Judgment:
P.D. Mulye, J.
1. This order shall govern the disposal of Company Petition No. 3 of 1983 (National Cereals Products Ltd. v. M.P. Beer Products Pvt. Ltd.), No. 4 of 1983 (Mohan Shramik Udyog Ltd. v. M.P. Beer Products Pvt. Ltd.), No. 5 of 1983 (Trade Links Ltd. v. M.P. Beer Products Pvt. Ltd.] and No. 6 of 1983 (Mohan Meakin Ltd. v. M.P. Beer Products Pvt. Ltd.) as all these petitions have been filed by the petitioners as creditors of the respondent company for winding up of the respondent company on the ground that the respondent company is commercially insolvent and has no prospect of paying its debts.
2. The facts giving rise to these petitions may be stated, in brief, thus :
(a) According to the petitioner in Company Case No. 1 of 1983 (Narendra Glass Works (P.) Ltd. v. M.P. Beer Products Pvt. Ltd.), the respondent company is indebted to the petitioner to the tune of Rs. 28,124 '46 for the goods sold as mentioned in the petition.
(b) In Company Petition No. 3 of 1983 (National Cereals Products Ltd. v. M.P. Beer Products Pvt. Ltd.), according to the said petitioner, the respondent company is indebted to the tune of Rs. 9,13,109'80 for the goods sold as mentioned in the petition.
(c) In Company Petition No. 4 of 1983 (Mohan Shramik Udyog Ltd. v. M.P. Beer Products Pvt. Ltd.), according to the said petitioner, the respondent company is indebted to the tune of Rs. 21,671'08 for the goods sold as mentioned in the petition.
(d) In Company Petition No. 5 of 1983 (Trade Links Ltd. v. M.P. Beer Products Pvt. Ltd.), according to the said petitioner, the respondent company is indebted to the tune of Rs. 1,28,298'45 for the goods sold as mentioned in the petition.
(e) In Company Petition No. 6 of 1983, according to the said petitioner, Mohan Meakin Ltd., the respondent company, is indebted to the tune of Rs. 8,02,735'96 as mentioned in the petition,
3. The respondent company, namely, M.P. Beer Products Pvt. Ltd., was incorporated on January 28, 1969, under the provisions of the Companies Act, 1956, as a private limited company, the registered office of which is situated at Barwani House, 12, Palasia, Indore ( M.P.)
4. The nominal share capital of the company is Rs. 10,00,000 divided into 1,000 equity shares of Rs. 1,000 each. The amount of paid-up capital is Rs. 375,000.
5. The objects for which the company is established are, inter alia, as follows:
(a) To manufacture, produce and buy beer and its allied products ;
(b) To sell beer and its allied products;
(c) To plant, cultivate, produce, digent (sic) and raise all the raw materials necessary for the manufacture of beer and to transact such other business as may be proper or necessary in connection with the above object;
(d) To raise and prepare monograms and patent designs for the products manufactured by the company or in which the company carries on trade and get the patent rights registered.
6. According to the petitioners, the respondent company, in their correspondence with them, admitted their liability to a substantial extent though they disputed the exact amount claimed by the petitioners who, in addition to the principal amount, have also claimed interest. That, despite registered notices dated November 16, 1981 (Company Petition No. 1 of 1983), dated November 20, 1981 (Company Petition No. 3 of 1983), dated August 5, 1982 (Company Petition No. 4 of 1983), November 24, 1981 (Company Petition No. 5 of 1983) and dated March 29, 1982 (Company Petition No. 6 of 1983) by which the respondent-company was called upon to pay, the respondent-company refused to accept the said notice which was returned with the endorsement ' refused' in all these cases. Hence, these petitions for winding up mainly on the ground that the company is insolvent and unable to pay its debts; that, according to the balance-sheet of the company as on March 31, 1980, the company has accumulated losses of Rs. 48,13,928'30 up to March 31, 1980, against the total paid up share capital of Rs. 3.75 lakhs and assets (including current assets and loans and advances) of less than Rs. 29 lakhs; that on March 31, 1980, the company had total liabilities of approximately Rs. 73.2 lakhs on secured loans, unsecured loans, sundry creditors, excise duty and purchase tax without any prospect of payment to these creditors and that thereafter the company's liabilities have tremendously increased during the year ending March 31, 1981, and the company's manufacturing facility has been closed since July, 1981, although it has briefly functioned during the summer of 1981 during which it has further incurred substantial losses. Thus, the company being commercially insolvent and having no prospect of paying its debts, deserves to be wound up;
7. The respondent company, in reply to the show-cause notice issued in all these petitions, has denied the petitioner's allegations and have also denied their liability to pay the amount as claimed by the petitioners, as, according to the respondent company, there is a bona fide dispute about which they have already filed a civil suit in the District Court, Indore, which is still pending. Further, according to the respondent company, there are bona fide counter-claims by the respondent company against Mohan Rocky, which is a sister concern of the petitioner company, and Shri Kapil Mohan and his family members who have substantial interest and is the controlling authority, chairman and director in most of the companies who have filed all these petitions; that the respondent-company is carrying on business effectively and efficiently and is earning profits, it is financially very sound, is regularly carrying on its manufacturing and selling activities, has got good turnover and huge assets, has financial capacity to pay any creditors, has very good future prospects and that the company is completely solvent.
8. Further, according to the respondent-company, in order to overcome the losses, the respondent-company had entered into an agreement with Mohan Rocky with effect from July 6, 1978, but the losses mounted during the period of agreement with Mohan Rocky, because the funds of the company were being syphoned off by Mohans. As such, the agreement was terminated by the respondent-company with effect from June 16, 1981. After the termination of the agreement, Mohan Rocky wanted to take over the management but Shri S.P. Bhagat competed with them and took over substantial shares and ultimate management with effect from September 9, 1981.
9. That since September 9, 1981, all the shares are held by Shri S.P. Bhagat, his family members and his friends. After take over of the shares on September 9, 1981, during the very first year, the company earned profits of Rs. 9,71,000 and the accumulated losses were reduced and since then and even now the respondent-company which has engaged a sufficiently large number of employees in the company is carrying on its business efficiently and with profits about which they have filed the latest balance-sheets up to 1985. Shri S.P. Bhagat, who is a director of the company, has experience of over 30 years in the said trade and has 2-3 other companies at Bombay and Delhi engaged in the same business.
10. Further, according to the respondent-company, Mohan Rocky Spring-water Breweries Ltd., a company incorporated under the Companies Act (hereinbefore and after called Mohan Rocky) and a sister concern of the petitioner company had entered into a technical and sales assistance agreement with the respondent company. Much earlier, the said Mohan Rocky had entered into another agreement with its sister concern, Mohan Meakin Breweries Ltd., and the aforesaid Mohan Rocky was licensed to acquire from Mohan Meakin on a continuous basis the vast know-how available to Mohan Meakin and Mohan Rocky was further allowed to sub-license the use of the know-how to other persons approved by Mohan Meakin. After having obtained the consent of Mohan Meakin Ltd. to disclose the know-how to the respondent-company, Mohan Rocky entered into an agreement dated July 6, 1978, being technical and sales assistance agreement, the terms of which were binding on Mohan Meakin Ltd.
11. Further, according to the respondent company, Mohan Rocky and Mohan Meakin Ltd., in collusion and conspiracy with each other to cause undue loss to the respondent-company purporting to act under the agreement, (annexure R-1), appointed one Shri S.N. Sharma as manager of the respondent company. All other staff was subordinate to him. Shri Sharma used to draw salary from Mohan Meakin Ltd., Gaziabad (U.P.), and as he was acting on behalf of Mohan Rocky, Mohan Meakin was in overall charge of the production, sales and management. The said agreement provided for fixation of prices of the products by Mohan Rocky. During the period of this agreement, between July 6, 1978, to 1981, no consultation whatsoever was had by Mohan Rocky with the respondent-company or any of its directors/board. The prices were unilaterally, deliberately and intentionally fixed by the said Mohan Rocky at rates much lower than the cost of production to syphon away the funds of the respondent-company indirectly in the hands of the sister concern, Mohan Rocky.
12. That the agreement provided that as far as the respondent was concerned, it was entitled to profit at the rate as per schedule mentioned therein. Further, according to the respondent, the respondent-company was earlier running in losses, and agreement, annexure R-1, was executed, according to which the respondent-company was to earn only profits and not liable for losses inasmuch as selling prices to be fixed by Mohan Rocky had to be in any case not less than the aggregate cost of production, taxes payable and the profit. Therefore, as per the said agreement, there could be no occasion for any losses to the respondent company as Mohan Rocky was entitled to a royalty-cum-technical assistance fee equivalent to the excess realisation. Therefore, as per the agreement, the respondent company was not liable to suffer any losses. Since Shri S.N. Sharma was deputed by Mohan Rocky and by Mohan Meakins Ltd. as manager with the respondent company, they were selling the products at prices much lower than the cost of production and to their own sister concerns and were thus syphoning off the funds of the respondent company. It was in this background that the agreement was terminated by the respondent company; that during the subsistence of the agreement, which was initially for a period of five years, Mohan Rocky received no profits and still they did not terminate the agreement because they were getting the profits by diverting the products manufactured by the respondent company to their own sister concerns at unilaterally fixed low prices below the cost of production in breach of the agreement and were thus indirectly getting benefits.
13. Thus, after the said agreement dated July 6, 1978, was terminated by the respondent, vide their letter dated June 16, 1981, only Shri S.N. Sharma went away on July 1, 1981, but no accounts whatsoever were rendered by Mohan Rocky as Shri S.N. Sharma, a permanent employee of Mohan Meakins Ltd. was acting on behalf of Mohan Rocky; Mohan Meakins as well as on behalf of the respondent.
14. That after the termination of the said agreement, the respondent company appointed a cost accountant who worked the cost of production on the basis of the relevant documents and material and he submitted a detailed report on July 14, 1981, from which it was revealed that Shri S.N. Sharma, who was acting on behalf of Mohan Rocky and Mohan Meakins was selling the products at a much lower rate than the cost of production to the sister concerns, Mohan Rocky and Mohan Meakins. That the respondent thereafter debited Mohan Rocky with the losses suffered by the respondent from July, 1978, up to August 24, 1981. Similarly, other amounts payable by Mohan Rocky were also debited. Thus, a total of Rs. 34,24,100.24 was payable by Mohan Rocky to the respondent company and the said amount was debited to their account.
15. That as Mohan Rocky did not pay the amount to the respondent company, a demand notice was sent for recovery of Rs. 53,86,150.66 from Mohan Rocky and as a counter-blast, the present petitions have been filed. Thus, the respondent company has prayed that there being a bona fide dispute regarding the claims put up by the petitioners relating to which a suit has already been filed, no valid grounds are made out for winding up the company as the company cannot be said to be commercially insolvent, but, on the contrary, it is now running at a profit as would be clear from the latest balance-sheets and has employed a substantial number of persons in the manufacture and sale of beer.
16. Learned counsel for the petitioners, after taking me through the annexures filed by the petitioners, submitted that from time to time, the respondent company has admitted its liability to pay the claim put up by the petitioners, have shown the said amount in the balance-sheets, included their names in the list of creditors and the audit report of the respondent company would also indicate that they are running into losses and it is somewhat surprising how all of a sudden they have started earning profits by overcoming these losses. He, therefore, submitted that when the capital of the company is only to the tune of Rs. 3,75,000 and the liabilities admittedly being much more, the respondent company cannot be said to be commercially solvent and it having failed to pay the petitioners despite demand by registered notices, which were refused, the pleas taken by the respondent company in reply to the show-cause notices do not concern the petitioners as they are independent creditors who are entitled to recover their dues from the respondent company and even though the respondent company may have filed civil suits, it cannot be said to be a bona fide dispute and in support of his submissions, He placed reliance on the decision in G. Claridge and Co. Ltd, v. Nav Bharat Investments Ltd. [1977] 47 Comp Cas 428 (Bom) and Registrar of Companies, U.P. v. K.T. Financiers Private Ltd. [1978] 48 Comp Cas 129 (All).
17. On the other hand, learned counsel for the respondent company, after taking me through the various documents filed by them, submitted that it would appear that the factual management and control of the respondent company was in the hands of Mohan Rocky/Mohan Meakins Ltd. and even the bills were also sent through Mohan Meakins Ltd. He further submitted that after the termination of the agreement on June 16. 1981, the new agreement was entered into with Raja Anirudha Singh on September 7, 1981, and since then the company is running at a profit gradually, in support of which learned counsel for the respondent company has submitted latest balance-sheets. Learned counsel further submitted that even though the balance-sheet of the respondent company for the year 1981 was signed by the managing director, Shri Anirudha Singh and not by Shri Sharma, even then, as Shri Sharma was in entire control and management of the affairs of the respondent company at that time, the petitioners cannot take any advantage thereof and on that basis it cannot be said that the respondent company has admitted its liability. He also submitted that, no doubt, according to annexure R-1, the accounts were kept by the respondent company during that period, but it is not the case of the petitioners that the respondent company had the actual management and control in the working thereof right from the first stage to the last stage of purchase of raw materials, manufacture thereof and its sales. He, therefore, submitted that the amounts have been rightly debited and shown in the balance-sheets of the company which have been audited by the auditors. He, therefore, submitted that there being a bona fide and genuine dispute between the parties regarding the nature of the claim, this is not a fit case for admission to wind up the same as none of the grounds for the winding up of the company are present in all these petitions and in support of his submissions, he placed reliance on the decisions of Shadiram and Sons v. Southern Aviation Private Ltd. [1978] 48 Comp Cas 570 (Mad), N. Ramamoorthy v. Nettai Metal Rolling Mills P. Ltd. [1979] 49 Comp Cas 553 (Mad), British Burmah Petroleum Co. Ltd. v. Kohinoor Mills Co. Ltd. [1980] 50 Comp Cas 544 (Bom) and Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp Cas 125 (SC).
18. Learned counsel for the respondent company, therefore, submitted that even though the facts in all these cases are slightly different and even though Mr. Kapil Mohan and his family members may not be having large percentage of shares in these different companies, still their active interest is apparent. But, I am of the opinion that this submission of learned counsel for the respondent company regarding the interest of Shri Kapil Mohan cannot be said to have a direct bearing so far as these petitions for winding up as such are concerned.
19. Thus, after hearing learned counsel at length and after going through the case-law as also the documents, affidavits and counter-affidavits filed on record in support of their respective contentions, as also the facts and circumstances of these petitions. I am of the opinion that there does appear a bona fide dispute regarding the claim put up by the petitioners. That apart, now, undisputedly, as the respondent company has engaged a large number of employees and is running at a profit, it would not be just and equitable to admit these petitions for winding up the respondent company, as has been held in the decision reported in National Textile Workers Union v. P.R. Ramakrishnan [1983] 53 Comp Cas 184 (SC) according to which, the interest of the workers has also to be taken into consideration. The authorities cited by learned counsel for the petitioners, being distinguishable on facts, cannot be applied to the facts of the present cases. I am, therefore, unable to agree with the submission made by learned counsel for the petitioners that the respondent company is commercially insolvent or that it had neglected to pay the alleged dues, being unable to pay its debts (see [1985] IJL 382).
20. In the result, for the above reasons, I do not see any valid ground to admit these petitions which are consequently dismissed with no order as to costs.