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2008 DIGILAW 558 (GAU)

Tezalpatty Tea (P. ) Ltd. v. Eastern Tea Brokers (P. ) Ltd.

2008-08-01

ASHOK POTSANGBAM, J.CHELAMESWAR

body2008
JUDGMENT Asok Potsangbam, J. 1. Heard Mr. A.K. Bhattacharjee, learned senior Counsel assisted by Mr. N. Deka and others, learned Counsel appearing on behalf of the appellant and Mr. R. Banerjee, learned Counsel for the respondent. This appeal is directed against the judgment and order dated 18.9.2007 passed by the learned Single Bench in Company Petition No. 16 of 2005. Brief facts giving rise to this appeal are stated as follows. Brief facts giving rise to the filing of company petition 2. The Appellant Company is a company incorporated under the provisions of the Companies Act, 1956 and it has its registered office at Rahman Building, S.S. Road, Guwahati-1, Assam. The objects of the appellant company, inter alia, are to carry on the business of planters, growers and manufacture of tea, coffee, jute, cinchona, paddy, sugarcane, fruits, cocoa, rubber, bamboo, citronella and to acquire by purchase, lease, grant, assignment transfer, sale or otherwise deal in any tea garden or plantation and premises from any person or persons, firm, company, municipality or government. The appellant is the owner of a tea estate called as "Tezalpatty Tea (P.) Ltd." and the appellant manages the tea estate with a workforce of about 200 workers. 3. The respondent is also a company incorporated under the provisions of the Companies Act, 1956 under the name and style as "Eastern Tea Brokers (P.) Ltd." and its has its registered office at Maniram Dewan Road, Guwahati-3, Assam. The stated objects of the Respondent-Company which can be gathered from the statement and documents available before the court, is to carry on the business of brokerage as a tea broker and the nature of business of tea broker is to procure and sell tea manufactured from various tea gardens through the respondent-company at the Tea Auction Centre at Gauhati. It is also the further case of the respondent that the company used to advance money to tea gardens/tea planters for supply of manufactured tea to be sold by the respondent at the Tea Auction Centre at Gauhati. It is also the further case of the respondent that the company used to advance money to tea gardens/tea planters for supply of manufactured tea to be sold by the respondent at the Tea Auction Centre at Gauhati. It is maintained that the purpose for such advance/loan given to the tea planters/tea estate owners is to ensure that the tea product and tea manufactured by the loanees would be sold only through the respondent-company and the money so advanced by the respondent are used to be realized from the sale proceeds of the manufactured tea at the Tea Auction Centre at Gauhati. 4. The Appellant is one of the tea estate owners who has been subjected to the aforesaid trade practice including the receipt of advance/loan from the respondent. The pleaded case of the respondent is that whatever amount which is advanced by the respondent to the appellant is chargeable with interest @ 22% p.a. at quarterly rest thereby meaning that interest so accrued on quarterly rest shall be capitalized and thereafter the interest for the next quarterly rest would be against the principal sum plus interest which has already been capitalized, and this capitalization and compound interest is to go on till the total outstanding amount is liquidated. As a result of the aforesaid practice, it is stated and claimed by the respondent in the company petition that amount indicated below had become due for payment by the appellant to the respondent: (i) Admitted Outstanding Sum as on 31.3.2004 Rs. 1,04,16,326.84 (ii) Further interest at the rate of 22% per annum. Rs. 24,92,831.83 Total Rs. 1,29,09,158.67 5. It is noticeable from the records that a sum of Rs. 35 lakh was offered by the appellant to settle the outstanding due, but the same was not accepted by the respondent and the respondent, in its turn, made another offer for an amount of Rs. 70 lakh for one time settlement but that was not acceptable to the appellant. After having failed the effort for one time settlement, the respondent company filed a Company Petition being No. 16 of 2005 under Sections 433, 434 and 439 of the Companies Act, 1956 for winding up of the appellant company mainly and substantially on the ground that the appellant company was/is not able to pay its debt and the appellant company is plainly and commercially insolvent. Contentions of the parties before the Single Bench 6. The contention of the creditor respondent is that as a tea broker they used to make advance of money to the tea planters/growers/manufacturers on the assurance and commitment that the tea manufactured by such loanees is to be sold only through the respondent at the Tea Auction Centre, Guwahati and money so advanced are to be realized from such sale proceeds at the Tea Auction Centre. Such practice has been carried on between the respondent and the appellant from 1996 onwards, on condition that money so advanced by the respondent at the request of the appellant would carry interest @ 22% p.a. with quarterly rest and money so advanced will be paid out of the said sale proceeds of the manufactured tea which would be sold through the respondent at the Tea Auction Centre, Guwahati. It is also contended that the parties are required to maintain an open, mutual current account. The respondent sought to establish and substantiate the aforesaid terms and conditions including the rate and nature of interest from the course of conduct between the parties and also from the documents on record. As a result of such transaction of advancing money/loan, a total sum of Rs. 1,29,09,158.67 with interest, as indicated above, has become due for payment by the appellant to the respondent. 7. It is also contended that the outstanding dues from the appellant company to the respondent had been acknowledged and admitted by the appellant, yet the appellant failed and neglected to make payment of the outstanding dues and accordingly, a statutory notice of demand, dated 19.5.2005 under Sections 433 and 434 of the Companies Act, 1956, was served upon the appellant and having failed to evoke any positive response, the company petition was filed. 8. Disputing and controverting the statement/contention of the creditor company, the appellant-company filed an affidavit-in-opposition followed by two Additional affidavits, and the main grounds, inter alia, taken by the appellant are stated as hereunder: (a) With regards to the contention of the respondent in its rejoinder-affidavit that there was an agreement dated 5.1.2000 between the parties providing interest @ 24% per annum with quarterly rest against an advance/loan of Rs. 15 lakh to the appellant, it was explained and clarified by the appellant that the aforesaid loan of Rs. 15 lakh to the appellant, it was explained and clarified by the appellant that the aforesaid loan of Rs. 15 lakh had already been liquidated in 2000 itself by paying a sum of Rs. 15,08,956.33 and as such the aforesaid agreement is confined only to the advance of Rs. 15 lakh, not to any other advance/loan. The case of the appellant is that there existed no agreement at all enabling the respondent company to charge 22 % interest per annum with quarterly rest against money/loan advanced by the respondent to the appellant except in the case of aforesaid Rs. 15 lakh. (b) The claim of the respondent that the statement of accounts relating to the outstanding due was already acknowledged by the Manager (Accounts) of the appellant, is strongly denied by the appellant on the ground that the Manager (Accounts) was not a person authorized for confirmation of statement of accounts and that it was only an acknowledgement of the receipt of the statement of accounts. (c) The case of the appellant is that the respondent company not being a Bank or a financial institution could not legally advance money/loan and charge interest with quarterly rest, i.e., with compound interest and the respondent has neither licence to carry on any Banking business nor has it a licence to carry on any money lending business. In order to substantiate the aforesaid contention that the respondent company indulges/engages itself without any authority or a valid licence to carry on money lending business at exorbitant interest chargeable with compound interest, names of 19 companies which are recipients advance of money or loanees of the respondent company are cited in the additional-affidavit of the appellant and the same is not disputed by the respondent. Name of 19 companies of which 18 are tea growing companies of Assam, are reproduced herein below: (1) Auro Tea Company (P.) Ltd. (2) Bhuyankhat Tea Company (P.) Ltd. (3) Buragohain Tea Company (P.) Ltd. (4) Savitri Seuj Tea (P.) Ltd. (5) Rangoli Tea Enterprise. (6) Gobindapore Tea Company (P.) Ltd. (7) Barmajan Tea Company (P.) Ltd. (8) Dalsajoori Tea (P.) Ltd. (9) Agarwal Tea Company. (10) The Dolaguri Tea Company (P.) Ltd. (11) Duliabam Tea Estate. (12) Hautley Tea Etate. (13) Hingarajan Tea Estate. (14) Lakhibari Tea Company. (6) Gobindapore Tea Company (P.) Ltd. (7) Barmajan Tea Company (P.) Ltd. (8) Dalsajoori Tea (P.) Ltd. (9) Agarwal Tea Company. (10) The Dolaguri Tea Company (P.) Ltd. (11) Duliabam Tea Estate. (12) Hautley Tea Etate. (13) Hingarajan Tea Estate. (14) Lakhibari Tea Company. (15) Nilpur Tea Company (P.) Ltd. (16) Shyampore Tea Company (P.) Ltd. (17) Shreemoni Tea Company (P.) Ltd. (18) Choudhury Tea and Agro Industries (P.) Ltd. (19) Manas Products (Protein) (P.) Ltd. (d) It is also contended that the business of the appellant company is agricultural and the loan advanced by the respondent is nothing but an agricultural loan and as such charging of compound interest on loan for agricultural purposes is barred by law as laid down by the Apex Court. (e) It is also contended that a company petition for winding up is not a legitimate means for recovery of debt against the company which bona fide disputed claim of debt. Decision of the Single Bench 9. (a) The company petition was allowed by the learned Single Bench by rejecting the contention of the appellant company that the statement of accounts for the period ending 31.3.2002 and 31.3.2004 was merely signed by the Manager (Accounts) acknowledging the receipt of the same but in no case this could be considered as confirming/admitting the statement of accounts as the Manager (Accounts) who received the statement of accounts was not a person authorized by the appellant company either to confirm or admit the Statement of Accounts referred to above. The learned Single Bench also held that the statement of accounts referred to above, was duly admitted and confirmed without any ambiguity by the appellant by acknowledging the outstanding dues with interest @ 22% p.a. (b) Despite recording a clear finding that there was no agreement between the parties, on the chargeable interest either compound or otherwise, learned Single Bench held that the transaction was a part of the continuing process of business relationship by which money was advanced and repaid against supply of manufactured tea from time to time. The learned Single Bench also relied upon a judgment of the Apex Court Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. and Ors. The learned Single Bench also relied upon a judgment of the Apex Court Solidaire India Ltd. v. Fairgrowth Financial Services Ltd. and Ors. (2001) 3 SCC 71 : wherein the Apex Court held that even if there is no agreement between the parties on the rate of interest, interest claimed by one of the parties in the transaction shall be paid unless refuted at the earliest opportunity and applying this principle, the learned Single Bench held that interest claimed by the respondent was not refuted at the earliest and rather it was admitted by the letter dated 20.5.2004 referred to above, and as such the rate of interest should be 22% p.a. in other words, the claim of the respondent that the chargeable interest is 22% with quarterly rest, i.e., compound interest is accepted by the Single Bench. Thereafter the learned Single Bench came to the conclusion that the appellant has failed to pay due debt and consequently directed the appellant to pay its outstanding dues inclusive of interest @ 22% calculated in the manner indicated above, within 3 months failing which the order directing to wind up the company will start operating and in that event, the official liquidator is to proceed with the winding up process. CASE BEFORE THIS COURT 10. The aforesaid impugned judgment and order of the learned Single Bench has been assailed by the appellant in this company appeal by repeating almost all the grounds taken before the learned Single Bench and also questioning the correctness or legality of the findings arrived by the learned Single Bench. 11. It is submitted by Mr. A.K. Bhattacharjee, learned senior Counsel appearing for the appellant that despite raising a specific issue that the loan advanced by the respondent to the appellant is for agricultural purposes inasmuch as tea plantation, tea production and its allied activities are agricultural in nature and as such charging compound interest is impermissible in view of the law laid down by a Constitution bench of the Apex Court as in Central Bank of India v. Ravindra and Ors. (2002) 1 SCC 367 : Relevant finding recorded in para 55(6) in the aforesaid case, is reproduced below: 55(6). Agricultural borrowings are to be treated on a pedestal different from others. (2002) 1 SCC 367 : Relevant finding recorded in para 55(6) in the aforesaid case, is reproduced below: 55(6). Agricultural borrowings are to be treated on a pedestal different from others. Charging and capitalization of interest on agricultural loans cannot be permitted in India except on annual or six-monthly rests depending on the rotation of crops in the area to which the agriculturist borrowers belong. (a) The issue raised above, which has a vital bearing on the adjudication of the issue of interest as claimed by the creditor respondent, has not at all been decided by the learned Single Bench, leave alone any discussion on this issue in any part of the impugned order and as such, submits by the appellant, the impugned order is liable to be set aside. (b) We have perused the impugned judgment and order and we find that the issue referred to above was neither discussed nor decided by the learned Single Bench. We find sufficient force in the submission of the learned Counsel for the appellant. 12. Mr. A.K. Bhattarjee, learned senior Counsel has also raised another issue that advance of money/loan with 22% interest at quarterly rest by' the respondent to the appellant and others, is nothing but money lending and such business of money lending is within the scope and meaning of money lending/money lender as defined in the Assam Money Lenders' Act, 1934, hereinafter referred to as 'the Act'. Admittedly, the respondent, in the course of its business, used to advance money to the tea planers and tea manufactures for future supply of manufactured tea with stipulation that such amount of money given as advance/loan would bear interest @ 22% p.a. with quarterly rest which, in fact, is indisputedly much higher than the chargeable interest fixed by the Reserved Bank of India for banking and other financial institutions. In support of the aforesaid contention, the appellant relies upon para 55(7) of Ravindra case (supra) and para 55(7) is quoted below: 55(7) Any interest charged and/or capitalized in violation of RBI directives, as to rate of interest, or as to periods at which rests can be arrived at, shall be disallowed and/or excluded from capital sum and be treated only as interest and dealt with accordingly. 13. 13. As already discussed above, it is not in dispute that the money so advanced, with the stipulation as mentioned above, is realized by the respondent from the sale proceeds of the tea manufactured by the appellant and sold exclusively through the respondent at the Tea Auction Centre, Guwahati. It is also submitted that the respondent company, not being a bank or financial institution and having no licence to lend money under the Assam Money Lenders' Act, 1934 with interest and that too above the rate of interest fixed by the Reserve Bank of India, cannot indulge itself in advancing or lending money with compound interest and as a result, the whole transaction is illegal and the respondent has no valid and actionable claim. It is, further, submitted by the learned Counsel for the appellant that this issue, Which goes to the root of the case, has not been adequately addressed to by the learned Single Bench, instead, the learned Single Bench, without assigning any cogent reason, abruptly came to the conclusion that the money given as advance/loan by the respondent to the appellant, is not loan as advanced by the bank/banking institution or money lenders and no cogent reason whatsoever is given supporting and justifying the aforesaid abrupt finding of the learned Single Bench. Thus, it is submitted that the impugned order is liable to be set aside on this ground also. 14. Another ground taken by the appellant for assailing the impugned judgment and order is that the amount claimed by the creditor respondent is disputed either wholly or partially and as such the creditor's application for winding up of the company of the appellant is not maintainable. Though several grounds have been taken by the appellant in the memo of appeal, the learned senior Counsel for the appellant has more or less confined his arguments mainly on the aforesaid three issues and as such, it may not elaborately require reference to other facts and contentions. 15. Mr. Though several grounds have been taken by the appellant in the memo of appeal, the learned senior Counsel for the appellant has more or less confined his arguments mainly on the aforesaid three issues and as such, it may not elaborately require reference to other facts and contentions. 15. Mr. R. Banerjee, learned Counsel appearing for the respondent/petitioner submits that though the business of the respondent as tea broker is to procure tea manufactured by the tea planters for sale at the Tea Auction Centre, Guwahati, money is always advanced to the tea planters for the purpose of getting a commitment from the tea planters that their products would be sold only through the respondent and money so advanced to such tea planters are realized from the sale proceeds of tea at the Tea Auction Centre, Guwahati. 16. With regards to the interest of 22% charged against the amount advanced to the appellant with quarterly rest (compound interest), Mr. Banerjee submits that the same is not disputed in the transaction between the parties and rather it was confirmed and admitted by the appellant in its letter dated 20.5.2004 and as such the outstanding amount already accepted/confirmed by the appellant is liable to be paid to the respondent. Secondly, Mr. Banerjee has also taken us to 'K' series Annexures numbering ten of the rejoinder affidavit to show that the amount requested by the appellant from 1998 onwards is not directly connected with tea plantation and as such, the advance of money given by the respondent to the appellant is not at all connected with any agriculture or agricultural activities and as such the issue raised by the appellant has no relevancy. 17. On perusal of the documents available on record and after hearing the parties, we feel and consider that the following issues are relevant for consideration of this Court in order to resolve the controversy involved in the case: (i) Whether the fact that money/loan had been advanced with interest @ 22% p.a. at quarterly rest in addition to the commitment given by the appellant company for selling tea manufactured by them at the Tea Auction Centre, Guwahati only through the respondent, would attract the provisions of the Assam Money Lenders' Act, 1934 and Rules made thereunder? (ii) Whether tea plantation and tea production are within the ambit and meaning of agriculture and agricultural products and if so, compound interest with quarterly rest is chargeable against loan/advance of money or not? (iii) Whether the application for winding up of a company on the basis of disputed claim is maintainable or not? 18. With reference to issue No. (i), it may be necessary to understand what exactly would be the meaning of the term of money lender, interest and loan as defined in the Assam Money Lenders' Act, 1934. The expression 'money lender', 'interest' and 'loan' as defined under Section 2(1), (2) and (3) of the Assam Money Lenders' Act, 1934 are reproduced herein below : 2(1) 'Money Lender' means a person who in the regular course of business, advances a loan as defined in this Act and shall include, subject to the provisions of Section 6, the legal representatives and the successors in interest whether by inheritance, assignment or otherwise of the person who advanced the loan and money-lending shall be construed accordingly; 2(2) 'Interest' means rate of interest and includes the return to be made over and above what was actually lent whether the same is charged or sought to be recovered' specifically by way of interest or otherwise; 2(3) 'Loan' means an advance, whether or money or in kind, made on condition of repayment with interest and includes any bond bearing interest executed in respect of past liabilities and any transaction which is in substance a loan, but does not include- (a) a loan to, or by, or a deposit with, any Society or Association registered under the Societies Registration Act, 1860 (Act XXI of 1860) or under any other law relating to public, religious or charitable objects, (b) a loan advanced before or after the commencement of this Act- (i) by a Co-operative Life Insurance Society. (ii) by a Bank which has been declared to be a notified Bank under Section 2A whether or not such Bank was declared to be a notified Bank at the time the loan was advanced, (c) a loan advanced by Life Insurance Corporation of India, Financial Corporation of India or any other Corporate Body; 19. (ii) by a Bank which has been declared to be a notified Bank under Section 2A whether or not such Bank was declared to be a notified Bank at the time the loan was advanced, (c) a loan advanced by Life Insurance Corporation of India, Financial Corporation of India or any other Corporate Body; 19. The crux of the matter rests with the understanding of the definition of 'money lender' as defined in Section 2(1) of the Act and whether the activities of the respondent, as discussed above, fall within the definition of 'money lender' or not. We must find out whether it is possible, without any aid or reference to any other, to understand and interpret the definition of 'money lender' and 'loan'. There is no doubt that the aforesaid two expressions, read together, would mean that there shall be a person who, in the regular course of business, advances money/loan and the expression 'loan' would again connote an advance, whether money or kind, made on the condition of repayment with interest. Thus, in order to establish that the activity of a person is within the meaning of 'money lender' as defined under the Act, there ought to be a person advancing money/loan, with interest in the regular course of business which is opposed to any casual or isolated case of advancing money/loan. In other words, the activities of advancing loan should be a regular affair. Therefore, it will be appropriate for us to find out whether advancing of money/loan by the respondent to the appellant and to other tea planters, etc., are of regular course of activity or casual or isolated case. We have not seen any pleading/contention indicating that advance of money/loan by the respondent to the appellant is only for 1 or 2 instances, which can be called casual or isolated cases. Admittedly, the pleaded case of the respondent is that the transaction of advancing money/loan between the parties have been going on since 1996 and a specific averment has been made in this regard in para-6 of the petition that in the course of its business, the petitioner also advances moneys to tea gardens for supply of manufactured tea to be sold at the Tea Auction Centre, Guwahati and the same is repeated in para-7 in the following words: 7. In the course of its business, the petitioner company used to advance moneys to the respondent company and the company supplied manufactured tea which was then sold at the Tea Auction Centre at Guwahati and from out of the sale proceeds, the moneys advanced by the petitioner to the respondent company along with agreed rate of interest were re-paid to the petitioner by the respondent company. The petitioner from time to time at the request of the company advanced such loans. The terms and conditions on which such advances were made as follows: (i) Moneys would be advanced by the Petitioner at the request of the company; (ii) Moneys will carry interest at the rate of 22% per annum with quarterly rest; (iii) Moneys advanced will be paid out of the sale proceeds of manufactured tea which will be sold through the petitioner at the Tea Auction Centre at Guwahati; (iv) There will be maintained as open, mutual, current account between the parties. 20. Thus, the respondent, a tea broker, whose stated object does not include advance of money/loan/money lending with compound interest, admittedly engaging itself in advancing money/loan with interest higher than the interest fixed by the RBI for bank and financial institutions and that too with compound interest. Further, it is also noticed from the record that indisputedly the respondent company had advanced money/loan with interest to 19 other companies, 18 of whom are tea planters in Assam and from this the irresistible conclusion is that the respondent regularly indulged or engaged itself in the business of money lending with compound interest and as such the activities of the respondent is very much within the meaning of money lender as defined under Section 2(1) of the Act. 21. Coming to the issue that tea plantation or tea production is agriculture or agricultural production, we do not find any specific rebuttal by the respondent to the contention of the appellant that tea cultivation or tea production is agriculture or agricultural products and also having taken into account the very nature of activities involved in the plantation of tea in huge tea garden by engaging a large number of labourers, etc., we have no hesitation to hold that tea plantation and tea production are agriculture or agricultural activities. The learned Single Bench, not having decided this issue despite specific plea on this issue, the impugned order suffers from non-consideration of relevant issue and accordingly the same is liable to be set aside. 22. In view of the above findings on the second issue and also in view of the decision of the Apex Court, as extracted above, we feel that compound interest is not permissible on agricultural loan except in the manner indicated therein. The contention of the respondent that huge amount of the money advanced as evidenced from 'K' series annexure/document in the rejoinder affidavit of the respondent is not relatable to agricultural activities, is not acceptable for the following reasons: (i) It is appears that the advance of money/loan sought by the appellant as disclosed by the aforesaid documents relate to the activities of tea plantation of a tea estate, in other words purchase of essentials for tea estate and payment of wages for the tea labourers, etc., essentially form a part of the activities of tea plantation in a tea estate; (ii) secondly, the amount disclosed by the K series documents, perhaps, form only small portion of the loan advanced by the respondent to the appellant against which the outstanding dues, now being claimed by the respondent, arises and this is more so in the absence of any specific pleading and document to show that the outstanding amount consists only of the amount shown in the K series documents. Further, the respondent has failed to establish that there was any agreement between the parties on the chargeable interest against the advance of money/loan referred to above and the outstanding amount now being claimed relates up to the period ending of 31.3.2004 whereas the letter dated 20.5.2004, the authority of the person who penned the letter is disowned and disputed, is a letter written much after 31.3.2004. 23. It is well settled law that a creditor's application for winding up of a company is ordered only in such cases where the claim, of the creditor is undisputedly or indisputably an enforceable claim. In view of our discussions above, the claim of the respondent company petitioner appears to be at least a partially disputed claim both on questions of fact and law. 24. On 4.1.2008 this Court recorded that pursuant to an earlier interim order dated 10.12.2007 passed in Misc. In view of our discussions above, the claim of the respondent company petitioner appears to be at least a partially disputed claim both on questions of fact and law. 24. On 4.1.2008 this Court recorded that pursuant to an earlier interim order dated 10.12.2007 passed in Misc. Case No. 4169/07 in the present appeal the appellant deposited an amount of Rs. 30,000,00 by three cheques drawn on the Federal Bank Ltd. Fancy Bazar Branch, Guwahati with the Registry. This Court further recorded that the respondent company petitioner shall be at liberty to withdraw the same. 25. In the circumstances, in view of our conclusion that the claim of the respondent company petitioner is only a disputed claim in part the respondent shall retain the amount and the same shall be adjusted towards the amount, if any, found due to the respondent in any appropriate proceeding that may be initiated by the respondent, as indicated earlier. 26. For the reasons discussed hereinabove, we are satisfied that the appellant has been able to make out a case for interference. Accordingly, the impugned judgment and order dated 18.9.2007 passed in Company Petition No. 16 of 2005 by the learned Single Bench is hereby set aside. However, it is open to the respondent company petitioner to move such appropriate forum for the recovery of money claimed by him. 27. No order as to costs. Petition disposed of.