MOLYCORP Minerals, LLC vs Indian Technomac Company Ltd.

Sanjay Karol, J—M/s. MOLYCORP Minerals, LLC, as petitioner, prays for winding up of M/s. Indian Technomac Company Ltd. (respondent herein). Both the petitioner and the respondent are registered/incorporated companies. Petitioner has its registered Office in the United States of America, whereas respondent has its registered Office at Delhi and works in District Sirmaur, Himachal Pradesh. Petition stands filed through the authorized attorney.

In relation to certain supplies having been effected by the petitioner to the respondent, leading to non-payment of dues thereof, petitioner is seeking winding up of the company. As claimed, the amount is an undisputed/admitted debt.

On the basis of purchase order(s) dated 29.8.2011 [Annexure-D(colly)], issued by the respondent, supplies stood effected by the petitioner, vide invoices of different dates, type and quantity of material, in the month of September, 2011. The total cost of the material, so supplied, in terms of the supply orders, works out to be US $5,851,296.70. As against the supplies effected, respondent issued an irrevocable Standby Letter of Credit amounting to US $3,351,296.70. Since respondent failed to pay the same, under constraint, petitioner invoked and encashed it vide communication dated 5.12.2011 (Annexure-G). Thus, an amount of US $3,351,296.70 stood credited to the account of the petitioner, leaving a balance sum of US $2,500,000.00 payable towards supply of material in question.

Record reveals that till the year 2014, respondent never exhibited any grievance, of whatever nature or by whichever manner, either with regard to the supplies, delivery or encashment of the Letter of Credit.

This was despite the petitioner reiterating its request, vide communication dated 12.9.2012, of remitting the balance amount, due and payable, for supply of the goods. Noticeably respondent always maintained stoic silence. Neither the amount was paid nor was the petitioner approached, seeking adjustment for payment of residual amount in installments.

Though first statutory notice stood issued on 5.12.2013, yet petitioner issued another notice dated 14.5.2015 (Annexure-I), calling upon the respondent to pay the balance amount of US $2,500,000.00 alongwith interest at the rate of 18 per cent per annum, which duly stood received and acknowledged.

For the first time, and only in response thereto, on 10.6.2014 (Annexure-J), respondent took plea of mismatch of supplies effected. Allegedly, product sent by the petitioner was not the one for which the order stood placed. Allegedly, in place of Cerium Hydrate, Ceric Hydrate stood supplied.

It is a matter of record, as is evident from the response, respondent admitted having received the goods supplied by the petitioner and the encashment of Letter of Credit. Evidently, prior to 10.6.2004, no such dispute, of whichever nature, was ever raised by the respondent. Plea so taken in Para-9 of the reply of having communicated with the petitioner-company is vague, unspecific and perhaps an afterthought, for no action against invocation and encashment of Letter of Credit was ever taken. In fact, there is an admission on the part of the respondent, with regard to the issue of purchase order(s) and receipt of goods, effected by the petitioner. And all this, without any demur.

Notice in the petition was issued on 26.8.2014 and despite service having been effected upon the company as also its Managing Director, respondent chose neither to appear nor contest the same. In fact, on 9.4.2015, matter was adjourned for the respondent to appear and only on the following date, respondent was proceeded ex-parte, and petitioner asked to take steps for appointment of the Official Liquidator. Petition was admitted and directed to be advertised vide order dated 24.6.2015. Record further reveals that despite publication in the daily newspapers, i.e. The Tribune (Chandigarh Edition) and Amar Ujala, circulated in the State of Himachal Pradesh, respondent chose not to appear. Also none else has come forward to oppose the present petition. Such publication also stands effected in the official Gazette of the State of Himachal Pradesh.

Even in an ex-parte proceedings, Court is duty bound to examine the record and pass appropriate orders, in accordance with law, for the discretion exercised by the Court has to be just, fair and legal. What needs to be considered is as to whether it is just and equitable for the company to be wound up or not. It is not that as a matter of course, under all circumstances, where the respondent defaults in paying the undisputed/admitted debt, company must and automatically in a routine manner be wound up.

Mr. Ankush Dass Sood, learned Senior Counsel, invites attention of this Court to the decision rendered by the Hon''ble Supreme Court of India in Madhusudan Gordhandas and Co. Vs. Madhu Wollen Industries Pvt. Ltd., AIR 1971 SC 2600 : (1972) 42 CompCas 125 : (1972) 1 CTR 193 : (1971) 3 SCC 632 : (1972) 2 SCR 201 , wherein the Court held as under:

"20. Two rules are well settled. First, if the debt is bona fide disputed and the defence 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 unreasonable. See London and Paris Banking Corporation, (1874) LR 19 Eq 444. 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 properly was not allowed. See Ire. Brighton Club and Horfold Hotel Co. Ltd., (1865) 35 Beav 204.

Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt, see Re. A Company, 94 SJ 369. Where however there is no doubt that the company owes the creditor a debt entitling him to a 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 the debt precisely see Re. Tweeds Garages Ltd., 1962 Ch 406. The principles which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence 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. Under Section 557 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. The wishes of the shareholders are also considered though perhaps the court may attach greater weight to the views of the creditors. The law on this point is stated in Palmer''s Company Law, 21st Edition, page 742 as follows: "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". 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 is 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 would 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 of the case, see Re. P. and J. Wacrae Ltd., (1961) 1 AER 302."

The aforesaid principles stand reiterated in Mediquip Systems Pvt. Ltd. Vs. Proxima Medical System GMBH, AIR 2005 SC 4175 : (2005) 2 BC 366 : (2005) 124 CompCas 473 : (2005) 4 CompLJ 6 : (2005) 2 CTC 392 : (2005) 3 JT 380 : (2005) 7 SCC 42 : (2005) 59 SCL 255 : (2005) 2 SCR 1015 : (2005) 1 UJ 402 : (2005) AIRSCW 5324 : (2005) 3 Supreme 39 .

Learned Senior Counsel also invites attention of this Court to a decision rendered by Hon''ble the High Court of Delhi in G.K.W. Ltd. Vs. Shriram Bearings Ltd., AIR 1999 Delhi 27 : (2002) 109 CompCas 636 : (1998) 2 ILR Delhi 855 : (1998) ILR Delhi 855 , wherein the Court held as under:

"13. As already pointed out above, the defence of the respondent company that there was delay in supply of the material or that the material supplied was defective does not cut any ice. This appears to be an afterthought defence taken up with the motive to escape its liability to pay the debt. In fact, nothing has been placed on record to substantiate this defence. In similar circumstances, the Punjab and Haryana High Court, in the case of Chhabra Steels Strips (P.) Ltd. Vs. Haspa Wheels Pvt. Ltd., (1996) 86 CompCas 703 , held that in the absence of any evidence indicating that the quality of goods was ever objected to at any point of time, and in the absence of any evidence suggesting that the company ever made a complaint to the petitioner regarding the quality of goods supplied, the company had to be held unable (sic: liable) to pay its debts and the provisions of section 433 of the Companies Act get attracted. Similar view was taken in the case of Joti Prasad Bala Prasad Vs. A.C.T. Developers (P.) Ltd., (1990) 68 CompCas 601 , wherein it was observed that even with regard to the question of delay if the company took delivery of the consignment without any demur and the consignment was accepted, then the company could not raise such a defence that there was delay in supply of material or it was defective. This observation squarely applies to the facts of this case. The company failing to pay the price of goods and disputing the quality, delay and the rate at which the material was supplied appears to e not a bona fide defence; as such, a plea was never raised earlier, nor any counter claim having been filed the defence appears to be motivated. The company took the delivery of the goods without any demur, rather it placed further orders indicating its requirement. This shows that the defence now raised is not bona fide. The property in goods having been passed on to the company, it has to pay the price of the same."

The principles laid down are squarely applicable to the instant facts. Thus, petitioner has made out a case for interference, under the provisions of Section 433(e) of the Companies Act, 1956), on the ground of failure on the part of respondent to pay the debt. The creditor has already issued statutory notice by way of a registered post, calling upon the debtor to pay the amount within a period of three weeks. The amount in question is an admitted/undisputed debt.

To the satisfaction of the Court, petitioner has been able to establish non-payment of the debt by the respondent. Record further reveals that the respondent has shut down its works and office in the State of Himachal Pradesh and apparently, is no longer in active business of manufacture of its goods. The substratum of the company appears to have been lost.

None has chosen to oppose the petition, despite its publication.

In the given facts and circumstances, the respondent-company is directed to be wound up.

Under these circumstances, the Official Liquidator attached to the Court is appointed as the Liquidator of the company. He is directed to take all necessary steps for taking over the management, assets and liabilities of the company. He shall forthwith prepare an inventory thereof.

Registrar General of this Court is directed to forthwith and not later than two weeks from today, send a copy of this order to the Official Liquidator as also the Registrar of Companies. Petitioner-company shall file certified copy of the order, not later than thirty days from today, with the Registrar of the Companies. The order of winding up shall also be published in the daily newspapers (The Tribune (Chandigarh Edition) and Amar Ujala, circulated in the State of Himachal Pradesh) and also in the official Gazette, in accordance with Rule 53 of the Companies (Court) Rules, 1959.

List on 26.10.2015 before the Additional Registrar (Judicial) of this Court, for compliance of the Order.

Petition stands disposed of, so also pending application(s), if any.