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TMI Blog2015 (6) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The petitioner is a Private Limited Company incorporated under the provisions of the Act and engaged in the business of providing services with respect to interior designing, structural design, development and construction. It is the case of the petitioner that it has duly completed the work of development of showrooms and workshops for brands like Nissan, Volkswagen etc. in different cities of India. The respondent company is a company incorporated under the provisions of the Act. The object of the said company as set out in the Memorandum and Article of Association is given in para 5 of the petition. The respondent being an authorized dealer of cars manufactured and sold under the brand name 'Nissan', approached the petitioner somewhere in September 2012 for the purpose of availing services of the petitioner for construction, development, interior and exterior designing of its workshop at Wagholi, Pune and showroom situated at Viman Nagar, Pune. The parties undertook discussions with respect to the manner and the phases in which the assignment was to be completed and thereafter the said work was given to the petitioner. The petitioner provided proforma invoice on 12th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3, the respondent admitted balance outstanding of Rs. 41,47,913/- and Rs. 17 lac towards the amount of taxes. The said document is produced at page 167 of the compilation. It is further the case of the petitioner that on 28th October 2013, the respondent paid an amount of Rs. 12 lac by RTGS and therefore the petitioner has received total amount of Rs. 92 lac for the aforesaid transaction and therefore amount of Rs. 2,49,48,913/- is still outstanding with applicable taxes and interest thereon. Petitioner repeatedly requested the respondent for making the payment of such outstanding dues. The said amount was not paid and therefore the petitioner issued demand notice on 27.01.2014 and demanded payment of Rs. 2,49,48,913/- along with the applicable taxes of Rs. 47,80,847. However, no reply was given by the respondent nor any payment was made. Petitioner, therefore, issued a statutory notice calling upon the respondent to make payment of Rs. 46,47,913/-. The said statutory notice was issued on 27.03.2014. The respondent gave its reply on 22.04.2014 and denied its liability for making such payment. Respondent has stated that amount of Rs. 3,29,00,000/- is paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of which deponent of the said affidavit is one of the Director. It is further stated that the respondent company is also satisfying the dues of the banks and financial institutions. It is further stated that there is no debt due and payable by the company and nonpayment of the disputed amount by the respondent company to the petitioner cannot be said to be "neglect to pay" as per Section 433(1)(e) read with Section 434 of the Act. 2.4. The respondent has produced on record a communication dated 4th December 2013 addressed to the petitioner company in which it has been stated that the work done by the petitioner is not up to the mark and not as per the Nissan's standard because of which the respondent company has faced lot of problems. The said job will be done from other civil engineers and payment to them would be adjusted from the balance payment of the petitioner. 2.5. The petitioner filed affidavit-in-rejoinder in pursuant to the affidavit-in-reply filed by the respondent company in which it is once again stated that there are certain admitted dues as per the e mail of October 2013 sent by the respondent company and therefore alleged turnover of Shivalik group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out the work and handed over the possession of the workshop in March 2013, whereas the possession of the showroom was handed over in September 2013. Learned counsel for the petitioner has referred to and relied upon various documents produced with the petition and more particularly the correspondence which had taken place between the parties in the form of emails. Learned counsel has referred to the email dated 30th September 2013 sent by the petitioner company to the respondent wherein it has been stated that as per the assurance given by the Director of the respondent, balance payment of Rs. 54 lacs would be released by the respondent before Navratri. Learned counsel further submitted that in pursuant to the said communication the respondent has sent email on 10.10.2013, which reads as under: "As per the bill submitted we have a balance of 4147913/- and taxes of 17 lacks. Details of which you have mailed to us. We regret the delay due to unavoidable reasons and assure you 70% on the 15th of Oct 2013 and the balance by the 20th of Oct 2013." 5. Learned counsel further submitted that it is admitted by the respondent that Rs. 41,47,913/- is the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the petitioner is nothing but an afterthought. That the demand notice was given in January 2014 and statutory notice was given in March 2014 and after the period of more than one year, during the pendency of this winding up petition, now the suit is filed on 11.03.2015 wherein false averments are made and false dispute is raised with a view to avoid the admitted liability of the respondent company to pay an amount of Rs. 46,47,913/- to the petitioner company. Learned counsel has, referring to the provisions of Section 433(e) and Section 434 of the Act, submitted that if the respondent company is unable to pay its debt the same is required to be wound up. He further submitted that under Section 434 of the Act there is a deeming provision and under certain circumstances the company shall be deemed to be unable to pay its debt. He referred to the provisions of Section 434(a) of the Act and submitted that if three conditions mentioned in this section are satisfied, this Court is not required to see whether in fact the company is a going concern or is in a position to pay its debt or not. He submitted that Rs. 41,47,913/- is admitted dues. The said amount was not paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said decision. 8. Learned counsel then relied upon the decision rendered by the Bombay High Court in the case of Tata Finance Ltd. v. Kanoria Sugar and General Manufacturing Company Ltd. [2002(1) Mh.L.J.617]. Learned counsel has, relying upon the observations made in para 8 of the said decision, submitted that the Bombay High Court has held that winding up petition should not be allowed to be taken as a means to recover debt from the company. It is not a legitimate way to enforce payment of debts which are bona fide disputed by the company and cannot be used as a weapon to pressurize and coerce the company to make payments. But it is also equally well settled that when the debt is undisputed and the defence is not bona fide and genuine, the Court will not act upon a defence that the company has liability to pay but chooses not to pay and the creditors will, in such case, be entitled to a winding up order. 9. Learned counsel thereafter referred the oral order dated 18.06.2012 passed by this Court in Company Petition No.154 of 2010. He relied upon the observations made by this Court in para 15.14 to para 15.18. After relying upon the said order, learned counsel submitted that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent company and the Shivalik group consists of five companies having turnover of Rs. 100 crores in the financial year 20132014. He further submitted that the company is fully commercially solvent and is satisfying the dues of the banks and financial institutions. Learned counsel submitted that the petitioner has suppressed the fact of communication dated 04.12.2013 in the petition. He referred to the communication dated 04.12.2013 made by the respondent company to the petitioner which is produced along with the affidavit-in-reply at page 207 of the compilation. He submitted that the work done by the petitioner was not up to the mark and not as per Nissan's standard because of which the respondent company faced various problems. The said work was required to be carried out by other civil engineers. He further submitted that the respondent company has now filed Special Civil Suit No.135 of 2015 before the concerned civil Court against the petitioner company for recovery of Rs. 1,88,00480/-. He referred to the averments made in para 5 to 8 of the said civil suit. He further submitted that total amount of Rs. 2,35,00,000/- was paid in cash to the Director of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent has failed and neglected to pay the amount to the petitioner company. Learned counsel has referred to the documentary evidence produced along with the additional affidavit filed by the respondent on 19th March 2015 and submitted that the respondent was required to make the payment to other engineers for rectifying the mistakes committed by the petitioner company. Learned counsel has relied upon the decision rendered by the Division Bench of this Court in the case of Tata Iron & Steel Company Ltd. v. Micro Forge (India) Ltd. [2000 (2) GLR 1594]. Learned counsel referred to the observations made in para 17 of the said decision and submitted that while exercising powers under Section 433 and 434 of the Act, this Court is required to keep in mind certain guidelines enumerated in the said paragraph. He further referred to para 29 of the said decision and submitted that the Division Bench in the said case held that the dispute raised by the respondent company was bona fide and therefore after referring to the various decisions rendered by the Hon'ble Supreme Court, the Division Bench of this Court held that the order of admission of winding up petition and the resultant direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, development, interior and exterior designing of its workshop at Wagholi, Pune and showroom at Viman Nagar, Pune. Proforma invoice dated 12.09.2012 was provided by the petitioner to the respondent with respect to initial phase of assignment comprising of different type of structural and pre-engineered building works. The petitioner also carried out certain other works with regard to standard furniture and fixtures. The respondent was provided with the bills of quantity by the petitioner describing the rates for every item that may be required during the work. (ii) The possession of the workshop was handed over by the petitioner to the respondent in March 2013, whereas, possession of the showroom was handed over to the respondent in September 2013. (iii) Total amount of Rs. 92 lac has been paid on various dates by RTGS by the respondent to the petitioner. The said fact is not in dispute. (iv) The case of the petitioner is that except Rs. 92 lac received through RTGS, no other amount is paid by the respondent, whereas the case of the respondent is that Rs. 2,35,00,000/- by way of cash has been paid to the Director of the petitioner company on various dates and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. In view of the aforesaid broad facts emerge from the record; it is clear that the respondent company has raised a dispute by producing on record the vouchers/receipts with regard to the payment made by it in cash to the Director of the petitioner company. The Director of the petitioner company has signed the said vouchers/receipts. These vouchers and receipts are produced along with the affidavit. From the conduct of the petitioner company also it is clear that initially the notice was given on 27.01.2014 demanding outstanding amount of Rs. 2,49,48,913/- and surprisingly within a period of two months, on 27.03.2014, the notice was issued demanding socalled admitted dues of Rs. 46,47,913/-. Thus, when the respondent has produced on record the vouchers and the receipts along with the affidavit and when in the reply to the statutory notice also the said aspects are pointed out, prima facie it cannot be said that the dispute raised by the respondent is not genuine. Further, before issuance of the first notice on 27.01.2014, by way of communication dated 4th December 2013, respondent has already pointed out to the petitioner about the defects in the work carried out b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said case, there was failure on the part of the company to pay the agreed/statutory interest. Therefore, it was held that the same is covered under the word 'debt'. 20. Learned counsel for the petitioner has relied upon the decision of the Delhi High Court in the case of Guangdong Fuwa Engineering Manufacturing Co. Ltd. (Supra) in which in para 16 and 17, the Court observed as under: "16. The respondent's preliminary contention that this Court has no jurisdiction to entertain this petition and that it should be dismissed due to the pendency of a civil suit whose subject matter is identical to that of the present proceedings and also because the respondent has invoked arbitration in that suit, has no force for the reason that the issued before this Court in exercise of company jurisdiction is whether the respondent company ought to be wound up or not, which issued is not available either to the Civil Court or to the arbitrator for decision. The issue of whether the pendency of a civil suit or arbitration would bar winding up proceedings is no longer res integra. See, Resham Singh & Co. Pvt. Ltd. v. Daewoo Motors India Ltd., (2003) 116 Comp. Cases 529 (Del.). 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means of Realizing its debts. [For the above propositions see Pradeshiya Industrial & Investment Corporation of Uttar Pradesh v. North India PetroChemical Ltd. [1994] 2 Comp. LJ 50 (SC) in which the observations in Amalgamated Commercial Traders (P.) Ltd. v. Krishnaswami [1965] 35 Comp. Cas. 456 (SC) and Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125 (SC) have been paraphrased]. (vi) If the stance of the adversaries hangs in balance, it is always open to the company court to order the respondent company to deposit the disputed amount. This amount may be retained by the Court and be held to the credit of the suit, if any. See Nishal Enterprises v. Apte Amalgamations Ltd. [Civil Appeal No. 720 of 1999 arising out of SLP (C) No. 14096 of 1998 dated 521999]. It appears to me that the following point may be added to the foregoing considerations. (vii) Generally speaking, an admission of debt should be available and/or the defense that has been adopted should appear to the Court not to be dishonest and/or a moonshine, for proceedings to continue. If there is insufficient material in favor of the petitioners, such di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liability to pay but chooses not to pay and the creditors will, in such case, be entitled to a winding-up order." 26. In the aforesaid decision the Bombay High Court has observed that it is not legitimate way to enforce payment of debts which are bona fide disputed by the company and cannot be used as a weapon to pressurize and coerce the company to make payments. In the present case, this Court is of the opinion that the dispute raised by the respondent company is a bona fide, reasonable and genuine dispute. 27. Learned counsel for the petitioner has also relied upon the oral order dated 18.06.2012 passed by this Court in Company Petition No.154 of 2010. There is no dispute with regard to the proposition laid down in the said order. However, in the facts and circumstances of the present case, the said decision is not applicable. 28. The Hon'ble Supreme Court in the case of IBA Health (India) Pvt. Ltd. (Supra) in para 30, 31, 33, 34 and 35 observed and held as under: "30. A company petition cannot be pursued in respect of contingent debt unless the contingency has happened and it has become actually due. In the absence of any evidence, it is not possible to conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iquidation proceedings against a company and later dismissed when a proper defence is made out on substantial grounds. A creditor's winding up petition implies insolvency and is likely to damage the company's creditworthiness or its financial standing with its creditors or customers and even among the public. PUBLIC POLICY CONSIDERATIONS 34. A creditor's winding up petition, in certain situations, implies insolvency or financial position with other creditors, banking institutions, customers and so on. Publication in the Newspaper of the filing of winding up petition may damage the creditworthiness or financial standing of the company and which may also have other economic and social ramifications. Competitors will be all the more happy and the sale of its products may go down in the market and it may also trigger a series of crossdefaults, and may further push the company into a state of acute insolvency much more than what it was when the petition was filed. The Company Court, at times, has not only to look into the interest of the creditors, but also the interests of public at large. 35. We have referred to the above aspects at some length to impress upon the Company C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r for admitting the winding up petition and therefore the order of winding up of the company passed by the High Court was set aside. 31. In the case of Tata Iron & Steel Company Ltd. (Supra), the Division Bench of this Court held that winding-up is a remedy of last resort and not to be utilised as a pressurizing tactic to obtain payment of dues and the Court laid down general principles in this regard. In the said case the Court found that the company was financially sound and there were disputed aspects about is liability to pay to the petitioner and therefore dismissed the petition. Para 29 of the said decision reads as under: "29. In the present case, there is a bonafide dispute of debt and also substantial dispute of counter claim. The principles, which we have enunciated herein above, are extensively, explored in catena of judicial pronouncements. For short, we cannot resist the temptation of referring the following decided cases: 1. Madhusudan Gordhandas & Co. v. Madhu Woolen Industries Pvt. Ltd, (1972) 42 Company Cases, 125 (SC), wherein, it is held that one act of dishonesty on the part of the petitioner is sufficient for rejection of petition. 2. Harinagar Suga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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