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M/s Walchandnagar Industries Limited Versus M/s JUD Cement Ltd.

2016 (4) TMI 966 - MEGHALAYA HIGH COURT

Winding up petition - Held that:- This Court has given anxious consideration to the case put up by the parties and is of the considered view that there is bona fide dispute as to the debts payable by the respondent-company. The defence of the respondent-company is a substantial one. It is now well settled that machinery for winding up will not be allowed to utilize merely as a means for realizing its debts due from a company. Therefore, there is no justification whatsoever for allowing the prese .....

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ion under Sections 433, 434 and 439 of the Companies Act, 1956 are:- (a) That M/S JUD Cement Ltd., the Respondent-Company be wound up by the order of the Court under the provisions of Section 433 (e) read with Section 433 (f) of the Companies Act, 1956. (b) Official Liquidator attached to this Hon ble High Court, be appointed as Liquidator of the Company with all powers under the provisions of the Companies Act, 1956, with powers to take charge and possession of the assets, properties, books and .....

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s a Private Company Limited. The respondent-company was earlier known as JUD Cements Private Limited. The registered office of the respondent-company is situated at GS Road, Hanumanbux Umadut, Shillong, Meghalaya, India-793001. The respondent-company was on or before about 15.04.2008 converted into a Public Limited Company and accordingly, a fresh certificate of Incorporation dated 15.04.2008 was issued by Registrar of Companies. As such, it is now a Public Limited Company and is known as M/s JU .....

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struction and building materials, all kinds of by-products of cement and limestone, calcium carbide, pozzolana, blast furnace, silica, precipitated lime and other products based on lime stone. 5. The facts of the petitioner s case leading to the filing of this application is briefly recapitulated. A contract was signed on 15.10.2006 between the petitioner and the respondent-company for supply of mechanical, electrical and instrumentation equipments, for providing of technical assistance, supervi .....

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31.10.2008. The respondent-company and the petitioner acted on this contract and the petitioner discharged all its liabilities as per the said contract dated 31.10.2008. Thereafter, the accounts were reconciled first on 10.09.2009 between the petitioner and the respondent-company, whereby a sum of ₹ 3,83,98,224/- (Rupees three crores eighty three lakhs, ninety eight thousand two hundred twenty four only) was found due and payable to the petitioner by the respondent-company. After signing .....

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the time of signing of Reconciliation statement. Against one of the said cheques of ₹ 50,00,000/- (Rupees fifty lakhs only), the petitioner received an amount of ₹ 25,00,000/- (Rupees twenty five lakhs only) on 01.10.2009 and ₹ 25,00,000/- (Rupees twenty five lakhs only) on 31.10.2009 from the respondent-company. However, the said two cheques of ₹ 50,00,000/- (Rupees fifty lakhs only) were dishonoured. Thus, the petitioner filed a case under Section 138 of the Negotiable .....

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l repayment of ₹ 1,80,07,277/- (Rupees one crore eighty lakhs seven thousand two hundred seventy seven only) apart from Rs. ₹ 50,00,000/- (Rupees fifty lakhs only), out of the total legally payable debt and liability of ₹ 3,83,98,224/- (Rupees three crores eighty three lakhs ninety eight thousand two hundred twenty four only). On 13.04.2011, the parties again met to reconcile the amount and the revised reconciliation statement and signed on 13.04.2011 by both the parties and a .....

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eturned unpaid. Thereafter, the proceeding under Section 138 of the Negotiable Instruments Act, 1881 was initiated and the same was pending. Time and again, the petitioner made telephone calls and sent reminders asking the respondent-company to make the payment of the said amount of ₹ 1,54,11,576/- (Rupees one crore fifty four lakhs eleven thousand five hundred seventy six only), but the respondent-company did not pay any heed to the same. Therefore, the respondent-company is liable and re .....

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f ₹ 79,25,213.56/- (Rupees seventy nine lakhs twenty five thousand two hundred thirteen and fifty six paise only) as interest calculated at the rate of 12% per annum within three weeks as per Section 434 (1)(a) of the Companies Act, 1956. The said notice was sent by registered post with AD at the registered office of the respondent-company and the same was duly delivered at and received by the respondent-company. However, the respondent-company did not respond to the same. However, through .....

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-1), Near ABC, Bhangagarh, G.S. Road, Guwahati 781 005 Dear Sirs, Under the instructions of my client M/s Walchandnagar industries Limited having its Registered Office at 3 Walchand Terraces, Tardeo Road, Mumbai 400 034 and Chief place of business at Walchand House 167A, 2/8 + 2/9 Karve Road, Kothrud, Pune-411 038, I have to give you this notice under section 434 (1)(a) of the Companies Act, 1956 and address as under. 1. That you had entered in to a contract dated 15th October, 2006, with my cli .....

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conciled first on 10-09-2009 and then on 13-04-2011, and a sum of ₹ 1,54,11,576/- (Rupees One crore Fifty Four Lakhs Eleven Thousand Five Hundred Seventy Six only) was found due and payable to my clients. That you accepted this reconciliation in writing and promised to pay the dues in due course. Accordingly you issued six post dated cheques to clear part of this due and payable debt. That these cheques issued by you have been returned dishonoured and proceedings under section 138 of the N .....

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t has sent you reminders, telephones etc. for the payment of said sum of ₹ 1,54,11,576/- (Rupees One crore Fifty Four Lakhs Eleven Thousand Five Hundred Seventy Six only) but you have not paid any heed to it and at present you are liable and responsible to pay the said sum of ₹ 1,54,11,576/- (Rupees One crore Fifty Four Lakhs Eleven Thousand Five Hundred Seventy Six only). 5. However after continuous follow up and reminders from my client you have failed and neglected to pay and clea .....

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pon you to pay a sum of Rs. ₹ 1,54,11,576/- (Rupees One crore Fifty Four Lakhs Eleven Thousand Five Hundred Seventy Six only) along with a sum of ₹ 79,25,213.56 as interest @12%, calculated up to 31-05-2012 and a sum of ₹ 10,000/- (Rupees Ten Thousand Only) towards legal cost, all totaling to ₹ 2,33,46,789.56 (Rupees Two Crores, Thirty Three Lacs, Forty Six Thousand Seven Hundred Eighty Nine and Paise Fifty six only) within three weeks as per section 434(1) (a) of the Com .....

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(B-1), Near ABC Bhangagarh, G.S. Road, Guwahati 781 005. 2. Mr. Akshat Jhunjhunwala-Director, C/o: M/s JUD Cements Ltd. Anil Plaza 4th Floor (B-1), Near ABC Bhangagarh, G.S. Road, Guwahati 781 005. 8. The respondent-company is unable to pay its creditors, the admitted debts due and payable, despite statutorily demanded by the petitioner within the period mentioned in the said notice. Thus, the respondent-company is commercially insolvent. Therefore, it is just, fit and equitable that the respond .....

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holding the statutory meeting; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; (f) if the Tribunal is of opinion that it is just and equitable that the company should be wound up; (g) if the company has made a default in filing with t .....

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of a company under clause (h) on application made by the Central Government or a State Government.] 434. Company when deemed unable to pay its debts.- (1) A company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding [one lakh rupee] then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company t .....

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to pay its debts, the [Tribunal] shall take into account the contingent and prospective liabilities of the company. (2) The demand referred to in clause (a) of sub- section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm. 439. Provisions as to applications for winding up.- (1) An applicat .....

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he Central Government in that behalf. [(g) in a case falling under clause (h) of section 433, by the Central Government or a State Government.] (2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors within the meaning of clause (b) of sub- section (1). (3) A contributory shall be entitled .....

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e company, below two; or (b) the shares in respect of which he is a contributory, or some of them, either were originally allotted to him or have been held by him, and registered in his name, for at least six months during the eighteen months immediately before the commencement of the winding up, or have devolved on him through the death of a former holder. (5) Except in the case where he is authorised in pursuance of clause (f) of sub- section (1), the Registrar shall be entitled to present a p .....

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ay its debts: Provided further that the Registrar shall obtain the previous sanction of the Central Government to the presentation of the petition on any of the grounds aforesaid. (6) The Central Government shall not accord its sanction in pursuance of the foregoing proviso, unless the company has first been afforded an opportunity of making its representations, if any. (7) A petition for winding up a company on the ground specified in clause (b) of section 433 shall not be presented- (a) except .....

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r winding up the company; and (b) until such security for costs has been given as the [Tribunal) thinks reasonable. 9. Hence, the present application for the prayers mentioned aforesaid. 10. The respondent-company had filed affidavit-in-opposition dated 23.04.2014 wherein, raising preliminary objection vis-à-vis maintainability of the present application for winding up of the respondent-company under Sections 433, 434 and 439 of the Companies Act, 1956. Para 5A of the affidavit-in-opposit .....

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rticle 16 of the contract dated 15.10.2006 entered into between the Parties herein which provides for arbitration and mandates the Parties to refer to a arbitrator in case of any disputes, controversy or claim arising out of or in connection with this contract, and or its break, termination and validity will be finally settled by arbitration to be conducted in accordance with the Rules of Indian Arbitration Act, 1996. The petitioner is barred under the law from initiating any proceeding without .....

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y the learned Trial Court at Pune. As any person who come before the Court seeking relief is reasonably expected to disclose all fact pertaining to the case, the action of the petitioner in concealing this material fact about the dismissal of the 138 proceeding with an ulterior motive to gain undue advantage and/or hide its lacuna tantamount to playing fraud on Court and as such the instant petition is liable to be dismissed outright. c) That the petitioner in their own admission has admitted to .....

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to abuse of process of law. As such the instant petition is liable to be dismissed being bad in law. d) That the instant petition is not maintainable for non-joinder of necessary parties in as much as the other creditors/Banks/shareholders who also have stake in the Company and whose participation and views in the matter is essential, have not been arrayed as parties in the case and as it is settled that if there is opposition to the making of winding up order by the Creditors etc., the Court wi .....

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of the Companies Act, 1956 (corresponding section 272 (6) of the Companies Act, 2013) which requires a winding up petition to be accompanied by an application seeking leave of the Court and its non compliance would also amounts to breach of rule 97 of the Company Rules and as leave of the Court is a mandatory pre-requisite before filing a winding up petition, thus non compliance of the same makes the instant petition liable to be dismissed. f) That for a winding up order, the essential requireme .....

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the instant petition lacks merit as required under the Companies Act, 1956 for a winding up order. Hence, the instant petition is liable to be dismissed. 11. It is admitted case of both the parties that there is an arbitration clause in the said agreement for the contract work dated 15.10.2006 and any dispute between the parties arising out of the said contract is to be referred to the arbitrator. It is also stated in the affidavit-in-opposition that every company faces financial hardships in t .....

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ue from the company. It is also further stated that the respondent-company is not commercially insolvent as alleged by the petitioner as its assets still exceeds its liabilities and recourse of winding up petition for payment of debt is nothing but a pressure tactics resorted to by the petitioner for realization of its debts for which appropriate proceedings before the competent court is pending. Paras 13 and 17 of the affidavit-in-opposition filed by the respondent-company read as follows:- 13. .....

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tioner and recourse to winding up process cannot be resorted to whenever a Company faces financial problems as admitted by the petitioner and machinery for winding up cannot be allowed to be utilized merely as a means for realizing debts due from a company. 17. That the averments made in paragraph 16 of the company petition is denied most vehemently by the answering Respondent and the Petitioner is put to the strictest proof thereof. On the contrary it is stated that Respondent company is not co .....

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of first agreement dated 15.10.2006 had already been paid. 13. The petitioner also filed rejoinder affidavit dated 11.08.2014 in reply to the affidavit-in-opposition filed by the respondent-company on 23.04.2014. In the rejoinder affidavit filed by the petitioner, the petitioner reiterated that the respondent-company is not commercially insolvent and as the respondent-company had neglected to pay its debts, the petitioner had filed winding up petition. It is also further stated in the rejoinder .....

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ettled and admitted, part payment was made and that proceeding under Section 138 of the Negotiable Instruments Act, 1881 are independent criminal proceedings having no bearing on the present proceeding. The gist of the rejoinder affidavit was that the dues were settled and admitted by the respondent-company and the respondent-company had neglected in clearing the admitted dues and debts. 14. In the course of hearing of the present application, learned counsel for the respondent-company strenuous .....

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mstances which show that the respondent-company had already paid the due amount. Accordingly, the respondent-company filed the additional affidavit dated 18.05.2015. Paras 3, 4, 5, 6, 7 & 8 of the additional affidavit dated 18.05.2015 of the respondent-company read as follows:- 3.That the petitioner company had moved this Hon ble Court by way of a Company Petition under section 433, 434 and 439 of the Companies Act, 1956 for winding up of the Respondent Company and the same was registered as .....

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re Fifty Four Lakhs Eleven Thousand Five Hundred and Seventy Six) only as would be evident from Annexure 3 to the Company Petition and correspondence made between the Chief Managing Director of the Respondent Company and the petitioner Company dated 24.01.2011. The Company craves leave of this Hon ble Court to rely on the same at the time of hearing. 5. That vide order dated 07.05.2015, this Hon ble Court was pleased to allow the Respondent Company to file additional affidavit only to the questi .....

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the Respondent Company is ₹ 57,87,85,000/- (Rupees Fifty Seven Crores Eighty Seven Lakhs Eighty Five Thousand) only. 7. That the Deponent states that as would be evident from the statement of accounts as well as the reconciliation statement dated 13.04.2011, the entire amount as claimed by the Petitioner Company for setting up of 1000 TDP cements plant in pursuance of contract dated 15.10.2006 has already been paid by the Respondent Company unto the Petitioner company and as such there is .....

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9.08.2007 (not the subject matter of this instant company petition) and is presently pending adjudication in arbitration before Hon ble Mr. Justice P.K. Musharay (Retd) vide Arbitration application No.1/2014, Walchandnagar Industries Ltd. Vs. JUD Cements Ltd. 15. Learned senior counsel appearing for the petitioner contended that the respondent company is trying to confuse the Hon ble Court by coalescing the accounts of the project which is subject matter of the present winding up petition with t .....

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ition and the said amount was arrived at by excluding the amount of ₹ 2,03,60,000/- paid by the respondent company towards the second unit in respect of which the arbitration proceeding is pending. This was indicated in the reconciliation statement dated 13.04.2011 by adding the amount of ₹ 2,03,60,000/- to the opening balance of ₹ 1,20,07,277/- and thus taking the total opening balance to ₹ 3,23,67,277/- this was done because the respondent company in their books of acco .....

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e amount of ₹ 2,03,60,000/- was added back to the opening balance as shown in the respondent books of accounts and the total opening balance thus arrived at ₹ 3,23,67,277/-. Thereafter, by subtracting the payments released during 2010-2011 that is ₹ 1,80,07,277/- from the aforesaid total opening balance of ₹ 3,23,67,277/- the balance due was found to be ₹ 1,43,60,000/-. Another amount of ₹ 10,51,576/- was also found due vide bill dated 02.01.2010 and was accor .....

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hat they have paid the entire dues and there is no outstanding dues payable to the petitioner company is entirely false, incorrect and misconceived. 16. To the contra, learned counsel for the respondent company by referring to the second reconciliation statement as on 14.04.2011 contended thus: AS PER JUD (RESPONDENT COMPANY) A. OPENING BALANCE - 1ST UNIT- CONTRACT DATED 15.10.2006 : 1,20,07,277 B. (IGNORE) - 2ND UNIT- CONTRACT DATED 09.08.2007 : 2,03,60,000 C. (IGNORE) NOT APPLICABLE Therefore .....

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s discretionary. There must be a debt due and the company must be unable to pay the same. A debt under this section must be a determined or a definite sum of money payable immediately or at a future date and the inability referred to in the expression unable to pay its debts in Section 433(e) of the Companies Act should be taken in the commercial sense. The machinery for winding up will not be allowed to be utilized merely as a means for realizing debts due from a company. If the debt is bona fi .....

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or at a future date and that the inability referred to in the expression unable to pay its debts in Section 433(e) of the Companies Act should be taken in the commercial sense and that the machinery for winding up will not be allowed to be utilized merely as a means for realizing debts due from a company. 19. The respondent is not a creditor and the appellant is not a debtor insofar as US $ 11,000 is concerned. The defence raised by the appellant is a substantial one and not mere moonshine whic .....

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at a future date. We are informed that the financial position of the appellant is sound. 22. This apart, both, the learned Single Judge and the Judges of the Division Bench have granted interim relief which can be granted only in aid of, and as ancillary to the main relief which may be available to the party on final determination of its right in a suit or proceeding. 23. The Bombay High Court has laid down the following principles in Softsule (P) Ltd., Re: (1977) 47 Comp Cas 438 (Bom): (Comp Ca .....

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into play and the winding up on the ground that the company is unable to pay its debts is not substantiated. Thirdly, a debt about the liability to pay which at the time of the service of the insolvency notice, there is a bona fide dispute, is not due within the meaning of Section 434(1)(a) and non-payment of the amount of such a bona fide disputed debt cannot be termed as neglect to pay the same so as to incur the liability under Section 433(e) read with Section 434(1)(a) of the Companies Act, .....

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lating to bona fide disputes: (i) if there is a dispute as regards the payment of the sum towards the principal, however small that sum may be, a petition for winding up is not maintainable and the necessary forum for determination of such a dispute existing between parties is a civil court. (ii) the existence of a dispute with regard to payment of interest cannot at all be construed as existence of a bona fide dispute relegating the parties to a civil court and in such an eventuality, the Compa .....

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(P) Ltd.: (1971) 3 SCC 632: (1972) 42 Comp Cas 125: AIR 1971 SC 2600. 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 the defence of the company is in good faith and one of substance; (ii) the defence is likely to succeed in point of law; and (iii) the company adduces prima facie proof of the facts on which the defence depends. 26. In view of the judgment .....

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on whatsoever for admitting the winding-up petition. Accordingly, the judgments passed by the learned Single Judge and of the Division Bench are set aside. The civil appeal stands allowed. No costs. 18. The Apex Court in Pradeshiya Industrial & Investment Corporation of U.P. v. North India Petrochemical Ltd. & Anr: (1994) 3 SCC 348 held that: 27. What then is inability when the section says unable to pay its dues ? That should be taken in the commercial sense. In that, it is unable to me .....

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