2000 (11) TMI 1130 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Company Court in disputes involving debtor-creditor relationships.
2. Validity of the interim order appointing a commissioner to verify the amount payable.
3. The necessity of producing original bills and supporting documents.
4. The appropriateness of using section 443(1)(c) of the Companies Act for interim orders.
5. The impact of existing civil suits on the jurisdiction of the Company Court.

Detailed Analysis:

1. Jurisdiction of the Company Court in disputes involving debtor-creditor relationships:
The appellant contended that the Company Court must first establish a creditor-debtor relationship and ascertain the amount due before invoking its jurisdiction. If the liability is disputed, the Company Court loses jurisdiction. The respondent argued that the Company Court can still proceed if the defense lacks bona fides and substance. The court found that the learned Single Judge acted within jurisdiction by appointing an auditor to verify the accounts, as the defense raised by the appellant was not bona fide.

2. Validity of the interim order appointing a commissioner to verify the amount payable:
The appellant argued that the learned Single Judge assumed the appellant had no defense and did not consider the explanations provided. The respondent countered that the Single Judge examined various documents before passing the order. The court upheld the interim order, noting that the Single Judge appointed an auditor to verify the accounts due to the exceptional circumstances, including confirmatory statements and handwritten notes from the appellant's director.

3. The necessity of producing original bills and supporting documents:
The appellant resisted payment, claiming the respondent failed to furnish original bills and supporting documents. The respondent was willing to produce these documents before the auditor. The court noted that the respondent's willingness to produce the documents negated the appellant's objection and supported the appointment of an auditor to verify the accounts.

4. The appropriateness of using section 443(1)(c) of the Companies Act for interim orders:
The appellant argued that section 443(1)(c) should only apply to orders determining the company's financial position and not to resolve civil disputes. The court disagreed, stating that section 443(1)(c) allows the court to pass any necessary interim order in the interest of justice. The court emphasized that the auditor's report would not be binding and the appellants could file objections, ensuring no injustice.

5. The impact of existing civil suits on the jurisdiction of the Company Court:
The appellant argued that the matter should be adjudicated in civil court due to an existing suit for rendition of accounts. The court rejected this argument, stating that the existence of a civil suit does not strip the Company Court of its jurisdiction. The court noted that the appellants had accepted a previous order for a detailed investigation by a chartered accountant, further supporting the current order's validity.

Conclusion:
The court found no merit in the appeals and dismissed them, supporting the learned Single Judge's interim order appointing an auditor to verify the accounts. The court emphasized that the Company Court acted within its jurisdiction and that the interim order was necessary to ascertain the correct financial position between the parties.