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2016 (5) TMI 824 - MADRAS HIGH COURT

2016 (5) TMI 824 - MADRAS HIGH COURT - TMI - Winding up petition - Held that:- This court finds a justification on the part of the company petitioner to knock the door of the company court seeking for winding up of the company. When that is the one of the legal course available to the company petitioner, this court cannot shut its door to the company petitioner, on technical reasons. In my considered view, while rendering substantial justice, neither the technicalities nor, to certain extent, un .....

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ion is admitted.

(i) Issue Notice on the Court Notice Board.

(ii) Issue Notice to the respondent.

(iii) Issue Notice to the Registrar of Companies, Madras.

(iv) Affixure of notice at the premises of the Registered Office of the respondent company.

(v) The petitioner is directed to publish the company petition in one issue of Tamil daily "Malai Murasu" in one issue of English Daily "Indian Express" and in the Tamil Nadu Government Gazette fix .....

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of ₹ 20,000/- towards initial expenses before the Official Liquidator in this matter. - C. P. Nos. 2 of 2009 - Dated:- 5-4-2016 - K. Ravichandrabaabu, J. For the Petitioner : Ms. Jayna Kothari for M/s. B. N. Suchindran For the Respondent : Mr. G. Kalyan Jhabakh for M/s.Surana & Surana ORDER This company petition is filed to wind up the respondent company and to appoint the Official Liquidator to take possession of all and assets management, books, papers and vouchers of the respondent .....

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said order, the company petitioner filed O.S.A.No.11 of 2013 which came to be disposed of on 30.04.2013, whereby the order passed by the learned Single Judge was set aside by remitting the matter back to the Company Court to dispose of the company petition on merits and in accordance with law. The Division Bench has also observed that the said e-mail dated 01.04.2008 has been sent by the respondent company acknowledging its debt and such acknowledgement of debt was made before the expiry of the .....

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ard for admission. 3. The case of the petitioner is as follows: The respondent company was incorporated in 2003 with Registrar of Companies, Tamilnadu under the provisions of the Companies Act, 1956. It is an Information Technology company. The respondent company sought the services of the petitioner as a Consultant for them and accordingly, the petitioner was engaged as consultant, by executing a consultancy agreement dated 21.05.2004. The consulting fee agreed to be paid by the respondent to t .....

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onsulting fees. By March 2005, the respondent was due to the tune of US$ 164,500 to the petitioner. The respondent company avoided in making the payment under the pretext of one or another. The petitioner tendered his resignation on 28.03.2005. The respondent company started negotiation with the petitioner. As a gesture of good faith, the petitioner agreed to settle for an amount of US$ 140,000. As per the settlement, the respondent company executed a promissory note in favour of the petitioner .....

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oposal made by the respondent, no payment was made to the petitioner. Consequently, statutory notice was issued to the petitioner on 15.08.2008 under section 434 of the Companies Act. Despite the said notice, the respondent neither replied to the same nor paid the money. Hence, the present company petition. 4. Counter affidavit is filed by the respondent wherein it is stated as follows: The company has not offered any sum to the petitioner as stated in the promissory note nor executed the same. .....

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etition and not to file a petition of this nature. When the respondent company has got an employee strength of more than 800 technical qualified persons, a petition for winding up cannot be admitted for adjudication. The Company Court cannot act like a Civil Court. Though the petitioner was appointed to act as the agent of the respondent, he has not procured a single business to the respondent. The petitioner has not even earned a single pie for the respondent company and has not done any work w .....

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respondent and the e-mail sent by them admitting the execution of such promissory note are enough to hold that there is an admission of liability to pay US $ 140,000 to the petitioner which has not been paid by the respondent company inspite of receiving the statutory notice. In their e-mail, the respondent has admitted that the company was facing a financial crisis and therefore, they could not honour the commitment. When there is an admitted liability followed by their admission of their incap .....

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has to see as to whether the defense of the companies is in good faith and that the court will not act upon a defense that the company has the ability to pay the debt where the debt is undisputed. She also relied on the decision reported in 2002 (3) MLJ 750, Imperial Corporate and Services (P) Limited vs Aruna Sugars and Enterprises, Chennai. 7. Per contra, the learned counsel appearing for the respondent submitted as follows: The alleged liability is not an undisputed liability. The promissory .....

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n (1965) 35 Compcas 456(SC), Amalgamated Commercial Traders (P.) Ltd. vs A.C.K.Krishnaswami. He further submitted that the respondent company is a running company having 1000 employees and therefore, it is not in loss. In support of his overall contentions, he relied on the following decisions: i) 100 (2002) DLT 14, NEPC India Ltd. vs. Indian Airlines Limited, ii) AIR 2005 SC 4175, Mediquip Systems Pvt. Ltd. vs Proxima Medical System GMBH; iii) (1994) 79 CompCas835(SC), Pradeshiya Industrial &am .....

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ss, consequently becoming as a commercial insolvent. The claim of the Company petitioner is that his service as a consultant for the respondent company was utilised after entering into a Consultant agreement dated 21.05.2004 agreeing to pay a sum of US$ 10,460 per month as consultancy charges and that the respondent company failed to pay such monthly remuneration towards such service rendered by the petitioner and consequently an amount of US$ 140,000 was due and payable without interest till 31 .....

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O.S.A.No.11 of 2013. The Division Bench of this Court by order dated 30.04.2013 allowed the appeal by setting aside the order of the Company Court and remitted the matter back to this court for disposal of the company petition on merits and in accordance with law. The relevant finding at paragraphs 38 and 39 of the above said order of the Division Bench are extracted hereunder: "38. It is also noted that the E-mail dated 1.4.2008, had been sent by the Managing Director, Gopalakrishnan, admi .....

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to the appellant. While so, the learned Single Judge had dismissed the company petition, in C.P.No.2 of 2009, as barred by limitation. The learned single Judge had held that the period of limitation had started to run from 28.3.2005, the date on which the appellant had tendered his resignation, as consultant in the respondent company. However, from the records available it could be seen that there were certain negotiations that had taken place between the appellant and the respondent company, b .....

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ted that, if the agreed amount was not paid by 31.10.2005, interest would accrue to the amount payable, on a monthly basis, at the rate of 1.5%. As such, the respondent company was at liberty to make the payment of the agreed amount of US $ 1,40,000, before 31.10.2005. Accordingly, the period of limitation, with regard to the amount payable to the appellant, by the respondent company, would start running from 31.10.2005 and not from 28.3.2005, as held by the learned Single Judge. 39. It is not i .....

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008, is within the period of limitation. However, the learned Single Judge had held that the company petition, in C.P.No.2 of 2009 is not maintainable, as the period of limitation had expired. Thus, it could be seen that the learned Single Judge had erred in dismissing the company petition filed by the appellant, in C.P.No.2 of 2009. In such circumstances, the order passed by the learned Single Judge, dated 29.06.2012, in C.P.No.2 of 2009, is set aside. The matter is remitted back to the learned .....

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the execution of the promissory note cannot be agitated once again before this court. The Division Bench has categorically found that the respondent company who extended the promissory note also sent the e-mail dated 01.04.2008. It is the further finding of the Division Bench that the claim is not barred by limitation. Therefore, the fact remains that there is a promissory note executed by the respondent company promising to pay a sum of 140,000 US$ to the petitioner followed by the e-mail date .....

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econdly it is evident that such feeble attempt is being made only to escape the liability of the respondent company, especially when in the e-mail dated 01.04.2008 sent by the Managing Director of the respondent company to the applicant it is accepted about the execution of such promissory note by specifically stating that the same was issued in absolute good faith. Therefore, the amount of 140,000US$ agreed/promised to be paid is, undoubtedly, to be treated as an admitted liability of the respo .....

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h by offering a lesser payment, it cannot be permitted to contend that there is no admitted liability of US $ 140000. On the other hand, such offer of the respondent company to pay lesser amount will not absolve the respondent company from its admitted liability of 140,000 US$. Therefore, there is no difficulty for this court to come to a conclusion that such admitted liability has not been paid even after the issuance of the statutory notice. Hence, this court is left with no other option excep .....

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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 .....

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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. I have already referred to the admission of the Managing Director of the respondent company-vide letter dated 30.12.98 and the reply by the respondent company dated 30.9.1999. In such a situation absolutely there is dispute regarding the effects and steps taken by the petitioner. On the other hand, only in the re .....

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armaraja Nadar, wherein their Lordships held that for determining the question as to whether the Company would be able to meet its then demands, the value of such assets without which it could not carry on business, should not be taken into account. According to them, the test of inability to pay the debt under Section 433(e) was not whether the company, if it converted all its assets into cash, would be able to discharge its debts, but whether in a commercial sense the existing liabilities coul .....

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al & Investment Corporation of U.P. vs North India Petrochemical Ltd., are cited to contend that if there is a bonafide dispute and the defense is a substantial one, the court will not wind up the company. There is no difficulty in accepting the above proposition. However, when I find that there is no dispute much less a bonafide one with regard to the claim made by the company petitioner and that the company has come forward only to offer a lesser amount than the admitted liability, I find .....

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conscious of its jurisdiction as well as the scope of the company petition. Certainly, this court is not functioning as debt collecting agency. At the same time, under the present facts and circumstances of the case, when this court finds that there is no dispute on the debt much less a bonafide one and that this winding up petition is also not for collecting the debt and on the other hand, only to wind up the company which has failed to pay the admitted debt/liability, as contemplated under se .....

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lowed by the Division Bench on 30.04.2013 specifically by rejecting the technical objections raised by the respondent company. Though the said order was attempted to be challenged before the Apex Court, the respondent company has only chosen to withdraw the said appeal on 24.03.2015. Thereafter, the matter is listed before this court on 12.02.2016, almost after one year. Either after the dismissal of the appeal by the Division Bench of this court or atleast after withdrawing the special leave pe .....

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to pay the debt. But at the same time, if such "failure" is not resulting out of any bonafide contention on the part of the company and on the other hand, inspite of having sufficient opportunity to settle the dues, if the company fails to do so, this court can, going by the facts and circumstances of the case, certainly bring such "failure", under the purview of "unable" to pay the debt or due, while considering the application for winding up. At this juncture, it .....

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spite of having sufficient opportunities to do so. I am also unable to appreciate the contention of the respondent company that no business was done through the petitioner and therefore, the claim is unsustainable. If there was no such business, then a question would arise as to why an execution of promissory note followed by sending an e-mail acknowledging such execution however by making only a lesser amount, not on the ground of no business but on the ground of financial crunches of the compa .....

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view, while rendering substantial justice, neither the technicalities nor, to certain extent, untenable factual objections, can block the way of this court in doing so. In this case, the Division Bench has already rejected those objections. It is well settled that when substantial justice and technicalities are pitted against each other, only the substantial justice should prevail over all other technicalities. On this principle, I always prefer to refer to the decision of the Apex Court reporte .....

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