Punjab Recorders Ltd. Vs. M/S. Magnetic Information Technology Ltd.

Punjab Recorders Ltd. vs M/S. Magnetic Information Technology Ltd.

Type Court Judgment Court Punjab and Haryana Decided Jul 05, 1994

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Citation: sooperkanoon.com/610560
Court: Punjab and Haryana High Court
Judge: N.K. Sodhi, J.
Decided On: Jul 05, 1994
Case Number: Co. Petn. No. 99 of 1992
Subject: Company

Case Summary

AI-generated summary - not the official court judgment text.

- Sections 100-A [As inserted by Act 22 of 2002], 110 & 104 & Letters Patent, 1865, Clause 10: [Dr. B.S. Chauhan, CJ, L. Mohapatra & A.S. Naidu, JJ] Letters Patent Appeal Order of Single Judge of High Court passed while deciding matters filed under Order 43, Rule1 of C.P.C., - Held, After introduction of Section ...

Key legal issue: Company
Acts & sections: Companies Act, 1956 - Sections 433, 434 and 439; Arbitration Act, 1940 - Sections 17 and 30; Transfer of Property Act - Sections 53A

Parties & Advocates

Appellant / Petitioner

Punjab Recorders Ltd.

Advocate J.S. Narang, Adv.

Respondent

M/S. Magnetic Information Technology Ltd.

Advocate A.P. Jagga, Adv.

Legal References

Acts: Companies Act, 1956 - Sections 433, 434 and 439; Arbitration Act, 1940 - Sections 17 and 30; Transfer of Property Act - Sections 53A
Cases Referred: Dalhousie Jute Co. Ltd. v. Mulchand Lakshmi Chand
Reported In: AIR1995P& H29

Excerpt

.....a party or decide an important aspect of a trial in an ancillary proceeding. amended section 100-a of the code clearly stipulates that where any appeal from an original or appellate decree or order is heard and decided by a single judge of a high court, no further appeal shall lie. even otherwise, the word judgment as defined under section 2(9) means a statement given by a judge on the grounds of a decree or order. thus the contention that against an order passed by a single judge in an appeal filed under section 104 c.p.c., a further appeal lies to a division bench cannot be accepted. the newly incorporated section 100a in clear and specific terms prohibits further appeal against the decree and judgment or order of a single judge to a division bench notwithstanding anything contained in the letters patent. the letters patent which provides for further appeal to a division bench remains intact, but the right to prefer a further appeal is taken away even in respect of the matters arising under the special enactments or other instruments having the force of law be it against original/appellate decree or order heard and decided by a single judge. it has to be kept in mind that the special statute only provide for an appeal to the high court. it has not made any provision for filing appeal to a division bench against the judgment or decree or order of a single judge. no letters patent appeal shall lie against a judgment/order passed by a single judge in an appeal arising out of a proceeding under a special act. sections 100-a [as inserted by act 22 of 2002] & 104:[dr. b.s. chauhan, cj, l. mohapatra & a.s. naidu, jj] writ appeal held, a writ appeal shall lie against judgment/orders passed by single judge in a writ petition filed under article 226 of the constitution of india. in a writ application filed under articles 226 and 227 of constitution, if any order/judgment/decree is passed in exercise of jurisdiction under article 226, a writ appeal will lie. but, no..........it is true that in that case a division bench of the calcutta high court held that a winding up petition could be filed on the basis of an unfiled award as that was prima facie evidence of the debt. the present is not a case of an unfiled award but an award which stands challenged in a court of competent jurisdiction and the validity of the award has yet to be finally decided.7. it was then contended by mr. narang on behalf of the petitioner that de hors the award the company is still liable to pay rent from december, 1984 and not having paid the same in spite of the statutory notice served upon it, it is liable to be wound up. i find no merit in this contention. if the award is to be ignored then the company may not be a tenant of the premises and as argued by mr. jagga on behalf of the company it continued in possession in part performance of the contract and paid a sum of rs. 7,15,040.80 ps. thereafter as a result whereof its status changed from that of a tenant in possession to a prospective vendee and the petitioner is debarred from enforcing against the company any right other than the one expressly provided by the terms of the agreement to sell. without expressing any considered opinion on this aspect of the matter. i am of the view that the defence raised by the company cannot be said to be wholly without substance and that it needs to be adjudicated upon in proceedings before a civil court or in other appropriate forum in accordance with law. at any rate, there are disputed questions of law and fact involved in the petition and i, therefore, hold that the winding up petition isnot the proper remedy pursued by the petitioner in the circumstances of the present case.8. before concluding, it may be mentioned that whatever has been stated herein-above is only for the purposes of disposing of the present winding up petition and no observation of mine should be taken as an expression of my opinion on any of the issues that may arise before the senior.....

Full Judgment

ORDER

1. The main point that arises for determination in this petition under Sections 433, 434 and 439 of the Companies Act, 1956 (for short, 'the Act) is whether an award that stands challenged in a Civil Court and is yet to be made a rule of the Court can form the basis of a winding up petition. In other words, whether the amount payable under such an award can be said to be a 'debt' within the meaning of Section 434 of the Act.

2. Petitioner was allotted lessee's rights for 99 years in plot No. B-100, Phase VIII, ELTOP Estate, S.A.S. Nagar, Mohali by the Punjab State Electronics Development and Production Corporation Ltd., Chandigarh. After constructing a part of the building on theland, the petitioner leased out the land and building to M/s. Magnetic Information Technology Ltd. -- a company incorporated under the Act and having its registered office at B-100, Phase VIII, S.A.S. Nagar, Mohali (hereinafter called 'the Company'). The Company entered into possession on 1-1-1983. The lease was executed on 10-11-1983 w.e.f. 1-1-1983 and was for a period of 30 years. The monthly rent payable by the Company to the petitioner was Rs. 25,675/-. The lease deed was registered on 16-11-1983. It is common case of the parties that the rent was paid by the Company up to November, 1984 whereafter it defaulted. Thereafter the petitioner agreed to sell the lease rights in the aforesaid plot and the structures raised thereon to the Company for a total consideration of Rs. 20,15,040,80 ps. An agreement to sell was accordingly executed between the parties on August 9, 1986 and the total sale consideration consisted of two parts Rs. 7,15,040,80 ps. was the price of the lease rights in the plot and Rs. 13 lacs for the structures. As per the terms of the agreement to sell, the Company was to pay the sum of Rs. 7,15,040.80 ps. to the Punjab State Electronics Development and Production Corporation Ltd. through the petitioner immediately and in any case before 15-8-1986. The Company was also to pay the arrears of rent for the use of the premises up to 15-8-1986. The petitioner, in turns was to obtain a letter from its bankers authorising the sale of the structures raised on the plot as the same stood mortgaged with them. On receipt of such a letter, the Company was to pay to the bankers of the petitioner a sum of Rs. 13 lacs to enable the bank to issue a formal letter relinquishing its rights as mortgagee of the said plot and structures thereon. On completion of transfer of lease rights, the agreement between the parties for payment of rent on account of use of the premises was to stand automatically terminated and the steps enumerated in the agreement were to be completed and performed within four months of the signing of the agreement to sell. For the duration of four months, no rent was payable by the Company to the petitioner in terms of the rent deed dated 10-11-1983/1-1-1983.Lastly, the agreement to sell had an arbitration clause and provided that in the event of any dispute or difference arising out of the agreement the matter shall be referred to the sole arbitration of a named arbitrator.

3, It is not in dispute that in pursuance of the aforesaid agreement to sell the Company paid a sum of Rs. 7,15,040.80 ps. within the stipulated period and thereafter disputes arose between the parties. The arrears of rent which were to be paid by 15-3-1987 were not paid nor was the amount of Rs. 13 lacs being the price of the structures raised on the plot paid. Both sides claimed that the other side was guilty of not performing its part of the contract. As there was an arbitration clause in the agreement the disputes between the parties by consent were referred to the sole arbitration of Mr. H.L. Sibal, a senior Advocate of this Court. The arbitrator after allowing opportunity to the parties to produce their evidence and after hearing them gave his award on June 2, 1989. The Company was a claimant before the Arbitrator and the petitioner was the respondent. Since the present petition is based solely on this award it would be pertinent to reproduce the relevant part of the award which reads as under :--

'In the circumstances, I give the following award :

1. That the claimant shall pay Rs. 12 lacs to the respondent by 31st August, 1989. If they pay this amount by that date or before that date by bank draft, the claimant shall be entitled to purchase the plot with structure thereon by paying another Rs. 13 lacs.

2. The respondent shall then on receipt of Rs. 12 lacs from the claimant, get a letter from its bankers by 30th Sept., 1989, authorising the respondent to sell the structure along with the plot in favour of the claimant.

3. If the claimant does not pay the amount by 31st Aug., 1989, its claim shall stand dismissed and it shall be deemed to be tenant according to the lease deed already executed between the parties and the respondent shall be entitled to recover the whole arrears of rent w.e.f. December, 1984.

4. If the money is paid and the respondent does not obtain the authority letter from the , bank authorising the sale of the plot and structure thereon, the claimant shall be entitled to purchase the whole property on the original amount of Rs. 25 lacs in all including misc. arrears of Rs. 5 lacs and nothing more.

5. If, however, the claimant's case fails and it is not entitled to purchase the land, although the respondent got the authority letter from the bank authorising the sale, with the result that the claimant remains tenant of the property, Rs. 7,15,040.80 shall be adjusted towards arrears of rent and balance, if any, will be recovered by the respondent from the claimant.

6. If the claimant discharges his obligation as stated earlier and the respondent also gets his authority letter from the bank authorising the respondent to sell the property, the claimant shall pay Rs. 13 lacs by draft by 1-12-1989. The respondent shall then get sale deed registered in favour of claimant up to 28-2-1990. In case of delay in execution, the respondent shall be liable to pay Rs. 20,000/-as damages. Announced in the presence of the parties.'

It is the admitted case of the parties that the award has been filed in the Court of Senior Subordinate Judge, Chandigarh where the petitioner has filed an application for its being made a rule of the court whereas the company has filed objections under Section 30 of the Arbitration Act challenging the award on various grounds and the prayer made on its behalf is for the setting aside of the award. The matter is still pending in the Court. The present petition has been filed for the winding up of the Company on the ground that it failed to comply with the terms of the award of the arbitrator as a result whereof it became a tenant of the premises in terms of the lease deed executed w.e.f. January 1, 1983 and as held by the arbitrator the petitioner is entitled to recover the arrears of rent w.e.f. December, 1984. It is alleged that in spite of a statutory notice served under Section 434 of the Act the Company failed/ neglected to pay the amount and it would, therefore, be deemed to be unable to pay its admitted debts.

4. In the reply filed on behalf of the company, a number of preliminary objections have been raised and it is stated that since the award which is the basis of the company petition is under challenge before the Senior Subordinate Judge, Chandigarh, this court should stay its hands in dealing with the matter till the civil Court finally adjudicates upon the validity of the award. It is also stated that disputed questions of law and fact have been raised in the petition which therefore, merits dismissal. It is further alleged on behalf of the company that the award of the arbitrator which creates an interest in immoveable property of the value of more than Rs. 100/- has not been registered and is, therefore, not admissible under the law. While relying on the doctrine of 'part performance' as envisaged in Section 53A of the Transfer of Property Act, it is submitted on behalf of the company that it was ready and willing to perform its part of the contract and served a notice on the petitioner to perform its part. A copy of this notice has been appended as Annexure R2 with the written statement. The reply sent by the petitioner to the notice was that the agreement between the parties stood frustrated.

5. I have heard counsel for the parties at length. There is no doubt that the petitioner has based its claim solely on the basis of the award given by the arbitrator. This award has yet to be made a rule of the court and the objections filed by the company under Section 30 of the Arbitration Act for the setting aside of the award are pending in the court of Senior Subordinate Judge, Chandigarh. The possibility of the award being set aside cannot be ruled out at this stage. It is true that as per the award the company has become a tenant in terms of the lease deed dated 10-11-1983/1-1-983 and that it has not paid any rent after November, 1984. Since the validity of the award stands challenged and the matter has yet to be finally decided by the Court of competent jurisdiction, it will not be prudent on the part of this court not to stay its hands and proceed further in the matter till the civil court has finally adjudicated upon the validity of the award. Even if the company petition is admitted it will have to be advertised forthwith which by itself will cause sufficient damage to the reputation of the company if the award is ultimately set aside. The company cannot, therefore, be wound up on the basis of an award which is under challenge.

6. Mr. Narang, in support of the petition, contended that an award holder can apply for the winding up of a company on the basis of an unfiled award which is prima facie evidence of a debt. He cited Dalhousie Jute Co. Ltd. v. Mulchand Lakshmi Chand, (1983) 53 Corn Cas 607 in support of his contention. It is true that in that case a Division Bench of the Calcutta High Court held that a winding up petition could be filed on the basis of an unfiled award as that was prima facie evidence of the debt. The present is not a case of an unfiled award but an award which stands challenged in a court of competent jurisdiction and the validity of the award has yet to be finally decided.

7. It was then contended by Mr. Narang on behalf of the petitioner that de hors the award the company is still liable to pay rent from December, 1984 and not having paid the same in spite of the statutory notice served upon it, it is liable to be wound up. I find no merit in this contention. If the award is to be ignored then the company may not be a tenant of the premises and as argued by Mr. Jagga on behalf of the company it continued in possession in part performance of the contract and paid a sum of Rs. 7,15,040.80 ps. thereafter as a result whereof its status changed from that of a tenant in possession to a prospective vendee and the petitioner is debarred from enforcing against the company any right other than the one expressly provided by the terms of the agreement to sell. Without expressing any considered opinion on this aspect of the matter. I am of the view that the defence raised by the company cannot be said to be wholly without substance and that it needs to be adjudicated upon in proceedings before a civil court or in other appropriate forum in accordance with law. At any rate, there are disputed questions of law and fact involved in the petition and I, therefore, hold that the winding up petition isnot the proper remedy pursued by the petitioner in the circumstances of the present case.

8. Before concluding, it may be mentioned that whatever has been stated herein-above is only for the purposes of disposing of the present winding up petition and no observation of mine should be taken as an expression of my opinion on any of the issues that may arise before the Senior Subordinate Judge, Chandigarh before whom the award is being challenged and the said Court will decide the matter before it on its merits and in accordance with law without being influenced by anything stated herein .

9. For the reasons recorded above, I find no merit in the petition and the same stands dismissed with no order as to costs.

10. Petition dismissed.

Same Court & Year Punjab and Haryana · 1994 Same Parties Punjab Recorders Ltd. vs M/S. Magnetic Information Technology... Same Subject Company Same Judge N.K. Sodhi, J. Acts & Sections Companies Act, 1956 - Sections 433, 434 and 439; Arbitration ...

Company