1960 (11) TMI 55 - HC - Companies Law

Summary

Issues Involved:
1. Service of the letter of demand.
2. Compliance with verification requirements.
3. Interpretation of Section 434(1)(a) of the Companies Act, 1956.
4. Whether the petitioning creditor's debt is a disputed debt.

Issue-wise Detailed Analysis:

1. Service of the Letter of Demand:
The primary issue was whether the letter of demand was properly served on the appellant company. The respondent company had sent a letter of demand by registered post, which was allegedly refused by the appellant company. The appellant company argued that no such letter was received and claimed the refusal was fabricated. However, the court noted that the original envelope with postal marks indicated it was correctly addressed to the registered office of the appellant company, albeit with a minor error in the company name. The court found that this error did not prejudice the appellant company, as the address was otherwise correct. Additionally, a supporting affidavit from a creditor indicated a similar refusal of a correctly addressed letter. The court concluded that the facts supported the respondent company's claim that the letter was duly posted and refused, thus establishing proper service.

2. Compliance with Verification Requirements:
The appellant company contended that the verification clause in the petition did not comply with Order XIX, Rule 3 of the Code of Civil Procedure, and thus the statement regarding the service of the letter of demand should be ignored. The court, however, clarified that the verification was made in accordance with the company rules of the court, which override the general provisions of the Code of Civil Procedure. Therefore, the court found no merit in the appellant's contention regarding the verification clause.

3. Interpretation of Section 434(1)(a) of the Companies Act, 1956:
The appellant company argued that Section 434(1)(a) requires the statutory notice of demand to be actually delivered to the company's registered office, and since the letter was returned, there was no service. The court interpreted that the term "delivered" includes a situation where the registered letter is tendered but refused by the addressee. The court stated that a refusal to accept a registered letter is as good as delivery and precludes the addressee from pleading ignorance. The court emphasized that allowing a debtor to avoid service by refusing a registered letter would render the statutory provision ineffective. The court held that the presumption of service under Section 27 of the General Clauses Act and Sections 114 and 16 of the Indian Evidence Act applies, and the refusal of the letter by the appellant company constituted proper service.

4. Whether the Petitioning Creditor's Debt is a Disputed Debt:
The appellant company argued that the debt claimed by the respondent company was disputed because the appellant had filed a suit against the respondent company for a substantial sum, which was pending. The court dismissed this argument, stating that the respondent company's claim was based on a decree passed after contest, which is not a disputed debt merely because an appeal is pending. The court noted that unless there is a stay of execution of the decree, the judgment-debt can form the foundation of a winding-up petition.

Conclusion:
The court dismissed the appeal, holding that the letter of demand was properly served, the verification requirements were met, the statutory notice was validly delivered despite refusal, and the petitioning creditor's debt was not a disputed debt. The appeal was dismissed with costs, and the decision was certified for two counsel.