TMI Blog2004 (7) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent s advertisers and media managers to advertise the products of the respondent on various channels. Agreement for this purpose was entered into. Terms and conditions were recorded in the letter dated 29-7-1999. The advertisements were to be telecast on various channels at the rates approved by the respondent-company and the petitioner was to get its commission thereon. The petitioner was to raise invoices every month in the manner indicated in the agreement and the amount was payable within 30 days from the end of the month in which the work was completed except in the case of TV and Radio where bills were payable within 15 days. Interest of 18 per cent PA was provided for over due payments. Agreement was terminable by either party giving three months written notice. The petitioner-company carried out its obligations by advertising products of the respondent-company on various channels and raised invoices from time to time upon the respondent-company aggregating Rs. 2,21,18,618.50. The respondent made on account part payments from time to time aggregating to a sum of Rs. 1,13,82,211 and failed to clear the balance outstanding dues. The petitioner had called upon the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding the communications noted above, the learned Counsel for the petitioner submitted that letters dated 6-12-2000 and 16-2-2001 would show that the respondent-com- pany had admitted the liability. It was stated that although part payments were made, in the communication dated 16-2-2001 the respondent-company itself accepted the difficulties and promised to clear the outstanding by 15-5-2001 but no payment was made. His submission was that in reply dated 10-7-2001 to legal notice, bogey of seizure of respondent s records by the Income-tax Department was raised to contend that the respondent was unable to properly examine the demand raised by the petitioner as the income-tax raid was conducted on 10-1-2001 whereas liability to pay was admitted much prior thereto i.e. on 6-12-2000. It was further submitted that in the communication dated 23-8-2001 by the petitioner s counsel to the respondent s counsel, the petitioner had still offered the respondent to depute its authorised representative to visit petitioner s office for the purpose of taking inspection and photocopies of the statement of accounts with all contracts, bills, payment details and other papers but the respondent had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, raised by the respondent-company nor the violation of the terms of the agreement by the petitioner-company, alleged by the JTL in the reply filed in response to the winding up petition. I am, therefore,clearly of the view that the disputes sought now to be raised in response to the TISCO s claims for repayment are obvious afterthoughts pleaded in the reply and the contemporaneous correspondence and documents between the parties do not reflect the existence of a dispute or a violation of the terms of the agreement by the petitioner-company. In this respect, I am not taking into account the letter dated 23rd February, 1998, cited by the petitioner which was issued by a mediator between the parties as it was private correspondence and was termed as personal and confidential." 6. Learned Counsel for the respondent, on the other hand, argued that this petition was not even maintainable as there was no debt acknowledged; even exact amount payable was not determined; the petition was based on the statement of account only which could not be the basis of winding-up petition as the petitioner was required to substantiate the said statement of account with cogent evidence; the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercially insolvent-that is to say, that its assets are such, and its 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." 9. It was also held that if there was a bona fide dispute about the debt and the defence was a substantial one, the Court would not wind up the company. It was also pointed out that an order under clause ( e ) is discretionary. Thus even if two ingredients are established still in a given case Court could refuse order of winding-up if circumstances warranted that it was not proper or just or equitable to exercise such a discretion. What should be the approach of the court in dealing with such kind of winding-up petition is stated in paras 28 and 29 of the judgment and it would be apt to reproduce the same. "28. While dealing with the scope of section 433( e ) this Court had occasion to hold the following [at page 131 in Madhusudan Gordhandas [1971] 3 SCC 632 (the case relied on by learned Solicitor General)] (SCC pp. 638-39, paras 20-22). Two rules are well settled. First, if the debt is bona fide disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the case of the persons opposing the winding-up is reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding-up order is made. It is also well-settled that a winding-up order will not be made on a creditor s petition if it would not benefit him or the company s creditors generally. The grounds furnished by the creditors opposing the winding-up will have an important bearing on the reasonableness of the case. [ See P. J. Macrae Ltd., Re (1961) 1 All ER 302]. 29. It is beyond dispute that the machinery for winding-up will not be allowed to be utilized merely as a means for realising its debts due from a company. In Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami (1965) 35 Comp. Cas. 456 (SC) this Court quoted with approval the following passage from Buckley on the Companies Acts, (13th Edn., p. 451) : "It is well-settled that a winding-up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Som Distilleries Ltd. was Rs. 61.15 lakhs. Thus varying amounts are claimed by the petitioner in different communications which is sufficient to indicate that even the petitioner is not clear as to what definite amount is due from the respondent. Therefore, first ingredient of section 433( e ) itself, namely, there must be a "debt" i.e., pre-determined or definite sum of money payable by the respondent-company, remains unsubstantiated. 11. The matter does not rest here. Along with the petition the petitioner has filed Exhibit A giving "particulars of claim" wherein a sum of Rs. 1,28,49,659.50 is demanded stating that interest is added at the rate of 18% p.a. on Rs. 1,07,36,407.50. No details as to how this amount was payable in the form of statement of account etc. were annexed. When in reply to the petition respondent raised the objection that the petition was vague and there was no statement of account between the parties, in the rejoinder the petitioner filed his statement of account. However, that is the statement of account with no acceptance or acknowledgement by the respondent. The petition on the basis of such a statement of account may not be maintainable. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accounts were settled some amount is found payable by the respondent-company. The petitioner has filed its own statement of account which is disputed by the respondent and respondent has filed its own statement of account. However, it is not the function of this Court to minutely go into those accounts and undertake the exercise by determining the exact amount payable. Winding-up petition cannot be resorted to as a short cut method to make money claims. 14. The Supreme Court in the case of Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 456 held as under : "It is a well settled that a winding-up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the Court. At one time petitions founded on disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under R.S.C. order 14 to defend an action for debt does not preclude the court, when considering a petition for winding-up the company founded on the debt, from finding on the evidence that the debt was owing and that the company could not pay its debts. Great damage might obviously be done to a solvent company by a winding-up petition presented by an unreasonable creditor, whose debt the company are able and willing to pay if established, but to whom they bona fide believe they are not indebted. In such a case, on writ issued by the company, an injunction will be granted to restrain the creditor from presenting a petition. If a petition has been presented which the Court finds to be an abuse of process, the Court may on motion stay all proceedings under it or dismiss it . ****** The principle upon which the Court will forbear from deciding the dispute as to liability for immediate payment and making a winding-up order in case it decides it against the company, is that winding-up proceedings are not intended to be exploited as a normal alternative to the ordinary mode of debt-realisation, and that it is more convenient that claims should be investigated and decided in a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alter by the filing of such petition. If on the record sufficient material is placed to indicate that the company is a defunct company and the process is served in accordance with law, the Court may adopt the course of even admitting the petition and straightaway directing the advertisement of the company petition". 18. The Allahabad High Court in the case of Alliance Credit and Investments Ltd. v. Khaitan Hostombe Spinels Ltd. [1999] 95 Comp. Cas. 436 has held as under : "In view of the settled position of law it is to be seen whether the petitioner has pleaded the required facts in the present petition before me. I do not find the requisite pleadings in the petition. In paragraph 16 thereof, it has been stated that the company has failed and neglected to pay the balance amount of the lease rental. In paragraph 17 it has been stated that in view of the facts and circumstances stated hereinbefore, it is evident that the company is unable to pay its debts. There are no allegations that the company is commercially insolvent or that the substratum of the company is lost. From the perusal of the petition it would be apparent that the pleas taken therein pertain to section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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