Lloyds Finance Ltd. vs Kitti Steels Ltd.

Krishna Saran Shrivastav, J 1. Heard learned counsel for both sides on admission.

It is an admitted fact that the respondent-company had taken on lease the arc welding machines and arc welding generators on a rent of Rs. 89,60,000 for a period of five years through agreement dated September 25, 1994. The lease rent was payable in 20 quarterly instalments of Rs. 4,48,003 and the respondent-company has also issued post-dated cheques against the quarterly lease rents. The respondent-company paid 7 quarterly lease rents.

The petitioner-company alleges that the respondent-company did not pay the lease rents amounting to Rs. 15,92,012, that is for three quarters including interest at the rate of 36 per cent, per annum. The respondent-company was liable to pay an amount of Rs. 19,03,773 and the balance of amount of lease rent amounting to Rs. 40,32,027 has also become recoverable. The petitioner-company has sent a notice u/s 434(1)(a) of the Companies Act for payment of the said amount of Rs. 59,35,802. But the respondent-company-did not pay and, therefore, the respondent-company should be wound up.

The defence of the respondent-company is that the sister concern of the petitioner-company, viz., Lloyds Metals Company has entered into a contract with the respondent-company and it has given a bank guarantee of Rs. 1 crore. But due to the default of Lloyds Metals Company, it cancelled the order and, therefore, the respondent-company was unable to claim damages due to the default of Lloyds Metals Company. The petitioner-company had orally agreed to adjust the outstanding quarterly rentals and to cancel the lease deed and abandon the claim for future quarterly rentals against the remaining amount of unascertained damages, A reply containing an answer to these allegations was sent to the notice, and, therefore, the respondent-company cannot be wound up.

It is urged on behalf of the respondent-company that, vide letter dated April 24, 1997, the petitioner-company had adjusted an amount of Rs. 3 lakhs being the amount of expenses incurred by it for cancellation of the bank guarantee. This fact has been suppressed in the company petition. There is no allegation in the company petition that the substratum of the respondent-company has come to an end and it has become insolvent and on these grounds the company petition cannot be admitted.

It is true that in the company petition, no reference has been made regarding adjustment of Rs. 3 lakhs in the amount of Rs. 15,92,012 as was due on April 25, 1997, up to October 25, 1997, and it is also true that a reference to the reply of the respondent-company dated July 4, 1997, has not been made in the company petition. But on a perusal of the correspondence between the respondent and the petitioner it appears that, vide letter dated September 24, 1996, the respondent-company had voluntarily intimated the petitioner-company that the amount of Rs. 3 lakhs incurred in getting" cancellation of the bank guarantee of Rs. 1 crore is to be adjusted against the outstanding amount of the lease rentals due as on that date, that is, up to quarter ending June, 1996, and the balance amount of Rs. 51,997 would be adjusted against the lease rentals for the quarter ending September, 1996. There is no whisper in the letter about the alleged oral agreement through which the respondent-company claims that the petitioner-company had abandoned the future claim of lease rentals against the alleged damages to which the respondent-company was put to loss on account of default of Lloyds Metals and Engineers Limited. From a perusal of the letter dated April 25, 1997, written by the petitioner-company it appears that it had given credit of Rs. 5 lakhs as requested by the respondent-company against the dues amounting to Rs. 15,92,012. It is clearly mentioned in this letter that future lease rental was demanded and a request was also made for the plans of the respondent-company for meeting the commitments. There is no reply to this letter on record. Therefore, prima facie, it appears that as per the oral understanding only an amount of Rs. 3 lakhs was agreed to be adjusted against the dues as was outstanding in the month of April, 1997. For the reasons aforesaid, the dispute raised by the respondent-company that due to an oral understanding" the petitioner-company has agreed to forgo the future lease rents and the lease deed was cancelled does not appear to be a bona fide or genuine dispute. Whether the company had become commercially insolvent or not is a question to be investigated at the time of enquiry. As noted above, a prima facie case is made out by the petitioner-company that the respondent-company is indebted at least to the extent of Rs. 12,92,012 and interest on it. Therefore, the petition is admitted.

At this stage, learned counsel for the respondent states that in C. P, No. 110 of 1997 this court has admitted the petition but has deferred the publication and has posted the case on September 28, 1998. Therefore, pub lication in this case may also be deferred to enable the respondent to make a compromise. Therefore, the publication is deferred till the next date of hearing.

Call on September 28, 1998.