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TMI Blog2015 (10) TMI 2670X X X X Extracts X X X X X X X X Extracts X X X X ..... erments made in the petition, the petitioning creditor sold and delivered to the Company diverse quantities of iron and steel materials. Delivery would be at the godown of the petitioning creditor. The goods were accepted and consumed. Invoices of the value of Rs. 6,18,91,744/-, were raised by the seller on the buyer. A table showing the details of all those invoices together with the copies of the invoices are annexed to the petition. Copies of the value added tax returns showing payment of this tax on the entire quantity of goods is also annexed to the petition. A statutory notice dated 11th December, 2013, U/s 434 of the said Act, was issued by the petitioning creditor to the Company, asking them to pay up the above invoice value together with interest @ 24% per annum, within three weeks from the date of the notice, failing which the petitioning creditor would be constrained to initiate winding proceedings against them. It is an admitted fact that the Company neither paid what was demanded of them nor bothered to reply to the statutory notice. On the failure of the Company to reply to the said statutory notice a presumption of insolvency arises by the operation of Section 434 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioning creditor in respect of the said sale of goods by them to the Company between July 2011 and August 2011, was set off by the company against the price receivable by them for the sale made in 2009. This was shown by one confirmation of account dated 31st December, 2011, which is Annexure- 'L' at page 561 of the Affidavit in Opposition. After balancing, a sum of Rs. 2,17,17,439/- was shown to be due and payable by the petitioning creditor to the company. Mr. Saha on reply denied that the Companies referred to in the Affidavit in Opposition of the company could be called group companies or that the transactions were made between the petitioning creditor and the companies which were said to comprise the group, on the understanding that they were being treated as one entity for the purposes of the transaction. Mr. Saha maintained that the transactions which were being referred to by the respondent company in their Affidavit in Opposition were between the petitioning creditor and Concast Bengal Industries Ltd. The transactions which were the subject matter of the winding up the petition were between petitioning creditor and Concast Exim Ltd. which was altogether a different enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petition was Rs. 10,78,67,248.36/-, inclusive of interest. It was stated in paragraph 23 of the Affidavit in Opposition that during the subject period the Ram Swarup Group had sold goods worth Rs. 29,01,91,266/- to the Concast Group, while the Concast group sold goods worth Rs. 31,19,08,705/- to the Ram Swarup Group. Therefore, the Concast Group was entitled to receive a sum of Rs. 21717439/- from the Ram Swarup Group. In my opinion, the cross transactions appear to be real. There is no evidence brought on record by the petitioning creditor to show that it ever made any payment for the goods supplied by Concast Bengal Industries Ltd. in 2009. Ordinarily if Concast Exim Ltd. is seen as a different entity than, Concast Bengal Industries Ltd., the petitioning creditor would have a separate cause of action against Concast Exim Ltd. In that event this winding up application would be maintainable. There is no record to show that Concast Bengal has taken out any action in respect of the said transaction against the petitioning creditor. Whether the Concast companies are to be taken as group companies or a single entity for adjudging the liability of each of these companies towards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods would well be sold and bought by companies controlled by them. These companies would only be acting as a front. These facts can only be established on affidavit. As of now, there is prima facie indication that Concast Exim Ltd. and Concast Bengal Ltd. were part of the same group and controlled by the same person. It also prima facie appears that the price payable on supply of goods to one company was adjusted against price payable by it for goods received by it from the other company. Now, let us analyse the legal principles. A company is liable to be wound up if it is unable to pay its debts. Now, how does a Court adjudge that a company is unable to pay its debts. A winding up application is made by affidavit, setting forth the claim of the petitioning creditor. Annexed to the petition are documents to substantiate the claim. The documents are photocopies. If so desired by the company the petitioning creditor has to give inspection of the original. The defence is also in the form of an affidavit with copy documents annexed. Similar inspection can be taken by the petitioning creditor. The judgement of the Supreme Court in M/s. Mechalec Engineers & Manufacturers v. M/s Basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d faith or a defence which is likely to succeed or prima facie likely to succeed at the trial, in that event the winding up application would fail. Sir George Jessel Master of the Rolls in London and Paris Banking Corporation reported in 19 Equity Cases 444 said that the Company should have reasonable ground for not paying the debt of the petitioning creditor, to avoid liquidation proceedings. Ajoy Nath Ray, A.C.J, in SRC Steel Pvt. Ltd. Vs. Bharat Industrial Corporation Ltd. reported in 2005 (4) CHN 343 opined that in a winding up application the Court had to come to the conclusion that the claim of the petitioning creditor was indisputable. This determination had to be final and not prima facie, at both stages of winding up, the admission stage and the trial stage. At the admission stage it was final and conclusive as between the petitioning creditor and the Company but at the final hearing stage it was conclusive between the petitioning creditor, the company, the creditors and all other persons who joined the winding up. The standard of proof required by the petitioning creditor to prove his case in the winding up application is the same standard that is required to prove a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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