K.A. Puj, J.
1. The petitioner has filed this petition under Sections 433, 434 and 439 of the Companies Act, 1956 for winding up of the respondent Company on the ground that the respondent Company is unable to pay its debt and failed to discharge its liabilities towards the petitioner.
2. This Court has issued notice on 1.7.2006. Since caveat is filed on behalf of the respondent Company notice was waived by Mr. J. S. Sadhwani, learned advocate appearing for the respondent Company. The petitioner's case in the petition is that that the petitioner has been suppling to the respondent Company, Steel Billets of various sizes since April, 2000. The respondent Company has time and again accepted and acknowledged the statement of accounts supplied to the respondent Company and has never disputed/controverted the various letters of the petitioner and, in fact, the respondent Company has based its entire defence on forged and fabricated documents, including forged and fabricated statement of accounts. As per the ledger account maintained by the petitioner in its Books of Accounts, a sum of Rs. 23,79,257.91 paise was due and payable by the Company to the petitioner as on 30.7.2002. Thereafter, the petitioner had supplied further statement of account for the period from 1.4.2002 to 26.2.2003, which was received by the Company and showed that a sum of Rs. 45,09,654.15 paise is due and outstanding to the petitioner as on 27.2.2003. The petitioner Company has never disputed the statement of account or its liabilities to pay. Despite repeated requests for payment, solely on the basis of Company's assurance, the petitioner continued to supply to the respondent Company. As per the invoices, which were raised by the petitioner from time to time, 45 days credit period was provided towards supply of Steel Billets. At the request of the Company the said credit period was increased to 60 days. The petitioner vide its letter dated 31.1.2005 called upon the Company to make payment of the entire outstanding dues, which was to the tune of Rs. 50,23,222.00. The petitioner finally addressed letter dated 20.6.2005 to make the payment towards the entire outstanding dues of Rs. 53,51,948/-. The principal amount outstanding than was Rs. 13,39,695/- and outstanding interest amount was Rs. 40,12,253.00. In addition to these amounts, a sum of Rs. 12,04,188/- is also payable towards interest from July, 2005 till March, 2006. The Company despite having received the said letter dated 20.6.2005, has neither replied to the same nor made any payments nor disputed its liability to pay. The petitioner, therefore, lastly issued statutory notice under Section- 433 read with Section 434 of 1956 calling upon the respondent Company to pay the amount of 53,51,948/- plus interest Rs. 12,04,188/- within 21 days from the date of receipt of the said notice, failing which the petitioner would be constrained to commence proceedings against the Company. The Company gave reply to the said statutory notice through its advocate without disputing the transaction. Despite this statutory notice since no payment was made the petitioner was constrained to file the present petition before this Court.
3. The respondent Company filed its affidavit-in-reply on 21.7.2006, wherein it is nowhere denied or disputed remotely the acknowledgment/receipt of various letters addressed by the petitioner together with the various statements of account supplied by the petitioner to the respondent Company. The respondent Company has also produced its accounts alongwith affidavit-in-reply which according to the petitioner are completely inconsistent with the accounts of the petitioner. The petitioner filed its affidavit-in-rejoinder on 25.11.2006, to which the respondent Company has filed its affidavit in sur rejoinder on 19.2.2007. The petitioner has also filed its affidavit in sur sur rejoinder on 25.2.2007.
4. Mr. S.N. Soparkar, learned Senior Counsel appearing with Mr. A.S. Vakil for the petitioner has submitted that various letters were addressed by the petitioner to the respondent Company making reference therein to the outstanding dues and the supply of Steel Billets received by the respondent Company but the respondent Company has never disputed and/or challenged remotely or otherwise the contents thereon. At least prior to the filing of the petition and upto the stage of giving reply to the statutory notice to the petitioner the respondent Company never disputed the receipt and/or the contents of the various letters addressed by the petitioner to the respondent Company. Thus, by not disputing the receipt and the contents of the various letters of the petitioner, the respondent Company has admitted the rate of commission, rate of interest and outstanding dues etc.
5. Mr. Soparkar has further submitted that the various statements of account supplied by the petitioner to the respondent company for the period from 1.4.2002 to 31.12.2002, 1.4.2002 to 26.2.2003 and 1.4.2002 to 31.3.2003 were received and confirmed by the respondent Company in writing. In none of the pleadings of the respondent Company, it has disputed the signature by which the said statements of accounts have been received/acknowledged/confirmed. The respondent Company has also not disputed in any of its pleadings the authority of the person, who has signed the aforesaid statement of account on behalf of the respondent Company. Thus, when the respondent Company has acknowledged statements of account it can reasonably be inferred/presumed that debt, which is subject matter of the present petition is admitted and is due and payable by the respondent Company. On the other hand, the statements of accounts produced by the respondent Company are produced for the first time. The contents of the said statements of accounts are completely contrary to and inconsistent with the various letters of the petitioner to the respondent Company as well as the statements of accounts of the petitioner, supplied to the respondent Company and received, acknowledged and confirmed in writing by the respondent Company. The respondent Company has not stated in any of its pleadings that it has supplied the said statements of accounts to the petitioner and that the petitioner has confirmed the same. He has, therefore, submitted that the statement of accounts produced by the respondent Company are manipulated and/or forged and/or wholly fabricated and completely inconsistent and contrary to the signed, acknowledged, received and confirmed statements of accounts produced by the petitioner. He has, therefore, submitted that the defence of the respondent Company in so far as the same is based upon its statements of accounts is demonstrably forged, fabricated and manipulated statements of accounts.
6. Mr. Soparkar has further submitted that in addition to the forged, fabricated, manipulated statement of accounts produced by the respondent Company, the respondent Company has indulged in further forgery, fabrication and manipulation by producing the letters dated 19.4.2002, 1.4.2003 and 5.4.2003. He has submitted that each of these letters are got up and/or concocted. The same were never addressed, much less received by the petitioner. In so far as letter dated 19.4.2002 is concerned, he has submitted that the same mentions following as the telephone numbers of the Company.
Tele: 0091-2827-253696 0091-2827-253696
Fax: 0091-2827-253132
It is further submitted that the address of the Company stated in the said letter dated 19.4.2002 is as follows:
Survey No. 239/1, Plot No. 14-16,
GEB Sub-Station Road,
National Highway 8B,
Shapar-360 002
District Rajkot,
Gujarat (India)
7. He has submitted that on 19.4.2002 none of the telephone numbers in the State of Gujarat, including at 'Shapar' were prefixed by the number '2'. The number '2' was prefixed in December, 2002/January 2003. Thus, the said letter head of the Company has been used to create a 'back dated letter'. He has further submitted that the address of the Company as on 19.4.2002, i.e. the date of the said letter, was Plot No. 16-17 and not 14-17. He has, therefore, submitted that the Company has created/concocted the letter dated 19.4.2002 by using its current letter head. So far as commission rate is concerned, the Company admitted that the regular commission rate is Rs. 550/- per metric tonne and yet by journal entry dated 30.3.2003 and 25.6.2003 respectively, debited/reduced commission by Rs. 2,50,746 and Rs. 1,36,044. In so far as the 'cutting charge' is concerned, the petitioner included the same, in its debit notes, only when the petitioner undertook the 'cutting' of the material supplied. The similar discrepancies were pointed out by Mr. Soparkar with regard to the letter dated 1.4.2003 and 5.4.2003. He has submitted that not only these three letters have not been received by the petitioner till date but surprisingly the same have not been referred to by the Company in its reply dated 24.5.2006 to the statutory notice dated 3.5.2006 of the petitioner. He has, therefore, submitted that the Company has not only tried to create or fabricate false documents but has also tried to put up unsustainable, bogus and illegal defence which in fact is inconsistent with the Company's stand taken from time to time. He has, therefore, submitted that since the entire substantial defence of the respondent Company having been raised on forged, fabricated and manipulated documents, this Court should not exercise its discretion in favour of the respondent Company and should reject the defence of the respondent Company and order the admission and advertisement of the petition. The respondent Company's defence is not bonafide. On the contrary, the evidence on record clearly demonstrate that the malafide defence was raised by the respondent Company.
8. In support of his submissions Mr. Soparkar has referred to and relied upon the following decisions;
(i) In Ficom Organics Ltd. v. Laffans Petrochemicals reported in (2000) 99 Company Cases 471 (Guj.) this Court has held that the Court is not prevented from admitting winding up petition for enforcing payment of just debt. It is a from of equitable execution. The Court would entertain petition after defaulting company failed to avail opportunity to pay debt. The Court would also conditionally admit petition while granting opportunity to company to pay debt. The Court is to consider whether time to be granted to company to pay debt or to conditionally admit petition and defer advertisement or not to admit petition.
(ii) In Madhusudan Gordhandas And Co. v. Madhu Woollen Industries Pvt. Ltd. reported in 42 Company Cases 125(SC) the Hon'ble Supreme Court has held that where the petition for the winding up of a company is based on the ground of the inability of the Company to pay its debts, it is well settled that if the debt is bona fide disputed and the defence is substantial one, the Court will not order winding up. The principles on which the Court acts are (i) that the defence of the company is in good faith and one of substance; (ii) that the defence is likely to succeed in point of law, and (iii) that the company adduces prima facie proof of the facts on which the defence depends. Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely.
(iii) In T.P. Shau & Sons Pvt. Ltd., In re 52 Company Cases 182 (Calcutta) it is held that a winding up petition, where a company accepted the supply of goods by a petitioning-creditor without any objection as would appear from the challan, weighment certificate and bill, and there was no difference in the description of the goods by the petitioning-creditor and the company and in fact, the company never raised any objection and it also never raised any objection to the bill at any point of time and various dates were given by the company asking the petitioning-creditor's representative to call for payment, as would appear from the endorsement on the said bill-cover and, only after the statutory notice was served, the company had manufactured a document alleged to have been sent under certificate of posting, on a date which was a public holiday, alleging that the goods were not according to specification and seeking thereby to dispute the claim, the dispute would not be in good faith and the winding up petition could not be said to be an abuse of the process of court. The company must be held to be unable to pay its debt as it had not raised any bona fide dispute to the claim of the petitioning-creditor, and the winding up petition should be admitted.
(iv) In Ashoka Industries v. Tobu Enterprises Ltd. reported in (2002) 39 SCL 923(Delhi) there was clear admission of debt. The defence to the winding up is that there is defects in supplied goods. The objection raised after three years of the delivery of the disputed supply. The Company has admitted its debt, and requested for further supplies. The Court held that the defence takes the colour not merely of moonshine, but of being sham and dishonest defence and accordingly the Court has admitted the winding up petition.
(v) In P.Y. Parry v. Cynotech Bioproducts Pvt. Ltd. Banglore and Ors. reported in (2000) 3 Company Law Journal 78 Karnataka it is held that it is well-settled law that if the debt that is pleaded is a disputed debt, that a winding up petition will not be maintainable. It is equally well-settled law that merely because a dispute is pleaded that the Court is not required to treat the debt as disputed unless the Court is prima facie satisfied that the dispute in question requires adjudication. If a company, on being called upon to discharge a debt after the lapse of considerable period of time, does not discharge the debt, a presumption arises that the company is commercially insolvent. The liabilities are outstanding since the year 1994 and the record indicates that the respondents have not paid up the amount. The first test of solvency is, ability to discharge the debts and liabilities within a reasonable period of time and if as the record indicates conclusively, that this is not done, then the presumption of commercial insolvency is complete. Apart from this aspect of the matter, this is not a case in which, apart from a bald averment, any material has been placed before the Court to indicate the financial solvency of the respondents and to merely state that the respondents are solvent in the face of the present record, would not be permissible. Viewed at from any angle, both on facts and on law, the petitioners have made out a ground for a prima facie case which deserves admission. The petition was accordingly admitted.
(vi) In Delhi Cloth & General Mills Co. Ltd. v. Stepan Chemicals Ltd. reported in 60 Company Cases 1046 (Punjab and Haryana) it is held that where a company is unable to pay its debts and after the filing of a petition for the winding up of the company under Section 439 of the Companies Act, 1956, the Company pays the principal amount due to the creditor during the pendency of the petition but does not pay the interest on the principal amount, the company can still be ordered to be wound up.
(vii) In Devendra Kumar Jain v. Polar Forgings and Tools Ltd. 84 Company Cases 766 (Delhi) it is held that where the order containing the order containing the terms and conditions under which the petitioner supplied goods to the respondent Company stipulated the dates on which the payments were due, and the petitioner had been writing to the company stating that if the outstanding balance was not paid, he would be constrained to charge overdue interest at 18 per cent, per annum from the due dates, and the company, during the pendency of the winding up petition paid the debt, but not the interest, that the amount of interest payable was merely a matter of mathematical calculation and the petition for winding up could not be dismissed on the ground that the amount of interest had not been calculated.
(viii) In Stephen Chemical Ltd., v. Innosearch Ltd. 60 Company Cases 702, the Division Bench of Punjab and Haryana High Court has held that where a petition is presented for the winding up of a company on the ground that it is unable to repay its debt and the company admits its liability and in fact pays it up, the forum of the company judge is the appropriate forum for determining as to whether the creditor is entitled to interest on the amount in question or not. The basic policy of law is to avoid multiplicity of litigation.
9. So far as defence based on forged documents are concerned, Mr. Soparkar has relied on the following decisions;
(i) 2000 (3) Comp. LJ 78 (Kant.) P.Y. Parry v. Cynotech Bioproducts Pvt. Ltd.
(ii) 1982 (52) Comp. Case 182 (Cal.) T. P. Sahu & Sons Pvt. Ltd.
(iii) 1983 (53) Comp. Case 41 (Cal.) Smt. Madan Devi Kundaliya v. Alpine Dairy Ltd.
10. Mr. S.N. Shelat, learned Senior Counsel appearing with Mr. J. S. Sadhwani, learned advocate for the respondent Company on the other hand has strongly objected the petition. It is submitted that right from the stage of reply to the statutory notice the respondent Company has disputed the claim of the petitioner. It was stated in the reply dated 24.5.2006 that the payment shall be made in time. The respondent Company has called upon the petitioner to provide the interest clause proviso agreed between both the parties and submitted that the said claim of interest was absolutely false and was not legal. He has further submitted that the petitioner Company has produced the account only upto 27.2.2003, and as on that date, the balance shown was Rs. 45,09,654.15 ps. The said statement consists of two disputes, (1) agreed rate 550 per metric tonne but Rs. 1500/- per metric tonne has been charged. (2) Interest of Rs. 6,64,477/- is claimed at 24% p.a. He has further submitted that the respondent Company in its reply dated 21.7.2006 has specifically stated that the transactions were from 1999 to 2005 and the said transactions/facts have been suppressed by the petitioner. The amount of Rs. 1,87,456.07 as per our Company's accounts was outstanding. The interest proviso was disputed and the commission increase was also disputed. It is also stated in the said reply that the financial condition of the Company was very sound. It is having about 95 persons connected with it and is a profitable concern. The respondent Company has also placed the statement of account as well as balance-sheet/Profit and Loss Accounts on record. He has further submitted that the total interest charged at the rate of 24% during the year 2001-02, 2003-04 and 2004-05 are to the tune of Rs. 6,64,477/-, Rs. 9,59,712/- and Rs. 11,14,765/- respectively. He has further submitted that all the payments made by the respondent Company have been debited towards interest instead of principal and the amounts have been added on.
11. Mr. Shelat further submitted that the respondent Company has placed all the financial results, balance sheet as well as profit and loss Accounts before this Court and the respondent Company is a profitable running concern. The Company has been making profit on year after year and there is no claim against the respondent Company. The company is a viable concern and not a sick company and, therefore, under the guise of exaggerated claims and disputed debts, the company cannot be ordered to be wound up. The company has paid taxes regularly and discharging its liabilities. He has further submitted that the claims of the petitioner are disputed and exaggerated. There are disputes as regards to the claims i.e. commission as well as the interest clause. There is no provision for interest. Besides this, the business between both the companies continued and payments were made against delivery and, therefore, interest cannot be levied as per the wish and whims of the petitioner Company. Besides, due to long and continuous transactions, there was no interest proviso agreed into between the parties. He has further submitted that the interest was charged at the rate of 24% and some time at the rate of 30% and interest amount goes beyond the principal amount. Therefore, the claim being disputed the Company cannot be ordered to be wound up.
12. In support of his submissions Mr. Shelat has relied on following decisions.
(i) In Mediquip System Pvt. Ltd. v. Proxima Medical System GMBH reported in : AIR2005SC4175 the Hon'ble Supreme Court has held that if debt is bonafide disputed and defence is a substantial one, the Court would not wind up the Company. The Court has further observed that in catena of decisions it was held by the Court that an order under Section 433(e) of the Companies Act is discretionary. There must be a debt due and the company must be unable to pay the same. A debt under this section must be a determined or a definite sum of money payable immediately or at a future date and that the inability referred to in the expression 'unable to pay its dues' in Section 433(e) of the Companies Act should be taken in the commercial sense and that the machinery for winding up will not be allowed to be utilized merely as a means for realising debts due from a company. After referring to the various judgments, the Court ultimately held that there is a prima facie dispute as to the debt. The Court, therefore, did not find any justification whatsoever for admitting the winding up petition. Accordingly, the judgments passed by the learned Single Judge the Division Bench were set aside and the Civil Appeal stood allowed.
(ii) In Dolphin International Ltd. v. Gabs Laboratories (P) Ltd. reported in : JT2002(10)SC142 , the Hon'ble Supreme Court after referring to various judgments had come to the conclusion that the case for winding up in accordance with Section 433(1)(e) of the Act has not been made out and the division bench committed error in not considering all the relevant materials and yet in jumping to the conclusion that a case for winding up has been made out. The Court, therefore, set aside the orders admitting the petition for winding up and directing publication of citation.
(iii) In Patel Kashiram Gangaram v. Unicure Remedies Pvt. Ltd. decided by this Court on 7.4.2005 in Company Petition Nos. 59 to 66 of 1999, this Court has held that when the Court found that the dispute raised by the Company is genuine and bonafide, it is not advisable nor even desirable to pass an order of winding up. The Court has also considered that the respondent Company has been making profits year after year. No other winding up petitions except the present group of petitions is pending before the Court. The Balance-sheets and financial data produced by the respondent Company show that the Company has earned profits till 2004 and that the financial substratum of the company has not gone down. The Court, therefore, held that there was no substance or merit in any of these petitions and they deserve to be dismissed and accordingly all the winding up petitions were dismissed by the Court.
(iv) In Tata Iron and Steel Company Ltd. v. Micro Forge (India) Ltd. reported in : (2000)2GLR1594 the Division Bench of this Court, after enumerating certain important contours and chronicles, held that when bonafide dispute of debt is raised, it is not the Company Court but the Competent Civil Court which should adjudicate the controversy as a original Court after undergoing fulfledged trial. The Court further observed that the petition for winding up with a view to enforce payment of disputed debt is abuse of process of Court and should be dismissed with cost. The Court, therefore, held that the order of admission for winding up petition and resultant directions are not justified and warranted and winding up petition deserves to be dismissed.
13. Based on the aforesaid submissions and the decided case law on the subject Mr. Shelat has submitted that there are disputed questions of facts and the petitioner has to establish its claim in the Civil Court after proper adjudication and trial and winding up petition cannot be entertained for the purpose of recovery of such disputed claims. He has, therefore, submitted that the petition deserves to be dismissed.
14. Having heard learned advocates appearing for the parties and having considered their respective pleadings in light of the documents produced before the Court and the decided case law on the subject, the Court is of the view that a genuine and bonafide dispute has been raised by the respondent Company. The petitioner's claim is merely consisting of interest charged at the rate of 24% per annum and for some period even 30% per annum. The claim also consists of higher commission charges. The petitioner has proceeded on the footing that the respondent Company has accepted and acknowledged the account produced by the Company. It is true that the accounts have been received by the respondent Company and no immediate response was given by the respondent Company. However, mere acceptance of letters or accounts cannot be treated as the acknowledgment or even it cannot be considered as the acceptance of the contents of the said account. Precisely for this reason the respondent Company has raised this dispute in reply to the statutory notice and in affidavit-in-reply filed before this Court. There was no agreement with regard to charging of interest. The transaction between the parties are ranging from the period 1999 to 2005. The payments were made, though late. The petitioner has unilaterally charged the interest at the rate of 24% and thereafter at 30%. The petitioner has also unilaterally changed the rate of commission which was never accepted by the respondent Company. The respondent Company has, therefore, in its account produced before the Court reduced the said increased rate of commission and also did not agree for charging of interest. A just and proper contention was raised before the Court that whatever payment was made over the years the petitioner has tried to adjust the same against the interest and not against the principal amount. The figure of outstanding amount is therefore increased only because of the interest charged at the rate of 24% and 30%. The petitioner has relied on the decisions where the Court has admitted the petition even for the purpose of outstanding dues on account of interest. However, when dispute is raised and the Court finds some substance in the said dispute, the Court may not like to exercise its discretion in favour of the petitioner seeking winding up of the respondent Company despite the fact that the respondent Company is going concern and profitable running unit and also when the fate of around 100 employees is involved.
15. Considering the entire facts and circumstances of the case and even without considering the defence raised in the disputed letters which were produced by the respondent Company raising dispute with regard to the quality of materials, the Court is of the view that the plea regarding fabrication and concoction of false documents would not take the petitioner's case any further. Even otherwise, determination of this issue requires fulfledged trial. It cannot be decided in winding up petition. Independent of the said letters, the Court is of the view that the petitioner has not been able to establish its case before the Court that the debt is undisputed and that there was no genuine or bonafide dispute or defence available to the respondent Company. Even on the basis of accounts produced by the petitioner, it is clearly revealed that the petitioner has claimed interest of Rs. 6,64,477/- for the period from 1.4.2000 to 31.3.2002 and Rs. 9,59,712/- for the period from 1.4.2002 to 31.3.2004 and Rs. 11,14,765/- for the period from 16.5.2004 to 31.1.2005. On the basis of account submitted by the respondent Company, it appears that the respondent Company is liable to pay Rs. 1,87,456.07/-. The respondent Company is, therefore, directed to pay the said amount to the petitioner within one month from the date of receipt of writ of this Court or from the date of receipt of certified copy, which ever is earlier and for the balance amount, the petitioner is at liberty to file Civil Suit which shall be decided by the competent Civil Court on the basis of evidence that may be produced by the parties and after proper adjudication of the claim of the petitioner. It is made clear that if such a suit is filed for recovery of the balance amount, the same shall be decided by the Civil Court without being influenced by any observation made by this Court in the present order.
16. Subject to the aforesaid directions and observations this petition is accordingly disposed of without any order as to costs.