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TMI Blog2004 (8) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... as admitted and directions for advertisement were given. 2. The statutory notice dated 31st July, 2003 had been served on the appellant company for a debt of Rs. 52.33 lac approximately. The case of the respondent in the statutory notice as well as in the winding up petition was put very simply. According to them during the period October, 2001 and January, 2003 they had supplied the company diverse quantities of steel plates and H.R. Coils, and upon such supplies being made and received they also raised upon the company the corresponding bills from time to time, the bills representing separate supplies individually. In the petitioning creditor's chart the bills aggregate approximately Rs. 5.09 crore and they have given credit to the company for the payments made by it from time to time aggregating approximately Rs. 4.57 crore. 3. The petitioning creditor claimed the balance amount as price of goods sold and delivered. 4. The company filed an affidavit-in-opposition to which a reply was used by the petitioning creditor and thereafter the company used a supplementary affidavit also. Various documents of a very important nature were annexed to the supplementary affidavit. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the company had put forward the claim for damages as mentioned in its affidavit-in-opposition. 9. The petitioning creditor took, in that suit, the step of praying for an extension of time for filing a written statement and then on the 12th of August, 2003 delivered a counter-claim in its written statement, wherein it claimed the said identical amount of Rs. 52.33 lac and claimed for a decree. 10. Under Order 8 Rule 6 of the Code of Civil Procedure the counter-claim is almost identical to a plaint. 11. The position, therefore, is that both parties before the Company Court had approached the Suit Court for a determination of their rights and for reliefs before the judgment was delivered in the winding up petition. 12. In the judgment under appeal His Lordship has opined that there is not a single document produced by the company to show that there had been contemporaneous demands for supply by the company. The facts stated above will show that a large part of the financial year in question, namely 2002-03 had expired by January, 2003 when the supplies stopped. In fact the last date of supply and the last date of part payment is practically on the same date, i.e., 16/17.1.2003. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on affidavit evidence. 17. On this short but sufficient description of the basic facts of the case, the legal position and the different legal points might be discussed. The first point which arose before us was whether the petitioning creditor was entitled to pursue the remedy in winding up, without in any manner having given up its choice of making a counter-claim before the suit Court. We are of the clear opinion that there is no bar either in the Companies Act or in the general body of our Civil Code governing and regulating suits in Court, that a person is to put to a strict choice, Whether to pursue the remedy by way of a winding up petition or to pursue the remedy for recovery of its debt by way of a suit. 18. The Supreme Court has opined in the case of Harinagore Sugar Mills, reported at 1966(36) Company Cases 426 (noted and applied in 66 Company Cases. 634, the S.T.C. Case) that although winding up is not a normal alternative for the realisation of debts yet it is a form of equitable execution. 19. It is well-settled law that a winding up petition is a perfectly proper remedy for enforcing payment of a just debt. 20. Mr. Sen rightly submitted that the presentation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it so think fit, restrain the parties from proceeding with the same claim or claims in the Suit Court. In short, the Company Court can stay its own proceedings which are pending before it, or, in the alternative, restrain the parties who are appearing before it from proceeding elsewhere. We do emphasise that it is, in general, not proper that the same claim be tried in parallel proceedings. Only in the most extraordinary and rare cases which exhibit special features like difference of parties of a substantial type, might the Courts feel helpless and thus permit identical claims to be adjudicated in two different forums. The normal rule is that the same claim which is pending adjudication between the same parties or substantially the same parties should be first finally adjudicated upon in one forum, and while that process is going on the proceedings before the other forum should either be stayed or the parties injuncted in such manner as practically to cause a stay of the proceedings to be made in any event. 22. In this regard, the inherent powers of the Court for granting stay for just and reasonable causes like the above is well-settled and beyond any doubt or dispute now. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim, which has been found by the Company Court to be indisputable, in the Suit Court or practically before any other forum. The problem of whether to go up with the winding up application or with the suit, thus gets solved at the same time when the Company Court solves its primary and basic problem as to whether it should or should not entertain and receive the winding up application. 25. Even in the later stages of the proceeding, after it has assumed representative capacity after advertisement, the position is quite clear and there can be but only one course open. If the company ultimately happens to get-wound up and an order to that effect is passed all suits involving the company would automatically come within the purview of the Company Court and it might or might not grant leave under Section 446 of the Companies Act. If it has already opined about the genuine and indisputable nature of a debt owed by the company, needless to mention, it will, almost as a matter of course, refuse to give leave to any party to proceed with a suit involving that very same indisputable claim. 26. If, on the other hand the Company Court comes to the conclusion that the debt is not really of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the company's counter-claim, which happens really to be the claim in the suit. 32. The law as to how far the company has to go, to establish the bona fide nature of its defence, has been expounded in many cases. Some of the cases show what is not a bona fide defence and some other cases show what is a bona fide defence. A good starting point in this regard today in India would be the case of Meehalic, reported at . That dealt with a situation of a summary decree and in delivering the judgment for the Court, Beg, J. extracted five heads which were formulated by S.R. Das, J. (as His Lordship then was) in the case of Kiranmoyee, reported at 1945 (49) CWN 246 at page 253. We are of the opinion, that the situations of a Company Court admitting a winding up petition and of the Suit Court passing a summary decree are practically identical. Each has to decide whether an order causing final and irretrievable prejudice to the defendant or the company, as the case might be, is to be passed, there and then, and only upon affidavits. In the one case, the prejudice is caused by the passing of the decree and in the other case by giving directions for advertisements which affect in a ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which the Court calls for either full security or a large percentage of it, are not to be made by the Company Court. Security is an appropriate remedy which a plaintiff might obtain but which is not available to the petitioning creditor. 36. We are not concerned with the question of ordering any security here as, upon instructions, learned Counsel for the Company had submitted before the first Court that the company was not prepared to furnish security for the petitioning creditor's claim. We have not heard any contrary submission before us during the long arguments which have been made. 37. Our task is simply to see whether the company comes within the test quoted above, i.e. although it does not make out a positively good defence now, might it be able to make out one at the time of the trial of the suit ? 38. The case of Gordhandas, reported at also lays down, inter alia, in paragraph 21 the grounds upon which the company might be entitled to resist the admission of a winding up petition. It appears from here that if the company raises a defence in good faith, or has a defence in law which likely to succeed (fine distinctions of slightly likely or very likely are not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake the payment as claimed by the petitioning creditor, but it cannot be said that it has also neglected to pay it. There is no negligence in the company in not paying a debt, if it is withholding payment on a reasonable ground, such as a reasonsable counter-claim. The passage of the Master of the Rolls is fully applicable in India as Section 434(1)(a) raises the presumption of inability to pay debts only when the company has neglected to pay the sum. 44. The basic question accordingly is the company's suit a bogus suit or is there some reasonable ground, however thin, but still reasonable, on the basis of which the suit can be opined to be not really a bogus one ? 45. The arguments in favour of the suit being a bogus one have already been noted and acted upon by the learned Judge in the Court below. The company made no demands for the making up of the alleged short supply of goods, not a single document is disclosed. The company's damage suffered by reason of non-supply is similarly not substantiated by any documentary evidence. The rate of five rupees loss per kilogram is similarly without any documentary support. The plaintiff does not even mention that the company mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be absolutely bogus just yet. 47. On the basis of the above arguments, we have thought out the matter in the following way. Although this thought process is short, it has proved to be of crucial importance to us in our own minds. We had also spoken this out aloud so that we had the advantage of hearing learned Counsel on this aspect also. Our thought process is this. It is not possible for lawyers and Judges to predict, on the basis of documents and pleadings available to them, what exactly the oral evidence is going to be, when the dramatis personae in flesh and blood walk into the witness box one by one and answer question in examination and cross-examination. 48. It might be that one Lohriwalla for the Company will go into the box on behalf of the plaintiff and one Gupta will go into the box on behalf of the defendant/petitioning creditor. We might imagine Lohriwalla being cross-examined on the lack of documents. We might imagine Gupta sticking to his guns and saying that there was no commitment for any supply beyond the supplies actually made. But one is not entitled to make out the result of examination and cross-examination from out of his head. That result will only b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the bona fide nature of the defence is made on affidavits and although it is a mixed question of law and fact, it is primarily a fact finding and fact assessing procedure. That finding of fact is made by the Court not by examining witnesses or by looking at their demeanour and thus forming an opinion on their credibility, but by looking at affidavit evidence only. In such cases the Appeal Court re-assesses the fact itself and it can, perfectly properly, and in accordance with law, make a different assessment from the one made by the Trial Court. The Trial Court might find on affidavits that the defence is not bona fide. The Court of Appeal might find on the same affidavits that the defence is, or might be, bona fide. This is not like reversing the first Court on facts in a witness action. The Appeal Court is with the same advantage or disadvantage as the Trial Court itself and must, therefore, unhesitatingly perform the task of forming its own opinion whether the defence of the company is bona fide or mala fide. 52. The discretion of the Company Court in admitting a winding up petition is exercised after this bona fide nature is decided upon. It might be, that in a small ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res correction and clarification. It is quite a serious point in Company matters. 56. His Lordship proceeded to admit the company petition on the basis that His Lordship was forming a prima facie view as to whether the debt of the company was of an indisputable nature. However, various cases have already held, and His Lordship himself has also held, in other parts of the judgment, that for admission of a winding up petition, the debt owed by the company has to be indisputable, and not merely owing prima facie. In our considered opinion, something cannot both be prima facie as well as indisputable at the same time. 57. However, various decided authorities of our High Court have opined in Company Matters that the stage of admission of the winding up petition is a prima facie stage. There are dicta to the effect that the finding of the Company Court at this stage of admission is a prima facie finding. So, for example, in the case of Pandam Tea, the observations of Ghosh J., as His Lordship then was, in 45 Co. Cas. 67 at 72 and 75, and the affirming judgment of the Appeal Court, and its observation in 47 Co. Case 15 at page 19. 58. In the case of Bangasri Ice and Cold Storage, D.N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of admission. The admission stage view bound the company and the petitioning creditor finally, but not the others, and therefore not the Company Court also, when hearing the matter finally. 62. But this is an exclusive and sole prerogative of the Company Court only. This is so, because before no other Court the creditors or contributories of the company have a locus standi to make separate representations about the binding nature of a debt alleged to be owed by the company. The rule in Foss V. Harbottle would prevent such a separate representation. Therefore, until the company comes up for the decision whether it is to be wound up or not, and excepting during the process of that decision only, the final nature of the debt pronounced upon at the stage of admission of the winding up petition will bind the company for all purposes and before all forums and Courts. 63. The rights of the parties decided at the final hearing of the winding up petition primarily mean the right of the company to stay alive. This is not finally decided at the admission stage, but only a prima facie view is taken, that it might have to die. We would thus respectfully interpret the above dicta of G.K. Mitte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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