Sipra Deb Majumdar & Ors. vs Medeor Pharma PVT. LTD.

The Court : The petitioning-creditor in one of the last winding-up petitions filed in this Court before the jurisdiction was transferred to a tribunal complains of a valid claim being disregarded on the ground of limitation.

By the order impugned dated December 17, 2018, the company court felt that the petitioning-creditor's claim was barred by limitation since the statutory notice did not refer to a promise to pay having been made by the company within the meaning of Section 25 of the Contract Act, 1872.

There is no dispute that the predecessor-in-interest of the appellants herein was a director of company Medeor Pharma Private Limited. There is also no dispute that such predecessor-in-interest, Samir Deb Majumdar, severed his relationship with the company sometime in September, 2010 or immediately thereafter.

On September 22, 2010, the board of directors of the company resolved, inter alia, that the dues of the outgoing director would be settled. It is necessary that the relevant resolution at the meeting of the board of directors of the company on September 22, 2010 be seen exactly as adopted:

"Further Resolved that the retiring director Mr. Samir Deb Majumdar OR his legal heirs (in the absence of Mr. S. D. Majumdar) will be paid the following amounts within the schedule of date given below:

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The Company will also pay to Mr. S. D. Majumdar a total amount of Rs.4,00,000/- (Rupees Four Lakhs) only including the refund of loans, out of which Rs.3,00,000/- (Rupees Three Lakhs) only to be paid by 31.03.2012 and Rs.1,00,000/- (Rupees One Lakh) only to be paid by 30.09.2012."

It is apparent that the resolution amounts to a promise to pay a debt and, when such a promise is made in writing, the consideration need not be looked into as recognised in Section 25 of the Contract Act. The board resolution of September 22, 2010 is not in dispute.

However, the company claims that the relevant board resolution was contrary to the memorandum and articles of association of the company and the board had no authority to make the promise as contained therein, particularly, since the claim embodied therein was hopelessly barred by limitation. It is the further defence of the company that the retiring director and his wife held certain shares in the company and such shares were sold and a sum of Rs.4 lakh or more was obtained, thus squaring off the company's debt, if any.

Neither ground is acceptable. Section 25 of the Contract Act instructs that when there is a promise to pay, irrespective of the promise being in respect of a debt that stands barred by limitation, it is possible to enforce such promise. Thus, whether or not the debt embodied in the promise stood barred by limitation at the time that the promise was made is irrelevant. Secondly, the board of directors of a company has complete authority to represent the company, subject to the articles of association of the company and the limits on the authority as imposed by the governing statute. There is no dispute that the resolution was adopted at a board meeting of the company and nothing in the articles of association of the company has been cited to demonstrate that such articles prohibited a promise to pay being made by the board on behalf of the company.

Needless to say, there was no provision in the Companies Act, 1956 that prevented the board of directors from adopting the resolution of September 22, 2010. Such resolution was adopted even before the Companies Act, 2013 came into effect, though even the successor statute does not prohibit the authority of the board in such regard.

It is equally elementary that a company cannot buy back its own shares unless it obtains the permission of the Court and there is a consequential reduction of share capital. Indeed, it is a fundamental principle of corporate jurisprudence that a company is not interested in its shares or, at the least, in the transactions pertaining to its shares. Thus, whether the retiring director or his wife sold their shares in the company to some other or received any consideration therefor could not have been any ground to refuse to discharge the promise as contained in the resolution of September 22, 2010. In any event, since a company cannot own its own shares, the debt due from the company to the retiring director could not have been discharged by the payment of any consideration for the sale of the shares held by the retiring director or his wife.

The company could make out no defence and the company petition ought to have been admitted in such circumstances. The reason given in the order impugned for declining to admit the petition was that the statutory notice issued under Section 434 of the Act of 1956 did not refer to the resolution of September 22, 2010 being a promise to pay.

It may be observed in this context that a notice under Section 434 of the Act requires the addressor to indicate the quantum of debt and if the debt is above the threshold indicated in the provision and the company fails or neglects to pay the debt despite a passage of three weeks from the date of receipt of such notice, there is a statutory presumption which arises as to the company's inability to pay its debt. In this case, notwithstanding the reply to the statutory notice and the alternative defences carried in the affidavit filed on behalf of the company, there was no excuse proffered by the company for not discharging its debt or for not acting in terms of its resolution of September 22, 2010. Indeed, the relevant resolution provided for the first tranche of payment to be made by March 31, 2012 and the second tranche by September 30, 2012. The winding-up petition was instituted sometime late in February, 2015. In fact, the statutory notice must have been issued at least three weeks prior to the date of institution of the company petition. Thus, by the time the petition was instituted, the inability to pay on the part of the company stood established since the company had promised to make payment of the entire amount by September 30, 2012 and till the time of the institution, no part payment had been made.

Nothing in Section 434 of the Act of 1956 requires a creditor to plead that the money claim was on account of a promise to pay within the meaning of Section 25 of the Contract Act notwithstanding the original claim being barred by the laws of limitation. Since the primary ground on which the creditor's petition was repelled is found to be exceptionable, the order impugned cannot stand and the same is set aside.

CP No. 144 of 2015 is admitted for the principal sum of Rs.4 lakh together with interest thereon at the rate of 8% per annum simple from October 1, 2012 till the date of payment. At this stage, the company seeks to pay off the debt in instalments. The company is permitted to pay off the entire amount, inclusive of interest, in six equal or nearly equal monthly instalments beginning February 15, 2020 and payable by the fifteenth day of the five succeeding months.

In the event the payment is made in terms of this order, the winding-up petition will remain permanently stayed. In the event of default in payment of any instalment or any amount due in terms of this order, the petition will be advertised once in the Statesman and once in Aajkal. Publication in the Official Gazette will stand dispensed with. In the event advertisements are issued, the same should indicate that the matter would be returnable before the company court on the first available working day after the expiry of four weeks from the later date of publication.

APO No. 213 of 2019 along with ACO No. 26 of 2019 stand allowed as above.

There will be no order as to costs.