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Soni Gulati & Co. Versus JHS Svendgaard Laboratories Limited

2015 (11) TMI 132 - HIMACHAL PRADESH HIGH COURT

Winding up of the respondent company seeked - Whether in the given facts and circumstances the respondent-Company is required to be wound up having failed and ignored to make payments of the outstanding amount being unable to pay its debts? - Held that:- In the matter of Vijay Industries Vs. NATL Technologies Limited [2008 (12) TMI 404 - SUPREME COURT OF INDIA] reiterated the prerequisites for winding up on the ground of inability to pay debt by holding that for invoking Sec.433(e) what is neces .....

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-mails and other correspondences have been exchanged between the parties, which would indicate that the petitioner had indeed raised a dispute with the respondent, but then the question arises as to whether the defense raised by the respondent is a bonafide one or not. After all, to raise a presumption of a company’s inability to pay its debts it is not enough merely to show that the company had omitted to pay the debt despite service of statutory notice, it must be further shown that the compan .....

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set out in their reply the reasons why the amount as claimed by the petitioner has not been paid to them and the contents thereof have already been reproduced (infra). The debt, therefore, is disputed and it cannot also be said that the respondent-Company has no genuine or substantial ground for refusal to pay or is unable to pay the same. The Company refusal to pay debt is as a result of bonafide dispute. The dispute is substantial and genuine and cannot be termed to be spurious, speculative, .....

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an the remedy of a petition for winding up be utilized to pressure a company which is commercially solvent to pay a debt which is bonafide disputed.

For the reasons aforesaid, no case for winding up of the respondent is made out. In the result, the company petition fails and is hereby dismissed, so also the pending application(s) if any. - Company Petition No. 8 of 2009. - Dated:- 7-5-2015 - Mr. Tarlok Singh Chauhan, J. For The Petitioner : Mr. K.D. Sood, Senior Advocate with Ms. Ranj .....

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ions of the Companies Act, 1956 and is limited by shares and is indebted to the petitioner for a Sum of ₹ 12,06, 580/- against Bill No. TS 5/09/06 dated 26.9.2006 for rendering services in connection with preparation of detailed project report for getting term loan and working capital limits sanctioned from Punjab National Bank. In addition, service tax or previous bill of ₹ 30,000/- and penalty for default in honouring the contract/backing out amounting to ₹ 1,50,000/- is also .....

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f the company. Even information supplied for onward submission to various authorities/Bank was through e-mail. 4. It is further averred that the petitioner had been doing his work properly but suddenly problem started when the Managing Director asked the petitioner to show EPS of more than ₹ 15/- on a share of ₹ 10/- on the balance sheet of September, 2005 on annualized basis ( as per MD this was the minimum EPS wanted by MB). 5. In addition to this, the petitioner pointed out that: .....

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. On 29th Nov. 2005 the petitioner got e-mail from MD asking to go slow with bank proposal, so as to match it with post public issue. The bank proposal at that time was in its final stage. On Dec. 27, 2005, petitioner got a call from MD and then an e-mail message that MD wants to change the auditors. Petitioner was offered assignment of internal audit and all work of IPO, but terms were not acceptable and so he declined the offer. 6. It is further averred that during February petitioner was aske .....

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f ₹ 25 crore with fee of 0.5% of sanctioned amount. In addition, it was agreed that the fee settled at ₹ 3 lacs would include ₹ 1.5 lacs as advance towards bank work (because the significant part this work has already been done and in Principal sanction obtained). The terms of payment were ₹ 50,000/- cheque dated 16.2.2006, ₹ 1,00,000/-cheque dated March, 2006, ₹ 2,00,000/- on clearance from Zonal office of the bank, ₹ 5,00,000/- on sanction and balance .....

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ce will also be payable as penalty by the respondent in case the loan is not taken or company backs out at any stage. 8. It is further averred that no dues certificate was issued to enable the new auditors to take the assignment, but the respondent was asked not to put any date on that, because the auditors may have to sign the balance sheet as on 31.12.2005 in back date, as prospectus etc. has already been finalized and circulated. The petitioner looking at the time spent on the job including p .....

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06. The petitioner handed over the bill for ₹ 12,06,580/- to the MD of the company on 26.9.2006 after final sanction of the loan. It is averred by the petitioner that during personal visit of the partner of petitioner to company office on 23rd, 25th September, 2006, the MD of the respondent promised the payment after he would be free from the public issue i.e. a week later but was asked to deliver the bill immediately since the MD was going to various cities for IPO conferences during thos .....

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e petitioner sent a letter to the MD advising him to inform the facts of the case to his solicitor enclosing some papers. 11. It is further averred that the partner of the petitioner got a telephone call from the elder brother of the MD of respondent Mr. Punit, who is settled in USA, advising not to take any legal step and assured that he will convince the MD to make the payment. During February, 2008 the partner of petitioner got a call from MD of respondent asking him to prepare Power Project .....

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the outstanding amount which had become due on 26.9.2009 alongwith penalty of ₹ 1,50,000/- and interest on the whole amount. It has been prayed that the respondent-company having its registered office at Trilokpur Road, Kheri (Kala-Amb), Tehsil Nahan, District Sirmaur, Himachal Pradesh be ordered to be wounded up being unable to pay its debts . 13. The respondent opposed the petition by filing its reply wherein preliminary objections regarding suppressing of material facts, malafide intent .....

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cument filed b y the petitioner appearing at page No.70 of their paper book wherein it has been stated by them on 11.2.2006 that they acted as the Statutory Auditors of the respondent company till 14.1.2005. Further, it has been declared therein by the petitioner that they have received all the claims/dues from respondent for whatever work done by them for the respondent and no dues/claim is pending from respondent in respect of any matter whatsoever, whether in their professional or personal ca .....

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7; 1,50,000/- from the respondent through three cheques for ₹ 50,000/- each dated 16.2.2006, 22.2.2006, and 25.3.2006 respectively towards advance for sanction. However, due to the inability of the petitioner to obtain the promised financial facility and loan and as a result of non availability of funds in time, respondent company suffered huge loss on account of Excise Duty loss as the land was already bought by the respondent company to set up their unit through internal resources but wa .....

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the same on completion of work and on payment of fees which also he is liable to return. K. That it is most respectfully submitted that petitioner failed inter alia to get the sanction of the financial facility and loan within the time as mutually agreed between the parties and thereby became liable to refund to the respondent the said entire advance received i.e. ₹ 1,50,000/- . This is evident and clear from the various documents filed by the petitioner with their paper book. It is submit .....

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in para-7 of the reply on merits the respondent has stated as thus:- It is most humbly submitted that respondent company had appointed their Merchant Bankers in August 2005 and filed RHP in SEBI by Feb, 2006. The petitioner was out of the whole IPO matter the day respondent appointed their Merchant Banker and EPS allegations of petitioner is nothing but a means to blackmail the respondent company. It is wrong and denied that the alleged work was done very fast as compared to the alleged expectat .....

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petitioner on 26.9.2006 as alleged or otherwise. It is denied that alleged last letter the petitioner got from the defendant regarding alleged work was on 12th Sept. 2006 as alleged or otherwise. On the other hand, no such alleged letter dated 12th Sept., 2006 was handed over by the respondent to the petitioner. It is wrong and denied that during alleged personal visit of the alleged partner of petitioner to company office on 23rd, 25th Sept., 2006 the MD of the defendant promised the alleged pa .....

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of at least the alleged amount which had become allegedly due on sanction as alleged or otherwise and it is also denied that alleged bill was submitted on 26th Sept. 2006 as alleged or otherwise. It is wrong and denied that it was requested to pay at least ₹ 5 lakhs out of ₹ 12 lakhs as alleged or otherwise. It is wrong and denied that on phone the MD of defendant informed that payment would be made in full on alleged documentation with bank as alleged or otherwise. It is wrong and .....

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s as alleged or otherwise. It is wrong and denied that the brother of the MD from USA, Mr. Punit called partner of the petitioner advising him not to take any legal step and assured that he would convince MD of defendant to make the alleged payment as alleged or otherwise. It is wrong and denied that during Feb. 2008 partner of the petitioner got a call from MD of defendant asking him to prepare alleged power project report to which petitioner asked to pay alleged previous dues first before alle .....

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on 26th Sept. 2006 and the limitation fall on 26.09.2009 as alleged or otherwise. It is most humbly submitted that contents of para D of the reply may also form part and parcel of the present para. All the other averments, as contained in the petition were denied. 15. The petitioner filed rejoinder, reiterating the submissions made in the petition and the contrary submissions made in the reply were denied. 16. This Court on 14.3.2014 had heard detailed arguments whereafter the judgment was rese .....

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o correspond with the petitioner for sanctioning of the loan from the Punjab National Bank. In this regard a copy of financial results for the quarter ended 30.6.2006 was given to the petitioner for onward submission to the Punjab National Bank. It is further alleged that the loan was sanctioned to the respondent-Company by the Punjab National Bank on 23.9.2006 and communication in this regard was duly sent by the bank to the respondent-Company and the public issue was subsequently opened on 26. .....

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petitioner failed to get the term loan sanctioned in a timely manner, the opening of the public issue got delayed. In order to avoid continuous and further delay in the opening of the public issue, the Company was constrained to seek sanction of the term loan from the Centurion Bank of Punjab Ltd. It was after obtaining this loan that the public issue was floated on 26.9.2006 and not due to any effort of the petitioner in attempting to get the term loan sanctioned from the Punjab National Bank. .....

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ail on Airtel/Blackberry as he was not in station in Delhi and had been frequently touring. Earlier an unsigned statement had been sent by the Company to the petitioner and it had been requested that the Managing Director of the Company send signed statements and documents for submission to the Punjab National Bank. 20. I have heard learned counsel for the parties and also gone through the records of the case carefully and meticulously. 21. The following point arises for determination:- Whether .....

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fide, it naturally follows that the company has declined to pay the claim on account of a dispute and not on account of its inability or negligence to pay the debts. The assumption that the company is unable to pay its debts can only be made in a situation where the debt is undisputed or an illusory and a sham defense is sought to be raised towards the liability. In both these cases, the company is liable to pay the debt and the fact that it has failed and neglected to pay the same despite a not .....

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ion 434(1) (a) of the Act. 23. Though number of judgments have been cited on either side, but in view of the comprehensive law laid down by the Hon ble Supreme Court, this Court shall be confining itself to the pronouncements made by the Hon ble Supreme Court from time to time. 24. The Hon ble Supreme Court in the matter of Amalgamated Commercial Traders (P) Ltd. Vs. A.C.K. Krishnaswami reported in 1965 (35) Company Cases 456 has held that a winding up petition is not a legitimate means of seeki .....

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a substantial one, the court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. See London and Paris Banking Corporation (1874) LR 19 Eq 444. Again, a petition for winding up by a creditor who claimed pauyment of an agreed sum for work done for the company when the company contended that the .....

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nding up order without requiring the creditor to quantify the debt precisely see Re. Tweeds Garages Ltd 1962 Ch 406. The principles 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 . 26. In the case of Pradeshiya Industrial and Investment Corporation of Uttar Pradesh Vs. North India Petro Chemic .....

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upreme Court has reiterated the principles relevant for passing winding up order by holding as follows:- 25. The rules as regards the disposal of winding-up petition based on disputed claims are thus stated by this Court in Madhsudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd (1971) 3 SCC 632. This Court has held that if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The principles on which the court acts are; [i] that t .....

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f notice by the creditor, the company which is indebted in a sum exceeding one lakh rupees then due, failed or neglected to pay the same within three weeks thereafter or to secure or compound for it to the reasonable satisfaction of the creditor. It has further been held that Section 433(e) does not state that the debt must be precisely a definite sum and it is not a requirement of law that the entire debt must be definite and certain. 29. The Hon ble Supreme Court in the case of IBA Health (Ind .....

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ompany Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bonafide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must .....

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judgments, the following broad legal principles can be deduced: 1. If the debt is bonafide disputed and the defense is a substantial one, the Court will not wind up the company. Conversely, if the plea of denial of debit is moonshine or a cloak, spurious, speculative, illusory or misconceived, the Court can exercise the discretion to order the company to be wound up. 2. A petition presented ostensibly for winding up order, but in reality to exert pressure to pay the bonafide disputed debt is lia .....

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discretionary. Even in a case where the companys liability to pay the debt was proved, order to wind up the company is not automatic. The Court will consider the wishes of shareholders and creditors and it may attach greater weight to the views of the creditors. 7. A winding up order will not be made on a creditors petition if it would not benefit him or the companys creditors generally and the grounds furnished by the creditors opposing winding up will have an impact on the reasonableness of th .....

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esheets as on 31.3.2006 from which it can safely be gathered that the Company was in a financially sound and in solvent condition. Therefore, the question would arise is as to whether the dispute between the parties is extant and not illusory. No doubt, numbers of e-mails and other correspondences have been exchanged between the parties, which would indicate that the petitioner had indeed raised a dispute with the respondent, but then the question arises as to whether the defense raised by the r .....

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that the examination of the company s insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bonafide dispute as to liability or whether it reflects an inability to pay, and in such a situation, solvency is relevant not as a separate ground. It was held as under: 24. The appellant Company raised a contention that it is commercially solvent and, in such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to re .....

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for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay it debts, the law should take its own c .....

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pay the debts. If the debt is an undisputedly owing, then it should be paid. If the company refuses to pay, without good reason, it should not be able to avoid the statutory demand by proving, at the statutory demand stage, that it is solvent. In other words, commercial solvency can be seen as relevant as to whether there was a dispute as to the debt, not as a ground in itself, that means it cannot be characterised as a stand alone ground. 33. It would be noticed here that the petitioner has nei .....

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