TMI Blog1968 (9) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... f July, 1959, mainly for the purpose of acquiring building sites and constructing buildings thereon and leasing or disposing of flits therein on ownership basis or otherwise. The company has already constructed a building named "Advent" on a site at Backbay Reclamation which has been occupied by the various persons and the court is not really concerned in the present case with that building. On the remaining portion of the same plot of land, however, there is under construction by the company another building, the work in respect of which has come up to and inclusive of the 9th floor. By an agreement dated 10th September, 1962, the petitioners, who are husband and wife, contracted to purchase from the company a full basement floor in the said building under construction for the price of Rs. 2,25,000 on certain terms and conditions to which it is unnecessary to refer, and the petitioners paid an aggregate sum of Rs. 80,000 to the company towards the purchase price of the said basement floor. The company having failed and neglected to start the construction of the said building, or to refund to the petitioners the said sum of Rs. 80,000, the petitioners filed a petition (being petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; ( i ) a sum equivalent to 15% of the balance of the price after payment of the amount mentioned in clauses ( a ) to( h ) above on the 8th floor slab of the said building being laid ; ( j ) balance of the purchase price after all the aforesaid payments have been made on delivery of possession of the said 2 top floor flats and production of completion certificate. 4. Completion 3 years from date." A copy of the letter recording that agreement is to be found annexed to the affidavit filed by the company in reply to the present petition and marked "No. 1". In addition to the sum of Rs. 10,000 which was paid by the company to the petitioners on the 21st of April, 1966, pursuant to the consent terms mentioned above, a further sum of Rs. 5,000 was adjusted towards the purchase price payable by the petitioners to the company in respect of the purchase of the top floor of the said building under construction in accordance with the terms recorded in the said letter dated 21st April, 1966. The petitioners appropriated the said sum of Rs. 15,000 towards the interest payable to them under the said consent terms dated 21st April, 1966. It is the case of the petitioners that the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re should be dismissed and might be stigmatized as a scandalous abuse of the process of the court. The said learned author, however, states a little earlier (at page 450) as follows : "A creditor who cannot obtain payment of his debt is entitled as between himself and the company ex debito justitiae to an order if he brings his case within the Act. He is not bound to give time. And, notwithstanding a voluntary winding-up, on proving his judgment and that it remains unsatisfied he will be so entitled". It may be mentioned that the expression ex debito justitiae connotes, according to Jowitt's Dictionary of English Law, a remedy to which the applicant is entitled as of right. It is further stated in the same entry in the said Dictionary that a remedy which may or may not be granted would be called discretionary. The latter statement is presumably intended to bring out the distinction between these two types of remedies. Dealing with the same subject, it is stated in Palmer's Company Precedents, 17th edition, part II, at pages 27, 28, that the mere omission of a company to comply with a statutory notice is not "neglect" within the meaning of the statute, if there is reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not the dispute was a bona fide dispute or, putting it in another way, whether or not there was some substantial ground for defending the action. In this connection, it may be mentioned that it has been laid down by a Division Bench of this court in the case of Bachharaj Factories Ltd. v. Hirjee Mills Ltd. [1955] 25 Comp. Cas. 227 ; 57 Bom. LR 378 that allegations about the mala fides of the petitioners are entirely irrelevant, because if the petitioners do make out a case for the winding-up of the company, the motive of the petitioners has nothing to do with the question whether an order for winding-up should be made or not, and the court cannot take into consideration "how wicked the petitioners were or how evil their actions had been". In his unreported decision dated 23/24th November, 1964, in Company Petition No. 59 of 1964, my brother Mody has stated that merely because the petitioners had two rights in law, viz ., to file a civil suit for the recovery of their dues or to file a winding-up petition against the company, and they chose the latter, it could not be said that the petitioners had acted mala fide to put improper pressure on the company. There was an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the same, and it is these two concepts which, in my opinion, have been mixed up by Mr. Bhabha in the course of his argument on the point. On the basis of the submission made by Mr. Bhabha, to which I have referred in the preceding paragraph, he has propounded the following consequential propositions : (1)If the action of the petitioner is not for the benefit of the general body of creditors, it must be held to be mala fide , and the winding-up petition should not be admitted ; (2)If the company is not commercially insolvent, a winding-up petition on the ground of non-compliance with a statutory notice under section 434(1)( a ) must be held to be mala fide , and the winding-up petition should not be admitted ; (3)If the petitioner could have filed a suit but has chosen to file a winding-up petition, the winding-up petition must be held to be mala fide , and should not be admitted, even if there be no bona fide dispute in regard to the debt on which the winding-up petition is founded; and (4)That the making of a winding-up order is discretionary and the court may decline to make the same, even if a case is made out which would fall within one of the grounds in sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in one or other of the grounds laid down in section 433 read with section 434 of the Companies Act. I have, therefore, no hesitation in rejecting this contention of Mr. Bhabha. The second contention of Mr. Bhabha, viz ,, that no winding-up order should be made unless the company is shown to be commercially insolvent, even though it may have neglected to comply with a statutory notice under section 434(1)( a ) of the Companies Act, is not only unsupported by authority but must be rejected in the face of the statutory provisions that are to be found in sections 433 and 434 of the Companies Act. If Mr. Bhabha's contention that commercial insolvency must be established in every case were to be accepted, it would lead to the logical absurdity that, though section 434 lays down six grounds on which a winding-up order could be made by the court, in the ultimate analysis, it boils down to only one ground, viz ., actual inability to pay debt laid down in clause ( e ) of section 433. Such a construction would render all other clauses of section 433 redundant. Moreover, if that were to be the construction to be placed upon section 434(1)( a ), there would be no reason why section 434(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r even in cases in which the petitioner is entitled to the same ex debito justitiae. In this connection, it may be pointed out that section 434(1)( a ) of the Companies Act does not merely lay down a presumption which can be rebutted, but uses the word "shall" and enacts a deeming provision which must come into play once the company neglects to pay the sum demanded by the statutory notice to which it refers. Mr. Bhabha also relied on the provisions of section 443(2) of the Companies Act. Sub-section (1) of that section lays down the various orders which the court can make at the hearing of a winding-up petition. Sub-section (2) thereof, however, enacts that where the petition is presented on the ground that it is just and equitable that the company should be wound up, which is the ground mentioned in section 433( f ), the court can refuse to make a winding-up order if it is of opinion that some other remedy was available to the petitioners and the petitioners were acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. Mr. Bhabha sought to contend that section 443(2), therefore, shows that the making of a winding-up order is a matter res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjusted in that manner. Another reason why the dispute sought to be raised by the company is not bona fide is that no such case was set up by the company in reply to the statutory notice dated 28th March, 1968, and the same appeared for the first time, and that too with some variation, in a suit which the company filed against the present petitioners in the Bombay City Civil Court on the 19th of April, 1968, for a permanent injunction restraining the present petitioners from taking any action pursuant to the statutory notice dated 28th March, 1968. It may be mentioned that the said suit itself is a perfectly frivolous suit filed merely in order to attempt to forestall and prevent the filing of the present winding-up petition. That is clear in view of the provisions of section 41( b ) of the Specific Relief Act, 1963, which prohibit a court from granting a perpetual injunction restraining a party from proceeding in a court not subordinate to that in which the suit claiming the injunction is filed. If there was any substance in the company's defence to the present petition that the amounts mentioned in the consent terms were not to be paid in cash, but were to be adjusted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being laid, and clause (j) proceeded to provide for the payment of the balance of the purchase price on delivery of possession of the two top floor flats, which would clearly indicate that it referred to the 9th floor. When 1 called for the relevant correspondence between the company and the municipality on the subject as to what were the number of floors that were to be constructed under the plans as sanctioned by the municipality at the date of the agreement, viz ., 21st April, 1966, it was clear that the company had applied for and the municipality had sanctioned plans only for the construction of a ground and 9 upper floors, and that that was what both parties had in mind at the date of the agreement, viz ., 21st April, 1966. The plan submitted by the company's architects, Messrs. M. G. Bhogle Co., with their letter dated 5th May, 1965, which was sanctioned on 6th May, 1965, actually shows the tenth upper floor as cancelled and the cancellation as duly signed on the said plan by the architects themselves. The said correspondence further shows that amended plans were submitted by the company's architects on 26th May, 1966, which would be after the date of the agreement betwe ..... 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