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2015 DIGILAW 393 (KAR)

ATALANTA PUMPS PRIVATE LIMITED v. KUNDA J. MAJLI

2015-04-08

S.SUJATHA, VINEET SARAN

body2015
JUDGMENT 1. This is a Company appeal filed against the order dated 5.7.2012 passed in Company Petition No.121/2009 whereby, after admitting the appeal, a direction for issuance of advertisement has been given. 2. The brief facts of the case are: That the respondent Mrs. Kunda J Majli was a director of the appellant – company M/s Atalanta Pumps Private Limited. A legal notice dated 21.2.2009 was given by the respondent to the company under Section 434(1)(a) of the Companies Act, 1956 (hereinafter referred to as the “Act”) claiming that as director, she was entitled to remuneration of Rs.25,000/per month plus Rs.15,622/per month towards vehicle expense, which had not been paid to her since July ‘05. Thus, a demand of Rs.17,06,124/was raised along with 12% interest. The said communication was acknowledged by the company vide letter dated 24.3.2009 and subsequently, on 30.3.2009 the company sent a reply informing the respondent that she had resigned from the directorship of the company on 5.8.2005 and hence, the question of payment of salary or vehicle expenses did not arise. It was also informed that after acceptance of resignation by the Board, Form No.32 had been filed with the Registrar of Companies intimating that she was no longer director of the Company after August ’05. The respondent thereafter filed Company Petition No.121/09, which was initially admitted on 10.2.2010 by the following order: “Admit. Advertisement deferred.” 3. The said order was challenged by the Company in OSA 8/2010 and by a detailed Judgment and Order dated 24.5.2012, a Division Bench of this Court allowed the appeal and quashed the order dated 10.2.2010. The matter was remanded to the learned Company Judge to consider the matter afresh and pass reasoned order, as one confirming to the requirements of a speaking order. Then, the impugned order dated 5.7.2012 has been passed whereby the Petition for winding up of the Company has been admitted and a direction for advertisement has also been issued. Challenging the same, this appeal has been filed. 4. We have heard Sri Saji P John, learned counsel for the appellant as well as Sri C K Nanda Kumar, learned counsel for the respondent at length and have perused the records. 5. Challenging the same, this appeal has been filed. 4. We have heard Sri Saji P John, learned counsel for the appellant as well as Sri C K Nanda Kumar, learned counsel for the respondent at length and have perused the records. 5. The submissions of the learned counsel for the appellant is that for invoking the provisions of Section 433(e) of the Act (under which provision the company petition has been filed), it was necessary for the Company Court to have recorded a finding to the effect that the Company was unable to pay its debts and in the absence of any such finding having been recorded, the order of admission of the Company Petition could not have been passed. It has also been contended that the Company Court has not even held as to whether the debts were such which were admitted or proved to be debts which were payable and as such, the order impugned in this appeal is liable to be set aside. Learned counsel for the appellant has further submitted that the respondent had herself resigned from the directorship of the company vide resignation letter dated 5.8.2005, which was accepted by the Board of Directors on 12.8.2005 and intimation in that regard was sent to the Registrar of Companies and by order dated 2.9.2005 passed by the Registrar of Companies, the name of the respondent was removed from the list of directors of the Company in the records of the Registrar of Companies. It is thus submitted by the learned counsel for the appellant that the claim of the respondent for payment of remuneration as well as vehicle expenses for the period from August 2005 onwards was not legally sustainable and cannot be said to be a debt within the meaning of Section 433(e) of the Act and as such, there was no debt due which could be said to be payable by the Company to the respondent. 6. It was next submitted that while passing the impugned order, learned Company Judge has proceeded to decide as to whether the resignation tendered by the respondent was proper or not i.e., whether it was a simple resignation or a conditional resignation and after holding that the resignation of the respondent was a conditional resignation and such condition having not been fulfilled, there was no resignation, learned Company Judge proceeded to decide the matter. The submission of the learned counsel for the appellant is that the question of resignation by a director could not have been looked into in a Company petition for winding up and the same could have been decided in appropriate proceedings which may be by way of filing a suit before the Civil Court or filing an appropriate petition before the Company Law Board, and not by raising the same in a winding up petition. Learned counsel has thus contended that the order of the learned Single Judge is bad in law and is liable to be quashed. 7. On the other hand, learned counsel for the respondent has vehemently argued that the dues need not be specifically quantifiable dues but, need only be admitted or determinable dues and since, the respondent had admittedly not been paid her salary as director (as well as the vehicle expenses) to which she was entitled to since August 2005, even though the quantification of the dues may be disputed, but it cannot be disputed or doubted that certain determinable debts were due to be paid to her by the Company. It is submitted by the learned counsel for the respondent that since resignation was on the fulfillment of certain contingency, which was that her shares would be purchased by the other two directors of the Company and that she would be delinked from the guarantees given by her towards the loan taken by the company, and the said contingencies had not been fulfilled, hence, there was no question of she having resigned. 8. In reply to a query made as to whether she had ever attended the meetings of the Board of Directors after 2.8.2005, it was stated that though she had not attended any meetings thereafter, but since under the Articles of Association of the Company she was a lifetime director, she would continue to be the director of the Company especially when she was never given notice of termination of her directorship. Learned counsel has however not disputed the fact that in September ‘05 her name as director was removed from the list of directors maintained by the Registrar of Companies, but it is contended that she was informed by the Company of having been removed as director of the company only in the year 2009. 9. Learned counsel has however not disputed the fact that in September ‘05 her name as director was removed from the list of directors maintained by the Registrar of Companies, but it is contended that she was informed by the Company of having been removed as director of the company only in the year 2009. 9. Learned counsel has thus argued that the respondent continued to be the director of the company and she was entitled to her remuneration, which had not been paid since August 2005 and as such, it was a valid debt due to be paid to her by the Company and since, the same was not paid to her despite notice, the Company was liable to be wound up. 10. We have heard learned counsel for the parties at length. The three questions to be considered by this Court are: (i) “Whether the Company Court, in a winding up petition filed under Section 433(e) of the Act, could have looked into the question about the correctness or validity of the acceptance of resignation of the respondent as director of the Company?” (ii) “Whether, in the circumstances, where the question of resignation of respondent no.3 was disputed and not determined by any competent Court of law, remuneration claimed by the respondent could be taken as an admitted or determinable debt due to be paid to her?” (iii) “Whether the Company was unable to pay such debts?” 11. As regards the first question, we are of the opinion that in a Company Petition, the question as to whether the respondent had tendered her resignation on 5.8.2005 and whether the same was correctly accepted by the Board of Directors on 12.8.2005, is not a question which could have been determined by the Company Court in winding up proceedings. Such a question is a question to be decided after leading of evidence by the parties, which could be done only in a civil suit or a proper proceedings initiated under the Companies Act before the Company Law Board. 12. We say so, as it is not disputed that after the respondent having tendered her resignation and acceptance of the same by the Board of Directors, her name had been removed on 02.09.2005 from the list of directors maintained by the Registrar of Companies i.e., four years prior to filing of the Company Petition. 12. We say so, as it is not disputed that after the respondent having tendered her resignation and acceptance of the same by the Board of Directors, her name had been removed on 02.09.2005 from the list of directors maintained by the Registrar of Companies i.e., four years prior to filing of the Company Petition. Even otherwise, such a question is not a matter to be decided in a winding up proceeding, especially one filed under Subsection (e) of Section 433 of the Act which relates to the winding up of a Company for being unable to pay its debts. The removal of a director and the liability for payment to such a director whose name has been removed from the list of directors, is a question which requires determination after leading of evidence by the parties. The same cannot, thus, be determined in proceedings before the company Court hearing a winding up petition. 13. The second and third questions are interrelated, and are being taken up together. With regard to the question as to whether the Company was unable to pay its debts, what is interesting to note is that in the entire judgment of the learned Company Judge, which we have gone through along with the learned counsel for the parties, there is not a mention about the fact as to whether the Company was unable to pay its debts or not, even if it is presumed that such were the debts for nonpayment of which the Company could have been wound up. 14. Learned counsel for the appellant had submitted that the company had filed its balance sheet to show that it was earning profits and that it was thus not a case where the company was unable to pay its debts but the dues claimed by the respondent were disputed dues and for nonpayment of the same, the company could not have wound up. Learned counsel for the respondent could not also show from the impugned judgment, any finding recorded by the learned Company Judge to the effect that the Company was unable to pay its debts. 15. Learned counsel for the respondent could not also show from the impugned judgment, any finding recorded by the learned Company Judge to the effect that the Company was unable to pay its debts. 15. Learned counsel however, tried to justify the passing of the order by submitting that an overall reading of the entire judgment, which records the pleadings of the parties as well as deals with the resignation of the respondent and the remuneration to which she was entitled, a conclusion could be drawn that the Company was unable to pay its debts. However, the fact remains that there is no finding recorded by the Company Court in this regard, nor has any such inference been arrived at in the impugned judgment. 16. As such, in the absence of their being a finding or the Company Court having come to the conclusion that the Company was unable to pay its debts, the passing of the orders admitting the petition and directing for advertisement, cannot be justified in law. Learned counsel for the respondent has relied on the following Judgments of the Supreme Court with regard to the acceptance of resignation: (1) Moti Ram vs. Param Dev and Another, (1993) 2 SCC 725 (2) Dr. Prabha Atri vs. State of U.P. and Others, (2003) 1 SCC 701 (3) Harshendra Kumar D. vs. Rebatilata Koley and Others, (2011) 3 SCC 351 17. The said judgments relate to the determination by the Courts with regard to the correctness of the acceptance of resignation in the common law and not while dealing with the resignation of a director, which has to be considered in terms of the provisions of the Companies Act. None of the above cases deal with the resignation of a director, and that too in the case of a Winding up petition where the Company Court has proceeded to decide the correctness of the acceptance of resignation of a director. As such, in our view, the said judgments do not have any application to the facts of the present case. 18. In view of the aforesaid, we answer the three questions in favour of the company and against the petitioner (respondent herein) and are of the firm opinion that the impugned order passed by the learned Single Judge deserves to be quashed. 19. 18. In view of the aforesaid, we answer the three questions in favour of the company and against the petitioner (respondent herein) and are of the firm opinion that the impugned order passed by the learned Single Judge deserves to be quashed. 19. Learned counsel for the respondent then contended that the matter at hand should be remanded back to the learned Single Judge for fresh determination of the question, “Whether the Company was unable to pay its debts or not?” 20. Since, we have already held that the dues claimed by the respondent were disputed, as the claim was with regard to the payment of salary and perquisites of a director whose name had already been removed from the list of directors four years prior to the filing of the petition, the question of ability or inability to pay such dues would be secondary. However, from a reading of the Company Petition, what we notice is that all that has been stated is that since even after the statutory notice, the company neglected to pay the amount claimed by the respondent, the same would amount to inability of the Company to pay the debts. Nothing further with regard to the financial position of the Company i.e., whether it was in a position or not to pay, on the basis of its financial strength or balance sheet, is stated in the Company Petition. In reply to the statutory notice, the company had taken a stand that there was no liability to pay the debts as the resignation of the respondent dated 5.8.2005 had already been accepted by the Board of Directors on 12.8.2005 and had been given effect to. As such, the submission of the learned counsel for the respondent that by not paying the dues claimed under the statutory notice, the same would amount to inability to pay, is not worthy of acceptance. 21. In the absence of there being any pleading with regard to the company being unable to pay the debts, we see no purpose to remand the matter back to the Company Judge for fresh decision on this question. 22. As such, we allow this appeal and quash the order dated 5.7.2012 passed by the learned Company Judge in Company Petition No. 121 of 2009. As a consequence thereof, the Company Petition stands dismissed. 22. As such, we allow this appeal and quash the order dated 5.7.2012 passed by the learned Company Judge in Company Petition No. 121 of 2009. As a consequence thereof, the Company Petition stands dismissed. However, in the facts of this case, there will be no order as to costs.