2013 (9) TMI 700 - HC - Companies Law

Winding up - Inability to pay debts - Held that - Whether the statutory notice dated 17.01.2011 - Annexure-E issued by petitioner is contrary to Section 434(1)(a) of the Companies Act, 1956 - Held that - The certificate of incorporation of respondent-company as per Extract produced at Annexure R-1 along with Statement of objection would indicate that registered office of the Respondent-Company is located at No.41/1, Uipar Mansion, R.V. Road, Basavanagudi, Bangalore and not at the address shown in the statutory notice. Hence, there is non-compliance of Mandatory requirement of Sec. 434(1)(a) of Companies Act - Decided against petitioner. Whether the petitioner has made out a case for winding up of the respondent-company under Section 434(e) and 439 of the Companies Act, 1956 - Held that - petitioner had participated, negotiated and mediated for the parties to enter into joint development agreement. In fact, petitioners themselves agree in the present petition that they used their long standing expertise in the real estate field and their good offices to persuade M/s. Era Land Marks India Limited enter into a joint development with the respondent-company which ultimately resulted in Joint-Development Agreement dated 05.07.2008 coming into existence on account of the negotiation and discussion made by the petitioner. It is because of this precise reason the agreement dated 26.04.2008 between respondent and petitioner came into existence whereunder respondent agreed to pay to the petitioners a professional fee of Rs. 2.50 crores. The said contract is a contemporaneous contract entered into between respondent and petitioner. In other words, the performance of obligations under the said agreement was dependent on the performance of the obligations by the parties to the Joint-Development agreement dated 05.07.2008 - conditions agreed to between the parties would indicate that there was substantial modification amongst other conditions to the original agreement dated 05.07.2008. This would also indicate that claim of the petitioner which was based on the Joint- Development Agreement dated 05.07.2008 got eclipsed by virtue of the Addendum agreement dated 28.10.2009 and thereby benefits which would have accrued to the respondent got substantially reduced. It is because of these subsequent developments, the respondent has attempted to stave off the claim made by petitioner contending that debt is not admitted and such a plea cannot be brushed aside as a false defence. It is to be further noticed that respondent - company and the developer are now at logger heads and they have ignited the arbitration proceedings and same is pending before the Arbitral Tribunal as admitted to by the learned Advocates appearing for the parties. In this background, it cannot be held or construed that the defence set up by the respondent- company to be either moon shine or a frivolous one to discard it or to construe the said defence raised by the respondent without any basis. In that view of the matter, I am of the considered view that the dispute raised by the respondent to deny the claim of petitioner is bona fide and one of substance and such dispute cannot be construed as frivolous or brushed aside as a cloak to hide its inability to pay the debt and prima facie respondent has established that plea putforward by way of defence in the statement of objections is a bona fide plea - Decided against petitioner.

Issues Involved:
1. Compliance with Section 434(1)(a) of the Companies Act, 1956.
2. Justification for winding up the respondent company under Section 434(e) and 439 of the Companies Act, 1956.
3. Determination of whether the defense set up by the respondent company constitutes a bona fide dispute.

Issue-wise Detailed Analysis:

1. Compliance with Section 434(1)(a) of the Companies Act, 1956:

The petitioner contended that the statutory notice dated 17.01.2011 was sent to the registered office of the respondent company. However, the respondent argued that the notice was not sent to the correct registered office address as per the records of the Ministry of Corporate Affairs, which was at 41/1, UIPAR Mansions, R.V. Road, Basavanagudi, Bangalore, and not the address mentioned in the notice. The court referred to the Division Bench decision in Sundur Manganese and Iron Ores Ltd. v. Manganese Ore (India) Ltd., which emphasized strict compliance with the statutory requirement of serving notice at the registered office. The court concluded that there was non-compliance with Section 434(1)(a) of the Companies Act, 1956, as the notice was not served at the correct registered office address. Consequently, this point was decided against the petitioner.

2. Justification for Winding Up the Respondent Company:

The petitioner sought the winding up of the respondent company on the grounds of its inability to pay a debt of Rs. 1.43 Crores under an agreement dated 26.04.2008. The respondent countered this by arguing that there was a bona fide dispute regarding the payment, and the joint development agreement dated 05.07.2008 had encountered issues, leading to an addendum agreement on 28.10.2009, which modified the original terms. The court noted that the respondent's defense was based on substantial grounds, including the reduction of the undivided share, security deposit, and HUDCO loan payment conditions. The court held that the defense raised by the respondent was bona fide and substantial, and not a mere pretext to avoid payment. Therefore, the petition for winding up was not justified, and this point was decided in favor of the respondent.

3. Determination of Bona Fide Dispute:

The court examined whether the defense set up by the respondent constituted a bona fide dispute. It referred to established legal principles, including the need for the defense to be in good faith, substantial, and likely to succeed in law. The court found that the respondent's defense was based on significant modifications to the original agreement and ongoing arbitration proceedings with the developer, M/s. Era Land Marks India Limited. The court concluded that the dispute was bona fide and substantial, and not a frivolous or baseless defense. Therefore, this point was also decided in favor of the respondent.

Conclusion:

The court dismissed the company petition, holding that the statutory notice was not in compliance with Section 434(1)(a) of the Companies Act, 1956, and the respondent had raised a bona fide and substantial dispute regarding the debt. The petitioner was advised to pursue remedies after the conclusion of the arbitration proceedings between the respondent and the developer. The parties were directed to bear their respective costs.

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