TMI Blog1996 (10) TMI 527X X X X Extracts X X X X X X X X Extracts X X X X ..... the leasing scheme of the petitioner. The said proposal was accepted by the petitioner and, the petitioner called upon the said Company to select and chose the said material (forklift) and the said forklifts were selected by the Company under winding up and a lease agreement for hire of the same was entered into by the petitioner and the Company under winding up. Under the said agreement, machinery was to be given on lease for a period of 96 months at the monthly rent of Rs. 8,906/-, on the terms and conditions mentioned in the said agreement. Under the terms and conditions of the said agreement, the total period of lease was being 96 months commencing on 15th August, 1983. The monthly rental was to be paid in advance on the 1st day of each month. There was to be a protanto raise in case of the increase in the Bank interest rate. Punctuality of payments of installments was agreed to be the essence of the lease and if any installment remained unpaid for more than fourteen days after it's becoming due, it was to be held as a default and under Clause 3(b) of the Agreement, the lessee Company was liable to pay compensation on overdue rentals at the rate of 3% per month until payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the said penal liability was ascertained and decided upon by a Court of Law, it could not have been deemed to be a debt. The learned Counsel relied upon Section 74 of the Indian Contract Act. Thirdly, the contention of the learned Counsel is that this was nothing but a money lending transaction as there is ample evidence on record to suggest that this was nothing but a finance made by the petitioner Company to the lessee Company and, in fact, this agreement of lease was only as eye-wash and, in fact, it was the advancement of a sum and as such the civil suit itself has barred under Section 10 of the Bombay Money lending Act, as admittedly, the petitioner Company did not have a money lending licence. 5. It will have, therefore ,to be found as to whether firstly the petition itself is within limitation. In this behalf, Shri S.A. Bobde, learned Counsel appearing on behalf of the petitioner Company, contended that it is not necessary for lodging a petition under Section 434 of the Companies Act for winding up of company, the liability should be recoverable by a suit. He contended that if it is proved that the company was indebted, meaning thereby that there was a debt against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision Bench quotes: It is not disputed that to maintain a petition for winding up on the ground of inability to pay the debt, the debt must be recoverable, i.e. due and payable and not barred by limitation at the date of the petition. This was so because under Section 439 quoted above, one of the persons, inter alia, entitled to file a petition for winding up, was a creditor and in order that a person could qualify himself to be a creditor, he must be able to satisfy the Court that at the date of the petition, there was a debt irrevocable or due and payable to him, which he could claim. In the present case also, the situation is no different. Shri Bobde suggest that these observations in para-17 are on account of the agreement between the parties, and the proposition that he wished to canvass was not contested. The contention of the learned Counsel is not right, as a look at para-17 itself suggests that the Division bench has given the approval to the proposition which was not contested on account of the express language of Section 439. 7. Shri Bobde then argued that the predominant purpose for presenting the petition for winding up was not a recovery of debt but it was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that, it is unable to meet current demands. As stated by William James, V.C. it is plainly and commercially insolvent - that is to say, that its assets are such, and Us existing liabilities are such, as to make it reasonably certain - as to make the Court feel satisfied - that the existing and probable assets would be insufficient to meet the existing liabilities. The Supreme Court further went on to quote in para 28 as under: Two rules are well settled. First, if the doubt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The court has dismissed a petition for winding-up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. Again, a petition for winding-up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed. 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. Where, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allments, alongwith the interest at 3% on such defaulted installment would be recoverable only on the date on which the last installment became due; according to the learned Counsel, the limitation would start from that date. The learned Counsel relied on Article 12 and Article 55 of the Limitation Act. 10. It will be, therefore, worthwhile to see as to whether a suit could have been filed under those Articles. Article 12 pertains to the hire of animals, vehicles, boats or household furniture. The limitation provided therefore is three years from the date when the hire becomes payable. Shri Bobde submitted that such hire would become payable and would remain payable even after the last installment was defaulted. According to him, therefore, the limitation of three years would be starting on 14.8.1991 for the hire charges as well as the so-called compensation. The argument that the period of three years would commence from the last date for an installment, is obviously incorrect. The liability to pay the hire charges or lease charges as per the agreement arises with each installment and therefore, every installment would give rise to an independent cause of action. It will have t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are successive breaches in respect of which the suit is instituted occurs or where the breach is continuing when it ceases. The learned Counsel tried to suggest that Article 55 would save the situation for him as the liability to pay the compensation was a continuing liability and the said liability came to an end only on the last date of the installment, i.e., in July or August, 1991 and, therefore, the whole compensation could be recovered. Now, strictly speaking, it is difficult to hold that the suit can fall under Article 55 of the Limitation Act. If the agreement is to be seen closely, it is a leasing agreement, whereby the respondent Company had agreed to pay the whole leasing charges by installments. The agreement, thus, apparently was a leasing agreement. Now, the suit, therefore, could not be for the compensation of the breach of agreement. A compensation covered under Article 55 is for the ascertained sum of compensation. Even if it is held for the argument sake that the suit could be filed for compensation, it will have to be held that the starting point of the limitation was when the breaches occured, because in this case the payment of the hire charges was to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se cause of action and base his suit upon any of them. This was a case under Article 132 of the Limitation Act, 1908. Now, in the said case, the Patna High Court was concerned with a mortgage where there was a condition that on failure of payment of any installment, all the installments, which had expired or not expired, would be paid by mortgagor and he was to pay interest hereon. The situation is clearly different here as there is no such clause entitling the petitioner Company to sue for the whole sum covered by all the installments of default of an installment. The learned Counsel has taken me through the agreement extensively. However, even a close scrutiny does not show that there is such a clause. A careful reading of Clauses 3 and 4 would show that there is no such term, though there is a clearcut effect shown of a default of the installment in Clause 3(b) which only provides for the rate of 3% per month interest. 16. Shri Mehadia, learned Counsel appearing on behalf of the respondent Company, pointed out that there could not have been such a clause, for the simple reason that all the interest which was calculated by the petitioner company was calculated in advance and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return the whole money. In the first place, the argument is incorrect, because it is not on the basis of the promissory-note that the suit could have been filed, as the payment terms were already fixed up by and agreement. Even if it is held to be a good promissory-note and even if it is held that on that basis of the same a suit could have been filed, it would be Articles 36 and 37 of the Limitation Act which would come into play. Now, the petitioner Company would certainly have got a limitation on the basis of Article 37 to wait till the last default by waiving its right to sue on the first default of the installment. However, as has already been pointed out, for that there should have been a term in the agreement that even if one default was made, all the amount involved in the transaction would become payable and recoverable. In the absence of that, even Article 37 cannot be availed of by the petitioner Company. If we read Article 36, it is clear that since the time starts running on the first term of payment or on the expiry of the respective terms of the payment, the suit would be clearly barred by limitation as regards all the defaulted installments and, therefore, Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 clearly suggests that this clause is intended to deal with the subject of recovery of sums due. Now a sum would be due to the purchaser when there is an existing obligation to pay it in praesenti. It would be profitable in this connection to refer to the concept of a 'debt' for a sum due is the same thing as a debt due. The classical definition of debt is to be found in Webb v. Stenton (1883) 11 QBD 518 where Lindley, L.J., said: '...a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation. There must be debitum in praesenti; solvendum may be in praesenti or in futuro - that is immaterial. There must be an existing obligation to pay a sum of money now or in future. The learned Counsel relies on these observations and invite my attention to the following observations in para-9: Now the law is well settled that a claim for unliquidated damages does not give rise to a doubt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary-obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayable in 96 monthly installments. However, the interest was calculated on Rs. 3,59,566/- for eight years al nominal rate of interest so as to arrive at the figure of Rs. 5,46,504/-. From this, Shri Mehadia, pointed out that not only was the money advanced but the interest has also calculated thereupon and, therefore, the whole thing becomes a moneylending transaction which was barred under Section 10 of the Moneylending Act. Shri Mehadia further contended that, at any rate, this could be a bona fide defence in the forthcoming suit and, therefore, the winding up petition was not liable to be admitted on this count. 24. It would not be proper to go into the nature of the transaction, in view of the agreement. The agreement does not suggest by itself that this was a moneylending transaction. The agreement is out and out a leasing transaction. However, whether this was a moneylending transaction at all, could not be decided on the basis of the available material and in the absence of any proper evidence. The transaction as reflected from the agreement does not prima facie, seems to be a money lending transaction. The execution of the promissory-note by itself would not make this to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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