TMI Blog1989 (9) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... 87, but the company, nonetheless, continued to avail of the petitioners' services up to January 15, 1988. Various amounts were payable to the petitioners by the company as remuneration, fees and charges for technical services and also for reimbursement of expenses incurred by them for and on behalf of the company. The petitioners' "account current" with the company showed as on December 31, 1986, a credit balance in the petitioners' favour in the company's books of account of Rs. 20,20,882.80, a balance which was confirmed in writing by the company on May 13, 1987. However, the audit of the company's account reduced the balance in favour of the petitioners as on December 31, 1986, to Rs. 15,82,659.74, and this amount was incorporated in the company's balance-sheet for the year ending on December 31, 1986, as the company's liability towards the petitioners. Various other amounts became due and payable to the petitioners by the company, and as such, debit notes were issued to the company and debited by the petitioners in their books of account to the company's accounts. The petitioners repeatedly called upon the company to pay all the amounts due and payable to them, including, in pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany in its registered office, being also a gross abuse of the process of the court inasmuch as the real intention of the petitioners is to coerce the company to pay a non-existent or a bona fide disputed debt. Secondly, and on merits, the company's case is that it has filed a suit against the petitioners, being Civil Suit No. 114 of 1989/A, in the Court of the Civil Judge, Senior Division, Panaji, on May 23, 1989, i.e. , prior to the serving of the notice of the filing by the petitioners of the present winding-up petition. The company claimed in the said suit a sum of Rs. 2,82,53,436.81. Thirdly, on the petitioners' own showing, the amount as due on December 31, 1986, is on a running account which continued after the said date. Fourthly, there are two other accounts, viz. , "RSA account" (advance against sale of room rights) and "city ledger account" between the petitioners and the company, being an admitted position that an amount of Rs. 5 lakhs was paid by cheque dated November 5, 1987, by the petitioners to the company and credited in the said ledger account. Fifthly, there are two written agreements, but in addition, it has been orally agreed that regardless of such writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accounts reduced such liability to Rs. 15,82,659.74 and this reduced liability was incorporated in the company's balance-sheet for the year ending on December 31, 1986. But, in any event, the company was owing to the petitioners an amount of money much in excess of Rs. 5 lakhs which was not paid even after the statutory notice was served on it, and, therefore, the kind of defence raised by the company is not bona fide and is clearly untenable. The petitioners are, as such, entitled ex debito justitiae to an order winding up the company. Support was sought in this connection in State Bank of India v. Hegde and Golay Ltd. [1987] 62 Comp. Cas. 239 (Kar), T.P. Shau and Sons Pvt. Ltd., In re [1982] 52 Comp. Cas. 182 (Cal), Westinghouse Saxby Farmer Ltd., In re [1982] 52 Comp. Cas. 479 (Cal), Durgapur Projects Ltd., In re [1983] 53 Comp. Cas. 320 (Cal), United Western Bank Ltd., In re [1978] 48 Comp. Cas. 378 (Bom) and Madhusudan Gordhandas and Co. v. Madhu Woollen Industries [1972] 42 Comp. Cas. 125 ; AIR 1971 SC 2600. Learned counsel further urged that, in addition, the filing of a suit by the company against the petitioners for damages of over Rs. 2,80,00,000 cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed debt, but also rushed to the court and filed the petition knowing full well that it was defective, inasmuch as the same was filed even before the statutory notice under section 434 of the Companies Act was served on the company in its registered office. That apart, the alleged debt was in a running account which was not closed and which was continued up to January, 1989, it being also an admitted fact that there existed two more accounts between the parties which were not yet closed and settled. Equally, most symptomatic is that though the alleged confirmed amount of Rs. 20,20,882.80 was reduced to Rs. 15,82,659.74 after audit, the petitioners still claimed the payment of over rupees 30 lakhs, having filed the petition on April 28, 1989, for an amount allegedly due and payable to them as on December 31, 1986. Pertinent also is, as indicative of the pressure tactics of the petitioners, the letter dated January 31, 1989, written by them to the IFCI, New Delhi, stating that the company has failed to pay to the petitioners their dues which were in excess of Rs. 65 lakhs and that a winding-up notice under section 434 of the Companies Act had been already issued and further leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners. Such a suit is not at all barred by limitation, and it is based on the aforesaid breaches and the consequent accountability of the petitioners in the discharge of the same duties under the agreements. The defence is thus a good defence. Finally, as far as the solvency of the company is concerned, learned counsel invited my attention to what is averred in paragraphs 17 and 19 of the affidavit-in-reply. According to him, such solvency was not denied in the affidavit-in-rejoinder, and, therefore, the solvency of the company cannot be a subject of doubt. Therefore, according to Mr. Chagla, the ground of insolvency of the company is not available to the petitioners to get a winding up order as regards the company. It is well-settled that a winding up petition should not be allowed to be taken recourse of as a means to recover debts from a company. It is not a legitimate way to enforce payment of debts which are bona fide disputed by a company and cannot be used as a weapon to pressurise and coerce the company to make payments. This clear position of law also flows from the authorities relied upon at the Bar and thus, in truth, it is not necessary for me to advert to suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .'s case [1980] 50 Comp. Cas. 356 (Bom), Aggarwal J. held the view that after a creditor establishes that the debt is clear, valid in law, unimpeachable and undisputable, the creditor is entitled to a winding up order ex debito justitiae. But if the debt is disputed and the dispute is bona fide and genuine, no winding up order can be made. He clarified that neglect to pay is not equivalent to omission to pay for it requires that such omission is without reasonable cause or valid excuse. Applying now the law as above to the case at hand, can it be said that the defence raised by the company is frivolous and was taken up for the mere purpose of avoiding payment ? Is the alleged debt of the petitioners clear, valid in law and undisputable ? Or, is the defence genuine and bona fide ? In my considered opinion, the answers to these vital questions flow clearly from the uncontroverted facts. Such facts indicate that the defence is not frivolous but genuine, and in addition, it appears that the debt claimed is merely a running debt which is not yet crystallised. It is, no doubt, true that on May 13, 1987, a reconciliation statement of the petitioners' "account current" as on Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch after allowing about two months to pass, the statutory notice dated January 17, 1989, was issued. The company replied to this notice by its letter dated February 13, 1989, once again mentioning the raised disputes and alleging acts of commission and omission on the part of the petitioners which entitled them to make some claims for compensation. By their letter dated April 21, 1989, the petitioners denied the company's allegations, and then filed the present winding up petition on April 28, 1989, although admittedly, the notice had been sent to the registered office of the company only on the previous day, i.e. , on April 27, 1989. In turn, the company filed on May 23, 1989, the aforesaid suit for damages against the petitioners, the filing being before the company was served with the notice of this winding up petition. A careful analysis of the above uncontroverted facts discloses that not only the claimed amount of Rs. 20,20,882.80 as payable as on December 31, 1986, had not crystallised, but also that that was a running debt that had to be adjusted after the three accounts above referred to were closed and settled. It also reveals that the so called confirmation of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1979, in conjunction with the "personal policy of the petitioners", I may also say that the stand taken by the company in the suit that the effective management and control of the company's hotel was with the petitioners cannot be ruled out. As regards the alleged insolvency of the company, both the parties relied on reports made by chartered accountants. Unfortunately, those reports are contradictory in terms and without a deep analysis of the accounts of the company, such reports are not of much help to this court in order to adjudicate on the question as to whether or not the company is insolvent. Relevant, however, is the fact that the allegations made in paragraph 19 of the affidavit-in-reply as regards the profits made by the company after the agreement with the petitioners came to an end, the alleged payment made to the financial institutions, the credit it has in the market and that no suits were filed against it by any other creditor, had not been denied. Therefore, there is no material at all before me to hold the company as commercially insolvent. Before parting with this case, I may also say that the conduct of the petitioners gives strong support to Mr. Chagla's co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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