R.P.G. Tranmissions Ltd. (M/s) vs Sitaram Chaudaha

A.K. Patnaik, C.J.

This is an appeal u/s 483 of the Companies Act, 1956 (for short ''the Act'') against order dated 04.05.2007 passed by the learned Company Judge in Company Petition No. 4/2003 directing advertisement of winding up petition in accordance with Rule 99 of the Companies (Court) Rules, 1959 (for short ''the Rules'').

The facts briefly are that the Respondent filed a petition u/s 439(b) of the Act for winding up of the Appellant company. In the petition, the Respondent claimed that a sum of Rs. 6,53,907/- was due and payable by the Appellant Company to the Respondent on account of supply of various types of oil for the industry of the Appellant, but despite notice dated 18.08.2003 served by the Respondent on the Appellant Company u/s 434 of the Act, the dues have not been paid and thus the Appellant Company was unable to pay its debts and should be wound up by the order of the Court. The Appellant company filed a reply saying that only a sum of Rs. 4,78,907/- was payable to the Respondent and the same has not been paid due to heavy financial crunch faced by the Appellant company. During the pendency of the petition, the Appellant company paid the said sum of Rs,4,78,907/- in installments by cheques. When the winding up petition was taken up for hearing, the stand of the Respondent before the learned Company Judge was that instead of paying Rs. 6,53,907/- the Appellant company had paid a sum of Rs. 4,78,907/- and hence had not paid the entire dues to the Respondent. The learned Company Judge in the impugned order dated 04.05.2007 found that the Appellant company had issued a Reconciliation Statement as on 03.11.2002 and as per the said reconciliation statement, a sum of Rs. 6,53,907/- and not a sum of Rs. 4,78,907/- was payable by the Appellant company to the Respondent and since the Appellant company had paid only Rs. 4,78,907/- and had not paid the entire dues of Rs. 6,53,907/- to the Respondent, the Respondent had made out a case for advertisement of the winding of petition in accordance with Rule 99 of the Rules.

The Reconciliation Statement as on 03.11.2002 annexed to the petition for winding up filed by the Respondent is extracted hereinbelow:

Dated 03.11.2002 Reconciliation Statement as on 03.11.2002

Dr. Balance as per M/s Sitaram & Brothers.

1,170,066

Less: Rate different agreed by them

1,05,600

Less : Material to be verified from stores record by RPGT against supply of material stated to be effected during 1987-88 by above party.

3,44,160

Balance as per party as on 03.11.2002 (subject to verification of point No. 3)

7,20,306

Dr. Balance as per M/s Sitaram & Brod. (subject to verification of point No. 3) Cr. Balance as per M/s RPGT

7,20,306 6,64,932

Diff. Amount

55,374

Rate Difference to be considered by M/s RPGT (subject to approval of Purchase Deptt.)

52,800

Difference to trace

2,574

From the aforesaid reconciliation statement as on 03.11.2002, it is clear that Rs. 3,44,160/- was claimed by the Respondents on account of materials

supplied during 1987-88 to the Appellant company but the supply of materials was to be verified from the stores record by the Appellant company. Thus, even if we hold that the reconciliation statement as on 03.11.2002 has been issued by the Appellant company, the liability of Rs. 3,44,160/- on account of material supplied by the Respondent to the Appellant company during 1987-88 had not been unequivocally and unconditionally acknowledge by the Appellant company to the Respondent. From the reconciliation statement as on 03.11.2002, it also appears that a sum of Rs. 1,05,600/- on account of rate difference had also not been acknowledged as payable by the Appellant company to the Respondent unequivocally and unconditionally as in the reconciliation statement an endorsement was made that the rate difference was to be considered by the Appellant company subject to approval of purchase department. Thus, the Appellant company had not acknowledged its debt to the extent of Rs. 3,44,160/- towards material supplied by the Respondent during 1987-88 and its debt of Rs. 1,05,800/- towards rate difference.

Mr. P.S. Nair, learned Counsel appearing for the Appellant cited a decision of the Supreme Court in Pradeshiya Industrial and Investment Corporation of U.P. Vs. North India Petrochemical Ltd. and Another, and submitted that the machinery for winding up can not be allowed to be utilized as a means for realizing debts due from a company which is bonafide disputed by the company. He submitted that since in the present case the Appellant company had bonafide disputed the supply of the material during 1987-88 worth Rs. 3,44,160/- and the rate difference of Rs. 1,05,600/-, the machinery for winding up cannot be permitted to be used by the Respondent to recover the said two amounts of Rs. 3,44,160/- and Rs. 1,05,600/-.

Mr. J.P. Sanghi, learned senior counsel appearing for the Respondent, on the other hand, cited a decision of a learned Company Judge of the Madras High Court in S.M. Ali Khan v. Stressed Concrete Constriction Pvt. Ltd. (AIR 1960 Mad 254), in which the following comments from Palmer''s Company Precedent, 16th Edition Part 2, page 34, have been quoted -

Thus, it is not uncommon for a company after again and again begging for time, for payment of a debt, to spring on the Petitioner, at the last moment the assertion that the debt is a disputed one and such a deference is naturally open to great suspicion and meets with no favour from the court.

Mr. Sanghi submitted that in the present case, the Appellant company in their reply to the company petition before the learned Company Judge admitted that the dues were payable by the Appellant company to the Respondent and took the plea that due to heavy financial crunch it requested the Respondent to accept the payment by installments but at a later stage the Appellant company has taken a stand that nothing was payable to the Respondent.

We find on a reading of the reply filed by the Appellant company before the learned Company Judge that as against a claim of Rs. 6,53,907/-made by the Respondent in the petition of winding up, the Appellant company has stated in the reply that a sum of Rs. 4,78,907/- only was due from the Appellant company to the Respondent. Thus, this is not a case where the Appellant company having admitted the entire amount of Rs. 6,53,907/- and after having agreed to pay the same in installments, has subsequently taken a stand that it was not liable for entire amount of Rs. 6,53,907/- as claimed by the Respondent to be due and payable by the Appellant company.

But we also do not accept the submission of Mr. Nair that the Appellant company has bonafide disputed the dues as claimed by the Respondent. The Appellant company has as yet not disputed the claim of the Respondent to Rs. 3,44,160/- towards the material supplied by the Respondent to the Appellant company during 1987-88 or Rs. 52,800/- claimed by the Respondent towards rate difference. This is because the Appellant company has not yet intimated the Respondent that it is not liable to pay the said sum of Rs. 3,44,160/- towards the materials supplied during 1987-88 or that it is not liable to pay a sum of Rs. 52,800/- towards rate difference as claimed by the Respondent. All that it stated in the reconciliation statement as on 03.11.2002 found by the learned Company Judge to have been issued by the Appellant company is that if on verification from the stores record of the Appellant company it is found that the materials have been supplied during 1987-88 by the Respondent, it will be liable for Rs. 3,44,160/- and similarly if on consideration of rate difference, the rate difference is approved by the purchase department of the Appellant company, then the Appellant company would pay the rate difference of Rs. 52,800/- to the Respondent. But, as we have held already, until the materials said to have been supplied by the Respondent during 1987-88 are verified and the rate difference approved by the purchase department of the Appellant company, the Appellant company cannot be said to be owing debts of Rs. 3,44,160/- and Rs. 52,800/- to the Respondent.

This is thus a case where the learned Company Judge should not have issued a direction for advertisement of the company petition under Rule 99 of the Rules which would have serious consequences for the Appellant company. Ends of justice require that within two months from today, the Appellant company should inform the Respondent after verification from the stores and the purchase department whether it is liable to pay the sum of Rs. 3,44,160/- towards the materials supplied by the Respondent to the Appellant company during 1987-88 and a sum of Rs. 52,800/- towards rate difference as claimed by the Respondent. In case, the Appellant company acknowledges its liability towards the aforesaid two or either of the two amounts, the learned Company Judge may proceed with the petition of winding up. But, in case, the Appellant company does not acknowledge its liability towards the two or either of the two amounts, then obviously the remedy of the Respondent is to file a suit for recovery of the same and the cause of action of such a suit will only arise from the date of such intimation by the Appellant company to the Respondent.

The appeal is partly allowed to the extent indicated above.