TMI Blog2006 (11) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Co. KG. The said agreement was signed and executed in June, 1998 and expired by efflux of time on March 31, 2003. In C.P. No 191 of 2005, it is stated that R. K. Imports had placed two orders on the petitioner for purchase of homeopathic medicines in the month of October, 2003 and the supplies were made but payment as agreed upon, of euros 34,804.78 has not been made by R. K Imports. In C. P. No. 192 of 2005, it has been alleged that during the period May 19, 2003, onwards, German had placed as many as eight different supply orders for purchase of homeopathic medicines. These were duly supplied but payment of euros 1,428,483.64 has not been made. It is further stated that a credit note for euros 480.20 was issued because of over delivery of goods and after reducing this amount the total outstanding amount due payable by the German to the petitioner is euros 1,428,003.44. The petitioner has stated that procedure followed by the parties was that R. K. Imports and German would place orders for purchase of homeopathic medicines. On receipt of the order, the petitioner would send a letter of confirmation along with proforma invoice to the R. K. Imports or German as the case may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k done for the company when the company contended that the work had not been properly was not allowed (see Brighton Club and Norfolk Hotel Co. Ltd., In re [1865] 35 Beav 204). 21. Where the debt is undisputed the court will not act upon a defence 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 SJ 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 defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends." The above view of the Supreme Court has been re-affirmed in Pradeshiya Industrial and Investment Corporation of U. P. v. North India Petro Chemical Ltd. [1994] 79 Comp Cas 835 ; [1994] 3 SCC 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terprises [1987] 61 Comp Cas 504 (Cal). It has been held that a counterclaim can be a legitimate ground to deny payment of a debt due. However, counter-claim should be prima facie bona fide and not one which is frivolous or mala fide . In such cases, it cannot be said that the company, which is sought to be wound up on the ground of inability to pay debt, has neglected to pay in spite of receipt of statutory notice. A genuine counterclaim will constitute a reasonable excuse and a cause not to make a payment. Thus, even when defence by way of counter-claim is raised before the company court, the respondent-company can rebut the statutory presumption under section 434(1)( a ) of the Act by showing prima facie that the counter-claim raised is in good faith and one of substance and not mala fide . Secondly, the defence or the counter-claim is likely to succeed on the point of law and thirdly prima facie proof of facts on which the counterclaim is based should be adduced and filed before the court. If these conditions are satisfied, the company court will go no further and will not decide the dispute itself but leave it to the civil court. In this regard, I may also make refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the two respondent companies. The agreement dated June 24, 1998, had expired on March 31, 2003, but commission was paid on the purchases made thereafter from the petitioner. Even prior to the aforesaid agreement, commission was being paid on the sales made by the petitioner in terms of the earlier agreements) executed between the respondent companies and Dr. Willmar Schwabe GmbH and Co. KG. I have therefore while examining this counter-claim and other counter-claims presumed that the petitioner is bound by the agreement and correspondence exchanged between the respondent companies and the Schwabe group as a whole. The respondent companies have also relied upon e-mail dated July 5, 2002 and clause 8 of the agreement dated June 24, 1998 and submitted that by implication and on tacit understanding the agreement was extended for one more year, i.e. , up to March 31, 2004. These are questions of fact and prima facie evidence in support has been filed. This counter-claim cannot be rejected outright or regarded as a frivolous counter-claim made without any basis. The respondent companies have been working as agents for the affiliate of the petitioner for the last thirty years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that the agreement was extended up to March 31, 2004. For examining this counter-claim I shall presume that the stand of the respondent companies is correct that clause 9 of the agreement dated June 24, 1998, applies on termination and also on expiry by efflux of time and by tacit understanding the agreement was extended up to March 31, 2004. I shall also presume that the agreement was/is binding and applicable to the petitioner. The first letter written by the respondent companies for repurchase was on November 24, 2004, i.e. , after lapse of nearly eight months. Moreover, clause 9 as quoted above specifically provides that repurchase of stock would be limited to three months requirement and the other balance stock would have to be destroyed by the respondent companies at their own cost. Neither in the letters nor in the pleadings the respondent companies have pointed out or stated "the three-months requirement" as mentioned in clause 9 nor was any letter written within the three months period. The details furnished and mentioned in the letter dated December 8, 2004, only refers to the "closing stock available" with the respondent companies and not to the three-months requirem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout substance and not bona fide . The claim for labelling relating to year 2000 is clearly barred by limitation and the claim for labelling for the year 2004, is an afterthought. In the letter dated November 5, 2004, the respondent companies had only claimed for additional cost of labelling for the years 2000-01 and no claim was made for the year 2004. However, with regard to claim for the year 2001, the petitioner in the e-mail dated January 20, 2003, has admitted that some payment was agreed to be made but nothing was fully finalised. In these circumstances, I hold that the claim for labelling for the year 2001 at euros 75,000 appears to be a genuine counter-claim, which requires investigation and trial. However, there is no justification for the balance amount of the counter-claim and the same cannot be regarded as genuine and substantial. ( D ) Counter-claim of euros 9,32,500 towards compensation as a result of red alert issued by WHO on eye drops supplied by the petitioner : 24. The break-up of this counter-claim has been given in letter dated December 12, 2002 and reads as under : Sl No. Brief description of the efforts Amount claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons were asked in Parliament about the quality of the product and the entire spade work including getting necessary approval after testing from the authorities and reintroduction of the product was a result of time, effort and money devoted and spent by the respondent companies. From the break-up of the claim given above, it is apparent that the respondent companies have claimed compensation, on account of reputation, goodwill, harassment, etc., of euros 5,00,000, which is equal to about Rs. 3 crores. Out of pocket expenses for visit to authorities, etc., of euros 27500 has been separately claimed. In addition, Rs. 1.40 crores (euros 2,50,000) is also claimed on account of expenses and losses as it is alleged that the selling price was much lower than actual cost on reintroduction of the product. Fee of Rs. 57 lakhs (approx) (euros 1,00,000) has been claimed for getting "new CMS job done for the petitioner" and euros 55000 have been claimed under different heads for out-of-pocket expenses, for getting tests done and obtaining approvals. On the face of it the claims are inflated and excessive. No documents justifying the quantum claimed or in support thereof have been filed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rclaim of euros 9,75,000 has been made by the respondent-companies in this regard. The petitioner has not disputed that some of the medicines supplied in the year 2002-03 were manufactured in Czechoslovakia. However, it is stated that the goods were not misdescribed as under the provisions of the German law, the said goods were made in Germany. The claim made by the respondent companies is for mishandling or for defective supplies. Along with the reply the respondent companies have enclosed therewith only one letter dated September 9, 2004, which makes reference to an earlier letter dated April 20, 2004. It is apparent from these two letters that no claim in this regard was made in 2003 and/or at the time when they accepted the said goods and even when payments were made. Even the letter dated April 20, 2004, has not been placed on record by the respondent-companies. In letter dated September 9, 2004, no specific claim in this regard has been made. The respondent companies have filed a chart giving details of the supplies, the subject-matter of the counter-claim on the ground of "mis-description''. The chart filed shows that the goods were supplied between April, 2002 to Octo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r quality of the medicines so supplied, in spite of the alleged breach of condition by the petitioner, namely, medicines manufactured in Czechoslovakia and not in Germany, as a result of which the right to reject the goods stands waived. However, in view of the above provisions the respondent companies were entitled to set up a claim under section 59 against the seller for breach of warranty by claiming diminution or extinction of price. This was not done and full payments were made. This belated claim therefore deserves to be rejected as not substantial and bona fide . This claim is an afterthought as first letter, raising the counter-claim in this regard was made after substantive delay in September, 2004 and that too once disputes and differences between the parties had arisen. The respondent companies have also not placed on record any material evidence to show that the medicines supplied were sold at a lower price and/or any loss of profit was caused to them. ( F ) Damages/compensation for breach of contract : Under this heading I shall be examining the following counter-claims made by the respondent companies : ( i )Illegal termination/breach of contract euros 3,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and their shareholding has come down to 6 per cent. The said company was incorporated with a knowledge and tacit consent/understanding of the respondent companies. The respondent companies cannot now after indirectly participating in the incorporation, cry and shed tears. The respondent-companies were also aware that Dr. Willmer Schwabe India P. Ltd., had been incorporated for carrying on business of manufacturing, distributing, selling, buying, importing homeopathic and herbal medicines. It is stated that the directors of the respondent-companies have made investments and purchased shares in Dr. Willmer Schwabe India P. Ltd., of about Rs. 3 crores. It is stated that there was mutual understanding and agreement between Schwabe group and the shareholders of respondent-companies pursuant to which the aforesaid investment was made in the said joint venture. The affairs of Dr. Willmer Schwabe India P. Ltd., are not subject-matter of the present petition. In the reply, respondent companies have stated that Mr. Kamlesh Gupta and his family members reserve ther right to initiate appropriate proceedings under sections 397, 398 and 402 of the Act. Inter se disputes between the shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon. The said plea is liable to be rejected as no such objection has been taken in the pleadings. A. K. Sikri, J. in his order has held that a petition for winding up can be filed by an attorney but the supporting affidavit should be of a person mentioned under rule 21 of the Companies (Court) Rules, 1959, or exemption/permission from the court/Registrar for filing an affidavit by another person should be obtained. But it has been held that failure to comply with rule 21 is an irregularity which can be cured. The respondent companies have not taken this objection in the reply. They cannot be allowed to take this technical plea in the written submissions. If this plea had been taken in the pleadings the petitioner could have taken appropriate remedial action. In D.M. Deshpande v. Janardhan Kashinath Kadam [1998] 8 SCC 315, at page 318 it has been observed : "9. Learned counsel for the appellants has relied upon three decisions in support of his contention that a vague plea does not justify an issue being framed. In this connection, a reference was made to Ram Sarup Gupta v. Bishun Narain Inter College [1987] 2 SCC 555 where the court has held that all necessary an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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