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2005 (3) TMI 467 - SC - Companies LawWhether the Division Bench of the High Court at Calcutta justified in dismissing the appellant s appeal summarily holding, inter alia, that the appellant was not entitled to stay of operation of the order passed by the company Judge under appeal or, in other words, whether dismissal of connecting stay petition could be justified reason alone for dismissing appeal summarily which was based on cogent grounds? Whether the appellant-company can be said to be indebted to the petitioning creditor/respondent in respect of US 11,000 equivalent to INR 4,69,680 when the said sum was not remitted by the said petitioning creditor namely, Proxima Medical Systems, GmbH? Whether the winding up proceedings under the relevant provisions of the Companies Act is maintainable against the company by the said petitioning creditor/respondent when it is evident from the document issued by the Deutsche Bank (remitter s banker) and Foreign Inland Remittance Certificate (issued by Company s banker) that US 11,000 was remitted by another company namely, Pameda Medizinische System, GmbH and not by the petitioning creditor? Whether the Division Bench and as well as the Company Judge, in exercise of their jurisdiction under the Companies Act erred in directing the company to deposit Rs. 4,69,480 to secure the alleged claim of the petitioning creditor when the petitioning creditor was not the remitter of the said amount and such was seriously disputed before the Company Judge and the Company Judge did not adjudicate the disputes at controversy and directed the petitioning creditor to file suit in respect thereof? Whether the Division Bench in passing the order under appeal was justified to direct the company to deposit the balance amount when an earlier Division Bench by an interim order reduced the quantum of deposit from Rs. 4,69,480 as directed by the Company Judge to Rs. 2 lakhs in compliance whereof the company had duly deposited Rs. 2 lakhs on 11-11-2002 and the petitioning creditor failed to present any suit within three months thereof as per direction of the Company Judge? Whether the Division Bench is justified in passing the order under appeal by dismissing the stay application, on extraneous considerations, when an earlier Division Bench by an interim order granted stay of advertisement subject to appellant s depositing Rs. 2 lakhs which was duly deposited by the Company to the satisfaction of the Court? Held that - Appeal allowed. The appellant will be entitled for refund of the sum of Rs. 2 lakhs deposited by them in compliance of the direction given by the High Court when the matter was pending before it. The High Court is directed to refund the same to the appellant on production of a certified copy of this judgment. Thus there is no prima facie dispute as to the debt. No justification whatsoever for admitting the winding-up petition. Accordingly, the judgment passed by the learned Single Judge and of the Division Bench are set aside.
Issues Involved:
1. Justification of the Division Bench of the High Court at Calcutta in dismissing the appellant's appeal summarily. 2. Indebtedness of the appellant-company to the petitioning creditor/respondent in respect of US $ 11,000. 3. Maintainability of the winding up proceedings under the Companies Act against the company by the petitioning creditor/respondent. 4. Jurisdiction of the Company Judge and Division Bench in directing the company to deposit Rs. 4,69,480. 5. Justification of the Division Bench's order directing the company to deposit the balance amount. 6. Justification of the Division Bench in dismissing the stay application on extraneous considerations. Issue-wise Detailed Analysis: 1. Justification of the Division Bench of the High Court at Calcutta in dismissing the appellant's appeal summarily: The Division Bench dismissed the appellant's appeal summarily, holding that the appellant was not entitled to stay of the operation of the order passed by the Company Judge. The Supreme Court found that the High Court failed to appreciate that there was a bona fide dispute concerning US $ 11,000. The Court noted that the learned Single Judge erred in not holding that the dispute concerning US $ 11,000 was bona fide, despite recognizing the dispute concerning US $ 5,000 as such. The Supreme Court concluded that the Division Bench was not justified in dismissing the appeal summarily. 2. Indebtedness of the appellant-company to the petitioning creditor/respondent in respect of US $ 11,000: The Supreme Court observed that the remitter of the sum of US $ 11,000 was M/s. Pameda Medizinische Systems and not the petitioning creditor. The Court noted that the Reserve Bank of India had initially withheld permission due to the discrepancy in the name of the remitter. The Court held that the appellant had made out a prima facie case for not remitting the Indian amount equivalent of US $ 11,000 as the petitioning creditor was not the remitter and could not have any claim in respect of US $ 11,000. Thus, the appellant-company could not be said to be indebted to the petitioning creditor/respondent in respect of US $ 11,000. 3. Maintainability of the winding up proceedings under the Companies Act against the company by the petitioning creditor/respondent: The Supreme Court reiterated that an order under section 433(e) of the Companies Act is discretionary and that there must be a debt due and the company must be unable to pay the same. The Court emphasized that the machinery for winding up should not be utilized merely as a means for realizing debts due from a company. The Court held that the respondent was not a creditor and the appellant was not a debtor insofar as US $ 11,000 was concerned. Therefore, the winding up proceedings were not maintainable against the company by the petitioning creditor/respondent. 4. Jurisdiction of the Company Judge and Division Bench in directing the company to deposit Rs. 4,69,480: The Supreme Court found that the Company Court had no jurisdiction to direct the company to deposit the amount payable to a party other than the petitioning creditor. The Court noted that the learned Judges themselves had doubts regarding the lawful entitlement of the petitioning creditor and erred in directing the appellant-company to deposit the amount. The Court concluded that there was no clear-cut finding by the learned Single Judge that a debt was prima facie due and payable by the Company to the petitioning creditor. 5. Justification of the Division Bench's order directing the company to deposit the balance amount: The Supreme Court observed that the earlier Division Bench had reduced the quantum of deposit from Rs. 4,69,480 to Rs. 2 lakhs, which was duly deposited by the company. The petitioning creditor failed to present any suit within three months thereof as per the direction of the Company Judge. The Court held that the Division Bench was not justified in directing the company to deposit the balance amount when the earlier Division Bench had already reduced the deposit amount and the company had complied with it. 6. Justification of the Division Bench in dismissing the stay application on extraneous considerations: The Supreme Court found that the Division Bench dismissed the stay application on extraneous considerations, despite the appellant depositing Rs. 2 lakhs as directed by the earlier Division Bench. The Court held that the Division Bench was not justified in dismissing the stay application when the appellant had complied with the interim order and the petitioning creditor had failed to present any suit within the stipulated time. Conclusion: The Supreme Court allowed the appeal, set aside the judgments of the learned Single Judge and the Division Bench, and directed the High Court to refund the sum of Rs. 2 lakhs deposited by the appellant. The Court emphasized that there was no prima facie dispute as to the debt and found no justification for admitting the winding-up petition.
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