M.M. Kumar, J.
1. M/s. Ramji Lal Lattu Ram, Commission Agents, Anaj Mandi Narwana, District Jind, has filed the present petition under Section 433(a), 434 and 439 of the Companies Act, 1956, for winding up of M/s Arti Food & Fats (P) Limited-respondent-Company. It is pertinent to notice that against the respondent Company C.P. No. 287 of 1999 was admitted by this Court vide order dated 5.10.2001 and the instant petition was ordered to be heard along with that petition. The aforementioned C.P. No. 287 of 1999 has been disposed of today by a separate order.
2. The case set up by the petitioner-firm is that respondent-Company is a private limited company and had authorised the petitioner-firm to purchase wheat for it. It is claimed that it was orally settled between the parties that if the payment of wheat was delayed for more than three days then respondent-Company was liable to pay customary interest @ 18% per annum on the delayed payment. The petitioner-firm purchased wheat for the respondent-Company during the years 1994 to 1997 and sent the same to respondent-Company through trucks along with bills and bilties. The petitioner-firm obtained LL Forms after deposit of market fee and 'E' Forms for having deposited the fee in the Market Committee. The respondent-company continued to make part payments up to 18.3.1998. During the years 1994-95 and 1995-96, the respondent-Company made all payments but in the year 1996-97, the respondent Company could not make complete payment and as on 1.4.1997 a sum of Rs. 5,25,476.28 paise (including customary interest) was outstanding towards it. This amount was paid by the respondent-company by 26.4.1997. In the year 1997, the petitioner-firm purchased and supplied to the respondent-company wheat valued at Rs. 34,27,719/-. The respondent-company could only make part payments. It is claimed that the respondent-company issued a confirmation certificate dated 30.9.1997 and confirmed credit balanced of Rs. 5,51,716 as on 30.9.199T(P-1). The details of accounts for the years 1996-97 to 1998-99, as given in para 7 of the petition, are extracted below:
Year 1997-98----------------------------------------------------------------------------------------No. Bill dated Quantity of Amount Payment madeWheat Rs. P. Dated Rs. P.Q. K.----------------------------------------------------------------------------------------Balance due as on 01.04.97 525476.28 09.04.07 150000.002051 14.04.97 242.25 129047.00 18.04.97 150000.002052 15.04.97 125.40 66954.00 21.04.97 108476.282064 07.04.97 137.75 70075.00 23.04.97 100000.002065 12.05.97 124.90 63539.00 26.04.97 117000.002066 12.05.97 124.45 63311.00 13.05.97 96001.002067 12.05.97 124.45 63311.00 22.05.97 100000.002068 12.05.97 133.00 67659.00 03.06.97 100000.002069 13.05.97 114.00 57998.00 17.06.97 200000.002071 13.05.97 114.00 57998.00 23.06.97 150000.002072 13.05.97 114.00 57999.00 27.06.97 175000.002074 14.05.97 121.60 64395.00 02.07.97 300000.002090 16.05.97 139.20 71401.00 02.07.97 5000.002100 18.05.97 137.75 73091.00 09.07.97 175000.002101 19.05.97 137.75 73091.00 23.07.97 200000.002104 20.05.97 124.45 66037.00 30.07.97 150000.002107 21.06.97 114.95 60851.00 06.08.97 150000.002112 16.06.97 133.95 70906.00 08.08.97 200000.002124 16.06.97 114.00 60122.00 18.08.97 200000.002125 17.06.97 114.00 60122.00 22.08.97 250000.002126 17.06.97 108.80 55356.00 04.09.97 200000.002127 17.06.97 109.25 57618.00 24.09.97 125000.002128 18.06.97 108.30 55103.00 18.03.97 299550.002129 18.06.97 107.35 54619.002130 19.06.97 107.35 54619.002131 19.06.97 107.35 54619.002132 19.06.97 107.35 54619.002133 20.06.97 124.05 63111.002134 21.06.97 102.60 52203.002135 21.06.97 102.60 52203.002136 21.06.97 102.80 52305.002140 23.06.97 112.10 57035.002141 23.06.97 111.15 56599.002142 24.06.97 142.50 72647.002143 24.06.97 142.50 72798.002144 25.06.97 171.00 87325.002145 25.06.97 122.05 62224.002146 26.06.97 142.50 72647.002147 26.06.97 121.60 61909.002148 26.06.97 121.60 61866.002149 27.06.97 199.50 101641.002152 06.07.97 114.00 55514.002158 17.07.97 123.60 64331.002160 21.07.97 142.50 77171.002161 21.07.97 142.50 77053.002162 22.07.97 171.00 92556.002163 23.07.97 101.65 54959.002164 24.07.97 118.75 64766.002165 24.07.97 118.75 64981.002166 25.07.97 118.75 64780.002172 28.07.97 133.95 72662.002180 11.08.97 123.50 65081.002181 12.08.97 120.00 62943.00-----------Interest up to 31.03.98 130858.00-----------Total 4184053.28 3801027.28-----------Balance as on 31.03.98 383026.00-----------Year 1998-99--------------------------------------------------------------------------------------No. Bill dated Quantity of Amount Payment madeWheat Rs. P. Dated Rs. P.Q. K.--------------------------------------------------------------------------------------Balance due as on 01.04.98 383026.00 - -Interest up to 31.03.99 069902.00----------Total 452928.00----------From dated 01.04.99 to 30.06.99--------------------------------------------------------------------------------------No. Bill dated Quantity of Amount Payment madeWheat Rs. P. Dated Rs. P.Q. K.Balance due as on 01.04.99 452928.00 - -Interest up to 30.06.99 024730.00-----------Total 477658.00-----------
3. The petitioner-firm has also placed on record copies of the bills, ST-15 Forms, LL-Forms and E-Forms as Annexures P-2 to P-124. On 18.3.1998, the respondent-Company made payment of Rs. 2,99,550/- vide Demand Draft No. 654282 of State Bank of Bikaner and Jaipur, dated 18.3.1998. Respondent No. 2 gave assurance to the petitioner-firm that all the payments of purchase price of wheat along with customary monthly interest @ 18% per annum would be made by the end of December, 1998. It is claimed that thereafter no payment was made by the respondent-Company. It has been asserted that till 31.3.1998 the respondent-Company had made payment to the tune of Rs. 38,01,027.28 paise and an amount of Rs. 3,83,026/- (including customary interest) was due to the petitioner firm as on 31.3.1998. Thereafter, the petitioner-firm on number of occasions asked the respondent-Company to clear its outstanding balance and lastly on 10.3.1999, the petitioner-firm informed the respondent-Company to clear the outstanding payments by 30.4.1999. On 15.5.1999, the respondent-Company told the petitioner-firm that it was unable to pay the debt. In this manner, it has been claimed that a total sum of Rs. 4,77,658/- (including customary interest) was outstanding as on 30.6.1999 against the respondent-Company. It has further been claimed that the petitioner-firm is also entitled to customary monthly interest @ 18% per annum from 1.7.1999 till the date of realization of the outstanding amount. On 25.6.1999, the petitioner-firm also sent a notice under section 434 of the Act demanding payment of Rs. 4,77,658/- along with future customary monthly interest @ 18% per annum from 1.7.1999 till the realization of the due amount (P-125). The notice was duly received by the respondent but no reply was given.
4. In response to the notice of motion having been issued to the respondents, preliminary objections were filed on behalf of the respondent-Company on 13.1.2000. It was, inter alia, pleaded that company petition is not bona fide and has been filed merely to exert undue pressure and to use it as a tool and pressure tactics for recovery of the alleged amount, which according to the respondent-Company is not due and payable to the petitioner-firm. It has been asserted that the control of the respondent-Company was earlier held by Late Shri Murari Lal, Late Shri Anil Kumar Garg and Smt. Minal Garg. It has been admitted that the petitioner-firm made supplies of wheat during the period 1.4.1997 to 12.8.1997 when the respondent-company was being run by the aforementioned persons. Shri Murari Lal died on 19.9.1997 and Shri Anil Kumar Garg died on 7.10.1997. Thereafter, the share holdings devolved in favour of Mrs. Minal Garg, wife of Late Shri Anil Kumar Garg and his children. The functioning of the respondent-Company came to a grinding halt as there was no regular management of the Company in place. It has further been disclosed that after the death of two active Directors. Shri Murari Lal and Anil Kumar Garg, the respondent-Company was not able to carry on its affairs in accordance with law and consequently Mrs. Minal Garg, the surviving shareholder moved an application before the Company Law Board for convening general body meeting under Section 186 of the Company Act and a committee of creditors was constituted for safe guarding the interest of the creditors of the company as well as the assets of the respondent-Company. It has been claimed that the petitioner-firm was also one of the active member and used to attend the meetings of the said Committee. The Committee of creditors stated to have invited the present directors of the respondent-Company to take over reins of the company along with all its assets and liabilities. On 28.12.1997, the present directors took over the respondent-Company and a Memorandum of Understanding was also signed for the effective revival of the Company. It has been claimed that all the creditors including the petitioner-firm agreed to accept the amount as offered by the respondent-Company in full and final settlement of their claim. The petitioner-firm is stated to have received a sum of Rs. 3,00,000/- out of total dues of Rs. 5,51,716/- through Demand Draft No. 654282, dated 18.3.1998. The respondent-Company has specifically denied that it is liable to pay any amount to the petitioner-firm and it has been claimed that the petition is liable to be dismissed. The respondent-Company has also furnished various facts and figures in relation to losses suffered by it and thereafter increase in its turnover etc., to show its bona fide that despite adverse financial position it has made payments to various creditors including the petitioner-firm.
5. On 3.7.2000, the petitioner-firm filed replication to the preliminary objections specifically controverting the stand taken by the respondent-Company that the petitioner-firm was also part and parcel of the alleged Committee of creditors, which was formed. It has been denied that any Committee of creditors was constituted. The petitioner-firm has further denied that it has ever accepted the amount of Rs. 3,00,000/- as full or final settlement of its claim out of Rs. 5,51,716/-. It has been disclosed that the respondent-Company had lastly made payment of Rs. 2,99,550/- (3,00,000.00?) only by way of demand draft not in pursuance to settlement but as a part-payment. However, the said demand draft was not honoured by the bank on the pretext that the same was stolen. The petitioner-firm received the aforementioned amount through Court on 28.3.1998. The other averments of the preliminary objections were also denied and that of petition were reiterated.
6. On 6.9.2001, a supplementary affidavit was filed on behalf of the respondent-Company as further reply to the petition in which almost same averments were made as were contained in the earlier preliminary objections. This time order of the Company Law Board, dated 2.2.1998 (R-1), minutes of the meeting of the creditors held on 15.1.1998 (R-2), and a statement of payments made to various creditors by the respondent-Company (R-3) were placed on record. On 5.11.2001, a reply by way of affidavit was filed on behalf of the petitioner-firm to the aforementioned supplementary affidavit of the respondent-Company. Along with the said affidavit, the petitioner-firm has also placed on record Annexure P-128 to P-132 i.e. proceedings of the civil suit filed by the petitioner-firm against the State Bank of Patiala and State Bank of Bikaner and Jaipur, seeking the relief of mandatory injunction directing the banks to honour and clear their Demand Draft No. 654282, dated 18.3.1998,which was given by the respondent-Company to the petitioner-firm.
7. It is apposite to mention here that another creditor, namely, M/s. Munshi Ram Om Parkash, Bankers and Commission Agents, Julana Mani, Jind, has also filed Company Petition No. 287 of 1999 in this Court for winding up of the respondent-Company. On 25.1.2001, the said company petition came up for hearing before the learned Company Judge, who passed an order admitting the petition and also ordered its publication. Thereafter on 24.8.2001, an application under Order IX Rule 13 of the Code of Civil Procedure, 1908, was allowed subject to payment of Rs. 25,000/- as costs. Consequently, the respondent-Company was allowed to file its written statement in the said case. On submitting the reply by the respondent-Company, C.P. No. 287 of 1999 was again admitted on 5.10.2001 by recording the finding that the same was a case of acknowledged liability and the respondent-Company was not able to discharge its obligation and was not in a position to pay its debts.
8. After hearing the learned Counsel for the parties and perusing the documents placed on record. I am of the considered view that the respondent-Company had acknowledged that a sum of Rs. 5,51,716/- was payable to the petitioner-firm and a sum of Rs. 2,99,550/- has been paid by demand draft No. 654282 of State Bank of Bikaner and Jaipur, dated 18,3.1998. The dispute centers around the issue whether the afore-mentioned draft was given as a full and final settlement of the account or it was part payment as claimed by the petitioner-firm. The documents which have been produced by the respondent-Company on record with additional affidavit, dated 6.9.2001 (Annexure R-2 and R-3) do not show that the same were accepted by the petitioner-firm. There are no signatures on either of the documents by the partners of the petitioner-firm or any one authorised by it. It is also pertinent to mention that the documents Annexures R-2 and R-3 have also shown the name of Munshi Ram Om Parkash who have filed connected C.P. No. 287 of 1999 with a prayer for winding up of the respondent-Company. Had these documents been authentic then the same would have been produced in C.P. No. 287 of 1999 also. The afore-mentioned petition was admitted and an amount of Rs. 10,14,486.92 paise, which was found to be principal amount due, was paid to M/s. Munshi Ram Om Parkash in the Court. The dispute with regard to interest has also been decided by a separate order of even date. Therefore, the reliance of the respondent-Company on documents Annexures R-2 and R-3 is wholly misplaced. Moreover, the petitioner-firm had to file a suit for mandatory injunction seeking encashment of demand draft No. 654282, dated 18.3.1998, in which averments have been made that the aforementioned demand draft was issued by the respondent-company in lieu of the wheat supplied by the petitioner-firm to it and thereafter the afore-mentioned demand draft was purchased from the State Bank of Bikaner and Jaipur. The demand draft was handed over to the petitioner-firm as part payment. Eventually, the payment of demand draft was made, which is evident from the order dated 31.3.1998 (Annexure P-131). Therefore, it is clear that a sum of Rs. 2,51,716/- is due to die petitioner-firm, which is inclusive of customary interest @ 18% per annum on the delayed payment as on 28.3.1998. Therefore, it is evident that after acknowledging the liability to pay, the respondent-Company has failed to substantiate its plea that a settlement between the petitioner-firm and the respondent-Company has taken place wherein the petitioner-firm has waived 50% of its due by accepting rest of the 50% in the shape of demand draft, which was paid on 28.3.1998.
9. Moreover, if the respondent-Company wanted to formulate any scheme with the unsecured/secured creditors it was obligatory to obtain necessary permission of this Court for arranging a meeting of the secured or unsecured creditors and circulate the agenda. It was also necessary to circulate a pubic notice. A reading of the minutes of the meeting would show that it does not bear signature of any authorised person of the petitioner-firm as has also been noticed in the admission order, dated 5.10.2001, passed in C.P. No. 287 of 1999. In the absence of any such document it is not possible for me to accept that there is a triable defence. There has been no answer to the main argument raised by the learned Counsel for the petitioner-firm that in the balance sheet for the year 1997-98 a sum of Rs. 5,51,716/- is due to the petitioner-firm. If there was any settlement or arrangement reduced in writing it should have been shown in the balance sheet, which is duly prepared by the officer and attested by the Directors. A notice was also required to be given to the public. In view of the over-whelming evidence it has to be concluded that the respondent-Company has failed to discharge its debt in respect of statutory notice issued by the petitioner-firm under Section 43 of the Companies Act.
10.The aforementioned facts conclusively establish that an amount of Rs. 2,51,716/- is due to the petitioner-firm, which is inclusive of customary interest @ 18% per annum on the delayed payment as on 28.3.1998. Therefore, interest from 28.3.1998 till date is also payable and now the question which is to be determined is in respect of rate of interest.
11. Dr. Surya Parkash, learned Counsel for the petitioner-firm has argued that it was orally settled between the parties that if, the payment of wheat was delayed for more than three days then respondent Company was liable to pay customary interest @ 18% per annum on the delayed payment. In order to substantiate its claim that the respondent Company used to pay interest @ 18% per annum. C.A. No. 846 of 2000 has been filed by the petitioner-firm to place on record copy of the Certificate of Deduction of Tax at source under Section 203 of the Income Tax Act, 1961 (P-133). A perusal of the aforementioned certificate deduction of tax at source shows that an amount of Rs. 13,30,000/- has been shown credited as on 31.3.1997 and an amount of Rs. 13,000/- has been shown as deduction at source. On the basis of the aforementioned document, learned Counsel has submitted that the rate of interest as agreed between the parties was paid. He has then referred to the legal notice, dated 25.6.1999 (P-125), sent to the counsel for the petitioner firm wherein payment of Rs. 4,77,658/- along with future customary monthly interest @ 18% per annum from 1.7.1999 till the realization of the due amount was claimed. Learned Counsel has maintained that from these documents the claim of the petitioner-firm for payment of interest stand completely substantiated.
12. Mr. Surya Parkash, learned Counsel for the petitioner-firm has also argued that once the money has been retained without any authority of law involving the petitioner-firm in series of litigation then the rate of interest could not be reduced below 18% per annum. In support of his submission, learned Counsel has placed reliance on the observations made in para 8 of the judgment by Hon'ble the Supreme Court in the case of Aditya Mass Communications (P) Ltd. v. A.P.S.R.T.C. : AIR2003SC3411 . He has then submitted that in cases of commercial transaction agreed rate of interest is leviable, especially keeping in view of the fact that the petitioner-firm has been driven into long drawn litigation. In support of his submission, he has placed reliance on Division Bench judgments of this Court in the case of Stephen Chemical Limited v. Innosearch Limited (1986) 60 Company Cases 702 and Jamna Auto Industries Ltd. v. Modern Steel Ltd. (2001) 104 Company Cases 296, and argued that interest @ 18% per annum is required to be awarded in favour of the petitioner-firm. He has then referred to a Division Bench judgment of Madras High Court in the case of Rashid Leathers (P) Ltd. v. Super Fine Skin Traders (1990) 68 Company Cases 684, and argued that in no case the rate of interest can be less than 12% per annum.
13. Mr. Chetan Mittal, learned Counsel for the respondent-Company has argued that there are no pleadings available with regard to agreed rate of interest except an averment concerning oral understanding which has no legal effect. He has drawn my attention to the averments made in the petition to show that the petitioner-firm has pleaded only trade practice for the purposes of charging interest @ 18% per annum and, therefore, it cannot be claimed as a right that there was a mutually agreed rate of interest. Learned Counsel has then referred to the admission order dated 5.10.2001, passed in C.P. No. 287 of 1999, to show that the respondent-Company had never conceded the rate of interest of 18% and it had only agreed to pay the rate of interest as per the usage of the Mandi. Learned Counsel for the respondent-Company has then submitted that the petitioner-firm has not pleaded any agreement with regard to mutual settlement of rate of interest.
14. Mr. Chetan Mittal, learned Counsel for the respondent-Company has then submitted that in any case the rate of interest should not be more than prime lending rate because as per the facts and circumstances of this case the interest @ 18% per annum cannot be charged. In that regard he has referred to the sudden death of Shri Murari Lal on 19.9.1997 followed by the death of his son Shri Anil Kumar Garg on 7.10.1997, which resulted in complete setback to the business of the respondent-Company. He has also raised a preliminary objection asserting that a petition under Section 433(e) of the Act for claim of interest is not maintainable. In support of his submission, he has placed reliance, on two Division Bench judgments of Karnataka High Court in the cases of Smt. Nagaveni Bhat v. Canara Leasing Ltd. (2002) 109 Company Cases 841 and Shakti Prakash Metal Finishers Pvt. Ltd. v. Hindustan Machine Tools Limited (2002) 08 Company Cases 310 and argued that any violation of the terms of contract would not ipso facto come within the purview of the aforementioned provision. He has also referred to the view taken by the learned Single Judge of Andhra Pradesh High Court in the case of Bombay Glass Blowing Industries v. Bio Vaccines Pvt. Ltd. (1999) 98 Company Cases 174.
15. The question of awarding interest and its rates has been the subject matter of consideration of Hon'ble the Supreme Court in numerous judgments including the case of Aditya Mass Communications (P) Ltd. (supra). In para 8 of the judgment it has been laid down that the quantum of interest which a Court may allow is governed by the facts of the case and not by any precedent. The aforementioned view is discernible from para 8 of the judgment, which reads as under:
8. The facts narrated hereinabove clearly shows the respondent has retained the money belonging to the appellant without authority of law and has driven the appellant to series of litigations, therefore, this fact itself should have been sufficient to refuse the request of the respondent made before the High Court for reduction of rate of interest. The quantum of interest a Court may allow in a given case is governed by the facts of the case and not by any precedent law unless, of course, limited by a statute. If a Court comes to the conclusion on a given set of facts, a party has been wrongly denied the use of its own money, it is the duty of the Court to see that the said party is appropriately compensated. In the instant case, we are of the opinion that the respondent has deprived the appellant of its rightful use of the money....
16. On examining the facts of the present case it cannot be concluded that there was a mutually acceptable agreed rate of interest nor it could be accepted that interest has been paid in accordance with the prevalent Mandi practice. There are further factors which would weigh in favour of the respondent-Company. The directors of the respondent-Company, namely, Shri Murari Lal suddenly expired on 19.9.1997 and within less than one month his son Shri Anil Kumar Garg also expired on 7.10.1997. In such a situation one has to take a realistic view of the whole situation in awarding the rate of interest. There is indication in the subsequent events showing that settlement on 31.3.1998 was reached and a large number of creditors settled their total dues by accepting 50% of the same. Therefore, there is ample evidence on record to show that the respondent-Company went into a deep financial crisis on account of two sudden deaths and then change of management. It has been rescued by acts of good management on the part of all concerned. These circumstances cannot be kept out of view while deciding the rate of interest. Applying the principle that the rate of interest should be decided in accordance with the facts of a particular case, as laid down by Hon'ble the Supreme Court in the case of Aditya Mass Communications (P) Ltd. (supra), I deem it just and appropriate to award interest @ 12& per annum from 28.3.1998 till date on the total amount of Rs. 2,51,716/-.
17. The argument of the learned Counsel for the respondent-Company that no petition under Sections 433 and 439 for realising interest from the respondent-Company would be maintainable, has to be rejected because it is well settled that once the Company Judge is seized of the matter with regard to payment of dues and for winding up then it is only a proper forum for determining as to whether the creditor is entitled to interest on the amount in question which is based on sound policy of law to avoid multiplicity of litigation. In that regard reliance may be placed on a Division Bench judgment of this Court in the case of Stephen Chemical Limited (supra), which has been followed by Delhi High Court in the case of Devendra Kumar Jain v. Polar Forgings & Tools Ltd. (1993) 1 Comp.L.J. 184 (Del). Similar view has been expressed by Madras High Court in Rashid Leathers (P) Ltd. (supra). Therefore, I have no hesitation to reject the argument raised.
18. In view of the above, this petition succeeds. The respondent-Company has failed to discharge its debt qua the petitioner-firm. Accordingly, the petitioner-firm is held entitled to recover principal amount of Rs. 2,51,716/- and interest @ 12% per annum from 28.3.1998 till date of realization from the respondent-Company and the same shall be paid to the petitioner-firm within a period of two months from the date of receipt of copy of this order. It is made clear mat if the payment as directed by this order is not made then it would be presumed that the respondent-Company is unable to pay and the respondent-Company shall be deemed to be wound up.
19. The petition stand disposed of in the above terms.