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TMI Blog2012 (6) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... d disputed the claim made in the instant petition and have put forth their grounds of defence. The petitioner has filed his rejoinder. 2. Heard Sri Srinivas Raghavan, learned counsel for Indus Law on behalf of the petitioner and Sri Aravind Kamath, learned counsel for ALM'T Legal appearing on behalf of respondents. Perused the materials on record. 3. The undisputed facts are that the respondent company which was incorporated on 29.12.2006 as 'Paprikaas Interactive Services Private Limited' has thereafter changed its name to the one indicated in the cause title. The respondent company is engaged in the business of providing services to global animation, video games, visual, effects and its objects and services are detailed in the Memorandum and Articles of Association. The petitioner was a Director of the respondent Company and also employed as Chief Executive Officer (CEO) in the respondent company. The terms of employment was agreed under an agreement dated 13.02.2007 which was for the initial period of three years. On mutual terms, the employment as CEO was terminated during September 2009 i.e., before the completion of the initial period of three years. Thereafter the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the proposition that the pendency of a suit is no bar to the maintainability of winding up petition when the company fails to show that the debt is bona fide disputed. On the other hand the learned counsel for the respondent relied on the decision of the Hon'ble Supreme Court in the Case of Pradeshiya Industrial & Investment Corpn. v. North India Petrochemicals Ltd. [1994] 3 SCC 348 wherein it is held as hereunder;- "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. 45 I): '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 stigmatised as a scandalous abuse of the process of the court'.' 30. Examined in the light of the above, we are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Re. A company 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 Re. Tweeds Garages Ltd. 1962 Ch. 406). 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." This decision in fact has been referred to in the subsequent decision rendered by the Hon'ble Supreme Court relied on by the learned counsel for the respondent: in the case IBA Health India (P.) Ltd. v. Info-Drive Systems Sdn.Bhd [2010] 8 taxmann.com 1/104 SCL 367 wherein it is held as hereunder; "The question that 'arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be "neglect to pay" within the meaning of 'Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated and non-payment of the amount of such a bona fide disputed debt cannot be termed as 'neglect to pay' so as to incur the liability under Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956. 8. Therefore, the settled position of law is that the dispute would be substantial and genuine, if it is bona fide and not spurious, speculative, illusory or misconceived, it is also the position that the company Court at that stage is not expected to hold a full trial of the matter and it must decide whether the grounds appear to be substantial. In my view, one of the surest ways to determine that aspect would be to notice whether such defence had been an issue between the parties even before the matter ended up in the Company Court. In any event it should be disputed before issue of statutory notice and not the one raised for the first time when the statutory notice is issued or in the objection statement filed befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clause 4 therein refers to the Compensation and payment. The retainership of the petitioner as Consultant is indicated at Rs. 11,62,500/- per month i.e., equivalent to USD 25000 which would amount to USD 900,000 in all since the Term agreed in clause-6 is for three years from 01.01.2010 to 31.12.2012 unless terminated in accordance with the provisions of the agreement- Clause 7, more particularly 7.1 to 7.3 regulates the Termination of agreement by the Company and the consequences flowing therefrom. The learned counsel for the petitioner therefore, placed heavy reliance on the same to contend that at best Commission may be discontinued which is also disputed and therefore, the same is claimed in Arbitration. It is however his vehement contention that the compensation/retainership fee agreed is to be paid for the entire period of three years notwithstanding the termination of agreement and as such the balance of USD 700,000 should be treated as admittedly due. It is argued that the only exception is if there is violation of Clause 12 by the petitioner which is not the case herein. Even if the alleged violation of non-compete/solicit as contended by the respondent company is taken, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be prima facie accepted since the petitioner was doing similar work for the respondent company as CEO and also as Director. Thereafter the agreement was entered which included sizeable compensation and commission for the services that would be provided to the respondent company. Keeping this in view, similar business restraint was imposed during the period of contract. The petitioner signed the contract agreeing to such condition and has also received the compensation till August 2010. 13. The petitioner in his rejoinder has no doubt sought to contend that the respondent company was aware that the petitioner had promoted 'Protein Entertainment' and that he was desirous of developing an animation feature film but did not raise objection earlier. As noticed it is also contended by the learned counsel for the petitioner that the petitioner had produced a movie which is not the business of the respondent company. When it is clear that the petitioner is not doing it independently but is doing with 'Pelagius Entertainment', it does not stand explained at this stage as to why such project could not be done with the respondent company and he had chosen a competitor of the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X
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