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Judgment
N.K. Jain, C.J.—These O.S.As are filed against the common order of the learned Single Judge dated 19-6-2002 passed in Company Petition Nos. 263 of 1999, 169 to 172, 12, 37 and 38 of 2000.
The grievance of the learned counsel for the appellants is that the learned Single Judge has not considered the case properly. The respondent-company was unable to pay its debt even after service of notice and the learned Single Judge has erred in not ordering winding-up of the company and has not considered the case in M/s. Mitsugen Glazes Limited, Bangalore Vs. M/s. Varkey Overseas Trading Company Private Limited, Bangalore and Another, in a proper way. Therefore, the order of the learned Single Judge is liable to be set aside and winding up order has to be passed.
Brief facts as alleged are :
It is alleged that the respondent came forward with a scheme to develop and promote 699 classic farms providing various facilities in Sy. No. 14/1 of Kenchenahalli, Nelamangala Taluk, Bangalore District. The total cost of one farm was Rs. 1,48,000 payable in 59 equal monthly instalments of Rs. 2,000 each together with Rs. 10,000 towards initial payment and Rs. 20,000 as development charges payable in four instalments. Also the purchaser was entitled to 15 per cent discount for out-right purchase. It is further alleged that the appellants have paid certain amounts to the respondent as mentioned below and receipts for payment of the same are issued by the respondent and entries made in the pass book maintained for the purpose.
The other facts in each case are :
In O.S.A. No. 70 of 2002, the appellant paid the entire amount of Rs. 1,48,000 between 9-7-1995 to 18-11-1998, i.e., 19 months in advance before the completion of the scheme. But even after 20 months of full payment, the respondent did not execute sale deed.
In O.S.A. No. 71 of 2002, the appellant agreed to acquire the farm land on out-right purchase basis and paid a sum of Rs. 30,000 on 6-7-1995 and Rs. 17,400 on 23-12-1997. Even after lapse of 48 months, the respondent did not register the land and on demand a letter dated 20-7-1999 was sent stating that balance of Rs. 1,01,000 was due for payment and the farm would be registered within one month, failing which the paid-up amount would be refunded.
In O.S.A. Nos. 72 and 73 of 2002, the appellants paid a total sum of Rs. 1,22,000 in 51 monthly instalments from 16-7-1995 to 11-9-1999 and 2 annual instalments of Rs. 5,000 each and Rs. 10,000 on 16-7-1995 as initial deposit.
In O.S.A. No. 74 of 2002, the appellant paid a total sum of Rs. 86,000, i.e., Rs. 66,000 in 33 monthly instalments from 19-8-1995 to 7-3-1998, two annual instalments of development charges of Rs. 5,000 each and Rs. 10,000 on 19-8-1995 as initial deposit.
In O.S.A. No. 75 of 2002, the appellant paid total sum of Rs. 86,000, Le., Rs. 66,000 in 33 monthly instalments from 6-7-1995 to 7-3-1998, two instalments of annual development charges of Rs. 5,000 each and Rs. 10,000 on 6-7-1995 as initial deposit.
In O.S.A. No. 76 of 2002,the appellant paid a total sum of Rs. 1,31,000, i.e., Rs. 1,06,000 in 53 monthly instalments from 19-6-1998 to 10-12-1999, 3 annual instalments of Rs. 5,000 each and Rs. 10,000 on 19-6-1998 as initial deposit.
In O.S.A. No. 77 of 2002, the appellant paid a total sum of Rs. 1,31,000, i.e., Rs. 1,06,000 in 53 monthly instalments from 1-7-1995 to 17-12-1999, 3 annual instalments of Rs. 5,000 each and Rs. 10,000 on 1-7-1995 as initial deposit.
The contention raised arises out of the same scheme and failure to allot the farm lands as per the agreement. It is stated that despite respective notices u/s 434 of the Companies Act, 1956 (''the Act''), the respondent-company has neither allotted the respective farm lands, nor refunded the amount with interest. The notice has also not been replied. Therefore, it is prayed that necessary order to wind up the company should be issued. The learned Single Judge has erred in rejecting the company petitions on the ground that, at that stage, it could not be held that the respondent-company has neglected to pay its debts. It cannot be said that the company is unable to pay its debts or has neglected to pay the same and the appropriate remedy is to file a suit.
These cases are heard and disposed of by a common order, since the basic controversy involved in all these cases is the same.
So far as the decision in Mitsugen Glazes Ltd.''s case (supra) is concerned, it is not helpful. In this case, the learned Single Judge has ordered winding-up holding that the company has not put forth any valid defence and never disputed the liability to pay the amount. In the appeal before the Division Bench, it is found that once the liability has been admitted and payment not made within three weeks of the service of notice and the only dispute was regarding the rate of interest, that too having agreed to pay the entire amount along with interest at the rate of 21 per cent in one of the letters, have not interfered in the order and held liable to pay admitted liability along with interest of 21 per cent. Whereas, in the instant case, some facility was assured on payment of some money as per the agreement. In absence of any clause for re-payment and further dispute of liability regarding payment of due amount as per letter dated 20-7-1999 stating that there is a balance of Rs. 1,01,000 was due for payment, the learned Single Judge has distinguished the case.
In Shakti Prakash Metal Finishers (P.) Ltd, v. Hindustan Machine Tools Ltd. 2002 (1) KCCR 285 , the respondent-company deposited the amount and disputed the claim for interest and the petitioner withdrew the amount without prejudice to its rights. The Division Bench observed that any violation of the terms of the contract cannot ipso facto come within the purview of Section 433 of the Act. Further, it is not the legislative intent that the Company Court should be converted itself into an ordinary civil court and proceed to hold a trial at the instance of individual claiming to be a creditor of the company on the basis of a contact. It was also observed that non-payment of bill amount under a contractual agreement could not be said to be an admitted debt, even when it was disputed. Ultimately, it was held that the order of the Company Court refusing to order for winding-up of the respondent-company was proper and need no interference.
The Division Bench of this Court in Synopsys (Singapore) (P.) Ltd. v. GPS Usha (P.) Ltd. ILR 2001 Kar. 1205 observed that the petition for winding-up cannot be entertained where there is a serious dispute with regard to payment or non-payment of due and that in such cases winding-up petition is not a proper mode of enforcing bona fide disputed debts. The civil court is the proper forum.
The Apex Court in a number of cases has held that the winding-up of company is not a legitimate means of settling a bona fide dispute with a company. A petition presented ostensibly for a winding-up order, but meant to exercise pressure will be dismissed. The procedure u/s 433 is a summary procedure and the disputed questions of fact cannot be decided in a company petition. Moreover, one cannot take parallel proceedings.
A reference can be made to the decision of the Apex Court in Amalgamated Commercial Traders (P.)Ltd. v. A.C.K. Krishnaswami [l965] 35 Comp. Cas. 456 sc wherein, it was observed :
"It is well settled that a winding up petition is not a legitimate means of seeking to enforce payment of debt which is bona fide disputed by the company. A petition presented ostensibly for winding up order but really to exercise pressure will be dismissed, and under certain circumstances may be stigmatised as a scandal our abuse of the process of the Court..." (p. 463)
In Kamadhenu Enterprises v. Vivek Textile Mills (P.) Ltd. 1982 (1) KLJ 296, wherein, their Lordships have observed :
"The Court u/s 433 of Companies Act is not a Court essentially meant for settling money disputes between parties. The jurisdiction is to subserve the object of winding up the companies which have not paid their debts or which are unable to pay their debts. Therefore, the first prerequisite must be to establish prima facie a debt against the company. But when a claim or debt is disputed, the proper forum for that is a civil court."
Admittedly, the payment of money disputed between the parties cannot be settled u/s 433, whereas it can only be invoked if a person has not paid the admitted debts and is unable to pay the same despite expiry of the statutory notice period. In other words, one, prima facie, has to establish that there is an admitted debt against the company, otherwise if the claim or debt is in dispute, the proper remedy is to invoke civil court''s jurisdiction. In O.S.A. No. 71 of 2002, for instance, on payment, some facility was assured and as per the letter dated 20-7-1999 raised a plea that Rs. 1,01,000 was due for payment.
Considering the facts of the given case and applying the settled law, in the instant case, some facility was assured on payment of some money as per the agreement. Repayment clause is not in the agreement, more particularly the plea that payment is due, hence, liability is disputed. Under the circumstances, the company petition for winding-up of the company cannot be invoked. The appellants have a remedy to file a suit for specific performance or as advised, accordingly. In view of this, the argument of the learned counsel is not tenable and is rejected.
The learned Single Judge, by an elaborate order has not interfered. On consideration and as discussed, we find no error or illegality in the order passed by the learned Single Judge so as to call for any interference. Accordingly, O.S.A. No. 70 of 2002 and connected O.S.As. are dismissed with no order as to costs. We make it clear that dismissal of these appeals and company petitions will not come in the way of the respective appellants to establish their rights, if any, against the respondent-company in civil court in accordance with law.