2017 (9) TMI 1744 - HC - Companies Law

Winding up of the respondent company u/s 433(e) and 434 of the Companies Act - Held that - This is a case where the respondent has failed and neglected to pay the amount which is, prima facie, due to the petitioner. It was made clear during the submissions that the petitioners have not sought winding up on the ground of deemed commercial insolvency but have restricted their case to failure and neglect to pay amount which is not in dispute that having been said. It is stated across the bar that the petitioner have also filed a Commercial Summary Suit. It will be open to the petitioner to pursue the said claim. The facts of the case before us is of the view that the respondent should be put to terms and therefore pass the following order - (i) The respondent shall deposit a sum of ₹ 1,45,79,032/- Prothonotary and Senior Master of this Court within a period of 8 weeks from today. (ii) In the event deposit is made and if a suit is filed by the Petitioner, the amounts so deposited will be transferred to the suit account and thereafter the company petition will stand dismissed. (iii) If the amount is not so deposited, the petition shall revive and shall stand admitted, returnable within six weeks from the date of default and be advertised in two local newspapers i.e. Free Press Journal (in English) and Navshakti (in Marathi) and in the Maharashtra Government Gazette. Delay in publication of the advertisement in the Maharashtra Government Gazette shall not invalidate the advertisement and shall not constitute non-compliance of this direction or of the Company (Court) Rules, 1959. (iv) The Petitioner shall deposit an amount of ₹ 10,000/- with the Prothonotary and Senior Master of this Court towards publication charges, within two weeks from the date of default, with intimation to the Company Registrar failing which the Petition shall stand dismissed for non prosecution. (v) The learned Counsel for the Respondent Company waives service of the Petition under Rule 28 of the Companies Court Rules, 1959.

Summary

Issues Involved:
1. Failure and neglect to pay a sum of ?1,45,79,032/-
2. Discrepancies in contract notes and client code errors
3. Suspension of trading on the NSEL
4. Bonafide nature of transactions
5. Payment obligations of the respondent broker

Detailed Analysis:

1. Failure and Neglect to Pay a Sum of ?1,45,79,032/-:
The petitioner sought the winding up of the respondent company under Section 433(e) and 434 of the Companies Act due to the respondent's failure and neglect to pay ?1,45,79,032/-. This amount arose from a transaction involving the purchase of White Refined Sugar-M Grade on the National Stock Exchange Limited (NSEL). The petitioner had been trading in commodities through the respondent, who acted as a broker. The transactions in question were executed on 15th July 2013, with the petitioner instructing the respondent to purchase and then sell the same quantity of sugar. The petitioner made a payment of ?1,45,79,032/- towards the purchase transaction on 17th July 2013.

2. Discrepancies in Contract Notes and Client Code Errors:
The petitioner received digital contract notes for the transactions, which were later found to have discrepancies when compared to the hard copies received on 19th July 2013. The hard copies did not contain references to the purchase or sale transaction in sugar. The petitioner discovered that the transaction was recorded in the name of "Sujana Sudini" in the NSEL records, which was a surprise to the petitioner. The respondent claimed this was due to a client code error. The NSEL confirmed that the trades were carried out with client code HYDS-1012 allotted to Sujana Sudini.

3. Suspension of Trading on the NSEL:
On 30th July 2013, all transactions and operations on the NSEL were suspended by the Government, leading to the petitioner not receiving the payment due under the sale transaction. The suspension was due to a series of transactions being investigated by the Economic Offence Wing (EOW) of the Mumbai Police. The petitioner continued to await the remittance of the amount due.

4. Bonafide Nature of Transactions:
The petitioner argued that the discrepancies in the contract notes and the client code error indicated that the transactions were not genuine. The respondent's defense of a client code error was not considered bonafide by the petitioner. The court noted that the times of the trades in the digital contract notes differed from those in the NSEL records, raising questions about the genuineness of the transactions.

5. Payment Obligations of the Respondent Broker:
The respondent contended that the transactions were "paired transactions" and that payouts for the sale transaction would only be made after 25 days (T+25). The suspension of trading resulted in the suspension of all payments. The respondent argued that they had no obligation to make a payout unless they received payments from the exchange. The court found that the respondent failed to provide a satisfactory explanation for the discrepancies in the contract notes and the client code errors.

Conclusion:
The court concluded that the respondent had failed and neglected to pay the amount due to the petitioner. The court ordered the respondent to deposit ?1,45,79,032/- with the Prothonotary and Senior Master of the court within eight weeks. If the deposit was made and a suit filed by the petitioner, the amounts would be transferred to the suit account, and the company petition would be dismissed. If the deposit was not made, the petition would revive and be admitted, with advertisements to be published in local newspapers and the Maharashtra Government Gazette. The petitioner was also required to deposit ?10,000/- towards publication charges within two weeks of default, failing which the petition would be dismissed for non-prosecution. The petition was disposed of in these terms.