TMI Blog2005 (4) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... office and the factory at Rayannagar, Adoni, Kurnool District, Andhra Pradesh. The respondent-company had its issued, subscribed and paid-up capital of Rs. 39,71,200 divided into 3,97,120 equity shares of Rs. 10 each. The respondent-company was mainly engaged to carry on the business of purchase, sell and manufacture of cotton, yarn, etc. It is stated that during the course of its business the respondent-company approached the petitioner-firm for the supply of cotton and accordingly, the petitioner-firm supplied cotton bales under various invoices during the period from 11-4-1997 to 14-6-1997, for different considerations. The respondent-company made certain payments directly through demand drafts and certain payments through third parties. It is stated that after payment of Rs. 13,63,065 till 15-7-1997, Rs. 3,00,000 and Rs. 2,00,000 on 30-11-1997, through demand drafts, left an unpaid outstanding balance of Rs. 5,89,157 as on 30-11-1997. 3. The respondent-company when failed to pay the balance consideration towards the value of the goods received by it and also failed to honour its promise, the petitioner-firm addressed a letter dated 2-12-1997, bringing to its notice that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent, the dues to the petitioner-firm were neither adjusted nor discharged. It is further stated that as per the books of account as on 31-5-2002, the respondent-company is liable to pay an amount of Rs. 95,15,697 and the said amount is payable with interest at 24 per cent per annum as is prevalent in the business transactions. As the respondent-company did not pay the said amount, a statutory notice was issued on 10-7-2002. In response to the said notice the respondent-company issued a reply deliberately denying the contents of the notice with false and incorrect facts. It is stated that the petitioner-firm came to know that the respon- dent-company has lost its substratum and in view of the above circumstances, it is unable to pay its debts and has become a fit case for winding up. The petitioner also came to know that even the banks have filed suits before the Debt Recovery Tribunal for the recovery of its debt. Hence, it sought for an order of winding up. 4. A counter is filed on behalf of the respondent-company disputing and denying all the allegations. Though the relationship between the parties with reference to the transactions is admitted, however, it is dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the petitioner-firm alone did not adhere to the terms of the scheme and it neither fulfilled the terms in regard to the quality of supply, nor the timing of supply nor even the quantum of supply. While the other two companies for which the respondent was acting as conversion agent, did make the best use of the conversion facility available and at the end of the two years period as a conversion agent, not only the liabilities that were due to the said two companies were liquidated, but there was surplus funds generated which enable the respondent-company to offset the losses that were being caused due to the inactivity of the petitioner-firm. It is admitted that the mill again closed on 9-2-2001, which was reopened after negotiations. The claim of the petitioner that it paid Rs. 7,00,000 on account of the respondent-company is wholly incorrect and it was paid only towards the electrical charges for using the machinery for conversion. It is denied that as on 31-5-2002, the respondent-company was liable to pay Rs. 95,15,697 together with interest and stated that the said claim is baseless, untenable and barred by time. It is also stated that when statutory notice was issued on 10-7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the petitioner contended that there is a running account between the parties as there were continuous transactions of sale and purchase of the goods and also various agreements entered into between the parties where also the outstanding dues were confirmed and further the petitioner was also allowed by the respondent-company to use the machinery for conversion of the cotton into yarn and the petitioner was liable to pay the conversion charges, which were supposed to be adjusted by way of repayment of the outstanding dues. But, however, at the end of the accounting period, the respondent was liable to pay a sum of Rs. 95,15,697 along with interest. Hence, the present petition. 8. Learned counsel also contended that the respondent never raised the issue of limitation when letters were exchanged between the parries. It is only for the first time in the counter, the respondent had raised the issue that the claim of the petitioner is barred by limitation. According to learned counsel there is a running account between the parties up to 31-5-2002, therefore, the debt is not barred by limitation. 9. Learned counsel for the petitioner relied upon the decision of the Apex Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 30-11-2001; 21-12-2001 to 31-12-2001; 23-1-2002 to 31-1-2002; 1-2-2002 to 28-2-2002; and finally from 2-3-2002 to 23-3-2002. Therefore, it is contended by learned counsel that the so called running account between the parties, which is relied upon by the petitioner, is not a continuous running account and relied upon some broken statements. Apart from that it is stated that the statements which are relied upon by the petitioner are subject to reconciliation, which is admitted by PW1 that such reconciliation as stipulated under exhibit A54 was not done and in the absence of such reconciliation, it is not open to the petitioner to rely upon certain accounts maintained by itself to fix up the liability on the respondent. It is contended by learned counsel that the petitioner could not rely upon any letter alleged to have been sent by the respondent to the petitioner, admitting the liability. Alternatively, it is contended that even if the running account is taken into account, the said running account came to an end by 23-3-2002, and the same is beyond three years. Apart from that there is absolutely no communication or correspondence from the respondent where an admission has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner s sister concern M/s. Navyug Cotton Company. It was agreed that the petitioner shall supply cotton on account of first and second parties, i.e., on account of itself and on account of its sister-concern to run 25 frames which require 13 loads of cotton (each load of 50 bales) per month. The price and quality of the cotton will be mutually discussed and agreed between both the parties and the total yarn produced from the above cotton supplies will be sold in mutual consultation and the authorization for total payment shall be done in first party s favour, i.e., the petitioner-firm. As per the said agreement, certain transactions had taken place between the parties. The said agreement was replaced by another agreement dated 19-1-2000, under exhibit A54. As per this agreement, the petitioner-firm was permitted to avail of 20,000 spindles of the respondent-company to enable to produce yarn from out of the cotton and the rate for conversion payable by the petitioner to respondent is also stipulated. The said agreement also provides to recover the outstanding amounts from the mill and in the process, if any loss is caused to the company, the petitioner-firm shall make go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent for conversion of the cotton into yarn. In any case, it is stated that as there is no admission on the part of the respondent within a period of three years, the claim of liability is barred by limitation. 16. At this stage it would be appropriate to refer to the decisions relied upon by both the parties. 17. The petitioner relied upon the decision of the Apex Court in Food Corpn. of India v. Assam State Co-operative Marketing Consumer Federation Ltd. [2004] (1) Decisions Today (SC) 944 wherein Food Corpo-ration of India filed a suit against the respondent-State Co-operative Marketing and Consumers Federation for recovery of a sum of Rs. 79,82,105.44 on the ground that it paid an advance of Rs. 2 crores towards the supply of paddy, the price of which was supposed to be fixed by the Government of India, which was not fixed as on the date of the transaction. According to the appellant-Corporation, on account of the supplies made by the Federation, the Corporation was liable to pay a sum of Rs. 1,60,63,190 as against the advance of Rs. 2 crores, therefore, the Corporation is entitled for an amount of Rs. 39,36,810. Correspondence ensued between the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order. " (p.463) 20. Learned counsel also relied upon a decision of this court in Multimetals Ltd. v. Suryatronics (P.) Ltd. [1997] 89 Comp. Cas. 259 ; where a learned single Judge of this court observed in para 4 of the judgment as under (headnote): "It is well-settled that a company can be wound up only when it is proved that the debt claimed against it is ascertained, definite and undisputed and that the company has failed to pay the same and winding up cannot be ordered if there is a bona fide and substantial defense denying the liability. . . ." (p.261) 21. Further, the court while considering the provisions of section 61(2)( a ) of the Sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the sum demanded by the creditor was unreasonable, [ see London and Paris Banking Corporation, In re [1874] L.R. 19 Eq. 444]. 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, [ see Brighton Club and Norfolk Hotel Co. Ltd., In re [1865] 35 Beav. 204]. Where the debt is undisputed the court will not act upon a defense that the company has the ability to pay the debt but the company chooses not to pay that particular debt, [ see A Company, In re [1894] 94 S.J. 369]. Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely, [ see Tweeds Garages Ltd., In re [1962] 32 Comp. Cas. 795 (Ch. D)]. The principles on which the court acts are first that the defense of the company is in good faith and one of substance, secondly, the defense is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The copies of the accounts filed for broken periods show that the account continued till 23-3-2002, and thereafter there is only a letter of the petitioner-firm dated 9-5-2002 under which the petitioner claimed only a sum of Rs. 12,82,000 and not the amount of Rs. 95,15,697 which the petitioner had shown as liability in the statutory notice. Further, even during the alleged running account between the parties, there is no communication from the respondent admitting any liability. In addition, the agreements exhibits A54 and A59 stipulate that the alleged claims of the petitioner-firm are required reconciliation with the books of the respondent-company. PW1, who was examined on behalf of the petitioner-firm, has admitted that there was no reconciliation. When once there is no reconciliation of the claims of the petitioner with the books of the respondent-company, it is difficult to accept the claim of the petitioner that there is ascertained and determined debt. When there is no ascertained and determined debt, as held in various decisions referred to earlier, the petitioner cannot maintain a petition under section 433 of the Act alleging that the respondent failed or unable to pay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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