Narsey Brothers vs Nithyalakshmi Textiles Mills Pvt. Ltd.

M. Chockalingam, J.—This appeal is directed against the order of the learned single judge made in Company Petition No. 27 of 2002, whereby a petition made by the appellant herein u/s 433(e) read with Section 434(1) and 439(2)(f) of the Companies Act, 1956, seeking winding up the company of the respondent, was dismissed.

The appellant/petitioner made a petition, stating that the petitioner is a registered partnership firm having its business at Mumbai. The respondent is the company registered under the Companies Act, 1956 and is having its business at Coimbatore. The petitioner is engaged in the business of sale of cotton bales to intending purchasers. As per the orders placed by the respondent for the supply of cotton, it was supplied as per the specifications received and the petitioner has raised invoices for the goods supplied. The respondent purchased on credit basis from the petitioner on November 30, 1999, 75 bales for a total price of Rs. 6,66,450. The respondent paid the amount on various dates totaling to Rs. 3,75,000. The last payment was made on February 11, 2000, and still there was a balance of Rs. 2,91,450. The respondent is liable to pay the same along with interest. Many demands, requests and reminders made were of no avail and whenever notices were issued, they were replied with false allegations. Finally, a statutory notice was issued on February 11, 2000, through a lawyer, calling upon the respondent to pay the balance of Rs. 2,91,450 along with interest, which would amount to Rs. 61,200. It was also replied with false and untenable allegations. Under these circumstances, a rejoinder was also issued, which was also replied reiterating the same allegations and under these circumstances, it would be quite clear that the respondent is unable to pay the debts and hence a necessity arose to file this petition for ordering winding up.

This petition was actually countered by the respondent''s side stating that it is true that the petitioner supplied 75 bales of cotton, but it was found to be of inferior quality; that immediately, the matter was brought to the notice of the broker; that the broker also made an inspection and also appraised the situation and he also brought the same to the knowledge of the petitioner and the petitioner also agreed to give rebate therefor, but the rebate of Rs. 2,51,996 was not given; that since as per the understanding, the petitioner did not send the credit note to that amount, the respondent raised a debit note and under these circumstances, there is dispute as to the quality and also the payments to be made; that there is substantial defence for the respondent and therefore, there is no liability at all and the petition is only the device invented for pressurising the respondent to make a demand illegally and hence the petition was to be dismissed.

On enquiry, the learned single judge thought it fit to take a view that the petitioner has not come with a case, which would require for ordering winding up and hence it has dismissed the same. Under these circumstances, this appeal has been brought forth by the petitioner.

Advancing arguments on behalf of the appellant, learned Counsel would submit that in the instant case, 75 bales of cotton was supplied to the respondent was an admitted fact and in the original invoice, which was also raised, the quantum is also mentioned. The payment of Rs. 3,75,000 was also an admitted fact and thus, the respondent is liable to pay Rs. 2,91,450 together with interest and therefore, originally there was a demand made, which was of no avail and reminders were also made by way of notices. Finally, the statutory notice was also issued through the lawyer, which resulted in a false reply. A rejoinder was also issued on March 14, 2001, which was of no avail. In the instant case, the respondent, who was liable to pay the specific amount, has failed to pay and the respondent was unable to make the payment and under these circumstances, winding up proceedings should have been ordered, but failed to do so. In the instant case, balance-sheet, which was actually filed by the respondent, would clearly reveal the amount what is now put forth by the petitioner''s side as liability and under these circumstances, it should have been taken into account. Once liability is an admitted fact, the petitioner is able to show that the respondent was unable to make the payment and hence the winding up proceedings should have been ordered.

Learned Counsel for the respondent would submit that in the instant case, the petitioner has neither shown the definite liability nor shown any circumstance which noted for ordering winding up; that there were originally notices issued, which were replied suitably; that it was also agreed to make rebate, but the petitioner has failed to keep the promise and came with the false case, though the matter was suitably replied when notices were issued and under these circumstances, the matter has got to be adjudicated before the court of civil law and it is not a fit case for ordering winding up and hence the order of the learned single judge has got to be sustained.

The court has paid its anxious consideration on the submissions made and heard learned Counsel on either side.

After doing so, the court is of the considered opinion that the order of the learned single judge does not require for any disturbance. It is not in controversy that the petitioner-firm is dealing with cotton supply. According to the appellant/petitioner, the total amount, which the respondent was liable to pay as per the debit order, was to the tune of Rs. 6,66,450. It is also admitted that a sum of Rs. 3,75,000 was paid by the respondent and that the balance was Rs. 2,91,450 along with interest. Immediately after the supply was made by the petitioner to the respondent, the respondent found inferior quality of cotton. Immediately, the broker was informed, who made an inspection and also found inferior quality of cotton and it is also brought to the notice of the appellant/petitioner. Further, there was an understanding to make rebate, but not done so. Subsequently, the statutory notice was also sent by the petitioner through the lawyer on February 11, 2000, which was also replied. Thus, the question as to whether the supply made was as per the quality as understood between the parties or they were inferior quality was the matter to be decided on fact. Apart from that, according to the respondent, as understood between the parties, a sum of Rs. 2 lakhs and odd was to be given credit by way of rebate, but not done and it is also made mentioning in the reply notice.

At this juncture, the contention put forth by learned Counsel for the petitioner is that there was balance-sheet of the respondent, which would show the particular figure now demanded by the petitioner as liability and hence it has got to be accepted. It is true, the balance-sheet shows the figure, but that did not mean that by which it can be taken as liability, while all the factual positions made above would make it clear that for the earlier notices, there were replies, where the amount is disputed and the quantum is in dispute and the liability is also under dispute. Further, in a given case, where winding up proceedings is initiated u/s 433 of the Companies Act, 1956, it becomes necessary that there must be a debt and the liability should be definite. If there is any substantial defence put forth by the respondent''s side, it has got to be decided by the court only on appreciation of evidence and hence no question of winding up to be ordered would arise. The petition filed by the petitioner, though ostensibly looks like a winding up petition, it is not so. This device, in the opinion of the court, is to pressurise the respondent for payment even before thrashing out the liability to be decided by the court of civil law/Under these circumstances, it is well settled that winding up petition cannot be made as a device to pressurise the respondent to make payment as per the demand made by the petitioner. Hence the learned single judge was perfectly correct in rejecting the petition. Accordingly, it is sustained and this O.S.A. is dismissed. No costs.