2001 (12) TMI 804 - HC - Companies Law

Summary

Issues Involved:
1. Entitlement to a direction under section 446(2) of the Companies Act, 1956.
2. Plea of set-off or adjustment of the admitted amount due.
3. Restriction on repayment towards unsecured creditors imposed by a financing bank.
4. Permission to pay the amount in instalments.
5. Relief to be granted.

Detailed Analysis:

1. Entitlement to a Direction Under Section 446(2) of the Companies Act, 1956:
The applicant-company (in liquidation) claimed that the second respondent owed Rs. 81,34,336 as on 31-12-2000, based on the books of account. The second respondent had admitted liability through letters dated 15-5-1999 and 24-3-1999, confirming the balance of Rs. 78,24,000 as on 31-3-1999. The second respondent did not deny borrowing the loan or the statement of accounts. The court found the letters sufficient to sustain the claim, and the second respondent's counter also admitted the liability. Thus, the applicant was entitled to a direction under section 446(2) of the Companies Act, 1956.

2. Plea of Set-off or Adjustment of the Admitted Amount Due:
The second respondent claimed a right to set off the amount payable to the applicant against amounts due from the applicant to Sical. The court noted that Sical and the second respondent are independent companies, and the transactions were not mutual dealings. Set-off is permissible only for mutual dealings between the same parties in the same right. The court cited precedents, including Union of India v. India Fisheries (P.) Ltd. and Official Liquidator, High Court of Karnataka v. Smt. V. Lakshmikutty, to support this view. The plea of set-off was thus rejected.

3. Restriction on Repayment Towards Unsecured Creditors Imposed by a Financing Bank:
The second respondent argued that ICICI Ltd., as a financing bank, imposed restrictions on repaying unsecured loans, preventing repayment to the applicant. The court held that such internal arrangements do not affect the applicant's right to claim the amount due. No statutory provision was shown to bar the discharge of the debt. The second respondent was obliged to pay the entire amount, and the restriction by ICICI Ltd. did not exonerate it from liability.

4. Permission to Pay the Amount in Instalments:
The second respondent sought permission to pay the amount in instalments, citing financial hardship and potential negative consequences for its business and employees. The court, while considering the plea, decided that granting instalments would be justified to avoid unintended results. The second respondent was allowed to pay the amount in three equal bi-monthly instalments, with the condition that failure to pay any instalment would make the entire amount due immediately.

5. Relief Granted:
The court allowed both applications with costs of Rs. 3,000 against the second respondent. The second respondent was directed to pay Rs. 81,34,336 with interest at 9% per annum from 31-12-2001, in three equal bi-monthly instalments. Failure to pay any instalment would result in the entire amount becoming due for recovery by the applicant.

Conclusion:
The judgment comprehensively addressed each issue, confirming the applicant's entitlement to the claimed amount, rejecting the plea of set-off, dismissing the impact of the bank's restrictions, and permitting instalment payments to mitigate financial hardship for the second respondent.