TMI Blog1990 (11) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... s, associations of persons, etc. They had various shareholdings and interests in all these concerns. Because certain disputes arose, they referred the dispute to arbitration, and, finally, settled the same With effect from July 1, 1985, as per the said agreement. The relevant clauses as far as this petition is concerned are the following: "19.1 The parties have made up their accounts and have determined the amount due by one group including their companies, firms, associations and trusts to the other group, their companies, firms, associations and trusts. Accordingly, as on June 30, 1985, a sum of Rs. 1,72,20,656 is payable by NRB/LRB group to SRB/DAB group in full and final settlement of all the inter se claims. Out of the above, NRB/ LRB group has already paid Rs. 11,50,000 after June 30, 1985, to SRB/ DAB group and has made further payments of Rs. 1,86,595 to other parties on account of SRB/DAB group, the payment whereof SRB/DAB group hereby acknowledges. Accordingly, the balance payable by NRB/LRB group in full and final settlement is Rs. 1,59,14,061. 19.2 It is agreed that the said amount shall be paid by Rajaram Bandekar (Sirigao) Mines Pvt. Ltd. (RBSMPL) to Bandekar Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the aforesaid amount of Rs. 1,72,20,656 takes into account all the amounts that may be found to be due by one group to the other including the amount that may be due by Bandekar Brothers Pvt. Ltd. to the ex-partners on account of the dissolution of the firm Rajaram Bandekar (Pale) Mines dissolved under a dissolution deed dated December 22, 1980, but excluding the amounts stated as payable/receivable under any other clause hereof. The parties shall not claim any further amounts from each other on whatsoever account". It is the case of the petitioner that the petitioner's group (DAB) and the other group of Suvarn (SRB) performed their obligations under the said family arrangement by making payments of their liabilities of Rs. 1,17,38,165 due to the other groups, namely, NRB/LRB. The petitioner says that the company was required to pay a sum of Rs. 16,00,000 to the petitioner, another sum of Rs. 16,00,000 to the said Suvarn R. Bandekar and a sum of Rs. 15,34,061 to Bandekar Brothers Pvt. Ltd. immediately on execution of the said agreement. However, the amount which was payable under the said agreement to the petitioner and to the said SRB group was not paid at the time of the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, and that, therefore, consequently, the company sought an order of injunction restraining the arbitrator who was made defendant No. 1 in the said suit, from proceeding in any manner with the arbitration proceedings. After filing the suit, the company made an application for a temporary injunction. That application was heard by the learned judge who by an order dated 6th June, 1989, dismissed the said application mainly holding that the company had miserably failed to prove that the agreement is not binding on the company and the company is not a party to the said agreement. The appeal filed against the same was also dismissed by the District Judge. Against the said judgment, the company then preferred Civil Revision Application No. 195 of 1989 in this court. The learned judge by his order dated 12th of January, 1990, upheld the order of the learned civil judge and dismissed the said revision application. In the order, the learned judge observed as follows: "However, as rightly pointed out by Mr. Chagla, it is rather difficult to accept the contention of Mr. Usgaonkar that the company could not have been made a party, as it is an admitted position that the same company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. R. Bandekar and Smt. Deepa A. Bandekar. The amount so payable is shown under 'current liabilities'. 3. Schedule 'K' Current liabilities Amount payable under family partition agreement Rs. 1,36,88,034". The petitioner, therefore, submits that this is an acknowledgment of liability on the part of the company, and, therefore, the company was bound to pay the said amount. Since the company has failed to do so despite a notice sent as provided under the law, this petition deserves to be admitted as the company is taking a totally dishonest stand not to pay the amount to the petitioner. The company has filed its reply to the said petition. The main contention of the company is that there is no privity between the petitioner and the company and that the company is not liable to pay any amount. The company also has pleaded that there is an arbitration clause under the said agreement, and that consequently, the remedy of winding up resorted to by the petitioner was misconceived. As regards the statement found in the balance-sheet, the company has taken a peculiar stand which it is better to set out in the same words as found at paragraph 4: "As to the ground of acknow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suit had had to be filed inasmuch as the claim perhaps would have been barred by the law of limitation, if no such suit had been filed. Here again, Mr. Zaiwalla did not contest this petition on that ground, as obviously, pendency of a civil suit is not, as such, a ground to oppose a winding-up petition. Therefore, the main contention of Mr. Zaiwalla is that the agreement is an agreement between the members of the company in their individual capacity and not an agreement binding on the company nor can it be said that the company is a party to such an agreement. On the question that this issue has been decided in earlier proceedings, Mr. Chagla has pointed out that there is an issue of estoppel as far as this company is concerned and till this decision is reversed it is not open to the company to contend that it is not a party to the said agreement nor can it contend that this agreement is not binding on the company. As against this, Mr. Zaiwalla submitted that the order is in an interlocutory proceeding and the court can, at best, be said to have taken a prima facie view of the matter. It will not make any difference that such an order might have been confirmed in all subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay 8, 1987, written by Narayan R. Bandekar itself shows that it is not written on behalf of the company but by Narayan for himself, perhaps representing his group. Therefore, by relying on this letter, it is not open to the petitioner to contend that the company has admitted any liability either by itself or through its managing director, the said Narayan R. Bandekar. Even with regard to the payment due by April 10, 1987, it was Mr. Narayan Bandekar who expressed his inability to pay the amount within that time and not the company. Mr. Zaiwalla, therefore, submitted that there is no acknowledgment of any liability as far as the correspondence is concerned. Mr. Zaiwalla further submitted that even though the balance-sheet contained a note as mentioned above, it cannot be said that that itself shows any liability for the company as such. He submitted that as the agreement itself shows, the dues are in respect of various companies, firms, trusts, belonging to various groups, and it is not that it is really a debt due and payable by the company as such. In this connection, he relied on clause 19.1 as set out above, which at once shows that it was not a liability or a debt due and pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ordinary course of business. One of the questions that arose before the learned single judge was whether under the agreement, which was again a compromise agreement amongst the members of the Doshi family, a managing director, without any express authority could give up large claims of the company and/or admit large claims against the company and/or create a tenancy on nominal rent of valuable premises of the company. The learned single judge held that these are not acts which could be performed by the managing director in the ordinary course of the business of the company. He then took note of the fact that under the Companies Act, the managing director is subject to the superintendence, control and direction of the board of directors and that he does not have all powers of management. He also observed that the managing director is only entrusted with such powers of management as are entrusted to him by virtue of an agreement or a resolution in a general meeting of the board of directors or such powers as are given by the memorandum and articles of association. It is on these facts that the learned judge held that the said agreement was not binding on the company. I am inclin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reon. As and when legal titles are transferred, the appropriated entries would be passed. ( c )As mentioned in the aforesaid family settlement and partition agreement dated March 11, 1987, reference to sub-para ( b ) above, the company has taken possession on June 30, 1985, of the mining machinery from Bandekar Brothers Pvt. Ltd. and Vassantram Metha and Co. Pvt. Ltd. for which the consideration payable is Rs. 24,75,719 but the legal title of the same is not yet transferred to the companies and hence the amount of Rs. 24,75,719 paid is shown under 'Loans and advances' and no depreciation has been charged thereon. The appropriate entries would be passed as and when the legal titles are transferred". What is the explanation for all these notings which clearly indicate the acceptance of assets and acknowledgment of liabilities? How did the company permit such notes to be appended to the balance-sheets? Mr. Chagla pointed out by referring to sections 210 to 227 of the Companies Act and submitted that no balance-sheet could have been presented without approval of the board of directors. I am inclined to agree with him. In any case, it is for the company to explain by g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company to raise such a contention across the Bar. If the company ,wanted to raise such a contention it ought to have properly raised the same in the affidavit-in-reply by setting out clearly all the relevant facts. The petitioner, then, would have dealt with the same in a proper manner. In my view, it is not a matter of law only. It is a matter of mixed question of fact and law. For aught we know, the receipt of the assets and acceptance of liability may not be a matter of business of the company. It may as well be a matter of management of the company with no application of principle relating to the doctrine of ultra vires . After arguments were over, the petition had been reserved for judgment as I had another connected matter before me arising on an application made under section 41 of the Arbitration Act in which the question was one of furnishing security to satisfy the claim of the petitioner. When that matter was taken up, the advocates agreed that without prejudice to the rights and contentions of the parties, the said Narayan R. Bandekar and other members of his group would furnish security to the satisfaction of the Special Officer of this court within a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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