Judgment:
Vipin Sanghi, J.
1. This petition has been filed by the petitioner under Section 433(e), 434 and 439 of the Companies Act, 1956 (for short 'the Act') to seek the winding up of the respondent company, namely, Delhi Express Travels Pvt. Ltd on the ground that the respondent company owes a debt to the tune of Rs. 1,38,83,974/- to the petitioner company which the respondent has neglected to pay despite the service of a statutory notice under the Act.
2. The petitioner is a company incorporated under the Laws of the Isle of Man. The present petition has been filed through Mr. Ghanshyam Bhardwaj, appointed as the Attorney of the petitioner company vide resolution of the Board of Directors dated 4.5.2007 for the purpose of filing the present petition. Copy of the extract of the Board of Resolution dated 4.5.2007 and the Power of Attorney dated 4.5.2007 have been placed on record along with the petition.
3. The petitioner states that the respondent is a company incorporated under the Act having its registered office at P-13, Connaught Circus, New Delhi i.e. within the jurisdiction of this Court. The main object of the respondent company is to carry on business of travel agents for every mode of travel i.e. by sea, air and land. The authorized share capital of the respondent company is Rs. 50 lakhs divided into 5000 equity shares of Rs. 1,000/- each. The petitioner states that the parties entered into a Sales Agency Agreement dated 1.4.2006 whereunder the respondent was appointed as a sales agent to provide services in the territory of India for advertising, publicity, marketing and obtaining bookings for cruise packages of Star Cruise vessels, subject to the terms and conditions set out in the said agreement. Under Clause 3.1.1 of the said agreement, the respondent has warranted and agreed to render and pay to the petitioner fair and accurate accounts of all monies due to the petitioner in respect of any sales, bookings, cancellation and amendment of the cruise packages. The petitioner states that as a result of the transactions undertaken by the respondent under the said agreement, the respondent became liable to the tune of Rs. 1,48,83,974/- towards the petitioner. The petitioner has placed on record the statement of account pertaining to the transactions had with the respondent beginning 31.5.2006 and upto 12.8.2006 showing the above amount outstanding and payable by the respondent. The petitioner has also placed on record the correspondence exchanged with the respondent through e-mail which was the accepted mode of communication between the parties under the Sales Agency Agreement.
4. The respondent, through its Executive Chairman, Sh. Vipin K. Singal sent an e-mail on 28.8.2006 to the petitioner stating that the respondent is exploring the sale/lease of one of their branch offices which would generate enough funds to meet the outstanding liabilities towards the petitioner. It was assured to the petitioner that the outstanding amount could be settled before 30.9.2006. The petitioner sent an e-mail on 5.9.2006 enquiring from the respondent as to when the outstanding amount would be paid. In response, once again the respondent on 11.9.2006 stated that payment of the outstanding dues of the petitioner was the top priority for the respondent. The respondent stated that it was seeking to lease out one show room in Connaught Place to liquidate the liabilities owed to the petitioner.
5. On 22.9.2006, yet another reminder was sent by the petitioner. The Executive Chairman of the respondent again responded on 23.9.2006 stating that a meeting had been fixed between the brothers in management of the respondent company to arrive at an amicable out of court settlement, which would enable taking of immediate steps to generate funds to clear all the pending dues in one go. From the aforesaid, it appears that there were inter se disputes between the brothers having interest in, and managing the affairs of the respondent company. On 25.09.2006, once again the petitioner sent a reminder to the respondent. On 30.10.2006, the respondent gave the details of the outstanding dues for ready reference and reconciliation in the petitioner's office. This communication was sent by the Executive Chairman, Mr. Vipin K. Singal. It was stated that the apartment of the respondent company at Mumbai could not be sold so far and neither the vacant office space at Connaught Place could be leased out as yet. The outstanding liability admitted by the defendant in the attachment to this communication was Rs. 1,48,93,580/-. On 21.11.2006, the respondent once again confirmed the outstanding liability owed to the petitioner as Rs.1,48,83,974/-.
6. The petitioner sent a notice through its advocates Bhatt & Saldhana dated 19.2.2007 calling upon the respondent to make payment of Rs. 1,48,93,580/- with interest at the rate of 18% per annum from 1.1.2007 till payment within three weeks of the receipt of the notice failing which it was stated that the petitioner would initiate appropriate legal proceedings including, but not limited to, winding up of the respondent company. This notice was responded to by the respondent through their advocates, Virender Sood & Co. on 12.3.2007 denying any liability towards the petitioner and instead claiming that the respondent has to recover Rs. 16,58,580 from the petitioner on account of expenditure incurred on advertisement. The petitioner, it appears invoked a bank guarantee for Rs. 10 lakhs furnished at the instance of the respondent on or about 12.2.2007. After adjusting the amount of Rs. 10 lakhs received upon honour of the said bank guarantee, the petitioner claims that Rs. 1,38,83,974/-, apart from interest at the rate of 18% per annum from 1.1.2007 is due and payable by the respondent.
7. Upon issuance of the notice in the petition, the respondent has filed its reply. It is stated that the present petition cannot be used as a means of effecting recovery and the petitioner should invoke the civil remedy instead of preferring the present petition. Various other technical objections have been raised, none of which were argued by the respondents at the time of argument. It is claimed that an amount of Rs. 16,58,580/- is due from the petitioner to the respondent towards 'advertisement subsidy'. It is further claimed that the petitioner is liable to pay service tax to the respondent from September 2004 to October 2005 to the tune of Rs. 19,33,619/-. In para 9 of the reply it is stated that earlier the business association between the parties was running smoothly. However, due to some unavoidable situation, the business association came under a cloud as differences arose between the parties. It is claimed that the respondent had to recover Rs. 75,89,199/- from the petitioner besides damages. The petitioner was accused of not settling the accounts. However the respondent has not denied having sent the e-mail communications above referred to wherein the respondent has repeatedly admitted its outstanding liability from time to time to the tune of Rs. 1,48,83,974/- before the encashment of the bank guarantee of Rs. 10 lakhs by the petitioner.
8. The petitioner in its rejoinder denies that any amount is due to the respondent company towards 'advertisement subsidy' much less to the tune of Rs. 16,55,580/-. It is stated that the respondent company had to bear all expenses towards promotional and advertising cost under the Sales Agency agreement dated 1.4.2006. Reference is made to Clause 5.2 of the said agreement to show that there was no such obligation cast on the petitioner to bear any liability for advertisement subsidy.
9. The claim for the sum of Rs. 19,33,619/- towards service tax from September 2004 to October 2005 is also refuted as it was made for the first time only after the issuance of the statutory notice. The said amount finds no mention in the correspondence exchanged between the parties, or in the statement of final accounts, or even in the amount admitted to be due to the petitioner by the respondent company.
10. A perusal of the correspondence between the parties shows that the respondent has not really raised a genuine and bona fide defence. The liability to the tune of Rs. 1,38,83,974/- stands admitted, and even if one were to deduct the amount of the alleged claim towards advertisement subsidy and towards service tax liability, as claimed by the respondent, the outstanding admitted liability is in excess of Rs. 1 Crore.
11. It has come on record that there are inter se disputes between the family members controlling the respondent company. This is evident from, inter alia, CA No. 633/09 filed by Virender Singal under Rule 9 of the Companies (Court) Rules, 1959 on Principles Analogous to Order 1 Rule 10 C.P.C. to seek impleadment in the petition. The said applicant alleges gross mismanagement and siphoning of funds of the respondent company by the other unscrupulous Directors. Mr. Virender Singh claims to be a shareholder to the extent of 31.31% in the respondent company and states that he was involved in the day to day running of the respondent company until the end of 2003 during which time the respondent company was running into profits. From the year 2004 onwards, due to certain personal animosity with majority directors, who include two of his brothers, the applicant claims that he was stripped of all the banking and executive powers in the respondent company and he lost control in the day to day activities of the company. He states that the present financial mismanagement is solely attributable to the current management consisting of two of his brothers, namely, Shri Vipin Singal and Sh. Vinay Singal. He states that the respondent company has the assets to liquidate the dues of the petitioner company and the same should not be wound up.
12. Having heard the counsel of the parties and perused the record, I am inclined to allow this petition for winding up under Section 433(e) of the Act. What is to be examined by the Court in these proceedings is whether there is clear cut admission of a debt by the respondent company and the debt, which should be in excess of Rs. 1 Lakh, is not discharged by the respondent company despite a notice issued in compliance with Section 434 of the Act. In case of a disputed debt, the Court has to examine whether the dispute on the face of it is genuine, or merely a cloak to cover the company's real inability or unwillingness to pay its debts. When the debt is undisputed the Court will order winding up and will not act upon a defense that the company has the ability to pay the debts but the company chooses not to pay the debt. (see Madhusudan Gorhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. and Ors. : (1971) 3 SCC 632).
13. Admittedly the parties had a business relationship under the Sales Agency Agreement dated 01.04.2006 whereunder the respondent, inter alia, booked Star Cruise packages on vessels operated by the petitioner. The respondent company was obliged to remit the booking proceeds to and render accounts to the petitioner under the said agreement. From the series of emails exchanged between the petitioner and the respondent company which are placed on record, I find that there is a clear and repeated admission of the debt payable to the petitioner company by the respondent company to the tune of Rs. 1,48,83,974/-.
14. Neither in the reply filed by the respondent company, nor otherwise, the genuineness of the emails exchanged between the parties, as produced by the petitioner, has been disputed. The petitioner company had sent various reminders through emails to settle the outstanding amount due at earliest. The Executive Chairman of the company, Mr. Vipin Singal in response to these emails, had repeatedly admitted the liability of the respondent company towards the petitioner company and has at every occasions given repeated assurances to pay off the said admitted debts.
15. The Executive Chairman vide email dated 28.08.2006 had confirmed the accrual of outstanding liability and in fact had given an impression that steps are being undertaken to raise funds for clearing the outstanding amount due to the petitioner company. The email dated 11.09.2006 also shows that the liability due towards the petitioner company is categorically admitted and it was represented that efforts were being made to clear the dues of the Petitioner company before 30.09.2006. Even in email dated 23.09.2006 it was assured that immediate steps will be taken to generate funds to clear all the petitioner company's dues in one go. The details of outstanding dues for ready reference and reconciliation at petitioner's office was, inter alia, sent vide email dated 30.10.2006. Here again it was assured that the respondent company and the brothers (i.e. Directors) are individually responsible to pay the amount due to the petitioner company. Again on 21.11.2006 it was informed by the respondent via email that the total outstanding dues which the respondent company owes to the petitioner is Rs. 1,48,83,974/- and the remittance of this amount was a top priority for the respondent.
16. From the conspectus of these emails it is evident that the respondent company had all along admitted the amount of Rs. 1,48,93,580/- to be due towards the petitioner and assurances were given to remit these amount. The denial of the liability in the reply to the legal notice of the petitioner and in the reply filed to the present petition is, therefore, an afterthought and malafide, only to somehow ward off the consequences of winding up. The subsequent denials have no basis and the respondent has not attempted to explain the circumstances in which the aforesaid categorical admissions of liability were repeatedly made. I, therefore, reject the stand sought to be taken by the respondent in its reply to the legal notice and in reply to this petition.
17. It appears that there are differences between the brothers who were managing the affairs of the company and the liability owed to the petitioner company has not been discharged, as different factions are trying to saddle the liability qua the petitioner upon the other. The amount which is legally due and not disputed by the respondent company can not be allowed to remain unpaid indefinitely due to some internal differences between the managers/directors of the respondent company. In these proceedings neither the creditor, nor the Court is concerned with the internal management issues of the respondent company. A creditor is not concerned with the inter se disputes between the directors and cannot be expected to wait indefinitely to receive its dues. He is legitimately interested in time bound payment of his dues. The respondent company has, admittedly, and in spite of repeated assurances neglected to make payment.
18. The balance sheet of the respondent company as at 31.03.2008 also shows a rather grim picture of the financial health of the respondent company. The company suffered losses of Rs. 2,18,74,569.38 in the year ending 31.03.2007 and the losses as at 31.03.2008 stood at Rs. 42,75,347.60 after exhausting the entire general reserves of the company.
19. The counter claims raised by the respondent company is also not legally sustainable and is a mere attempt to counter blast the undisputed debt owed by it towards the petitioner company. The claim of respondent company to the tune of Rs. 16,55,580/- towards advertisement subsidy clearly is an afterthought to overshadow their failure to pay off legally admitted dues. Clause 5.2 of the Sales Agency Agreement clearly states that any amount incurred on promotional activities and advertisement expenses would be entirely borne by the Sales Agent i.e. respondent company. It is only when the petitioner company and respondent company jointly undertakes special sales promotion, publicity or advertisement expenses are to be shared by both the parties in accordance with agreed written terms from time to time. The respondent company has not even pleaded that any demand under this head was ever made to the petitioner company and was not paid. Pertinently, it is only after the statutory legal notice was served upon respondent company, that such a demand for advertisement subsidy was made for the first time by the respondent. Thus, it cannot be said that the respondent company has been able to raise a bona fide dispute to the admitted debt by raising the above defences. For the sake of argument, even if the amount claimed by the respondent company towards Service Tax liability from the petitioner company amounting to Rs. 19,33,619/- is credited to the respondents' account, even then the liability of the respondent company would be in excess of Rs. 1.28 crores.
20. The other defense raised to resist this winding up petition is that the respondent company has the assets to liquidate the dues of the petitioner company. Assuming that the assets of the respondent company are sufficient to meet the liability owed to the petitioner, but the conduct of the respondent company and the defences raised by it show that respondent company is not ready and willing to make the payment, so far as the debt owed to the petitioner company is concerned. The respondent company, in spite of statutory notice and demand, till date has neglected to make the payment. Such neglect is clear in the facts of this case.
21. In the facts and circumstances of the case, it is just and equitable to pass a winding up order in the present matter. There is no material on record to exercise the judicial discretion in favour of the respondent company. The case clearly falls within the ambit of Sections 433 and 434 of the Companies Act and, therefore, I am inclined to admit the petition and order the winding up of the respondent company. It is ordered accordingly.
22. Accordingly, the official liquidator attached to this Court is appointed as the liquidator in respect of the respondent company. He shall forthwith take over all the assets an records of the respondent company and proceed according to law. Citation shall published in the 'Statesman' (English) and 'Jansatta' (Hindi) for 17.07.2009. Petitioner may take steps accordingly.