2014 (7) TMI 1115 - HC - Companies Law

Refusal to admit winding up petition - Carrier did not adhere to the terms and billed at a rate far above the settled rate - Rates were not approved - Non reply of statutory notice - Presumption of insolvency - Bona find dispute - Held that - On a combined reading of these three decisions - M/S Madhusudan Gordhandas and Co. 1971 (10) TMI 49 - SUPREME COURT OF INDIA , Harinagar Sugar Mills Co. Limited 1966 (3) TMI 19 - SUPREME Court , Bangasri Ice and cold Storage Limited 1962 (5) TMI 28 - CALCUTTA HIGH COURT , we would find, although the winding up process is not a normal alternative for debt collection, it is also used as a forum of equitable execution. The Division Bench of our Court in a recent decision in the case of Kotak Mahindra Bank Limited 2012 (11) TMI 827 - CALCUTTA, HIGH COURT , dealt with all the relevant cases on the issue as to what would mean as presumption of insolvency and bona fide dispute. We thus conclude, an unsecured creditor would maintain a winding up proceeding with a just claim upon service of statutory notice of demand that either remains unreplied or is dealt with without any plausible defence. For the company, once it faces a winding up proceeding followed by a statutory notice of demand it has to rebut the presumption of insolvency that would arise on service of the statutory notice. The presumption could only be rebutted on raising a bona fide dispute. Merely raising a dispute having no support from reality, would be moonshine, sham, colourable and would not be regarded as a good defence to resist a winding up proceeding. In this regard, we would be failing in our duty if we do not mention and rely upon a decision in the case of M/s Mechalec Engineers and Manufacturers 1976 (11) TMI 194 - SUPREME COURT which quoted the celebrated decision of this Court in the case of Kiranmoyee Dassi, five criteria stipulated therein, to deal with summary proceeding that would also be available for consideration by a Company Judge dealing with a winding up proceeding, would be apt in the present case. On the other way, we find, as many as four letters would remain unreplied. It is not a fact, the company was silent. The letters would show, there had been at least two meetings on the issue yet, the company did not confront the creditor by replying to their letters. Those four letters were followed by the statutory notice of demand that would also remain unreplied. Mr. Abhrajit Mitra, Learned Senior Counsel could not give any plausible explanation why the letters were not dealt with. This would definitely lead to statutory presumption of insolvency. To rebut such statutory presumption, the company would have to raise a bone fide dispute that they failed to raise prior to the initiation of the winding up proceeding by replying to the letters as referred to above. They came out with their defence for the first time in the affidavit in opposition. The defence is not clear to us. It is somewhat confusing. At the same time, we could not find a definite stand from the appellant to support their claim being just and proper and strictly as per the approved rate. We can not overlook the circular that the appellant annexed in their winding up proceeding mentioning about D.P. Jajodia settling the rate. Four emails referred to by Mr. Mookherjee were for the period of February 2013, March 2013 and May 2013. The first two e-mails would relate to a period that the appellant did not make an issue in the winding up proceeding as we find from the Statement of Account. The next two e-mails could not be used as a support to the entire claim. Moreover, we do not find any co-relation at least, not shown to us to dispel the doubt in our mind. Hence, considering the state of fact that we discuss herein before, we can not convincingly come to a conclusion as to the exact amount of debt. At the same time, we cannot leave the respondent scot-free as their defence is doubtful. - Decided that the company admitted ₹ 1,84 crores. We permit the company to pay the same along with interest in case of default in payment within specified period.For the balance claim the parties are relegated the suit subject to the respondent disposing the balance sum with the Registrar Original Side, by September 15, 2014. In case the above sum is deposited, the Registrar would invest the said sum in any nationalized Bank of his choice and keep the same renewed till the disposal of the suit. - In default of deposit, the balance sum would immediately become due and payable and the appellant would proceed with the winding up proceeding. - In default of filing any suit by the appellant within six weeks from the date of communication of such deposit, the respondent would be entitled to refund of the same.

Summary

Issues Involved:
1. Refusal to admit a winding-up petition.
2. Dispute over freight charges and adherence to agreed rates.
3. Statutory presumption of insolvency under Section 434 of the Companies Act, 1956.
4. Bona fide dispute raised by the respondent.
5. Legal precedents on winding-up petitions and debt collection.

Detailed Analysis:

1. Refusal to Admit a Winding-Up Petition:
The appeal concerns an order that refused to admit a winding-up petition filed by the appellant against the respondent. The appellant, a carrier of the respondent's products, claimed outstanding freight charges. Despite multiple demand notices, the respondent did not reply, leading to the filing of the winding-up petition.

2. Dispute Over Freight Charges and Adherence to Agreed Rates:
The appellant argued that they were entitled to freight charges for goods carried over several years. However, the respondent contended that the appellant billed at rates higher than those fixed by Mr. D.P. Jajodia, as per their agreement. The appellant provided a statement of accounts showing an opening debit balance of Rs. 6.53 crores and a closing balance of Rs. 6.37 crores. The respondent disputed this, claiming they had paid bills verified at the agreed rates.

3. Statutory Presumption of Insolvency Under Section 434 of the Companies Act, 1956:
The appellant issued a statutory notice of demand, which the respondent did not reply to, leading to a statutory presumption of insolvency. The appellant argued that the respondent's failure to respond to the statutory notice should lead to the admission of the winding-up petition.

4. Bona Fide Dispute Raised by the Respondent:
The respondent argued that there was a bona fide dispute regarding the rates and amounts claimed by the appellant. They contended that the winding-up court was not the proper forum for resolving these disputes, which required thorough reconciliation over the entire period of transactions.

5. Legal Precedents on Winding-Up Petitions and Debt Collection:
The appellant relied on several legal precedents to argue that winding-up proceedings could serve as an "equitable mode of execution" for debt collection. The court discussed the discretion of the company judge in winding-up proceedings, emphasizing that a winding-up petition could be admitted if the debt was just and had no plausible defense.

Judgment Analysis:

Refusal to Admit the Winding-Up Petition:
The court noted that the learned single judge had observed that the dispute was limited to the fixation of rates and had directed the parties to reconcile their accounts. However, the reconciliation failed, and the respondent admitted to owing Rs. 1.84 crores, which they offered to pay in installments. The appellant did not agree to this.

Statutory Presumption of Insolvency:
The court emphasized that the respondent's failure to reply to the statutory notice of demand led to a statutory presumption of insolvency. The respondent needed to rebut this presumption by raising a bona fide dispute, which they failed to do before the initiation of the winding-up proceeding.

Bona Fide Dispute:
The court found the respondent's defense confusing and insufficient to rebut the statutory presumption of insolvency. The respondent did not provide a clear explanation for the difference between the claimed amount and the admitted amount of Rs. 1.84 crores.

Legal Precedents:
The court referred to various legal precedents, including decisions from the Supreme Court and the Calcutta High Court, to support the view that a winding-up petition could be admitted if the company failed to raise a bona fide dispute and the debt was just and proper.

Conclusion:
The appeal was allowed, and the judgment and order of the learned single judge were set aside. The court directed the respondent to pay Rs. 1.84 crores in installments, with interest at 9% per annum on the reducing balance. In case of default, the winding-up petition would stand admitted. For the balance claim, the parties were relegated to a suit, with the respondent required to deposit the balance sum with the Registrar Original Side by September 15, 2014. The appeal was disposed of without any order as to costs.