrishnan Chettiar, .

After hearing learned Counsel for the appellant and after looking into the materials available, the court is of the considered opinion that the

appeal does not carry any merit whatsoever. The petition was brought forth, after issuance of the statutory notice as contemplated under the

Companies Act, for winding up that the respondent, despite notice, was unable to make payment as per the demands made under the statutory

notice and that liability was to an extent of Rs. 1,26,914.41. It is pertinent to point out that at the time when the counter was filed, the petition was

resisted on the grounds that actually the liability as found in the petition and the transactions were denied. Further, the respondent required the

petitioner to produce the original of the credit bills with due acknowledgment made by the respondent-company and the delivery notes. Thus, it

would be quite clear that those documents were not produced. Learned Counsel for the appellant, in reply, would submit that it is true, those

documents were not filed, since they were not necessary and the liability has been acknowledged in the communication addressed by the company

and hence it is not necessary. Even assuming that there was balance of Rs. 1,26,914.41 as claimed by the petitioner and though it was definite, the

court is able to see that certain issues have got to be decided by adducing evidence of both sides and only on appreciation of the same, the court

could pass the order for winding up.

It is clear from the counter filed by the respondent that it was barred by time. It was contended by learned Counsel for the appellant that what

is available under the situation is Section 25(3) of the Contract Act. It is true, the letter dated September 19, 1991, was out of time, but by

operation of Section 25(3) of the Act, even after the period of three years, if it has been done, it has got to be accepted and it was well within time.

At this juncture, it is pertinent to point out that the learned single judge has pointed out that before acknowledging the liability as provided u/s 292

of the Companies Act, certain powers will have to be exercised by the Board only at the meeting and Section 290 of the Act validates the acts of

the directors.

Under these circumstances, now the question is that whether the person, who signed the letter dated September 19, 1991, had got the authority to

issue such a letter, acknowledging the liability.

It could be seen from the available materials that rehabilitation scheme was approved with effect from July 19,1989 and it continued till March

31, 2001 and during which period, the letter was issued. Under these circumstances, the court is of the considered opinion that when the defence

plea that was stated in the course of the counter was that it was time-barred, it has got to be looked into and decided only on appreciation of

evidence and not otherwise. At this juncture, it is pertinent to point out that the learned single judge, at the end of the order, recorded the finding

that the claim was time-barred. Now, the grievance was that that finding has got to be removed from the order.

Accordingly, that finding is removed from the order. Thus, the question as to whether it is time-barred or not is to be decided only on adducing

evidence of both parties and on appreciation of the same. With the above observation, this O.S.A. is dismissed. No costs. It is open to the

appellant to make a claim, as per the law, before the appropriate forum for getting appropriate remedy.