2013 (11) TMI 441 - HC - Companies Law

Validity of defence - Arbitration clause - Held that - In the circumstances, particularly, since the rubber stamp of the petitioner appearing on the questioned document of September 22, 2010 is at variance with the impression of the petitioner s rubber stamp in the documents elsewhere, the company s defence appears to be without basis and the petitioner appears to be justified in his assertion that the company has fabricated the document or brought the same into existence for the purpose of resisting this claim. There is a further tell-tale sign of the company having no defence to the claim in the company having received the statutory notice and not replying thereto. If a company had squared off a transaction by payment in the year 2010, if would defy logic and reason that it would receive the statutory notice demanding payment in respect of such transaction but would not reply thereto. The company s affidavit makes out a simplistic story of some person in the company having questioned the petitioner or an associate and it having been agreed between such persons that the statutory notice would not be proceeded with. The explanation by the company as to why the statutory notice was not replied to, is not worthy of belief. It is elementary that an arbitration clause does not stand in the way of a company petition being filed or being adjudicated on merits. In any event, the agreement that is asserted by the petitioner in this case is the settlement agreement of June 16, 2009 which does not contain any arbitration clause.

Summary

Issues:
- Dishonest defense of the company
- Claim of the petitioning creditor for goods delivered/services rendered
- Dispute over outstanding payment of Rs.1.18 crore
- Agreement for settlement of Rs.98 lakh
- Demands for balance payment of Rs.82 lakh and Rs.62 lakh
- Questioning the validity of documents by the petitioner
- Allegations of fabrication by the company
- Lack of plausible defense by the company
- Requirement of security for defending the claim
- Relevance of arbitration clause in the original agreement

Analysis:
The High Court of Calcutta noted the company's defense as "utterly dishonest" and lacking any basis, highlighting the absence of the original document during the hearing. The petitioning creditor's claim was based on goods delivered or services rendered under an agreement for the conversion of coking coal to beehive hard coke. The dispute arose from an outstanding payment of over Rs.1.18 crore, with the parties later entering into an agreement for settlement at Rs.98 lakh. However, subsequent demands for the balance payment of Rs.82 lakh and Rs.62 lakh were made by the petitioner, leading to a legal confrontation.

The petitioner raised concerns regarding the authenticity of documents presented by the company, particularly disputing a payment acknowledgment document dated September 22, 2010, which the company claimed settled the balance claim. The petitioner questioned the validity of the rubber stamp on this document, emphasizing discrepancies in the signature. The court criticized the company for failing to produce the original document for verification, casting doubt on the validity of its defense strategy.

The court highlighted the company's lack of a plausible defense, especially its failure to respond to statutory notices and subsequent demands. The company's explanation for not replying to the statutory notice was deemed unconvincing, further weakening its position in the case. As a result, the court ruled in favor of admitting the petition but provided the company with an opportunity to defend the claim by furnishing security in cash with the Registrar.

Additionally, the court addressed the issue of an arbitration clause raised by the company, clarifying that such a clause does not hinder the adjudication of a company petition. The court emphasized that the settlement agreement in question did not contain any arbitration clause, reinforcing the validity of the petitioning creditor's claim. The judgment outlined specific requirements for the company to defend the claim effectively, including furnishing security and adhering to specified timelines for legal actions.

In conclusion, the judgment highlighted the critical evaluation of the parties' actions, emphasizing the importance of substantiating claims and defenses with valid documentation and responses to legal notices. The court's decision aimed to ensure a fair and transparent resolution of the dispute while upholding the principles of justice and legal integrity.