M/s Gulati Agencies (P) Ltd. vs M/s Hallex Applied Power Pvt. Ltd.

Indermeet Kaur, J.—M/s Gulati Agencies Private Limited (hereinafter referred to as the ''petitioner'') seeks winding up of Hallex Applied

Power Private Limited (hereinafter referred to as the ''respondent company'') u/s 433 read with Section 434 of the Companies Act, 1956. The

respondent had placed purchased orders upon the petitioner for the supply of Mobil Delvac Super 1300 15W40 (hereinafter referred to as the

''goods'') which were duly supplied and consumed. Submission of the petitioner is that the respondent has admitted his liability in the

correspondences exchanged between the parties and also by issuance of a cheque dated 30.03.2009 for Rs. 15,72,024/- which was to discharge

the then due and existing liability. There is no dispute to this fact that a cheque of Rs. 15,72,024/- dated 30.03.2009 had been issued by the

respondent to the petitioner which stood dishonoured on 17.07.2009. This was in fact a second dishonor; the cheque was dishonoured for the first

time on 15.07.2009 (at that time the validity of the cheque was six months). To support this argument, the Learned Counsel for the petitioner

further points out that on 19.09.2009, a sum of Rs. 1,25,000/- had been repaid by the respondent and deducting the sum of Rs. 1,25,000/- from

the amount of Rs. 15,72,024/- (the amount for which the cheque dated 30.03.2009 had been issued), the figure arrived at would be Rs.

14,47,024/- for which the legal notice of demand had been issued. Submission being that this cheque of Rs. 15,72,024/- which had been paid by

the respondent to the petitioner was a clear admission of his liability and the subsequent dishonor of the cheque on two separate dates clearly

shows that the respondent company owed a debt to the petitioner which he is not in a position to pay; the respondent company being unable to

pay its debt is liable to be wound up. Reliance has also been placed upon the provisions of Sections 9, 118 and 139 of the Negotiable Instruments

Act. Submission being that a ''holder in due course'' means any person who for consideration becomes the possessor of a promissory note, bill of

exchange or cheque. u/s 118 of the said Act until the contrary is proved, the presumption shall be that every negotiable instrument was made or

drawn for consideration; the word ''shall'' appearing in Section 118 is a mandate upon the Court and unless there is anything to the contrary, the

submission of the Learned Counsel for the petitioner on this count is that this presumption that he was the holder of a cheque for a valuable

consideration arises in his favour. To the same effect is the provision contained in Section 139 of the said Act.

To support this submission, reliance has also been placed upon Vol. CXXXV-(2003-3) page 20 Hotline Teletubes and Components Ltd. Vs.

A.S. Impex Ltd. where when the cheque issued by the respondent company had stood dishonoured, when presented for encashment, the

indebtedness of the respondent to the petitioner was made out.

The next submission of the Learned Counsel for the petitioner is that on 12.10.2009, another cheque of Rs. 15 lacs had been issued by the

respondent to the petitioner wherein it was stated that this cheque should be kept only for a security purpose and should not be encashed. Issuance

of this cheque is also not in dispute. Submission of the petitioner again being reiterated that the very fact that this cheque has been issued for a

security purpose means that this is a security for a liability which is due by the respondent to the petitioner.

The last submission of the Learned Counsel for the petitioner is that ''C'' form have also been issued by the respondent to the petitioner. The

said documents are clearly an admission of the transactions between the parties and even if it is not stretched to the limit that it is an admission of

the liability by the respondent to the petitioner, yet undisputed position being that issuance of ''C'' Forms by the respondent amounted to a

transaction between the parties. To support this submission, reliance has been placed upon a judgment of this Court delivered on 09.08.2012 in

Co. Petition No. 475/2009 M/s Shyam Dri Power Ltd. Vs. Bhav Shakti Steel Mines Private Limited wherein it has been noted that a ''C'' Form is

a proof of sale made by one party to another; it is an acknowledgement of the transactions between the parties. For the same proposition, reliance

has also been placed upon a judgment of the Punjab and Haryana High Court Vol. C XXI (1999-1) Ram Kumar and others Vs. the Haryana

Cotton Mills. Attention has also been drawn to the Central Sales Tax Act, 1956; Section 8(4) provides that embargo of 3% tax contained in sub-

section (1) will not apply to interstate sales. Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 postulates that the

declaration and the certificate referred to in Section 8(4) shall be in Forms ''C'' and ''D'' respectively. Form ''C'' is the declaration where the name

of the purchasing dealer to whom it is issued along with his registration certificate has to be given. Attention has been drawn to Annexure ''G''; the

three documents (forming a part of the Annexure-G) show that the transactions between the petitioner and the respondent to the tune of Rs.

68,544/-, Rs. 15,03,480/- and Rs. 5,31,930/- had been effected. These figures total to Rs. 21,03,954/- which as per the case of the petitioner

was the value of the transactions which had been entered into between the parties. Three payments of Rs. 1,51,980/-, Rs. 3,79,950/- and Rs.

1,25,000/- were thereafter made by the respondent to the petitioner on 23.10.2008, 01.04.2009 and 19.09.2009 respectively. The balance

amount due and payable from the respondent was Rs. 14,47,024/- for which a legal notice of demand had been issued to the respondent. The

legal notice dated 21.11.2009 has been perused. Proof of dispatch at the registered office of the company at Mathura Road, Delhi has been

annexed at pages 83-85 of the paper book. Admittedly no reply has been sent to this legal notice.

this Court shall now revert to the defences set up by the respondent company. Admittedly no reply has been filed to the legal notice. The first

submission of the Learned Counsel for the respondent is that the legal notice had not been received. In this context, it is relevant to note that the

registered A.D. Card has been placed on record by the petitioner showing dispatch and receipt of the aforenoted legal notice. Presumption u/s 27

of the General Clauses Act and Section 114(8) of the Indian Evidence Act arises in favour of the petitioner. Nothing contrary has been shown to

rebut this presumption. It was only for the first time that in the reply filed to the present petition that a defence has been sought to be set up. This

defence is largely bordered upon the submission that the bills which have been presented for payment by the petitioner to the respondent are

forged and fabricated bills. Attention has been drawn to the aforenoted bills; they are Annexure ''D'' to the petition. Submission being that the

payment has not been mentioned in the said bills; there is also no signature in column of the receiver. Further submission being that the name of the

petitioner company i.e. M/s Gulati Agencies Private Limited has been stamped on top which also shows that this document has been fabricated

and is also not a printed format. This submission of the respondent is palpably incorrect. It is a printed format and clearly shows that M/s Gulati

Agencies Private Limited has three addresses; the head office and two branch offices have been detailed in the last but three lines of the aforenoted

document (page 36 of the paper book). In fact this defence set up by the respondent does not match his second defence which he has taken which

is to the effect that the goods were of a lower quality and were returned back by the respondent to the petitioner. In one breath he appears to be

denying the transaction stating that the bills of the petitioner are forged and fabricated and in the very same breath his submission is that the goods

were defective and had to be returned. The issuance of ''C'' Forms has however not been denied by the respondent. His defence qua this argument

that the ''C'' Forms had been issued in good faith and are now being used by the petitioner only to harass the respondent. The submission qua the

cheque of Rs. 15 lacs (dated 12.10.2009) is that this cheque was only given as a security and was not an admission of the liability; it does not

confer any right on the petitioner.

What was the security and why it was given and relating to what transaction has neither been explained and nor answered by the respondent.

The earlier cheque of Rs. 15,72,024/- (dated 30.03.2009) which also stood dishonoured has also not been explained; presumption that this

cheque was issued for a valuable consideration has not been rebutted. Moreover, this figure of Rs. 15,72,024/- squarely meets the figure

contained in the legal notice; the legal notice had been sent on 21.11.2009 claiming an amount of Rs. 14,47,024/- along with interest. Cheque

dated 30.03.2009 was issued by the respondent for Rs. 15,72,024/- but the legal notice had made a demand for the lesser amount of Rs.

14,47,024/- for the reason that a sum of Rs. 1,25,000/- had been paid by the respondent to the petitioner on 19.09.2009. These figures fully tally

with one another.

The e-mails and correspondences exchanged between the parties are also very relevant to determine the admission made by the respondent of

his liability towards the petitioner. These e-mails are annexed at pages 45 to 61 of the paper book. There is no denial to these communications.

Mr. Mohnish Mukkar, Director of the respondent on 21.08.2009 has specifically admitted that six payments of Rs. 2.5 lacs each will be made

within the next ten days; this is in the nature of a proposal; this proposal made by the Director of the respondent company was obviously based on

the intention of the company to wash off its liability. So also is the earlier e-mail dated 07.08.2009 addressed by Mohnish Mukkar to Vinayak

Gulati wherein again, the interest figure of 18% has been accepted by the respondent; the respondent has gone to the extent to state that whatever

the petitioner company chooses will be accepted by the respondent. On this score, a half baked submission has been made by the respondent that

Mohnish Mukkar was not authorized to act on behalf of the company; relevant would it be to state that this defence has not been taken up in the

reply filed to the petition and this oral submission has no basis. The submission of the respondent that the matter requires trial has to be rejected in

view of the clear admission made by him. In no manner can it be said that the defence of the respondent is bonafide; it is wholly imaginative.

Commercial solvency of the company is also not by itself a ground for not entertaining a winding up petition. In this context, the Apex Court in

IBA Health (I) Pvt. Ltd. Vs. Info-Drive Systems Sdn. Bhd., has held as under:-

If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be

allowed to proceed and if demand is not met and an application for liquidation is filed u/s 439 in reliance of the presumption u/s 434(1)(a) that the

company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation

application to rebut that presumption.

An examination of the company''s solvency may be a useful aid in determining whether the refusal to pay debt is a result of a bona fide dispute

as to the liability or whether it reflects an inability to pay, of course, if there is no dispute as to the company''s liability, it is difficult to hold that the

company should be able to pay the debt merely by proving that it is able to pay the debts. If the debt is an undisputedly owing, then it should be

paid. If the company refuses to pay, without good reason, it should not be able to avoid the statutory demand by proving, at the statutory demand

stage, that it is solvent. In other words, commercial solvency can be seen as relevant as to whether there was a dispute as to the debt, not as a

ground in itself, that means it cannot be characterized as a stand alone ground.

On all counts, the petitioner has been able to establish before this Court that the respondent owes a debt to the petitioner which he was unable

to liquidate. Even today before this Court, the counsel for the respondent has been queried as to whether he is willing to make the payment to the

petitioner but he is not inclined for the proposal.

Considering all the aforenoted aspects, this Court is satisfied that the respondent owes a debt to the petitioner; despite service of the statutory

notice by the petitioner to the respondent, it has failed to liquidate the demand of the petitioner.

Petition is accordingly admitted. However, the order for publication of the citation is deferred for a period of two weeks; the respondent is

granted two weeks time to make the payment of Rs. 14,47,024/- along with interest @ 18% per annum to the petitioner failing which citations of

this petition shall be published in the ''Statesman'' (English edition) and ''Jansatta'' (Hindi edition); publication shall also be effected in the official

gazette. The petitioner will take effective steps in this regard after a period of two weeks from today.

Petition disposed of.

Co. Application No. 558/2010 (for appointment of Provisional Liquidator)

Since the petition is admitted, the official Liquidator attached to this Court is appointed as Provisional Liquidator to take charge of the assets

and books of accounts of the respondent-Company; he will act in accordance with law. For this purpose, official Liquidator would be entitled to

obtain police aid and the local police is directed to render all assistance to the official Liquidator.

In the meantime, respondent-company, its directors, officers, employers, authorised representatives are restrained from selling, transferring,

alienating, encumbering and parting with the possession of any movable and immovable assets and funds of the respondent-company. They are

also restrained from withdrawing any money from the accounts of the respondent-company. The directors of the respondent-company are directed

to forthwith hand over all the records of the respondent-company to the official Liquidator including its books of account. The directors of the

respondent-company are also directed to provide the statement of affairs and file their statements under Rule 130 within a period of twenty one

days as provided for in the Companies Act, 1956.

This order is however deferred for two weeks.

Application disposed of.

Status report be filed by the official Liquidator. Renotify for 04.01.2013.