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Rajasthan High Court · body

2000 DIGILAW 867 (RAJ)

Har Narayan Tandon v. Jaipur Smelting Pvt. Ltd.

2000-07-21

P.P.NAOLEKAR

body2000
JUDGMENT 1. - This petition is filed under Sections 433, 434 and 439 of the Companies Act, 1956 (for short "the Act") for winding up of the respondent-company, duly incorporated under the provisions of the Act, having its registered office at H-115, Malviya Industrial Area, Jaipur. The respondent-company is carrying on business of production of copper wire and selling the same throughout the country. For the purposes of manufacture the company purchases copper bars from open market as well as from MMTC and Hindustan Copper Ltd. (HCL). 2. It is alleged that on May 25, 1992, the respondent-company requested for giving financial assistance by way of loan of Rs. 1,30,000 for purchase of raw material from HCL. The petitioner purchased demand draft No. 277194 dated May 29, 1992, drawn on the Punjab National Bank of Rs. 1,30,000 and delivered it to the authorised representative of the respondent-company. The demand draft was given to HCL. Thereafter, vide letter dated June 6, 1992, again the respondent-company requested for giving financial assistance of Rs. 1,50,000. The petitioner purchased demand draft No, 227231 dated June 8, 1992, drawn on Punjab National Bank of Rs. 1,50,000 and handed it over to the authorised representative of the respondent-company. The respondent-company delivered it to HCL for purchase of copper, bars. On June 10, 1992, the respondent-company issued a receipt-cum-Ietter acknowledging the payments made by the petitioner by way of two demand drafts to the value of Rs. 2,80,000, to the respondent-company as loan on interest at the rate of 15 per cent. per annum payable quarterly. The respondent-company neither repaid the loan amount nor paid any interest but has acknowledged the said outstanding amount to the petitioner vide issuing letters dated March 7, 1994, August 20, 1995, and also July 26, 1997. The petitioner came to know that in the manner in which the affairs of the respondent-company are managed it will not be in a position to repay the loan amount to the creditors. The petitioner has also come to know that there are a number of creditors, namely, Smt. Kamla Tandon, Smt. Kusum Caupra and Smt. Krishna Tandon, to whom the company owes various amounts and is unable to repay it. The petitioner has also come to know that there are a number of creditors, namely, Smt. Kamla Tandon, Smt. Kusum Caupra and Smt. Krishna Tandon, to whom the company owes various amounts and is unable to repay it. Various demands were made by the petitioner for repayment of the loan amount with interest as agreed, however as no repayment was forthcoming, the petitioner finally sent notice of demand to the respondent-company dated January 23, 1998, calling upon it to make payment of Rs. 2,80,000 along with 15 per cent. compoundable interest from the date of payment. The total sum due against the respondent-company towards principal and interest amount was Rs. 6,44,300. As the respondent-company failed to repay the amount in spite of the statutory notice given under the Act, the present petition for winding up of the company is filed. 3. After notice was issued by this court the respondent-company entered appearance and submitted reply denying its liability. It is alleged that the claim made by the petitioner was based on manipulations, forged documents, issue of false and antedated documents and the respondent-company does not owe any amount to the petitioner. The fraud was being played by manipulation and preparation of the false documents with the aid of ex-director Mr. V. N. Tandon to whom the petitioner is related as brother-in-law. The petitioner Mr. H. N. Tandon is the husband of the sister of Mr. V. N. Tandon, Smt. Krishna Tandon. Mr. V. N. Tandon was director of the petitioner-company from September 6, 1990, to January 12, 1998, till he resigned. The details of directors of the respondent-company from its inception are thus- Dr. Awadh Prasad and Avadesh Kumar September 3, 1985, to July 28; 1987 Dr. Awadh Prasad and Mrs. Manju Gupta July 28, 1987, to September 6, 1990 V. N. Tandon and Mrs. Manju Gupta September 6, 1990, to October 24, 1994 V. N. Tandon, Mrs. Manju Gupta, and Aradesh Kumar October 24, 1994, to January 12, 1998 Awdesh Kumar and Mrs. Manju Gupta January 12, 1998, onwards. 4. It is alleged that during the period September 6, 1990, to January 12, 1998, the management of affairs of the respondent-company was virtually and exclusively in the hands of Mr. V. N. Tandon. Mrs. Manju Gupta being in regular service as lecturer and not well conversant with the company affairs, had no check and supervision in the management. 4. It is alleged that during the period September 6, 1990, to January 12, 1998, the management of affairs of the respondent-company was virtually and exclusively in the hands of Mr. V. N. Tandon. Mrs. Manju Gupta being in regular service as lecturer and not well conversant with the company affairs, had no check and supervision in the management. Awdhesh Kumar was in service and, therefore, he could not also look after the affairs of the company, and thus the entire management was under Mr. V. N. Tandon who virtually acted as the sole director of the company. It is alleged that in the books of account of the respondent-company, the name of Mr. H. N. Tandon, the petitioner, appears only in the year ending March 31, 1993, as a creditor of Rs. 10,000 which has been shown to be paid in cash to the company. Mr. V. N. Tandon manipulated this entry and no reason has been given as to how and why the amount was taken from his brother-in-law in the year 1992-93. This entry continued up to the year 1993-94 and is being adjusted in the books of account by transfer to the accounts of his wife Smt. Krishan Tandon. The company also maintains the accounts of Smt. Krishna Tandon and in which it is shown that on May 29, 1992, a sum of Rs. 1,30,025 was received from her by bank transfer and on June 8, 1992, a sum of Rs. 1,50,000 was received by bank transfer. A bank cheque was issued in favour of Smt. Krishna Tandon for a sum of Rs. 30,025 on May 29, 1992, and, therefore, a credit balance of Rs. 2,50,000 remained to be paid by the respondent-company to Smt. Krishna Tandon. The aforesaid two amounts of Rs. 1,30,025 and Rs. 1,50,000 are the same amounts which have been claimed by the petitioner Mr. H. N. Tandon. This amount has been shown to be taken by the respondent-company from Smt. Krishna Tandon through the same cheque numbers bearing the same dates as shown to have been drawn by Mr. H. N. Tandon. In the accounts there is no mention of the name of Mr. H. N. Tandon as lender of the amount instead there is a mention of Smt. Krishna Tandon. H. N. Tandon. In the accounts there is no mention of the name of Mr. H. N. Tandon as lender of the amount instead there is a mention of Smt. Krishna Tandon. The amounts mentioned in the petition have been manipulated showing them as loan by the petitioner to the respondent-company by Mr. V. N. Tandon, a close relative of the petitioner, by issuing the letters after he has resigned and gone out of the respondent-company in the form of acknowledgement of the loan and receipt thereof. Smt. Krishna Tandon has also issued a notice dated August 3, 1998, for repayment of the loan amount along with the interest. The respondent-company has come to learn that Mr. V. N. Tandon had arranged the letter pads of the company from Parnami Printers and the receipt/letters were issued in the letterheads of the company by Mr. V. N. Tandon subsequently putting prior date. The letters are in the handwriting of Mr. V. N. Tandon. This was simply a forgery. The company has also lodged a report against Mr. V. N. Tandon in the Malviya Nagar police station on September 1, 1998. 5. The company has never authorised Mr. V. N. Tandon to take loans from his relatives and to issue letters acknowledging debt of the company. The books of account of the company do not show that the company owes any amount to Mr. H. N. Tandon. The petitioner's claim is a made up claim, with the help of Mr. V. N. Tandon, who happened to be a director of the company at the relevant time, on the basis of receipt and letters issued under the signature of Mr. V.N. Tandon, who was involved in the conspiracy, neck-deep, of creating false debts of his relatives against the company. 6. It is said that the company petition for winding up under Section 433(e) of the Act for non-payment of debts against the company in spite of legal demand being made, is not maintainable as the notice does not indicate that on failure to pay the amount claimed, winding up petition shall be filed. 7. The notice of demand given by the petitioner to the company is annexure 10, Contents of the notice start with the caption "Repayment of loans advanced to the company" and then the details of the amounts have been given as Rs. . 7. The notice of demand given by the petitioner to the company is annexure 10, Contents of the notice start with the caption "Repayment of loans advanced to the company" and then the details of the amounts have been given as Rs. . 1,30,025 by cheque No. 584929 dated May 29, 1992, and an amount of Rs. 1,50,025 by cheque No. 584931 dated June 8; 1992, and contains demand to pay amount with interest at the rate of 15 per cent. to be compounded quarterly within fifteen days failing which he shall be free to start legal proceedings against the company. 8. The submission of counsel for the respondent is that the notice served on the company cannot be held to be a legal notice for constituting a ground under Section 433(e) of the Act for filing the company petition on assertion that the company is unable to pay its debts. 9. Section 434(1)(a) of the Act creates a presumption that the company is unable to pay its debts, if a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by registered post or otherwise at its registered office, a demand under his hand requiring the company to pay the sum so due and after service of the notice the company has for three weeks thereafter neglected to pay this amount or to secure or compound for it to the reasonable satisfaction of the creditors. Thus, the creditor who owes from the company an amount exceeding Rs. 500, serves the notice on the registered address of the company demanding repayment of the amount of debt and the company either neglected to pay or to secure or compound to the reasonable satisfaction of the creditor within three weeks the amount of debt, the provisions of Section 434(1)(a) of the Act shall be attracted. The debtor company if has neglected to pay the sum demanded or to secure the said sum, or compounding it to the reasonable satisfaction of the creditor then alone the presumption shall be drawn that the company is unable to pay its debts Satisfaction required is reasonable satisfaction of the creditor and not the debtor. The demand notice under the Act need not be in a special form. The demand notice under the Act need not be in a special form. It is also not necessary that the notice should carry warning that if the demand was not met the winding up petition shall be filed. Request for repayment would be sufficient. The law does not require that the demand shall recite a threat for proceeding for winding up in the case of non-payment nor is there any necessity that the demand notice should mention that the notice is being given under Section 434(1)(a) of the Act. 10. In the present case the petitioner served a notice at the registered office, which is a mandatory requirement, to pay the debt, which is of course more than five hundred rupees and informed the company that failing which legal action shall be taken. Legal action includes action for winding up under Section 433 of the Act. In my opinion there was sufficient compliance with Section 434(1)(a) of the Act and thus it cannot be said that the company petition is not maintainable under Section 433(e) of the Act. That apart even if the notice was bad, that will not debar the petitioner from filing a petition under Section 433(e) of the Act. Legal notice under Section 434(1)(a) only draws a presumption that the company is unable to pay its debt which is rebuttable presumption. If the notice served on the company is not in accordance with law or if no notice is served under Section 434(1)(a) of the Act it cannot be said that independent of the notice under Section 434 the creditor cannot institute the proceedings for winding up under Clause (e) of Sub-section (1) of Section 433 of the Act. The creditor without there being any presumption drawn on account of the service of notice under Section 434(1)(a) can prove the fact that the company is unable to pay its debt. The creditor/petitioner can satisfy the court by placing relevant material and evidence on record that the company is unable to pay its debt and on such proof, a winding-up order can be passed by the court under Section 433(e) of the Act. 11. The creditor/petitioner can satisfy the court by placing relevant material and evidence on record that the company is unable to pay its debt and on such proof, a winding-up order can be passed by the court under Section 433(e) of the Act. 11. Coming to the merits of the case, the claim of debt against the company is made on the basis of two transactions which have been said to be effected by issuance of demand drafts in favour of HCL by the petitioner and non-payment of that amount by the respondent-company. In reply submitted by the respondent-company, it is alleged that there is no amount due from the company to the petitioner, in fact the cheques mentioned in the notice, i.e., No. 584929 dated May 29, 1992, and No. 584931 dated June 8, 1992, by which demand drafts were purchased and issued by the petitioner's wife Smt. Krishna Tandon. The relevant entries relating to the cheques find place in the books of account of the company, in the account maintained of Smt. Krishna Tandon. The defence of the company is that the same amount is claimed by the petitioner as well as by his wife, source of which is the same cheques, issued on the same dates, for the same amount and these facts can be demonstrated by production of the company's accounts. It is also alleged that the claim is substantiated on the basis of receipts acknowledging the debts, issued by Mr. V. N. Tandon, who is close relative of the petitioner Mr. H.N. Tandon. Taking advantage of his position as director, he forged the documents and the records of the company. Letters of acknowledgement were issued after the retirement of Mr. V. N. Tandon as director of the company and these facts can be proved by leading evidence before the court. It is also said that Mr. V. N. Tandon was never authorised by the company to take loan from his close relative nor to acknowledge the same. 12. It appears from the allegations made in the written statement that the petitioner and one Mr. V.N. Tandon are close relatives. Issuance of letters acknowledging the loan, on a subsequent date without there being any advance, cannot be rejected as baseless. To prove these facts and to deny the allegations of the company the respondent as well as the petitioner would be required to produce evidence. Whether Mr. V.N. Tandon are close relatives. Issuance of letters acknowledging the loan, on a subsequent date without there being any advance, cannot be rejected as baseless. To prove these facts and to deny the allegations of the company the respondent as well as the petitioner would be required to produce evidence. Whether Mr. V. N. Tandon had any authority to take loan and acknowledge the debt for and on behalf of the company, would also be a matter of evidence. Whether the amount claimed by Mr. H. N. Tandon on the basis of cheque issued is the same as is being reflected in the books of account in the name of his wife and the claim made by his wife Smt. Krishna Tandon, are also matters of evidence. It is settled law that if there is a reasonably plausible defence available to the company to defend the amount claimed then the parties should be relegated to the proceedings before the civil court. It is only when the defence raised by the company is not plausible or can be rejected outright on the basis of the pleadings of parties and material on record then and then alone the company petition under Section 433(e) shall be entertained by the court. The company petition cannot be permitted to be utilised as measure to enforce the company to pay the amounts which are alleged to have been advanced by the petitioner. 13. In my opinion there is a bona fide defence available to the company to refute the claim made by the petitioner arid thus it would not be appropriate to exercise the jurisdiction under Section 433 of the Act. The petitioner, if he thinks fit and proper, may approach the civil court for redressal of his grievance. The company petition is dismissed with costs of Rs. 3,000. *******