Rahul Inter-Dyes (P.) Ltd. vs Anand Tissues Ltd.

Prakash Krishna, J.—Heard Sri R.P. Agarwal, learned Counsel for the petitioner-company and Sri P.K. Pandey, advocate holding brief of Sri Anoop Trivedi, learned Counsel appearing on behalf of the respondent-company.

This is a petition for winding up of the respondent-company u/s 433(e) and (f) read with Section 434/439 of the Companies Act, 1956. The respondent-company, i.e., Anand Tissues Ltd., is a public limited company and its authorised capital is Rs. 750 lakhs. Its registered office is situate at Bhrigu Ashram, 49/4, Mansarovar, Meerut, U.P. The case of the petitioner-company is that it is engaged in the manufacture of sodium sulphite and sodium bisulphite at its factory situate at Gujarat. The petitioner claims that it is a small scale unit and registered with the Industries Department of the State of Gujarat. It appears that a contract for supply of sodium sulphite and sodium bisulphite was entered into between the petitioner and the respondent-company. The petitioner claims that it has been maintaining proper books of account and the ledger account of the respondent-company in the regular course of business. The case of the petitioner-company is that there was a total balance of Rs. 32,19,118 as on 31-3-2008. In spite of repeated demands and requests to clear the outstanding dues, the respondent-company has failed to discharge the mid debt. Ultimately, a notice dated 25-3-2008, u/s 434 for winding up was given. By the said notice, the respondent-company was asked to clear the outstanding dues failing which the proceedings for winding up shall be initiated. The receipt of the said notice is not disputed. However, no reply was given by the respondent-company. Hence, the present petition for winding up of the respondent-company under the aforestated sections has been filed.

In response to the show-cause notice, before admission of the winding up petition, a counter affidavit has been filed. In the counter affidavit it has been stated that the goods supplied by the petitioner-company were of inferior quality. Further, it has been stated in paragraphs 19 and 20 (only these paragraphs were referred during the course of arguments) that the respondent-company asked the petitioner-company to adjust the amount for inferior materials as the same had been rejected after clinical tests. Necessary information about the rejection of the materials on the basis of inferior quality was given to the petitioner-company. A dispute has also been sought to be raised in the counter affidavit that the petitioner-company is demanding the price of the goods supplied at the higher rates over and above the prevailing market rates shown in the bills.

In the rejoinder affidavit, the contents of paragraphs 19 and 20 of the counter affidavit have been denied and the averments made in the original petition have been reiterated. It has been further stated in the rejoinder affidavit that the respondent-company has unilaterally debited certain amount from the account of the petitioner-company and even after adjustment of those amount, a sum of Rs. 31,05,717 is still due from the respondent-company.

learned Counsel for the petitioner-company submits that a sum of Rs. 32,19,118 was due originally as on 31-3-2008. The submission is that the amount due is an admitted amount which the respondent-company has failed to pay in spite of repeated opportunities granted to it. Therefore, the respondent-company is liable to be wound up. Elaborating the arguments, he invited the attention of the court towards the statement of account filed along with the counter affidavit filed by the respondent-company. A bare perusal of the said statement of account would show that still a sum of Rs. 31,05,717 is the admitted liability of the respondent-company, submits learned Counsel for the petitioner.

In reply, learned Counsel for the respondent-company has placed reliance on paragraphs 19 and 20 of the counter affidavit. In paragraph 19 of the counter affidavit it has been stated that the petitioner-company has to adjust the amounts for the inferior material as the same had been rejected after the clinical tests and the same was duly informed by the respondent-company to the petitioner-company. In paragraph 20 it has been stated that several consignments sent by the petitioner were on a very higher rates over and above the prevailing market rates shown in the bills concerned and as such the respondent-company made request to the petitioner-company to issue fresh credit notes and the petitioner-company assured the respondent that the renewed credit notes would be issued to it at the proper rates. However, the petitioner-company has deliberately not taken any steps. The amounts shown by the petitioner-company are seriously disputed by the respondent-company.

On the basis of the averments made in the rejoinder affidavit, learned Counsel for the petitioner-company submits that the respondent company has unilaterally debited Rs. 1,13,401 under various heads. Even after the said debit, still a sum of Rs. 31,05,717 is due. The submission is that even if the said adjustment is allowed, still a sum of Rs. 31,05,717 is the admitted liability of the respondent-company.

Considered the respective submissions of learned Counsel for the parties and perused the record.

The only defence raised in the present winding up petition is that the liability said to be "admitted liability" is not the "admitted liability" of the respondent-company. learned Counsel for the respondent-company in support of his arguments could refer to only paragraphs 19 and 20 of the counter affidavit which have been noted in detail in the earlier part of this judgment. It may be noted that in paragraph 19 of the counter affidavit it has been stated that certain letters were issued by the respondent-company making a complaint that the goods supplied by the petitioner-company were of inferior quality and those goods have been rejected. It is further mentioned in the said paragraph that postal receipts showing that those letters were dispatched have been filed along with the counter affidavit. But no such evidence has been filed along with the counter affidavit. learned Counsel for the respondent-company could not point out any material to show that the letters which have been collectively filed as annexure 4 to the counter affidavit were sent to the petitioner-company. The letters, according to the petitioner company, are fabricated documents and were never dispatched. In the absence of any material to show even prima facie, the dispatch and service of these letters on the petitioner, the plea as set out by the respondent-company in the counter affidavit is liable to be rejected. The respondent-company was required to file at least some prima facie evidence in support of the said plea which it failed.

In the alternative, through these letters which have been collectively marked as annexure CA-4, an objection, regarding low quality of goods (low purity) in respect of four Invoice Nos. 46, 74, 78 and 80, was raised.

The case of the petitioner-company is that no such grievance was raised by the respondent-company at any point of time. It appears that the plea of charging of higher rates over and above the prevailing market rates in the bills has been put forward as an afterthought, for the first time here. Significantly, no such grievance was raised by the respondent-company in response to various letters given by the petitioner-company for payment nor any such plea was put forward in response to the legal notice dated March 25,2008, of the petitioner given before filing of the present petition. The respondent-company has debited a sum of Rs. 66,000 in this regard on October 31,2007. The said entry for the sake of convenience is reproduced below:

31-10-2007 To Sodium Sulphite (Ex. U. P.) New Ref. 91 30 days deduction due low purity 66,000 Dr. Debit Note 91 66,000 in your flowing inv. 46/23-6-7 74/16.978/27.980.4.10.

Sri R.P. Agarwal, learned Counsel for the petitioner-company submits that the respondent-company has unilaterally debited the amount from the account, as is evident from the copy of the statement of account filed by the respondent-company. A bare perusal of the said statement of account would show that the following amounts have been debited:

---------------------------------------------------------------------------- Date of debt Description Amount Rs. ---------------------------------------------------------------------------- 5-4-2007 Special discount on supplies under Invoice No. 3/2-4-07 8,000 31-7-2007 Debit Note No. 38 - deduction due to low purity 38,749 31-10-2007 Debit Note No. 91 - deduction due to low purity 66,000 - Invoice Nos. 46, 74, 78 and 80 16-11-2007 TDS against bill No. 90 653 ---------------------------------------------------------------------------- Total 1,13,401

The aforesaid amount has been debited from the petitioner-company and the balance amount comes to Rs. 31,05,717. It may also be noted that there is no dispute between the parties with regard to the other payments.

In view of the above, it is clear that the respondent-company has admitted its liability for payment of Rs. 31,05,117. It cannot be said that the respondent-company has any valid defence or the present petition is mala fide one.

learned Counsel for the petitioner-company has placed reliance upon following three decisions:

(1) In Madhusudan Gordhandas & Co. v. Madhu Woolen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125, the Apex Court has held as follows:

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 A Company 1894] 94 SJ 369 ; 2 Ch. 349 (Ch. D). 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 Tweeds Garages Ltd [1962] 32 Comp. Cas. 795 (Ch.D) : [1962] Ch. 406]. The principles on which the court acts arc 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 adduce prima facie proof of the facts on which the defence depends. (p. 131).

(2) In In the Matter of Advent Corporation Pvt. Ltd., it has been held that the court takes only a prima facie view of the petition on the material before it and has to consider whether that material would justify the court in summarily dismissing the petition, or whether it would require further investigation. At the admission stage, the court has to consider the contentions of a preliminary nature that the petition is not maintainable or that the petition constitutes an abuse of the process of the court insofar as it is based on a disputed debt or if it is a creditor''s petition, that the petitioner has failed to make out that he is a creditor.

(3) In Nepa Ltd. Vs. Jnanamandal Ltd., a decision of this court; it has been held that there are three tests which have been laid down by the Apex Court in Madhusudan Gordhandas & Co.''s case (supra), namely, that:

(i) that the defence of the company is in good faith and one of substance;

(ii) that the defence is likely to succeed in a point of law ; and

(iii) the company adduces prima facie proof of the facts on which the defence depends. (p. 246).

Applying the ratio, as laid down above, to the facts of the present case, it is evident that the defence as set out in the counter affidavit is not in good faith and has got no substance. No material has been placed on record in support of the defence as set out in the counter affidavit to show that any bona fide dispute has been raised by the respondent-company. Repeated opportunities, as detailed above, was granted to the respondent-company to pay the debt. More than six months have passed but the respondent-company has not been able to clear its admitted liability. Looked from any angle and taking the case of the respondent-company on its face value with regard to the payments made by it from time to time including the payments made during the course of pendency of the present proceedings before this Court, under the orders of this Court, it is evident that the respondent-company has not been able to discharge its admitted liability which as it stands today, comes to Rs. 31,05,717 minus Rs. 14,67,728 (paid during pendency of the present proceedings) = Rs. 16,37,989. In any view of the matter, there is no doubt that the respondent-company owes the petitioner-company of the debt entitling it to a winding up order.

this Court by order dated 4-8-2008, while granting time to file response on behalf of the respondent-company, directed counsel that while filing counter affidavit, the respondent-company shall also enclose by way of bank draft or cheque the admitted amount due, if any, payable to the petitioner-company. On 28-8-2008, learned Counsel for the respondent-company produced a bank draft for a sum of Rs. 4,67,758 which according to him was the admitted amount due to the petitioner-company. Thereafter, the matter was adjourned for one reason or the other. It was heard on 5-2-2009 and the following order was passed:

List in the next cause list.

Sri Anoop Trivedi, learned Counsel appearing on behalf of the respondent assured the court that in the meantime substantial amount near to Rs. 30 lakhs shall be paid to the petitioner-company failing which the court may hear the petition finally.

Thereafter, the matter was taken up on 19-3-2009. On that day, learned Counsel for the petitioner-company pressed for hearing of the winding up petition on the ground that the amount has been admitted by the respondent-company. However, the matter was adjourned to 2-4-2009, to enable the respondent-company to bring further sum of Rs. 10 lakhs, failing which it was provided that the winding up petition will proceed.

It may also be placed on record that on 19-3-2009, a bank draft of Rs. 5 lakhs was given to the petitioner-company but the court directed for further payment of Rs. 10 lakhs.

The matter was taken up on 2-4-2009 and the following order was passed:

The company has clearly violated the terms of the order dated March 19, 2009, as the same has not been complied with.

Put up this matter on April 13, 2009.

On that date the respondent-company will bring a further draft of Rs. 10 lakhs failing which the petition will be advertised. The respondent will also on the April 13,2009, show the draft of Rs. 5 lakhs indicated in the fax message dated March 31, 2009, as placed before this Court has been handed over to the applicant-company.

The matter was then listed on 21-4-2009, when a draft of Rs. 5 lakhs was offered which was not accepted by learned Counsel for the petitioner-company on the ground that the respondent-company was required to pay a sum of Rs. 10 lakhs. On 21-4-2009, Sri Anoop Trivedi, advocate sent illness slip. However, the matter was adjourned to accommodate him with clear understanding that the matter shall be heard on the next date.

It was stated by learned Counsel for the respondent-company that a sum of Rs. 5 lakhs was given on 6-4-2009, outside the court. This fact has not been disputed by Sri R.P. Agarwal, learned Counsel appearing for the petitioner-company. He submits that a sum of Rs. 14,67,728 has been paid over by the respondent-company during the pendency of the present proceedings.

In this view of the matter, a case for advertising the petition has been made out. The petitioner-company is directed to get. the petition advertised in two daily newspapers, namely, The Times of India and A mar Ujala (both Delhi editions) within four weeks as envisaged Under Rule 24 of the Companies (Court) Rules, 1959.

List the petition on 8-7-2009, for hearing.