infrastructure Leasing and Financial Services Ltd. Vs. S.A.B. Industries - Court Judgment

Excerpt:
- 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 110a in the c.p.c., by 2002 amendment act, no letters patent appeal is maintainable against judgment/order/decree passed by a single judge of a high court. a right of appeal, even though a vested one, can be taken away by law. it is pertinent to note that section 100-a introduced by 2002 amendment of the code starts with a non obstante clause. the purpose of such clause is to give the enacting part of an overriding effect in the case of a conflict with laws mentioned with the non obstante clause. the legislative intention is thus very clear that the law enacted shall have full operation and there would be no impediment. it is well settled that the definition of judgment in section 2(9) of c.p.c., is much wider and more liberal, intermediary or interlocutory judgment fall in the category of orders referred to clause (a) to (w) of order 43, rule 1 and also such other orders which poses the characteristic and trapping of finality and may adversely affect a valuable right of 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 writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - but the respondent failed to purchase the shares and neglected to make payment of aggregate sum of rs. 4. levelling a variety of allegations, in all, according to the appellant-company, as the respondent-company failed to pay a sum of rs. in the event of sale if the appellant got a lower price than the agreed amount, then the promoters were to make good deficiency in accordance with the terms of the agreement. in case of lower price by sale of shares, the promoters were to make good the difference of the amount as described in the agreement. 8. after hearing the learned counsel for the parties and after going through the material on record, the learned company judge refused to entertain the petition and relegated the parties to the remedy of civil suit especially having regard to the fact that the appellant still continues to be a holder of the shares which were the subject matter of buy-back article under the agreement, vide impugned order dated 3-11-1995. 9. the appellant-company did not feel satisfied with the impugned order and filed the present appeal. the co-joint reading of these provisions of the said sections of the act would reveal that the followings are the essential ingredients, which are conditions precedent and required to be proved for winding up the company, (i) not only that there must be an ascertainable and definite amount of debt which respondent-company failed to pay, (ii) but the respondent-company must be proved to be unable to pay the same i. 's case (supra), it was observed by hon'ble apex court that where 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. but at the same time, it was ruled that the principles on which the court acts for winding up has to be kept in focus, firstly that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. because, the appellant-company has not proved the ascertainable and determined specific amount of debt and it also did not substantiate that the respondent-company is unable to pay the debt as well which are conditions precedent for winding up a company. 18. possibly, no one can dispute that it is well recognized principle of law that the relief under clause (e) of section 433 of the act is discretionary and winding up petition is not legitimate means of seeking to enforce the payment of the debt which is bona fidely disputed by the company. the court should grant the relief of winding up only if it is satisfied that existence of the company will cost immense prejudice to all concerned. there is a buy-back of shares clause 6.1 and it is clearly stipulated in clause 6.5 in the agreement that in the event of the promoter not accepting either wholly or in part the offer made to him pursuant to clause 6.1 within the indicated period, the intending subscriber shall be free to sell such shares offered to the promoter but not accepted by him to any other person. in case, the intending subscriber is not able to realize for the said shares, the price determined in accordance with clause 6.1, the difference in the price realized and the price determined and the sale expenses, if any, subject to a ceiling of 15 per cent of sale consideration shall be made good by the promoter to the intending subscriber. that being so, the appellant-company had a legitimate right to sell the shares to any other person and in case of loss, the respondent-company was liable to make good the same. 27. thus, it would be seen that if the entire material emanating from the record as discussed here-in-above is put together, then, the irresistible conclusion is, not only that the appellant-company has miserably failed to prove the definite, quantified debt and ascertainable amount but also did not substantiate the fact that the respondent-company is unable to pay the disputed amount.mehinder singh sullar, j.1. impugning the judgment dated 3-11-1995 passed by learned company judge, the infrastructure leasing & financial services limited-appellant (for brevity 'the appellant-company') has directed the present appeal, invoking the provisions of section 483 of the companies act, 1956 (hereinafter to be referred as 'the act').2. the matrix of the facts, culminating in the commencement, relevant for disposal of the present appeal and emanating from the record, is that originally, the appellant-company filed a petition for seeking winding up m/s. s.a. builders company-respondent (for short 'the respondent-company') under sections 433 and 434, read with section 439 of the act. the case set up by the appellant was that the respondent as a promoter of m/s. indian acrylics limited (for brevity 'ial') approached it for obtaining finance for setting up of ial. a tripartite agreement dated 1-8-1989 was entered into between the appellant-company, ial and r.k. garg and respondent-company, whereby the appellant agreed to purchase 10 lakh shares of ial. it was agreed that at any time after the expiry of 36 months but not later than 39 months unless mutually agreed upon, from the date of allotment to buy back the said shares at a price which was to be of the face value of the shares and at a return calculated at the face value of the shares as detailed in the agreement for every financial year as per its terms and conditions. in the event of not accepting either wholly or in part the offer for sale of shares within a period of 90 days from the receipt of offer, the appellant was free to sell such offered shares to the respondent and if not accepted by it to any other person. 10 lakh shares of ial were stated to have been allotted to the appellant on 16-4-1990.3. the case of appellant-company further proceeds that it offered the shares to the respondent within the time as envisaged in the agreement. but the respondent failed to purchase the shares and neglected to make payment of aggregate sum of rs. 1,68,52,000, being the value of the shares calculated in terms of the agreement despite repeated requests and written letter dated 26-7-1993. thus, the appellant-company claimed the said indicated amount equivalent to the speculative value of the shares in question.4. levelling a variety of allegations, in all, according to the appellant-company, as the respondent-company failed to pay a sum of rs. 1,68,52,000 in lieu of the value of the shares in question to it despite repeated demands and statutory notice dated 28-10-1993 for winding up of the company, which was duly received, therefore, it is liable to be wound up. on the basis of the aforesaid allegations, the appellant-company filed a petition for winding up of respondent-company, in the manner indicated here-in-above.5. the respondent-company contested the petition and filed its reply, inter alia, pleading certain preliminary objections of its maintainability and non-joinder of necessary parties. according to the respondent, neither even a penny was advanced nor any debt was due to it. the existence of debt liability was denied. it was claimed that in view of the agreement, the appellant-company subscribed to 10 lakh equity shares of m/s. ial and there is a provision of buy-back clause, whereby after expiry of indicated period, the appellant was to offer the said shares to the promoters of ial and in the event of the shares being not accepted by the said promoters, the appellant was free to sell the same to any other person. in the event of sale if the appellant got a lower price than the agreed amount, then the promoters were to make good deficiency in accordance with the terms of the agreement. the agreement did not contain a clause, under which, the promoters had no option but to buy-back the shares. according to the respondent, in fact the appellant neither offered the shares to the promoters within the stipulated period nor it is alleged that the appellant sold the same to any other person and the present winding up petition was filed without complying with the terms of the agreement, which is liable to be dismissed as such being wholly misconceived. it was also claimed by the respondent that the dispute arising under the agreement is referable to the arbitration and since the petition has been filed without taking recourse to the arbitration clause, so it is liable to be dismissed.6. on merits, the case set up by the respondent-company was that there was no express undertaking that the company was to buy-back the said shares. the shares were only to be offered to the promoters and in case they did not buy the shares, the appellant-company was free to sell the same to any other person. in fact, the shares were never offered to the promoters for buying back. in case of lower price by sale of shares, the promoters were to make good the difference of the amount as described in the agreement. however, it was denied that the respondent is commercially insolvent and unable to pay its debts. according to the respondent, during the year 1994, it earned a profit of more than five crores. the winding up petition was stated to be pressure tactics to force the respondent to buy 10 lakh shares of ial. it will not be out of place to mention here that the respondent has stoutly denied all other allegations contained in the petition and prayed for its dismissal.7. controverting the allegations contained in the reply and reiterating the contents of the petition, the appellant filed the replication and prayed for acceptance of winding up petition.8. after hearing the learned counsel for the parties and after going through the material on record, the learned company judge refused to entertain the petition and relegated the parties to the remedy of civil suit especially having regard to the fact that the appellant still continues to be a holder of the shares which were the subject matter of buy-back article under the agreement, vide impugned order dated 3-11-1995.9. the appellant-company did not feel satisfied with the impugned order and filed the present appeal. that is how, we are seized of the matter.10. at this stage, it may be added here that since the respondent-company m/s. s.a. builders was merged with m/s. s.a.b. industries, so, m/s. s.a.b. industries was impleaded as respondent-company during the pendency of this appeal vide order dated 16-7-1996 of this court.11. we have heard the learned counsel for the parties and have gone through the relevant material on record with their valuable help.12. as described above, the facts of the case are neither intricate nor much disputed. the bare perusal of the record would reveal that the appellant-company filed the original petition for winding up the respondent-company, invoking the provisions of section 433 of the act, which postulates that a company may be wound up, inter alia, on the grounds mentioned therein and as per clause (e), the company can be wound up if it is unable to pay its debts as defined under section 434. the procedure for winding up a company is provided under section 439 of chapter ii of the act. the co-joint reading of these provisions of the said sections of the act would reveal that the followings are the essential ingredients, which are conditions precedent and required to be proved for winding up the company, (i) not only that there must be an ascertainable and definite amount of debt which respondent-company failed to pay, (ii) but the respondent-company must be proved to be unable to pay the same i.e., incapacity to pay the amount, and (iii) an order under clause (e) is discretionary.13. such thus being the position of law and facts on the record, now the short and significant question, arises for determination in this appeal, is whether the respondent-company is liable to be wound up or not under the present set of circumstances.14. at the very outset, in this regard, learned counsel for the appellant-company contended with some amount of vehemence that it stands proved on record that although as per agreement (annexure p1), the respondent-company admitted the liability and agreed to personal guarantee of r.k. garg and corporate guarantee of m/s. steel strips alloys limited for the outstanding amount, still the respondent-company did not make the payment of the indicated amount due to it. it is, therefore, argued that since the respondent did not pay the amount to the appellant, so it is liable to be wound up. in support of his contention, he has placed reliance on the judgment of hon'ble supreme court of india in madhusudan gordhandas & co. v. madhu woollen industries (p.) ltd. : air 1971 sc 2600 and judgment of this court in vivek sarin v. state of haryana 1998 (2) rcr 179.15. in madhusudan gordhandas & co.'s case (supra), it was observed by hon'ble apex court that where 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. but at the same time, it was ruled that the principles on which the court acts for winding up has to be kept in focus, firstly that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends.16. sequelly, in vivek sarin's case (supra), the question before this court was whether the petitioners were liable to buy-back the shares in view of the agreement between the parties. while interpreting the clause of the agreement in that case, it was observed that since the promoter-directors have undertaken to buy-back the shares with a minimum interest of 18 per cent per annum compounded at quarterly rests, so the agreement requires the corporation to offer the shares to the company, at the price which is 'quoted' or as determined under sub-clause (i), whichever is higher. hence, the corporation shall be entitled to insist upon the price as determined under the agreement. it does not imply that the petitioners are absolved of their obligation under sub-clause (i) and on the peculiar facts and circumstances of that case, promoter-directors of the company were held liable to buy-back the shares at the price determined under the agreement.17. there is hardly any dispute about the law laid down in the aforesaid judgments, but the same would not come to the rescue of the appellant-company, as regards the present controversy is concerned. because, the appellant-company has not proved the ascertainable and determined specific amount of debt and it also did not substantiate that the respondent-company is unable to pay the debt as well which are conditions precedent for winding up a company.18. possibly, no one can dispute that it is well recognized principle of law that the relief under clause (e) of section 433 of the act is discretionary and winding up petition is not legitimate means of seeking to enforce the payment of the debt which is bona fidely disputed by the company. if there is no neglect to make the payment of definite and quantified debt, then, the deeming provision does not come into play.19. sequelly, the provisions of section 433 of the act are discretionary and can only be invoked if the respondent-company is unable to pay the ascertainable amount due. the court should grant the relief of winding up only if it is satisfied that existence of the company will cost immense prejudice to all concerned. as the order of winding up would amount to death penalty of juristic person/legal entity, therefore, it should be made in a rarest of the rare case. the discretion to wind up should not be exercised when the respondent-company is a running company. similarly, a debt must be determined or definite sum of money payable immediately or at the future date. a contingent or conditional liability is not a debt unless contingency or the condition had already happened. reliance in this regard can be placed upon the judgment of hon'ble supreme court in mediqup systems (p.) ltd. v. proximo. medical system gmbh [2005] 59 scl 255 and this court in ambala bus syndicate (p.) ltd. v. bala financiers (p.) ltd. [1986] 59 cornp. cas. 838.20. as is evident from the record that there was no definite and quantified debt and the appellant-company is claiming the speculative amount on the basis of agreement dated 1-8-1989 (annexure p1) between the ial, r.k. garg and s.a. builders limited co-jointly called as the promoters. the fact remains is that no actual money was advanced and only 10 lakh equity shares of rs. 10 each were given to the promoters subject to the terms and conditions contained therein. there is a buy-back of shares clause 6.1 and it is clearly stipulated in clause 6.5 in the agreement that in the event of the promoter not accepting either wholly or in part the offer made to him pursuant to clause 6.1 within the indicated period, the intending subscriber shall be free to sell such shares offered to the promoter but not accepted by him to any other person. in case, the intending subscriber is not able to realize for the said shares, the price determined in accordance with clause 6.1, the difference in the price realized and the price determined and the sale expenses, if any, subject to a ceiling of 15 per cent of sale consideration shall be made good by the promoter to the intending subscriber. that being so, the appellant-company had a legitimate right to sell the shares to any other person and in case of loss, the respondent-company was liable to make good the same.21. the matter did not rest there. it is not a matter of dispute that during the pendency of the appeal, the appellant-company had already sold 10 lakhs equity shares in question of ial and this court passed the following order on 27-8-2004, in this respect:company appeal no. 1 of 1996 was heard by us and orders were reserved. however, before the judgment could be dictated, this cm. has been filed in which it has been pointed out that the disputed 10 lakh equity shares of indian acrylics limited had already been sold by the appellant and, therefore, the appeal had been rendered infructuous. it has also been pointed out that the winding up petition had been filed against s.a. builders, which had subsequently merged with m/s. steel strips alloys limited, having its registered office at village rampur mazri, near daula kuan, district sirmour (hp). subsequently, the name of the merged company was changed to m/s. sab industries limited, having registered office at the same place. it is, therefore, sought to be contended that this court has no jurisdiction over the matter now.mr. arun nehra, learned counsel for the non-applicant/appellant does not dispute the factual position. however, he contests the legal effect thereof as alleged in the application.since, these facts have an important bearing on the outcome of the main appeal, it would be in the fitness of things that the main appeal be listed for rehearing. ordered accordingly.22. therefore, in this manner, the appeal was again listed for re-hearing. in compliance with the order of this court, nitin v. lokhande filed an affidavit on behalf of the appellant-company depicting that during the pendency of the appeal, original company m/s. s.a. builders has been merged with m/s. steel strips alloys limited. thereafter, name of m/s. steel strips alloys limited was changed to m/s. sab industries. it has also been specifically mentioned in it that in view of the provisions of clause 6.5 of the agreement (annexure p1), the appellant had sold the shares in question in the year 2002-03 for a sum of rs. 77,66,061. no doubt, in a subsequent affidavit dated 23-1-2009, it was claimed that the shares were sold for rs. 36,26,105 instead of rs. 77,66,061.23. be that as it may, the fact remains is that the appellant-company had already sold 10 lakhs equity shares of ial and the appellant itself is not sure about the amount owed to it by the respondent-company. such disputed amount cannot be determined in summary winding up proceedings.24. on the contrary, proceeding on this premise, the argument of learned counsel that the amount is not ascertainable as such and as the respondent-company has a clear and bona fide dispute regarding the disputed amount, therefore, appellant cannot invoke the jurisdiction to seek winding up of m/s. sab industries, has considerable force in this regard.25. this is not the end of the matter. in the wake of cm no. 20 of 2009, the respondent-company has produced on record the affidavit of its director h.k. singhal, inter alia, depicting as follows:that m/s sab industries limited is a going concern. it is a profit making and dividend/bonus paying concern. it has executed several multicrore infrastructure and other projects and has various similar projects in its kitty including a mega township projects of rs. 2170 crores in banur (punjab) and ssl highway towers - a housing and commercial complex of rs. 200 crores at derabassi (punjab). it is providing employment to approximately 2000 persons who are hired in its various projects directly or indirectly. in addition to this, the defendant is setting up a joint venture fertilizer manufacturing unit in iran at an estimated cost of rs. 4000 crore as major shareholder. it has constantly made profits during the last several years. it is a going concern and ought not to be wound up. the brief particulars of performance of the company as per the audited balance sheet for the last three years are as under: (rs. in crores)--------------------------------------------------------------particulars fy 2005-06 fy 2006-07 fy 2007-08--------------------------------------------------------------total assets 168.6 185.85 173.94--------------------------------------------------------------profit before tax 1.74 2.79 1.22--------------------------------------------------------------dividend/bonus 0.76 - 3.8to shareholder--------------------------------------------------------------these allegations have not been controverted by the appellant-company. it means, it stands established on record that m/s. s.a.b. industries is a going concern and has adequate financial capacity.26. there is another aspect of the matter, which can be view from a different angle. article 10 of the agreement posits that 'any dispute or question under agreement shall be referred to the arbitration of three arbitrators. the company and the promoter shall appoint one arbitrator. the intending subscriber shall appoint another arbitrator and the two arbitrators so appointed shall appoint the umpire and the cost of arbitration shall be borne equally by the parties and only courts in bombay shall have the jurisdiction to entertain any dispute arising under the agreement.' therefore, although the appellant-company was free to sell the shares in question to any person after a stipulated period, but in the event of any such dispute having arisen between the parties regarding settlement of price under buy-back article it was open to the appellant to refer the dispute to the arbitrators by invoking the arbitration clause for the purpose of determination of the exact amount. but instead of invoking the arbitration clause, the appellant-company straightway rushed to this court for winding up proceedings against respondent-company.27. thus, it would be seen that if the entire material emanating from the record as discussed here-in-above is put together, then, the irresistible conclusion is, not only that the appellant-company has miserably failed to prove the definite, quantified debt and ascertainable amount but also did not substantiate the fact that the respondent-company is unable to pay the disputed amount. on the other hand, it stands established on record that the claim of the appellant-company is based on speculative consideration and the respondent-company (m/s. s.a.b. industries), is running/going and profit earning company having assets in 100 crores. hence, the contrary arguments of learned counsel for the appellant-company 'stricto sensu' deserve to be and are hereby repelled in this context.28. in this view of the matter, it is held that no case for invoking the discretionary winding up provision against the respondent-company is made out under the present set of circumstances, particularly, when the appellant-company has effective alternative remedies to settle their dispute by way of arbitration or through the civil court. it is in this manner that the learned company judge has decided the matter and relegated the parties to the remedy of civil suit. therefore, no ground for interference in the impugned judgment of the learned company judge is made out in the obtaining circumstances of the case.29. no other point, worth consideration, has either been urged or pressed by the learned counsel for the parties.30. in the light of the aforesaid reasons, there is no merit in the instant appeal, which is hereby dismissed. however, taking into consideration the nature of litigation and peculiar facts and circumstances of the appeal, the parties are left to bear their own costs.