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TMI Blog2010 (1) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondent as a promoter of M/s. Indian Acrylics Limited (for brevity "IAL") approached it for obtaining finance for setting up of IAL. A tripartite agreement dated 1-8-1989 was entered into between the appellant-company, IAL and R.K. Garg and respondent-company, whereby the appellant agreed to purchase 10 lakh shares of IAL. It was agreed that at any time after the expiry of 36 months but not later than 39 months unless mutually agreed upon, from the date of allotment to buy back the said shares at a price which was to be of the face value of the shares and at a return calculated at the face value of the shares as detailed in the agreement for every financial year as per its terms and conditions. In the event of not accepting either wholly or in part the offer for sale of shares within a period of 90 days from the receipt of offer, the appellant was free to sell such offered shares to the respondent and if not accepted by it to any other person. 10 lakh shares of IAL were stated to have been allotted to the appellant on 16-4-1990. 3. The case of appellant-company further proceeds that it offered the shares to the respondent within the time as envisaged in the agreement. But th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed without taking recourse to the arbitration clause, so it is liable to be dismissed. 6. On merits, the case set up by the respondent-company was that there was no express undertaking that the Company was to buy-back the said shares. The shares were only to be offered to the promoters and in case they did not buy the shares, the appellant-Company was free to sell the same to any other person. In fact, the shares were never offered to the promoters for buying back. In case of lower price by sale of shares, the promoters were to make good the difference of the amount as described in the agreement. However, it was denied that the respondent is commercially insolvent and unable to pay its debts. According to the respondent, during the year 1994, it earned a profit of more than five crores. The winding up petition was stated to be pressure tactics to force the respondent to buy 10 lakh shares of IAL. It will not be out of place to mention here that the respondent has stoutly denied all other allegations contained in the petition and prayed for its dismissal. 7. Controverting the allegations contained in the reply and reiterating the contents of the petition, the appellant filed the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, in this regard, learned counsel for the appellant-company contended with some amount of vehemence that it stands proved on record that although as per agreement (Annexure P1), the respondent-company admitted the liability and agreed to personal guarantee of R.K. Garg and corporate guarantee of M/s. Steel Strips Alloys Limited for the outstanding amount, still the respondent-Company did not make the payment of the indicated amount due to it. It is, therefore, argued that since the respondent did not pay the amount to the appellant, so it is liable to be wound up. In support of his contention, he has placed reliance on the judgment of Hon'ble Supreme Court of India in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. AIR 1971 SC 2600 and judgment of this Court in Vivek Sarin v. State of Haryana 1998 (2) RCR 179. 15. In Madhusudan Gordhandas & Co.'s case (supra), it was observed by Hon'ble Apex Court that where 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. But at the same time, it was ruled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istence of the Company will cost immense prejudice to all concerned. As the order of winding up would amount to death penalty of juristic person/legal entity, therefore, it should be made in a rarest of the rare case. The discretion to wind up should not be exercised when the respondent-company is a running company. Similarly, a debt must be determined or definite sum of money payable immediately or at the future date. A contingent or conditional liability is not a debt unless contingency or the condition had already happened. Reliance in this regard can be placed upon the judgment of Hon'ble Supreme Court in Mediqup Systems (P.) Ltd. v. Proxima Medical System GMBH [2005] 59 SCL 255 and this Court in Ambala Bus Syndicate (P.) Ltd. v. Bala Financiers (P.) Ltd. [1986] 59 Comp. Cas. 838 . 20. As is evident from the record that there was no definite and quantified debt and the appellant-company is claiming the speculative amount on the basis of agreement dated 1-8-1989 (Annexure P1) between the IAL, R.K. Garg and S.A. Builders Limited co-jointly called as the promoters. The fact remains is that no actual money was advanced and only 10 lakh equity shares of Rs. 10 each were given to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. Ordered accordingly." 22. Therefore, in this manner, the appeal was again listed for re-hearing. In compliance with the order of this Court, Nitin V. Lokhande filed an affidavit on behalf of the appellant-company depicting that during the pendency of the appeal, original Company M/s. S.A. Builders has been merged with M/s. Steel Strips Alloys Limited. Thereafter, name of M/s. Steel Strips Alloys Limited was changed to M/s. SAB Industries. It has also been specifically mentioned in it that in view of the provisions of clause 6.5 of the agreement (Annexure P1), the appellant had sold the shares in question in the year 2002-03 for a sum of Rs. 77,66,061. No doubt, in a subsequent affidavit dated 23-1-2009, it was claimed that the shares were sold for Rs. 36,26,105 instead of Rs. 77,66,061. 23. Be that as it may, the fact remains is that the appellant-Company had already sold 10 lakhs equity shares of IAL and the appellant itself is not sure about the amount owed to it by the respondent-Company. Such disputed amount cannot be determined in summary winding up proceedings. 24. On the contrary, proceeding on this premise, the argument of learned counsel that the amount is not ascer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the agreement." Therefore, although the appellant-company was free to sell the shares in question to any person after a stipulated period, but in the event of any such dispute having arisen between the parties regarding settlement of price under buy-back article it was open to the appellant to refer the dispute to the arbitrators by invoking the arbitration clause for the purpose of determination of the exact amount. But instead of invoking the arbitration clause, the appellant-company straightway rushed to this Court for winding up proceedings against respondent-company. 27. Thus, it would be seen that if the entire material emanating from the record as discussed here-in-above is put together, then, the irresistible conclusion is, not only that the appellant-Company has miserably failed to prove the definite, quantified debt and ascertainable amount but also did not substantiate the fact that the respondent-company is unable to pay the disputed amount. On the other hand, it stands established on record that the claim of the appellant-company is based on speculative consideration and the respondent-Company (M/s. S.A.B. Industries), is running/going and profit earning company h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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