TMI Blog2013 (11) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... Drive Systems SDN. BHD [2010 (9) TMI 229 - SUPREME COURT OF INDIA] - Decided against petitioner. - Co. P. No. 244 of 2012 - - - Dated:- 28-6-2013 - Aravind Kumar, J. For the Appellant : Ashok Haranahalli and Manmohan P.N.. For the Respondent : D.R. Ravishankar. ORDER:- Petitioner is seeking for winding up of the respondent company by invoking section 433(e) and (f) read with section 439 of the Companies Act, 1956, contending inter alia that it has failed to pay the admitted debt due to the petitioner and respondent Company has become commercially insolvent and as such, it is just and equitable to pass an order of winding up. 2. Heard the arguments of learned Advocates appearing for the parties namely, Sri. Ashok Haranahalli, Senior Counsel along with Sri. P.N. Manmohan, for petitioner and Sri. D.R. Ravishankar, Advocate for respondent. Perused the averments made in the company petition, annexures appended thereto and the statement of objections filed by the respondent. I have carefully bestowed my attention to the arguments advanced by the respective learned advocates in support of their case. 3. Petitioners contend that they entered into an agreement dated 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company petition except to the extent of express admission made therein. It is admitted by the respondent that there was an agreement entered into between the parties on 29.08.2010 whereunder petitioners had agreed to purchase the 100% stake holding of equity shares standing in the names of Sriyuths Manoj Rupani, Sidda Reddy, Venkataraghunatha Reddy, M/s. Madira Online Private Limited and Mahalakshmi Liquor Promoters Private Limited. It has been contended that the total consideration paid is Rs. 11 crores and not Rs. 8.5 crores. It is contended that without express consent of the respondent, petitioner had taken out paper publication even before payments which were required to be made in terms of the agreement was not paid by the petitioners, as a result of which timely settlement could not be brought about by the respondent with M/s. Tilak Nagar Industries Limited. Respondent contends that as a result of non-performance of the terms of the agreement by the petitioner led to the filing of Company Petition No.223/2011 by M/s.Tilak Nagar Industries Limited. It is also admitted that Rs. 2.50 crores was paid by petitioner to said M/s. Tilak Nagar Industries Limited but it is contend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for balance amount of Rs. 2.50 crores with interest and costs. Hence, the present company petition is filed seeking winding up since respondent does not dispute the debt and also in view of the fact that liabilities is far exceeding its total assets. He would also bring to the notice of the court the financial statement of the respondent company whereunder M/s.Tilak Nagar Industries Limited have been depicted as sundry debtors when it is a creditor. He would also draw the attention of the court to the balance sheet of the respondent company as at 14.12.2012 whereunder a note has been made that contingent liability towards godown rent charged from M/s. Tilak Nagar Industries Limited is for an amount of Rs. 2,64,98,953/ - which has been not disclosed to the petitioners at the time of entering into an agreement and in fact the said reflection in the financial statement is also factually erroneous. Hence it is contended that respondent company should be wound up as it would be just and equitable in the interest of the creditors. In support of his submission he relies upon the following judgments: 1. Madhusudan Gordhandas Co., v. Madhu Woollen Industries (P.) Ltd.,[1972] 42 Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards sale consideration in the agreement dated 29-8-2010. He contends that in the year 2010 itself respondent had informed the petitioner about the dues to M/s. Tilak Nagar Industries Limited i.e., on 22.12.2010 and as such petitioner cannot plead ignorance and in support of his submission he relies upon the following judgments: 1. Pradeshiya Ind. Inv. Corpn. of U.P. v. North India Petro Chemicals Ltd. [1994] 3 SCC 348 2. Mediquip Systems (P.) Ltd. v. Proxima Medicals System GMBH [2005] 7 SCC 42 3. IBA Health (India) (P.) Ltd. v. Info Drive Systems SDN. BHD [2010] 104 SCL 367. 7. Having heard the learned Advocates appearing for the parties and on perusal of the pleadings as well as the documents appended thereto and after bestowing my careful attention to the oral arguments advanced by the respective learned Advocates, I am of the considered view that following point would arise for my consideration: "Whether the petitioner has made out a case for winding up of the respondent-company under Section 433(e) and (f) read with section 439 of the Companies Act, 1956? OR Whether the defence set up by the respondent company is genuine and a bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing been filed by the petitioners the amount claimed as a debt in the present company petition cannot be divorced from the agreement dated 29.08.2010 and petitioners have to pursue their claim before Civil Court. It is also contended that consideration amount agreed to be paid under the agreement dated 29.08.2010 was not paid by the petitioners and as such the demand of the petitioners to hand over possession of the factory with all machineries, assets was not complied. It is further contended that what has been paid by petitioners was also belated and demand made by the respondent and its stake holders to pay the balance amount did not yield result and petitioners were adopting delay tactics and raising fresh demands from time to time and there is a bona fide dispute between the parties with regard to non-performance of contractual obligations and as such petitioners cannot pressurize the respondent to pay the disputed debt. 11. As to whether the debt claimed to be due by the petitioner is a bona fide dispute? and, whether defence set up by the respondent is a substantial one which requires examination is an issue required to be considered at the threshold; as also and whether m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lest there is danger of abuse of winding-up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding-up petition as a means of forcing the company to pay a bona fide disputed debt." "24. On a detailed analysis of the various terms and conditions incorporated in the deed of settlement as well as the compromise deed and the averments made by the parties, we are of the considered view that there is a bona fide dispute with regard to the amount of claim made by the respondent company in the company petition which is substantial in nature. The Company Court while exercising its powers under Sections 433 and 434 of the Companies Act, 1956 would not be in a position to decide who was at fault in not complying with the terms and conditions of the deed of settlement and the compromise deed which calls for detailed investigation of facts and examination of evidence and calls for interpretation of the various terms and conditions of the deed of settlement and the compromise entered into between the parties. A company petition cannot be pursued in respect of contingent debt unless the contingency has happene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition for winding up will be rejected. A mere assertion of a debt payable by the respondent company is not sufficient to attract the discretion of the Court in favour of the petitioner. The principle governing the exercise of Court's discretion is extracted in the decision of the Division Bench of this Court in Hegde Golay Limited v. State Bank of India. "A basic question arises, does the Court have a discretion under Section 222(e) and 223? The general rule is that where a petitioning creditor can prove that his debt is unpaid and the company is insolvent it is the duty of the Court to direct a winding up and the creditor is entitled to an order ex debito justitiae. On the other hand, it has been said that the latter is phrase which means no more than that in accordance with settled practice the Court can only exercise its discretion in one way namely by granting the order. These statements can be reconciled on the basis that although the matter is 'a complete and unfettered judicial discretion' the discretion is exercised in accordance with certain established principles, but the principles do not bind the Court in an all or nothing way. In accordance with these princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e be termed as a bona fide one? When is it to be treated as substantial? These questions are difficult of a precise answer in abstract. These are in the realm of facts and each case would churn out different answers. But the Court can refer to certain tests envisaged in similar circumstances, though not exactly under the provisions of the Companies Act. In the case of a suit filed under Order 37 of the Code of Civil Procedure, the defendant has to seek leave of the Court to defend against the claim. It has been held that if the defence could be honest and bona fide, leave should be granted; a decision whether the defence pleaded is bona fide or honest at the initial stage of a suit, can only be hazardous; but, still, the Court is called upon to apply its judicial mind on this question. Similarly is the situation when, the respondent company is asked to show cause against a winding up order, at the initial stage; the respondent, here, has to show cause as to why the petition filed should not be advertised; such an advertisement has adverse effects on the reputation of a company and therefore, it is given an opportunity to show cause against ordering the advertisement- (vide: The Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fide dispute, then this Court would be loath in exercising the said discretion for ordering winding up of the company. 16. In the background of above reference analysis of case law, the plea put forward by the petitioner and the defence set up by the respondent will have to be examined. 17. Undisputedly, petitioner and the respondent have entered into an agreement dated 29.08.2010 for purchase/sale of the respondent-company as a going concern and the total consideration amount agreed to between the parties is Rs. 23 Crores. Petitioners by issuing a legal notice have terminated the said agreement and have filed a suit for recovery of money advanced to the tune of Rs. 8,50,00,000/- together with interest and damages in O.S.No.2/2012 on the file of Principal District Sessions Judge, Chikkaballapur. Copy of the plaint has also been produced as Annexure-H to the present petition. A perusal of the same would indicate that plaintiffs therein i.e., petitioners herein have referred to the said agreement dated 29.08.2010 and all other details pertaining thereto in extenso. In this petition, petitioners are claiming the amount of Rs. 2.50 Crores paid to M/s.Tilak Nagar Industries. Fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced to Rs. 19.60 crores. Agreement time is further extended." Sd/ Manoj Rupani" This would also clearly indicate that payment of Rs. 2.50 crores is relatable to the agreement dated 29.08.2010. 20. The contention of respondent's counsel is that petitioners knew about the liability of the respondent - company towards M/s.Tilak Nagar Industries way back in 2010 itself and as such, they cannot feign ignorance. As to whether the petitioners were aware of this transaction when examined on the basis of the pleadings and the supporting documents produced thereto, it would emerge as under: (i) On 22.12.2012 by e-mail respondent -company has forwarded the details of its unsecured loans which is admitted by the petitioner in paragraph 10 of the plaint in O.S.No.2/2012. (ii) Petitioner claims that unsecured loans of respondent-company was more than the amount fixed for sale consideration and as such, the petitioners by e-mail sought for documents listed therein for verification as admitted in paragraph 10 of the plaint in O.S.No.2/2012. (iii) Petitioners also admit that by e-mail dated 24.06.2011 they had requested the respondent to furnish accounting ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 10.09.2012 - Annexure-L issued on behalf of respondent-company. In fact, at paragraph 12 in the reply notice (Annexure-L), it has been contended that petitioners were bound to remit Rs. 4.5 Crores on or before 22.09.2010 but had remitted only a sum of Rs. 2 Crores on 16.09.2010 and Rs. 1 Crore on 24.09.2010, which according to the respondent would indicate that petitioners were unable to fulfil their commitment and default had been committed by them from time to time. As against this claim, petitioners contend that details requisitioned by them relating to the financial transaction of the respondent - company was not being furnished, payments were withheld and they contend that payment of Rs. 2.5 crores to M/s.Tilak Nagar Industries itself acts as a mirror to depict the conduct of the respondent and as such, they have contended that there is no breach of the terms of contract on their part. This Court, would not be in a position to examine these aspects at this stage for the simple reason that petitioners have already filed a suit in O.S.No.2/2012 before the Civil Court and the matter is seized by the said Court. Any observation or finding if given on these contentious issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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