TMI Blog2018 (10) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... ense raised by the appellant was neither bona-fide nor substantial. Mr. Sancheti, however chose to rely upon NSEL circular dated 8th July, 2011 in support of the primary defense. He submitted that this circular makes it clear that the NSEL permits client code modification and therefore, on the basis of such circular, it must be held that errors in punching in the client's code are quite routine and correction/modification is clearly permissible. Mr. Sancheti submits that on the basis of this circular the primary defense raised by the appellant deserves to be accepted. If modification had indeed been effected by the appellant, as repeatedly asserted, then surely the same would have been reflected in the records of NSEL, which was fully operational between 15th July, 2013 and 30th July, 2013. Admittedly, no such modification/correction is reflected in the records of the NSEL. As noted earlier the NSEL by its communication dated 29th September, 2014 has very clearly stated the subject trades stand recorded in the name of Sujana and not in the name of the NSEL. Therefore, it is not possible to accept Mr. Sancheti's contention that the NSEL circular dated 8th July, 2011 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of default, with intimation to the Company Registrar failing which the Petition shall stand dismissed for non prosecution. (v) The learned Counsel for the Respondent Company waives service of the Petition under Rule 28 of the Companies Court Rules, 1959. (iv) Petition is disposed of in the above terms. 3. Mr. Sancheti, the learned Senior Counsel for the appellant submits that this is not a case where any 'debt' can be said to be due and payable by the appellant to the respondent. In the absence of any debt due and payable by the appellant, no petition was maintainable for winding up of the appellant. 4. Mr. Sancheti, by way of elaboration submits that the appellant was only a broker through whom the respondent traded at the National Spot Exchange Limited (NSEL). The appellant has nowhere denied receipt of an amount of ₹ 1,45,79,032/- from the respondent for the purposes of the transaction involving a paired contract concerning purchase and sale of White Refined Sugar-M Grade ('Sugar') at the NSEL. The appellant, consistent with the instructions received from the respondent carried out the transaction and even issued contract notes for pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect of any alleged time discrepancy. Therefore, the appellant was deprived of opportunity to explain the same. In any case, such a time discrepancy, which even according to the learned Company Judge applies only to the second segment of the transaction i.e. T+25 (sale segment), is certainly not sufficient to infer any fraud. 9. Mr. Sancheti submits that the very institution of the winding up petition was an abuse of the process of law since such institution was for exerting undue pressures upon the appellant. He submits that it is evident that the respondent is trying to take undue advantage of some bonafide mistake in punching the correct client codes at the time the subject trades were transacted on the NSEL on 15th July, 2013. Mr. Sancheti submits that substantial and bonafide defenses have been raised by the appellant and therefore, the impugned order warrants interference. 10. Mr. Venkatesh Dhond, the learned Senior Counsel for respondent and Mr. Shyam Kapadia, defended the impugned order on the basis of reasoning reflected therein. They pointed out that there is no dispute whatsoever that the respondent had advanced through the regular banking channels an amount of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is for the Court to consider this aspect in the light of certain observations in 63, Moons Technologies Limited (formerly Financial Technologies (India) Ltd. others vs. The Union of India and others 2017 SCC OnLine Bom 9297 . 14. Mr. Dhond, learned Senior Counsel for the respondent however responded by stating that the issue of paired contracts being contrary to public policy or not does not arise in this matter, because the material on record overwhelmingly establishes that the amount advanced by the respondent to the appellant was never utilised for transacting any contracts, much less any paired contracts. He points out that this is not the case where the respondent is seeking to enforce any paired contracts but rather this is case where the respondent only points out that the amount which was admittedly advanced by the respondent to the appellant was never utilised for transacting any contracts at all on behalf of the respondent and therefore, the appellant cannot hold on to such amounts. Secondly and what prejudice, Mr. Dhond submits that the claim of the respondent for the amount of ₹ 1,45,79,032/- at the highest relates to the T+2 (purchase segment) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at the stage of a winding-up petition 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 must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. If the debt is bona fide disputed, there cannot be neglect to pay within the meaning of Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated and non-payment of the amount of such a bona fide disputed debt cannot be termed as neglect to pay so as to incur the liability under Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956. 18. The Apex Court in IBA Health (India) Private Limited (supra) has also held that where the company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the company for the purpose of winding up. Bona fide dispute implies the existe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was obviously on the appellant to at least prima-facie establish that such trades were indeed transacted by the appellant in the name of the respondent. In fact, as will be noted hereafter, it has been the specific defense of the appellant that such trades were indeed carried out in the name of the respondent though, after correction/modification of client code on the platform of NSEL. 22. The communication dated 29th September, 2014 addressed by the NSEL however maintains that the subject trades stand in the name of Sujana and not in the name of the respondent. Therefore, the onus of at least prima-facie explaining as to how the subject trades stand recorded in the name of Sujana in the NSEL records, when the appellant has time and again insisted that the subject trades, consequent upon modification/correction stand in the name of the respondent, is clearly upon the appellant. 23. If the specific defense raised by the appellant, both in response to the statutory notice under Section 433 of the Companies Act as well as the averments in the company petition is found to be a bona-fide defense, a defense of substantial nature, likely to succeed in point of law and further, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C for the said trades of White Refined Sugar M Grade was modified outside the online platform of NSEL for operational purpose. As a result of the error committee by the dealer, contract note pertaining to your buy trade initially did not include your trade in White Refined Sugar M Grade. However, revised contract note/s (hard copy as well as ECN) were sent to you at your registered address/e-mail ID. 3.8 With reference to Para 2 and 3 of your Notice, we reiterate that the dealer while punching in your buy trade for White Refined Sugar M Grade having Contract Specification No. SM30AMBL2 committed an error and realized his mistake on the very same day after trading hours. As the online platform of NSEL was not available after trading hours, the UCC for the said trades of White Refined Sugar M Grade was modified outside the online platform of NSEL for operational purpose. As a result of the error committed by the dealer, contract note pertaining to your buy trade initially did not include your trade in White Refined Sugar M Grade. However, revised contract notes (hard copy as well as ECN) were sent to you at your registered address/e-mail ID. We would further like to clarify that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of NSEL, the trade in Refined Sugar M Grade executed at the request of the Petitioner was modified offline and as such the subject trade appears in the name of another client named Sujana Sudini in whose account the subject trade was inadvertantly carried out by the dealer of the Respondent. [Emphasis supplied] 27. From the aforesaid, it is clear that the appellant, in opposition to the company petition, has raised the following specific defense :- (i) That the appellant's dealer committed an error in punching the correct Unique Client Code (UCC) in respect of the transactions undertaken by the appellant on the NSEL platform on 15th July, 2013. The appellant's dealer, instead of punching in the respondent's UCC, punched in the UCC concerning Sujana; (ii) The error as aforesaid was realised by the appellant's dealer on the very same day, but after trading hours. Therefore, the appellant's dealer corrected/modified UCC outside the online platform of NSEL for operational purposes; (iii) That the factum of the aforesaid error/mistake as well as its immediate correction/modification was intimated to the respondent. 28. In addition to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es had no nexus whatsoever with the respondent. The respondent contends that even on 23rd April, 2014, the representatives of the appellant insisted that the subject trades were in fact in the name of the respondent and the confusion would be shortly cleared. However, no documents were produced on record in support of the plea that there was any error in punching in the correct UCC and that such error was in fact corrected in the records of the NSEL. Instead, on 6th May, 2014, the appellant chose to forward duplicate and unsigned contract notes including therein the subject trades. The respondent also pointed out that no delivery allocation reports (DAR) in respect of the subject trades were ever forwarded by the appellant to the respondent. The respondent also pointed out that the circumstance that so called proportionate amounts, which correspond to a minuscule of what is due and payable to the respondent, may have been received by the respondent, was clearly relatable to the misimpression created by the appellant that the subject trades had indeed been transacted by the appellant in the name of the respondent. 31. Besides, as regards the secondary defenses, it must be noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facie proof in support of the primary defense raised by it in response to both, the statutory notice and the company petition. As noted earlier not a single document has been produced on record by the appellant to demonstrate that the appellant's dealer, either on 15th July, 2013 or even within 2-3 days thereafter actually corrected/modified or for that matter attempted to correct/modify the alleged error in punching in in the respondent's UCC in the record of the NSEL. This is despite the fact that the appellant, both in response to the statutory notice as well as in its reply opposing the company petition, has time and again asserted that such modification/correction was in fact carried out. Again, there is also no material produced on record by the appellant to even prima-facie establish that the factum of alleged error/mistake as well as its immediate correction/modification was intimated to the respondent either on 15th July, 2013 or within some reasonable period thereafter. In such circumstances, we cannot really fault the view taken by the learned Company Judge in holding that the defense raised by the appellant was neither bona-fide nor substantial. 34. Mr. Sanch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with certain conditions. However, the real question is whether in the facts and circumstances of the present case any client code modification was in fact carried out by the appellant in relation to the transactions on 15th July, 2013. The circular is certainly not any proof or even prima-facie proof that the appellant in the present case consistent with the terms of the circular or even otherwise, in fact carried out any client code modification. 37. If modification had indeed been effected by the appellant, as repeatedly asserted, then surely the same would have been reflected in the records of NSEL, which was fully operational between 15th July, 2013 and 30th July, 2013. Admittedly, no such modification/correction is reflected in the records of the NSEL. As noted earlier the NSEL by its communication dated 29th September, 2014 has very clearly stated the subject trades stand recorded in the name of Sujana and not in the name of the NSEL. Therefore, it is not possible to accept Mr. Sancheti's contention that the NSEL circular dated 8th July, 2011 constitutes any prima-facie proof in relation to the primary defense urged by and on behalf of the appellant. 38. Applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing not been utilised at all for carrying out such transactions, the appellant is liable to pay back the same to the respondent. Therefore, this is not a case where the claim is based upon some breach of contract which is yet to be adjudicated by the appropriate forum. 41. Similarly, the ruling in E-City Media Private Limited (supra) is also not applicable in the facts of the present case. In the said case, the winding up of the company was applied for on the basis of loss or damages sustained by the petitioner on account of alleged breach by the respondent company of the agreement dated 22nd May, 2008. Such is not the position in the present case. 42. The learned Company Judge in the present case has exercised discretion reasonably in not directly ordering the admission of the company petition. The learned Company Judge has granted the appellant an opportunity to deposit the amount of ₹ 1,45,79,032/- and in case such deposit is made, the petition is to stand dismissed. In the facts and circumstances of the present case and the legal position in such matters, we cannot say that the exercise of discretion by the learned Company Judge is vitiated in any manner. 43. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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