2014 (4) TMI 1199 - HC - Companies Law

Company when deemed unable to pay its debts - Entitlement to interest on the sums paid by the Respondent which have been utilized by the Appellant ever since the year 2007 - period of limitation - Held that - We do not find any merit in the first contention that the Company Petition is barred by limitation for the reason that it is an admitted fact that the Appellant company itself issued a letter dated 09.01.2012 demanding the balance payment from the Respondent. In the said letter, the Appellant company stated that the Respondent can take possession of the flat and get their title deeds registered very soon. The money taken by the Appellant company from the Respondent as well as from other investors had in fact been siphoned and diverted by the Directors and other persons responsible, for the day-to-day management of the Appellant company. As in the reply filed by the Appellant company to the petition, the Appellant company has categorically admitted that the letter dated 09.01.2012 was sent to the Respondent informing her to make balance payment and take possession of the flat. In such circumstances, we do not see as to how the present petition is barred by limitation. On the aspect of interest also, we do not find any merit in the contention of the Appellant that the Respondent is not entitled to interest on the sums paid by the Respondent which have been utilized by the Appellant ever since the year 2007. As noted by the learned Company Judge, the Respondent had itself demanded interest at the rate of 20% in the event the first installment of ₹ 2,25,000/- was not paid within a period of 30 days from the date of the demand.We accordingly affirm the findings of the learned Company Judge on the aspect of interest payable to the Respondent and reject the contention of the Appellant that the question of interest should be left to be determined by a Civil Court. Amount of interest awarded by the learned Company Judge at the rate of 12% per annum also appears to us to be reasonable and proper

Summary

Issues Involved:
1. Barred by Limitation
2. Interest Payable

Issue-wise Detailed Analysis:

Barred by Limitation:
The appellant contended that the subject matter of the Company Petition was barred by limitation. However, the court found no merit in this contention. It was admitted that the appellant company issued a letter dated 09.01.2012 demanding the balance payment from the respondent, indicating that the respondent could take possession of the flat and get their title deeds registered soon. The respondent alleged that the appellant company attempted to create an impression that the flats were constructed and the project was completed, which was contrary to the fact. The money taken from the respondent and other investors was siphoned and diverted by the directors and other responsible persons of the appellant company. Consequently, the respondent issued a legal notice dated 01.10.2012 under Sections 433 and 434 of the Companies Act, 1956, and upon failure of the appellant company to pay the due amount, the respondent instituted the petition for winding up of the appellant company.

The court noted that the appellant company, in its reply, admitted sending the letter dated 09.01.2012 to the respondent. Therefore, the petition was not barred by limitation. The court affirmed the findings of the learned Company Judge, stating, "The contention that the claim of the petitioner, which is subject matter of the present petition, is barred by limitation is erroneous and is liable to be rejected."

Interest Payable:
The appellant contended that no interest was payable to the respondent, much less at the rate of 12% per annum. The court found no merit in this contention, noting that the respondent had demanded interest at the rate of 20% if the first installment of Rs. 2,25,000/- was not paid within 30 days from the date of demand. The court referenced the case of Devendra Kumar Jain v. Polar Forgings & Tools Ltd., where it was held that the creditor need not initiate separate litigation for recovery of interest, and the interest amount can be determined by the Company Judge in winding up proceedings.

Further, in the case of Vijay Industries vs. Natl Technologies Limited, the Supreme Court observed that failure to pay agreed or statutory interest would come within the purview of "debt" under Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956. The court also referenced Bhajan Singh Samra v. Wimpy International Ltd., where it was held that the creditor need not be relegated to the remedy of a civil suit for interest, as interest is payable by way of restitution.

The court affirmed the findings of the learned Company Judge on the aspect of interest, stating, "The amount of interest awarded by the learned Company Judge at the rate of 12% per annum also appears to us to be reasonable and proper and we see no reason to interfere therewith."

Conclusion:
The court dismissed the appeal, finding no merit in the appellant's contentions regarding limitation and interest. The learned Company Judge's order directing the appellant to pay Rs. 3,75,000/- along with 12% interest per annum was upheld, affirming that the respondent was entitled to the interest as restitution.