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1999 DIGILAW 603 (CAL)

Swil Ltd. v. Simportex Ltd.

1999-11-19

PINAKI CHANDRA GHOSE

body1999
JUDGMENT The Court : This is an application filed by the petitioner inter alia praying for an order :- (a) The Company, Swil Limited, be directed to be wound up in accordance with the provisions of the Companies Act, 1956; (b) The Official Liquidator, High Court, Calcutta be appointed Liquidator of the Company with a direction to forthwith take possession of the assets, properties, books, papers, documents and' affairs of the Company; (c) The claims of the petitioner and the cost, charges and expenses relating to the instant proceedings do come out of the assets of Swil Limited; and other ancillary reliefs. 2. The facts of the case on the basis of which this application has been filed are as follows;- On September 10, 1992 there was a contract between the Company and the petitioning creditor and the Company agreed to buy 200 metric tons of Copper Wire bars. The Company failed and neglected to purchase the rules in terms of the said contract and agreed to pay a differential of US $ 235 per M.T. amounting to a total of US $ 47,000 to the petitioning creditor. Thereafter, various correspondences exchanged between the parties and thereafter the matter was referred to the London Metal Exchange Arbitrators, since there was an Arbitration Clause in the said agreement. 3. On September 1, 1994 London Metal Exchange passed an award in favour of the petitioning creditor for US $ 47,000 and US $ 4465, being the principal claim and the interest thereon at the rate of 6% per annum till September 1, 1994. The costs of the award was also awarded in favour of the petitioning creditor to the tune of UK Pounds £ 4673.49 to be paid by the Company and the award also directed the Company to bear the cost of the reference. 4. In or about 1994 a suit was filed by the Company against the petitioner inter alia for declaration that the petitioner was not entitled to publicise or make known the said award and also for other ancillary reliefs. Initially, an interim injunction was passed in favour of the Company. Ultimately, the same was dismissed on December 5, 1994. 5. On August 3, 1998 the said suit was withdrawn by the Company. Initially, an interim injunction was passed in favour of the Company. Ultimately, the same was dismissed on December 5, 1994. 5. On August 3, 1998 the said suit was withdrawn by the Company. On March 13, 1995 order was passed by the High Court of Justice, Queens Bench Division, England, in favour of the petitioner in terms of the award dated September 1, 1994 and on March 22, 1995 cost of the reference taxed by the Arbitrators as UK Pounds 8,804.20 since the costs of the reference taxed by the Arbitrators. 6. The Company filed an application on July 24, 1995 before the English Court for setting aside of the order dated March 13, 1995 and again on July 27, 1995 application was filed by the Company before the English Court for setting aside the order dated April 11, 1995. 7. On October 6, 1995 the matter was set down for trial. The action upon the awards was tried in the English Court on June 24, and June, 25, 1995 and thereafter judgment was delivered by the English Court in favour of the petitioning creditor as follows :- (i) US $ 58,943.49 comprising of the awarded sum of US $ 51,465 and the statutory interest thereon till the date of judgment. (ii) UK Pounds 9,693.78 comprising of Taxed Costs of Arbitrator of UK Pounds 8,804.20 and the statutory interest thereon till the' date of judgment. (iii) UK Pounds 5,352.60 comprising of Arbitrator's costs of the award of UK Pounds 4,673.49 and the statutory interest thereon till the date of judgment. (iv) Company was also directed to pay the costs which would be taxed if not agreed. 8. On July 11, 1996 judgment dated 25th June, 1996 was entered and sealed in favour of the petitioning creditor. 9. On September 5, 1996 certified copy of the said judgment was issued by the Court in favour of the petitioning creditor and no appeal had been preferred by the Company. It would appear from the certificate issued by the Master of the Queen's Bench Division that no objection was raised' to the jurisdiction of the English Court. Thereafter, on May 16, 1998 the petitioning creditor issued the notice under section 434 of the Companies Act, 1956 by the petitioning creditor. 10. On June 9, 1998 the company duly acknowledged the said statutory notice. Thereafter, on May 16, 1998 the petitioning creditor issued the notice under section 434 of the Companies Act, 1956 by the petitioning creditor. 10. On June 9, 1998 the company duly acknowledged the said statutory notice. On June 22, 1998 the company issued a letter refusing the payment on the ground that the judgment of English Court could not be enforced for the reasons stated therein. The petitioning creditor duly denied the said allegation by a letter dated July 21, 1998. 11. Mr. Jayanta Mitra appearing on behalf of the petitioning creditor submitted that the company appeared before the English Court, oral evidence was taken in the matter, no objection taken in respect of the jurisdiction of the said Court and further the company has not preferred any appeal from the said judgment and the time for appeal has expired. In connection of those facts and the facts stated hereinabove, all the documents annexed to the pleadings to which Mr. Mitra drew my attention. 12. In support of this application he submitted that the claim of the petitioner is undisputed, vide the awards dated 1st September, 1994 and March 22, 1995. Thereafter, awards were tried in the High Court of Justice in England and upon contest by the company judgment was delivered by the Court in favour of the petitioner for the amounts and therefore there cannot possibly remain validity, legality and justifiability of the claim of the petitioner. He further submitted that the foreign judgment made on 25th June, 1996 and entered on 11th July, 1996 was given on the merits of the case and, therefore it is conclusive as to any matters thereby adjudicated upon between the parties under the provisions of section 13 of the Code of Civil Procedure. He further submitted that the foreign judgment delivered by the High Court of Justice in England is a judgment on merits and is conclusive one against the company. 13. He also submitted that the company submitted to the jurisdiction of the said foreign Court and did not raise any objection whatsoever. 14. He further drew my attention to the documents and submitted that the company was given a full hearing before the judgment was pronounced and the company had accepted the judgment by agreeing the interest payable on the judgment. 14. He further drew my attention to the documents and submitted that the company was given a full hearing before the judgment was pronounced and the company had accepted the judgment by agreeing the interest payable on the judgment. He further submitted that it is significant that the company also agreed to pay the cost of the action. 15. He further drew my attention to the fact that the company filed a suit in the City 'Civil Court at Bombay which was subsequently withdrawn by the company and the interlocutory application filed therein was dismissed on contest. 16. Mr. Mitra further submitted that a foreign judgment in favour of the petitioner adjudicating the amount due constitutes a debt owing by the company to the petitioner within the meaning of section 433(e) of the Companies Act, 1956. According to him, once a notice contending the demand is sent to the registered office of the company under registered post and the company fails and neglects to pay the amounts claimed within three weeks thereafter, the deeming provision in section 434 of the Companies Act comes into operation and a legal fiction is created that the company is unable to pay its debt, unless the company raises a bona fide dispute. In the instant case, the foreign judgment having become conclusive under section 13 of the Code of Civil Procedure with regard to the debt due and payable by the company. No bona fide dispute can possibly be raised by the company. In this circumstances he submitted that the presumption under section 434 of the Companies Act will come into full operation against the company and the company will be deemed to be unable to pay its just and lawful debts. 17. He further submitted that section 434(1)(a) is disjunctive and alternative to section 434(1)(b). Under section 434(1)(a) if a notice is served on the company regarding payment of a debt due to the creditor, and such debt is not satisfied within 3 weeks from the date of service of the notice, then the company should be deemed to be unable to pay its debts, whereas section 434(1)(b) contemplates initiation of execution proceedings on a decree which is returned unsatisfied. A creditor has thus an option to proceed either under section 434(1)(a) or under section 434(1)(b), each of which is mutually exclusive of the other. 18. A creditor has thus an option to proceed either under section 434(1)(a) or under section 434(1)(b), each of which is mutually exclusive of the other. 18. He further relied upon the passage of the Palmer's Company Precedents which is reproduced herein :- "....... A winding up petition is a perfectly proper remedy for enforcing payment of a just debt. It is the mode of execution which the Court gives to a creditor against a company unable to pay its debts.”: 19. The said passage was approved by the Supreme Court in Harinagar Sugar Co. vs. Court Liquidator, Bombay, reported in AIR 1966 SC 1707 at page 1709. In support of his above submissions he also relied upon the judgments reported in : (a) 48 Com Cases 599 at 602 (In re: Market Cardboard Box Manufacturing Company Private Limited); (b) 48 Com Cases 604 (All India General Transport Corporation Ltd. vs. Raj Kumar Mittal); (c) (1994) 15 CLA 92 (Silver Shield Construction & Trading Limited vs. Recondo Limited). 20. As it appears the case reported in (1994) 15 CLA 92 (supra) and in the said judgment it has been held by the Bombay High Court that an application for the execution of a foreign judgment filed by a foreign company against an Indian company in terms of section 13 of the Code of Civil Procedure. A petition was also filed for winding up of the company on the ground of its failure to discharge its debt under section 434 of the Companies Act. The foreign company also sought the appointment of a provisional liquidator and a restraint order on the alienation of its assets by the Indian company. The Indian company contended that unless its dispute about the validity of the judgment was resolved, the execution application would be anterior in point of time and there was no failure to pay on its part since there was no 'debt' as such. The Bombay High Court has held that in the absence of any valid ground for disputing it the foreign judgment was conclusive and admitted the winding up petition accordingly. 21. He further contended that the provision of the Foreign Exchange Regulation Act will not constitute a bar to the proceeding for winding up and have no application, even when the award has been passed and a judgment has been pronounced thereon by a foreign Court in foreign currency. 21. He further contended that the provision of the Foreign Exchange Regulation Act will not constitute a bar to the proceeding for winding up and have no application, even when the award has been passed and a judgment has been pronounced thereon by a foreign Court in foreign currency. In support of his contention he relied upon the judgments reported in 53 CC 744 [Eurometal Limited vs. Aluminium Cables & Conductors (U.P.] Limited] and 1998 (2) CLJ 46 [K.T.S., Singapore PLC. Ltd. vs. Associated Forest Products (PJ Ltd.]. 22. Mr. Sen, Senior Advocate appearing on behalf of the company has submitted that there is no decree enforceable in India and no proceeding for execution of any decree has been started in any Court in India. Therefore, section 434(1)(b) of the Companies Act, 1956 has no application in the present case. Mr. Sen tried to distinguish the judgment cited by Mr. Mitra which is reported in 15 CLA 92 (supra) and submitted that the execution proceeding had already started in the said matter before Bombay High Court and notice under Order 21 Rule 22 of the Code of Civil Procedure had already been issued by the Bombay High Court. He further submitted that the facts of the said case were different and not applicable in the instant case. 23. According to him, under sections 5 and 6 of the Foreign Awards (Recognition & Enforcement) Act, 1961 (hereinafter referred to as the said Act) any person interested in a Foreign Award has to file such award in the appropriate Court in India and the Court shall order the award to be filed and proceed to pronounce judgment in terms of the said award by the said Indian Court and then only under section 7 of the said Act the award may be enforced. He further submitted that the procedure for enforcement of foreign award has been specifically stated in the said Act. He further submitted that the said Act constitute a complete Code by providing all possible contingencies. No reason has been disclosed by the petitioner for not availing of the remedy available under the said Act nor any attempt has been made by the petitioner to file the award and to obtain a judgment thereon. 24. He further submitted that the said Act constitute a complete Code by providing all possible contingencies. No reason has been disclosed by the petitioner for not availing of the remedy available under the said Act nor any attempt has been made by the petitioner to file the award and to obtain a judgment thereon. 24. He also submitted that a judgment and decree of an Indian Court' is required to be passed in a suit on the basis of the foreign judgment. He further submitted that under the general principles of law any decree of a foreign country is not enforceable in a Court unless such decree is embodied in a decree of the Court of that country. In support of such contention he relied upon a judgment reported in AIR 1967 Mad 45 (Sheik Ali vs. Sheik Mohamed). 25. He also submitted that the petitioning creditor cannot straight away put the foreign judgment into equitable execution by initiating winding up proceeding. He further contended that the arguments advanced by the petitioning creditor that the foreign judgment is presently executable under section 44A of the Code of Civil Procedure is otherwise fallacious. under section 44A(2) of the Code of Civil Procedure a certificate showing the extent to which the foreign decree has been executed is required to be filed. According to him, this is a mandatory pre-condition for execution of a foreign decree, no submission whereof will result in the application for execution being rejected. In support of his such contention he relied upon a judgment reported in AIR 1964 Mad 221 (Uthamram vs. K.M. Abdul Kasim Co.). 26. According to him, when a statute requires a thing to be done in a particular manner it should be done in that manner and not otherwise. He further submitted that the cases relied upon by the petitioning creditor reported in 48 CC 599 (supra) and 48 CC 606 (supra) have no application. 27. The contract between the parties is barred under section 27 of the Foreign Exchange Regulation Act, 1973. Section 9 read with section 47(3) of the said Act prohibits payment including payment through enforcement of any judgment or order of the Central Government or Reserve Bank of India. 27. The contract between the parties is barred under section 27 of the Foreign Exchange Regulation Act, 1973. Section 9 read with section 47(3) of the said Act prohibits payment including payment through enforcement of any judgment or order of the Central Government or Reserve Bank of India. He further contended that the claim of the petition in the winding up petition as well as in the notice under sections 433, 434 and 439 of the Companies Act, 1956 is in Sterling Pounds and not in Indian Rupee and as such the winding up petition is not maintainable. 28. Mr. Mitra, in reply, submitted that judgment delivered by the English Court is conclusive and it binds the company. He submitted that the company would not produce any document whatsoever to show that the said judgment is not conclusive on any ground mentioned under the said section. In such circumstances the said foreign judgment is a conclusive one. He further submitted that the provisions of the Foreign Awards (Recognition & Enforcement) Act, 1961 is not applicable in the instant case. 29. He also submitted that filing of a suit in India is not the only way of proceeding on the foreign judgment. Where the foreign judgment is a reciprocating territory, the same is executable under section 44A of the Code of Civil Procedure and no suit is instituted on that basis in India. Therefore, unless a decree is obtained in India, as submitted by the learned Senior Advocate on behalf of the company, on the basis of the foreign award in terms of the said Act, the foreign award or the foreign judgment thereon cannot be accepted. In support of his contention he relied upon the following. judgments :- AIR 1957 Cal 103 (Ganguli Engineering Limited vs. Sm. Sushila Bala Dasi & Anr.), AIR 1967 Mad 45 (Sheik Ali vs. Sheik Mohamed), JT 1999 (4) SC 50 (Harendra H. Mehta vs. Mukesh H. Mehta). 30. He further submitted that even an unfiled award which is not a decree of Court evidences a debt for the purpose of winding up proceedings and as such application can be filed for winding up of the said company. In the instant case there is no controversy that the claim of the petitioner in the winding up petition exceeds Rs. He further submitted that even an unfiled award which is not a decree of Court evidences a debt for the purpose of winding up proceedings and as such application can be filed for winding up of the said company. In the instant case there is no controversy that the claim of the petitioner in the winding up petition exceeds Rs. 500/- and therefore, it is well within the provisions of section 434 of the Companies Act, 1956 and as such this application is maintainable. 31. In the circumstances, he submitted that the petition should be admitted and direction should be given for advertisement and the order should be passed accordingly. 32. After considering the facts and circumstances of this case and the submissions made by the parties before me, it's an admitted fact as it stands as on today that the award has been passed and the decree and/or judgment in terms of such award has been passed by the High Court of Justice in England. Such judgment has become conclusive between the parties. It further appears that the Company filed a suit before the Bombay High Court which has been dismissed. 33. I have considered the cases cited before me by the learned Counsel and after considering the said judgments and particular by the decision of the Bombay High Court reported in 15 Corporate Law Adviser 92 (supra) holding a winding up application is maintainable on the identical facts. In the said judgment the Bombay High Court has specifically held that both the remedies, viz. execution of decree, as well as winding up, proceedings, are available to its creditor and that the foreign decree in its favour which is a" 'debt' within the meaning of section 433(e) so far the Indian company is concerned. It further appears here that the London Court judgment based on merits and the Indian company had submitted to its jurisdiction. The Bombay High Court also held that in the absence of any valid ground for disputing the foreign judgment was conclusive and admitted the winding up petition accordingly. However, the prayer for appointment of a provisional liquidator was rejected since it was not shown that the company was in an insolvent position and since it was carrying on its business. However, an injunction was imposed on the disposal of its assets in the normal course of its business. 34. However, the prayer for appointment of a provisional liquidator was rejected since it was not shown that the company was in an insolvent position and since it was carrying on its business. However, an injunction was imposed on the disposal of its assets in the normal course of its business. 34. In the instant case it's a fact that in my opinion, the instant case is almost identical to the facts of the said case and accordingly I hold that the judgment which was delivered by the London Court is a judgment on merits. I do not see any substance in any of the objections raised by the company. In my opinion, under section 13 of the Code the foreign judgment is conclusive as a result whereof I do not see any disputes as to the claim of the petitioner and further the same comes within the meaning of 'debt' under section 433(e) of the Companies Act. Thereby attracts the jurisdiction of this Court under such provisions. In view of that the company petition requires to be admitted. 35. In these circumstances I do not have any hesitation to accept the contention of Mr. Mitra and admit the winding up petition. 36. In these circumstances, I direct the company to pay the dues of the petitioning creditor alongwith the interest @ 10% per annum from the date of the filing of this application till the dues are paid fully in six equal instalments, first of such instalments to be paid on or before 1st January, 2000 equivalent to the Indian Rupees and thereafter on each succeeding month until the dues are wiped off by the company, in default of payment of anyone of the instalments or the last instalment the petitioning creditor shall be at liberty to publish an advertisement once in the Statesman, once in the Anandabazar Patrika, publication of the notification in the Calcutta Gazette is dispensed with. In case the company pays the amount as aforesaid, the winding up petition should be permanently stayed. 37. The matter is returnable after twelve weeks after such advertisement, if such occasion arises. Hence, winding up petition of petitioning creditor admitted.