MAIKSAL FIBRES LTD v. VINIYOGA CLOTHEX LTD — 1999 DIGILAW 1416 (ALL)

SUDHIR NARAIN, J. The petitioner, M/s Maiksal Fibres Limited, New Delhi, has filed this petition for winding up the respondent company M/s. Viniyog Clothex Ltd. having its registered office at B-l Udyog Kunj, U. P. S. I. D. C. Industrial Area, Dasna, District Ghaziabad (hereinafter referred to as the respondent Company ). 2. The winding up has been sought on the ground that the respondent company is unable to pay its debts. The version of the petitioner is that the respondent company has been purchasing Bio Cotton Yarn from the petitioner and supplies have been made to it from time to time. The petitioner maintains a running account against the supplies and the respondent makes periodic payments. The respondent company issued three cheques to the petitioner in the month of March 1996 but those cheques were dishonoured. The details of cheques and the rreason for dishonour given by the Bank have been mentioned in paragraph 6 of the petition which are as under:- SI. Cheque Amount Bank Reason No. NOS. and Rs. for date Dishonour 1. 6959 4,50,000/- Canara Payment dt. 31-3- Bank Ind. Stopped 1996 Fin. Branch New Delhi 2. 6960 4,70,448/- -do- -do- dt. 31-3- 1996 3. 6958 5,00,000/- -do- Exceeds dt. Arrange- 26. 3. 1996 ment. 3. The aforesaid amount is alleged to be due on account of supplies made by the petitioner company in the year 1995-96 to the respondent company. The petitioner made demand for the payment of the out standing dues but when it was not paid it sent a notice dated 3rd October, 1996 under Section 434 of the Companies Act, 1956. The respondent company inspite of service of notice did not make any pay ment. 4. The respondent company has filed counter affidavit. It is asserted that the respondent company and its group com pany had been purchasing yarn from the petitioner company at the instance of M/s Ramei AG. The petitioner company and M/s Remei AG are part of the same busi ness group. It was agreed upon between the petitioner company, M/s Remei AG and the respondent companys group that once supply is made to M/s Remei AG they would make payment for the entire con signment, out of which the cost of the yarn purchased from the petitioner company would be paid to the petitioner company. It was agreed upon between the petitioner company, M/s Remei AG and the respondent companys group that once supply is made to M/s Remei AG they would make payment for the entire con signment, out of which the cost of the yarn purchased from the petitioner company would be paid to the petitioner company. On account of this arrangement, respon dent companys group did not insist on advance payments for the supplies of the fabrics as demanded by M/s Remei AG. On the basis of the above agreement payments were first made by Remei AG to the respondent company and its group who would then clear the account of the petitioner company. The said Remei AG having declined to clear the outstanding of the respondent company and its group, the respondent company rightly stopped pay ment to the petitioner company as the same never became due to the petitioner company. It was denied that any sum, as claimed by the petitioner, is due against the respondent company. 5. The real controversy is as to whether there is any bona fide dispute regarding the amount claimed by the Petitioner Company against the respon dent Company. It is not denied that respondent Company issued three che ques in the month of March 1996, the details of which have been given above. The first cheque of Rs. 4,50,000/- was dishonoured because the payment was stopped. The second cheque of Rs. 4,70,448/- was also dishonoured for the same reason. The third cheque of Rs. 5,00,000/- was dishonoured on account of the fact that the amount exceeded the ar rangement. In paragraph 6 of the counter-affidavit filed on behalf of the respondent company it is not denied that the cheques were issued by it to the petitioner. The contention is that there was a tripartite agreement between the petitioner, respondent Company and Remei AG, that once the supply is made to Remei AG by the respondent Company the latter would make payment for the entire consignment, out of which the cost of yarn purchased from the petitioner will be paid to the petitioner. The respondent Company has not placed any material on record to show that there was such an arrangement. The petitioner was supplying yarn to the respondent Company and it after having manufactured from the yarn made sup pliers to M/s Remei AG. The respondent Company has not placed any material on record to show that there was such an arrangement. The petitioner was supplying yarn to the respondent Company and it after having manufactured from the yarn made sup pliers to M/s Remei AG. The respondent Company had issued the cheques in the month of March 1996 and after the che ques were dishonoured, took up the mat ter with M/s Remei AG. M/s Remei AG is a sister company of which Mr. P. Hohmann is a Managing Director. The respondent Company wrote a letter dated 18-5-1996 to the petitioner enclosing certain docu ments to be handed over to Mr. P. Hoh mann, a true copy of such letter is annexed as Annexure-2 to the petition. They al leged that the letter contained certain documents giving details of various ac counts of the respondent company includ ing the amount due to the petitioner. The respondent company also gave another letter dated 18-5-1996 to Mr. P. Hohmann with enclosures containing the said ac counts, a copy of which is Annexure-3 to the petition. The amount payable to the petitioner company is shown a Rs. 9. 70 lacs. The respondent company has ad mitted that the letter was sent but has denied the statement of accounts as indi cated in the said annexure. It is, however, not explained that in the letter a specific acknowledgment regarding the statement of account was given which is quoted below:- "i sincerely thank you for giving me an opportunity to explain the reasons for delay in clearing the payments of M/s Hindustan CIBA Geigy, Maiksal Fibres and Patodia Syntex. I am enclosing a statement of Account of all the three parties along with explanatory notes. You may observe that the net amount payable from out side is Rs. 1,440,000 (Rs. 14. 40 lacs ). Kindly note that this amount does not include the interest payment to these par ties, which also be paid by us after clearing of the pending dues. Out of the total amount, we shall clear Rs. 4. 4 lacs, before 30th May and balance in (2) two instalments before 30th June 1996. " 6. It is not denied that this letter was issued after the respondent company dishonoured the cheques. Out of the total amount, we shall clear Rs. 4. 4 lacs, before 30th May and balance in (2) two instalments before 30th June 1996. " 6. It is not denied that this letter was issued after the respondent company dishonoured the cheques. The respondent company has also not submitted any other statement of account to show that the statement of account as mentioned in the letter of respondent company (Annexure-3 to the petition) was of some other ac count. In these circumstances there is no reason to disbelieve the statement of ac count which was part of the letter given by the respondent Company to the Managing Director of Remei AG. In view of the admitted fact that the cheques were issued by the respondent company to the petitioner and they were dishonoured by the Bank and secondly, the contents of the letter written by the respondent to the Managing Director of Remei AG, it is clear that the respondent company has admitted its liability to pay the amount to the petitioner for the supply of cotton yarn made by the petitioner to the respondent company. 7. The respondent company has fur ther taken the view that the amount al legedly due to the petitioner was only about Rs. 10,00,000/- but the cheques were issued for Rs. 14,20,448/ -. This has been explained by the petitioner in paragraph 6 of the rejoinder-affidavit. It has been stated that after adjusting two cheques of total amount of Rs. 4. 50 lacs the balance comes to Rs. 11,20,355/ -. Against this rebate of Rs. 1,49,000/- was given and, therefore, the balance amount was shown at Rs. 9,70,455/ -. It did not include the amount of third cheque. 8. Learned Counsel for the respon dent contended that there is a bona fide dispute about the amount payable to the petitioner and the winding up petition is not legitimate means of seeking payment of any debt. He has placed reliance upon the passage from Bukley on the Com panies Acts, 13th Edition, Page 451, wherein the law in this regard has been elucidated as under:- "a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the com pany. He has placed reliance upon the passage from Bukley on the Com panies Acts, 13th Edition, Page 451, wherein the law in this regard has been elucidated as under:- "a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the com pany. A petition presented ostensibly for a wind ing up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the Court. At one time petitions founded on disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial ground, the Court may decide it on the petition and make the order. " The above observations was quoted with approval by the Supreme Court in Amalgamated Commercial Traders (P) Ltd. v. A. C. K. Krishnaswami and another, 1965 (35) Company Cases 456, wherein the winding up petition was filed on the allegation that the company did not pay the dividend on the shares held by the petitioner. The company disputed its liability on the ground that there was no declaration of dividend. On the facts the Court found that there was a bona fide dispute by the company and the petition for winding up was dismissed. 9. In M/s Madhusudan Gordhandas and Co. v. Madhu Woolen Industries Private Ltd. , AIR 1971 SC 2600 , the Apex Court laid down the principles onwhichbonafide dispute in regard to the debt is to be decided. It was observed: "two rules are well settled. First if the debt is bonafide disputed and the defence is a sub stantial one, the Court will not wind up the Company. The Court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable (See London and Paris Banking Corporation, (1874) 19 Eq. 444 ). The Court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable (See London and Paris Banking Corporation, (1874) 19 Eq. 444 ). Again, a peti tion for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not al lowed, (see Re. Brighton Club and Norfolk Hotel Co. Ltd. , (1865) 35 Beav. 204 ). Where the debt is undisputed the Court will not act upon a defence that the Company has the ability to pay the debt but the company chooses not 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 likely to succeed in point of law and thirdly the com pany adduces prima facie proof of the facts on which the defence depends. " It is for the respondent company to establish that the dispute which it is raising is bona fide and for that it has to lead evidence once it is established by the petitioner that the respondent company is indebted to the petitioner. 10. In Straw Board Manufacturing Company Ltd. v. Mahalaxmi Sugar Mills Company Ltd. , 1991 (71) Company Cases 544, the petition of winding up was filed on the allegation that respondent company entered into a contract for purchase of 100 truck of Bagasse from the petitioner but the payment was not made. The respon dent took a defence that sub-standard material was supplied. It was found that the respondent Company had at no point of time disputed the correctness of state ment of accounts submitted by the petitioner and the defence was after thought and was not in good faith. The respon dent took a defence that sub-standard material was supplied. It was found that the respondent Company had at no point of time disputed the correctness of state ment of accounts submitted by the petitioner and the defence was after thought and was not in good faith. The petition was directed to be advertised. 11. In Smt. Deepa Anant Bandekar v. Raja Ram Bandekar (Sirigao) Mines Private Ltd. , 1992 (74) Company Cases 42, wherein the petitioner had claimed the amount payable under the agreement by the respondent company where inter alia defence was taken that the agreement on which the petitioner relied upon was not binding, the Court after examining the matter held that the dispute was not bona fide and allowed the winding up petition. 12. There is no dispute about the proposition laid down in the above cases. It is, however, to be examined in each case as to whether the dispute raised in defence by the respondent is bona fide or not. As discussed above the respondent company having admitted that the cheques were issued by the respondent company and they having been dishonoured and further the letter written by it to M/s Remei AG it is clear that the respondent company has admitted the liability to pay the amount and it has failed to pay the amount ad mitted by it. 13. One of the pleas raised by the respondent company is that the claim of the petitioner company is barred by limita tion. The respondent company has ad mitted its liability in its letter dated 18-5-1996. The limitation will run from such date. The company petition was filed on 9th October, 1998 within the period of three years of limitation. Even if the said letter is ignored the cheques issued by the respondent Company were dishonoured in the month of March 1996 and still the petition will be within three years from the date of cheques were dishonoured. 14. Having considered the entire aspects of the case I find that prima facie the case is made out for admitting the petition and advertising under Rule 24 of the Companies (Court) Rules, 1959. The respondent Company is, however, granted two months time to pay the amount of Rs. 14,77,215. 35 from today and in case of default the advertisement shall take place in accordance with Rule 24 of the Com panies (Court) Rules. 15. The respondent Company is, however, granted two months time to pay the amount of Rs. 14,77,215. 35 from today and in case of default the advertisement shall take place in accordance with Rule 24 of the Com panies (Court) Rules. 15. There is a dispute of liability of the respondent Company to pay the interest due on the outstanding amount. It is not necessary to go into that controversy, as I am not directing to pay the interest by the respondent company to the petitioner. Petition admitted. .