Smt. Mridula Gupta Vs. Shree Datta Stone Crushers P. Ltd. and ors. - Court Judgment

Shiv Kumar Sharma, J.

1. The petitioner has approached this Court with the following prayer:

(a) The respondent-company M/s. Shree Datta Stone Crusher Pvt. Ltd., Jaipur, be directed to be wound up under the direction of this hon'ble court under the provisions of the Companies Act (1 of 1956) and the official liquidator, attached to the Rajasthan High Court, Jaipur, be appointed liquidator of the respondent-company to take charge of all the assets, properties and records of the respondent-company with all powers under Section 457 of the Companies Act (1 of 1956) to be exercised under Section 458 of the said Act without the section and intervention of this hon'ble court save and except in the case of sale of the immovable properties of the respondent-company.

(b) the respondent-company be directed to pay to the petitioner the costs of the petition.

2. Upon failure to repay the loan and interest, provided by the petitioner to respondent-company, the petitioner gave a statutory notice to the respondent-company under sections 433 and 434 of the Companies Act, 1956 (for short 'the Act'), demanding loan amount with interest but the respondent-company failed to make payment within statutory period, as a result of which the petitioner was led to file the instant company petition for winding up under sections 433 and 434 of the Act.

3. It is averred in the petition that the respondent-company is a private limited company incorporated under the provisions of the Act having its office at H-1-E, Ashirwad Complex, 1st floor, Transport Nagar, Jaipur. Respondents Nos. 2 and 3 are its directors. The respondent-company was established to carry on the business of every matters, stone merchant, dealers, architects, builders, contractors and dealers in stone of all types and varieties and lime, brick and other building materials.

4. The respondent-company contacted the petitioner and requested to advance them a loan of Rs. 10 lakhs for their business purposes. The respondents assured the petitioner to pay the interest of the amount regularly bimonthly and the principal amount will be paid as and when demanded by the petitioner. The petitioner advanced the loan Rs. 5 lakhs through cheque No. 553510 dated January 25, 1996, UCO Bank, Johari Bajar, Jaipur. The interest at 1.70 per cent. per annum for first two months and 18 per cent. per annum was payable. The cheque was encashed by respondent-company and the amount was used by them. The interest was regularly paid by the company till August 31, 1997, and it also deducted tax at source under the provisions of the Income-tax Act, 1961. The respondent-company also issued TDS certificates in Form No. 16A.

5. The respondent-company defaulted in paying the interest from September, 1997, and since then it has not paid any interest on the loan amount, therefore the petitioner sent letters dated July 20, 1999, and September 3, 1999. Thereafter a notice under sections 433 and 434 of the Act on November 30, 1999, and another notice on December 31, 1999.

6. The notices of the petitioner were replied by the respondent-company vide letter dated February 3, 2000, mentioning that there was no recoverable debt. It was also mentioned that there should be any document for recoverable debt. The petitioner sent reply dated March 3, 2000, along with photo copy of Form No. 16A furnished by the respondent-company and requested to discharge the liability of payment of the principal amount along with the interest. The petitioner averred that a sum of Rs. 10 lakhs along with interest of Rs. 5,46,842 till April 30, 2000, along with further interest till date of actual payment is due. The respondent-company has raised various contentions against the winding up petition, which are as under:

(i) Respondents Nos. 2 and 3 directors of company have been impleaded in the winding up petition which amounts to misjoinder of parties. They seems to have been impleaded to take support in favour of the petitioner. Therefore the petition is liable to be dismissed.

(ii) Respondent No. 2 has unduly helped the petitioner in the transaction and has also squandered very valuable assets of the company and since 1999 he is absconding. It is also doubtful as to how respondent No. 2 was served on the address of Jawahar Nagar, Jaipur.

(iii) The respondent-company is an artificial person and the petitioner has not disclosed as to who contacted him. No documentary proof has been placed by the petitioner to make the demand of loan and terms and conditions of the loan.

(iv) The petitioner has not filed any document or resolution of company authorising any body to take loan from the petitioner or anybody else. As such the transaction is not binding on the company and it is wholly null, void and without jurisdiction.

(v) It is not mentioned as to which the respondent assured the petitioner about payment of interest and what were the terms about interest. In the natural course of business any such transaction, more particularly with a company, cannot be without document and without backed by authority of the company through a resolution of the board of directors or by general meeting of the company.

(vi) The alleged extract of account of books of the petitioner is not admissible in evidence nor reliable. Similarly the statement of account of bank is not reliable as the same is not verified as per the Bankers' Books Evidence Act.

(vii) No document has been placed regarding payment of interest till August, 1997, or any period. The alleged certificate of deduction of tax at source is also not reliable.

(viii) The petition is filed with oblique motive to pressurize the respondent-company to make the payment of the amount as alleged to be due.

(ix) Loan was allegedly given on January 25, 1996, and notice was given on November 30, 1999, which is much beyond the period of limitation and therefore even if there was any transaction it became completely time barred and not recoverable at all.

(x) The respondent-company is a running concern yielding handsome profits and having sound financial position. It is denied that the respondent-company is unable to pay its debts or that for any reason it is just and proper to wind up the company.

7. The petitioner filed rejoinder to the reply reiterating the facts stated in winding up petition.

8. I have given anxious consideration to the rival submissions.

9. In Mediqup Systems Pvt. Ltd. v. Proxima Medical System GmbH : AIR2005SC4175 , the apex court indicated as under (para. 18) (page 481):

This court in a catena of decisions held 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 utilised merely as a means for realising debts due from a company.

10. In Madhusudan Gordhandas and Co. v. Madhu Woollen Industries : [1972]2SCR201 , their Lordships of the Supreme Court had occasion to consider the circumstances under which the court is justified in ordering winding up of the company. It was indicated in paras. 20 and 21 thus (page 131):

20. Two rules are well-settled. First, if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The court had dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. (see London and Paris Banking Corporation, In re [1874] LR 19 EQ 444). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been properly was not allowed. (see Re. Brighton Club and Norfolk Hotel Co. Ltd. [1865] 35 Beav 204).

21. 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. (see Re. A Company [1894] 2 S. J. 369 (Ch D)). 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. (see Re. Tweeds Garages Ltd. [1962] 32 Comp Cas 795 : [1962] 1 Ch 406). The principles on which the court acts are first 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.

11. The principles on which court should act in disposing winding up petition may be deduced thus:

(i) If the debt is not disputed on some substantial ground the court may make the order.

(ii) If the debt is bona fide disputed, there cannot be 'neglect to pay' within the meaning of Section 433(1)(a) of the Act and petition for winding up is not maintainable.

(iii) Dispute with regard to payment of interest is not a bona fide dispute.

(iv) The defence of the respondent-company should be in good faith, one of substance and likely to succeed in point of law.

12. Bearing these principles in mind if I examine the facts of this case, I find that this is a case of bona fide disputed debt. Even from the petition for winding up it is evident that the petitioner failed to place on record the terms and conditions of the alleged debt and respondent No. 2, who has unduly helped the petitioner, is absconding since 1999. Even the petitioner failed to place on record the valid documents regarding alleged payment of interest till September, 1997. In the facts and circumstances of the case it cannot be held that the respondent-company neglected to pay the debt within the meaning of Section 433(1)(a) of the Act. The winding up petition is not a legitimate means of seeking to enforce payment of debt which is bona fidely disputed by the company.

13. For these reasons, I find no merit in the petition and same stands accordingly dismissed without any order as to costs.