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TMI Blog2015 (8) TMI 1589X X X X Extracts X X X X X X X X Extracts X X X X ..... isposing off its property. 2. Heard learned advocate Mr. Navin Pahwa for the petitioner with learned advocate Mrs. Sangeeta Pahwa and learned advocate Mr. B. T. Rao for the respondent. 2.1 Learned advocate Mr. Pahwa for the petitioner submitted that the respondent awarded a contract to a consortium headed by Samsung SDS Company Limited which is having its registered office at Seoul, Korea (hereinafter referred as as 'Samsung') on certain terms and conditions. Samsung in turn entered into a contract with the petitioner. Learned advocate submitted that the petitioner executed the contract both to the satisfaction of Samsung and the respondent. The parties mutually agreed that a part of the outstanding dues payable by the respondent to Samsung shall be assigned to the petitioner. Therefore, after certain deliberations and correspondence, the respondent issued a certificate dated 12.12.2005 regarding the mutual understanding in this regard. It is contended by learned advocate that the respondent, however, did not join into execution of tri-partite agreement though earlier agreed. Therefore, the Deed of Assignment of debt was entered into between Samsung and the petitioner whereby it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming that the claims of the petitioner shall be brought to the knowledge of the Board of Directors. 2.4 Learned advocate Mr. Pahwa would submit that thereafter the respondent sent a letter dated 11.4.2007 stating that the respondent acknowledges a debt of amount of USD 1,65,493. However, it was clarified in the said communication that if no interest whatsoever is applied on the dues which has been reflected in the Deed of Assignment, then outstanding dues are acknowledged. From the contents of the aforesaid letter, it is clear that respondents had acknowledged the principal amount of USD 1,65,493. The petitioner has, therefore, informed the respondent that if the respondent agrees to pay the principal amount within a period of 90 days from 20.4.2007, the petitioner is agreeable to accept the said amount failing which the petitioner will insist for the interest amount. 2.5 Learned advocate for the petitioner thereafter submitted that another letter was received from the respondent that the respondent is agreeable to the payment of amount of USD 1,65,493 provided the petitioner does not insist upon the interest on the said amount. It was also pointed out that because of loss in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying out the work at Wadinar Port of the respondent-company. The petitioner has failed to produce any document on record that the respondent has entered into any contract with the petitioner for undertaking any work and, therefore, in absence of any agreement, the present petition filed by the third party is not maintainable. 3.1 Learned advocate referred to the various correspondence entered into between the respondent and Samsung from November, 2003 to June, 2005 annexed at pages 62 to 73 of the compilation and submitted that the transaction was between the respondent and Samsung for execution of a particular work. Learned advocate Mr. Rao appearing for the respondent would contend that the claim of the petitioner is based on the Assignment Deed executed between Samsung and the petitioner on 30.12.2005. However, the said document is not signed by the respondent nor the respondent has ratified the same and, therefore, when the respondent has not accepted the Deed of Assignment executed by Samsung in favour of the petitioner, the petitioner cannot file the present petition and, therefore, the same may be dismissed. 3.2 Learned advocate Mr. Rao for the respondent thereafter su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stries Limited, Essar Limited and Petronet India Limited. The respondent-company has been incorporated for setting up under water pipe line for transporting liquid crude, oil, petrol, diesel from the vessel which is anchored in the mid sea to the storage tanks. For the said purpose, the respondent had given a contract to Samsung for the work of Wadiner-Kandla pipe line project. The said contract was given in February, 1999. It was to be completed with a period of two years. Said period was extended for the completion of the work and it was completed on 18.4.2003. Final bill has been submitted by Samsung to the respondent on 23.5.2003. Respondent pointed out various discrepancies in the final bill and called upon the Samsung to rectify the same. Meeting was held in July, 2003. The assurance was given by Samsung to rectify the defects. However, it was not rectified. It was pointed out that there were serious disputes about the finalisation of the work with Samsung. It is also pointed out by learned advocate that there were disputes with regard to payment between Samsung and the petitioner for the work carried out by the petitioner. Learned advocate Mr. Rao thereafter pointed out that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned advocate Mr. Pahwa appearing for the petitioner-company has submitted in the rejoinder that the present petition is filed within the prescribed time limit. Learned advocate has placed reliance upon the provisions contained in Sections 18 and 20 of the Limitation Act, 1963 and submitted that the respondent has acknowledged its debt in the communication dated 11.4.2007 and 4.10.2007. Lastly, in the communication dated 20.3.2008 also, the respondent has accepted liability to make payment of USD 1,65,493 and, therefore, when there is an acknowledgment of debt on the part of the respondent, the present petition is filed thereafter within stipulated time limit. Learned advocate Mr. Pahwa further contended that the respondent is disputing the letter dated 4.10.2007 written by its Manager. However, there is no dispute with regard to letter dated 11.4.2007 written by the said officer. In any case, the internal authorisation is a matter governed by the doctrine of indoor management of the company. An outsider is not expected to be aware of the internal authorities given to the officers by the company. He further contended that the respondent has made the payment of Rs. 30,90,136/- to Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work. e) Notice was issued by Samsung to the respondent and called upon it to pay Rs. 30,90,136/- as well as USD 3,06,725. f) The respondent has made the payment of Rs. 30,90,136/- by way of full and final settlement. g) There were certain communications between Managing Director of the respondent, petitioner and Samsung. From the said correspondence, it is clear that the petitioner addressed various communications to Managing Director of respondent-company. From the record, it is also revealed that suggestion was made to execute Deed of Assignment between the petitioner and Samsung. However, the Managing Director of the respondent informed Samsung on 20.5.2005 that they are not directly concerned with any assignment which Samsung may have with the petitioner and Deed of Assignment is not feasible. h) After the said communication dated 20.5.2005 from Managing Director of respondent to Samsung, Samsung issued notice on 2.6.2005 as observed hereinabove for recovery of outstanding amount from the respondent and the respondent has made payment of Rs. 30,90,136/-. i) On 30.12.2005, Samsung executed the Deed of Assignment of debt in favour of the petitioner whereby it was agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correspondence between the Managing Director of the respondent and Samsung as well as the petitioner-company. The Managing Director has specifically stated that Deed of Assignment is not feasible in May, 2005. Therefore, it is surprising that Manager of the respondent-company has informed the petitioner that they are agreeable for the principal amount of USD 1,65,493 if interest is waived. However, when the authority to write such letter by the Manager is disputed by the respondent, the petitioner cannot rely upon the said communication and more particularly when the other communications are from Managing Director of the respondent. Thus, it cannot be said that the respondent has acknowledged its debt and was agreeable for the payment of USD 1,65,493 to the petitioner. The last communication is in March, 2008 and the petition is filed even after approximately a period of three years i.e. on 18.3.2011. Thus, it is also clear that the petition is liable to be dismissed on the ground that it is filed after the period of limitation. 10. However, it is true from the record that the respondent-company itself has stated that they are facing certain financial difficulties and incurring lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. A.C.K.Krishnaswani, this Court quoted with approval the following passage from Buckley on the Companies Act: "It is well settled that 'a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bonafide disputed by the Company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the Court."' 27. While examining the entire case laws on the issue with reference to the word "debt" under Sec.433(e) of Companies Ac t , in 2000(III)CTC 107 [Neg Micon A/s.Alsvoj 21 DK 8900 Rangers Denmark v.NEPC India Limited 1678 Trichy Road, Ramanathapuram Coimbatore 641 045], the Division Bench of this Court held as under:- "16. If the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the Company. In determining whether a debt is disputed bona fide or mala fide, the conduct of the parties, the character of the pleas and the circumstances which will be peculiar to each case will be the contributing factors. The test is whether the dispute is raised only to avoid payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whole or in part, to the extent such claim is barred by time the Court is not required to adjudicate on merits.(Vijayalakshmi Art Productions v. Vijaya Productions Pvt.Ltd. (1997) Vol.88 CC 353 (Madras). 10. Period of limitation "has been defined under Section 2(j) of the Limitation Act, 1963 to mean the period of limitation prescribed, for any suit, appeal or application by the Schedule, and "prescribed period" has been defined to mean the period of limitation computed in accordance with the provisions of the Limitation Act. Under Section 3(1), subject to the provisions contained in Sections 4 to 24, every suit instituted, appeal preferred and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence. Under Section 3(2)(a)(iii), for purposes of the Limitation Act a suit is instituted, in the case of a claim against a company which is being wound up by the Court, when the claimant first sends in his claim to the Official Liquidator. The Schedule to the Limitation Act prescribes the period of limitation. The First Division thereunder relates to suits and a suit for recovery of money filed within three years, from the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lsory winding-up or an insolvent voluntary winding-up is under a duty to reject the proof of a statute-barred debt; in a solvent voluntary winding-up, he must do so likewise unless the contributories consent. A winding-up order stops the period of limitation from running in the company's favour so that a debt which is not statute-barred at the date of the order can be proved for." 13. In the case of Madhusudan Gordhandas & Co., (supra), the Hon'ble Surpeme Court has observed and held as under: "The High Court on appeal upheld the judgment and order and found that the alleged claims of the appellants were very strongly and substantially denied and disputed. The first claim for erection of plant and machinery was totally denied by the company. The defences were first that the books of the company showed no such transactions; secondly, there was no privity between the company and the persons in whose names the appellants made the claims; thirdly, the alleged claims were barred by limitation; and fourthly, there was never any demand for the alleged claims either by those persons or by the appellants. The alleged claims for interest and commission were therefore equally baseless ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of the fact that there was no privity of contract between the petitioner and the respondent and though the Deed of Assignment is entered into on 30.12.2005 between the petitioner and Samsung, the petition is filed in the year March, 2011. The communication by the Manager of the respondent-company cannot be termed as acknowledgment of debt by the respondent-company as he was not authorized to write such letters and, therefore, when the Manager was not authorized to send the communication to the petitioner, it is not covered within the meaning of acknowledgment of debt. Further, as observed hereinabove, the last communication is in March, 2008 and the present petition is filed on 18.3.2011 i.e. almost after period of three years. Thus, in the facts of the present case, the decisions relied upon by learned advocate for the petitioner are not applicable and therefore the same are not discussed in detail. 15. In the decision rendered by this Court in the case of Tata Iron & Steel Company Ltd. V/s Micro Forge (India) Ltd., reported in 2000(2) GLR 1594, wherein the Hon'ble Division Bench has observed and held in paragraphs 16 and 17 as under: "16. The parameters prescribed or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igned action or mere temporary shock and effect of economy and market. In a given case, it may happen that a party may become unable to pay its debts for a while, but that by itself is not a criterion for exercise the power to wind up, ipso facto. (4) It is necessary for the Company Court to consider the financial status, strength and substratum of the Company, in overall context. It is possible, at times, there may be a cash crunch. It may be also, possible, at times, the temporary cash crisis despite high sale and heavy turnover and, therefore, in such a situation, mere disability or only on the ground of inability to pay would not constitute a ground empowering the Court to wind-up the Company. (5) If the Company is an ongoing concern having regular business and employment of employees, the Court cannot remain oblivious to this aspect. The effect of winding up would be of putting an end of the business or an industry or an entrepreneurship, and in turn, resulting into loss of employment to the several employees and loss of production and effect on the larger interest of the society. (6) Even dividend declared by the company regularly and having profit in the light of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (14) The Court is also obliged to consider that it would be in the interest of justice to give the Company some time to come out of the momentary financial crisis or any other temporary difficulty as winding-up is a measure of last resort. (15) Winding-up course cannot be adopted as a recourse to recovery of the debt. (16) The Court must bear in mind one more celebrated principle and consider whether the Company has reached a stage where it is obviously and plainly and commercially insolvent, that is to say, that its assets are such and its existing liabilities are such as to make the Court feel clearly satisfied that currents assets would be insufficient to meet the current liabilities, along with other principles. (17) It is also necessary to consider whether the respondent-Company has become defunct or has closed its business for quite some time, whether it is commercially insolvent. For the purpose of finding commercial insolvency, a mere look into the financial data is relevant to examine about its soundness. In all matters relating to winding-up, the Court may have regard to the wishes of the creditors and contributories and may, if necessary, ascertain their wishes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact. The expression "bona fide" would mean genuine, in good faith and when dispute is based on substantial grounds or when defence is probable and with some substance, it is a bona fide dispute. It must be strictly noted that winding-up petition is not an alternate to civil suit." 16. Thus, the Hon'ble Division Bench has laid down various guidelines which are required to be considered by the Company Court while deciding the winding up petition. It is clear from the said guidelines that remedy under Section 433(e) is not a matter of right and it is the discretion of the Company Court. It does not confer any right on any person to seek order that the company must be wound up. However, it gives power to the Company Court to pass an order of winding up in appropriate cases. The Court is not bound to order winding up of the company merely because any one of the circumstances enumerated in Section 433 of the Companies Act exists. It is possible that at times, there may be a cash crunch or temporary cash crisis despite heavy turnover. Therefore, mere disability or inability to pay in such case would not constitute a ground for winding up of the company. Even when the company is an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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