2016 (12) TMI 367 - HC - Companies Law

Neglect to discharge of debt payable under a loan transaction - winding up petition - Held that - The explanation offered by the company of a sale transaction and that the parties proceeded on a misconception that the area is larger than 2.73 acres and, accordingly, an excess amount was paid by the petitioning creditor which subsequently on ascertainment of the actual area was refunded without refund of the excess stamp duty and registration cost paid is difficult to accept. The survey alleged to have been conducted on 28th May, 2004 without notice to the petitioner. The consideration for sale of land was paid by separate cheque subsequent to the loan transaction. If the contention of the company were to be accepted then there would be no requirement to issue separate cheques on 15th April, 2014 and May 30, 2014 for ₹ 48,00,000/- and ₹ 1,74,000/-. The said sum of ₹ 1.90 crores ought to have been mentioned in the Memo of Consideration. The necessity to prepare a survey report allegedly on 28th May, 2014 without notice to the petitioner and significantly coinciding with the date of execution of the sale deed is something more that it meets the eyes. The survey report was not at all necessary or required as the recitals of the sale deed would clearly show that the vendor purchased 2.73 acres of land on 14th December, 2005. The very fact that the said sum of ₹ 1.90 Crores was not mentioned in the Memo of Consideration in the sale deed shows that the parties never intended to treat the said amount as sale consideration. Accordingly, the company upon making payment of a sum of ₹ 86 lakhs to the petitioner and furnishing cash security for a sum of ₹ 52 lakhs in favour of the Registrar, Original Side, High Court, Calcutta within a period of four weeks from date with intimation to the petitioner shall be entitled to stay of winding up petition and the petitioning creditor would be required to file a suit for the remaining balance amount of ₹ 52 lakhs together with interest within a period of four weeks thereafter. However, if the petitioner fails to institute such proceeding notwithstanding the compliance of this order by the company, the Registrar, Original Side, High Court, Calcutta shall refund the said amount together with interest of the company on payment without any further reference. The Registrar, Original Side, High Court, Calcutta shall deposit the said amount with the United Bank of India, High Court Branch in a suitable fixed deposit account yielding highest return and shall keep the said account renewed till the disposal of the suit.

Summary

Issues Involved:
1. Whether the company neglected to discharge its debt of ?1.38 Crores payable under a loan transaction.
2. Whether the amount claimed by the petitioner was part of a sale consideration for land.
3. Whether the winding up petition should be admitted based on the alleged debt.

Issue-wise Detailed Analysis:

1. Neglect to Discharge Debt:
The petitioner filed a winding-up petition on the grounds that the company neglected to discharge its debt of ?1.38 Crores, which was part of a ?1.90 Crores loan transaction. The petitioner provided evidence of a cheque dated April 15, 2014, and partial payment of ?52 lakhs made on July 17, 2014, through RTGS. A statutory notice was issued on February 26, 2015, to which the company responded on March 17, 2015, denying the loan and claiming the amount was paid in discharge of a legal liability.

2. Part of Sale Consideration:
The company argued that the amount in question was part of a sale consideration for land. It was alleged that the petitioner, through I.P. Traders Pvt. Ltd., acquired a plot of land measuring 2.73 acres. The company and its sister concerns, Pragma Builtech Pvt. Ltd. and Vigneshwara Properties Pvt. Ltd., believed the land measured 3.32 acres and agreed on a total consideration of ?5.50 Crores. The petitioner paid ?69,96,000/- by cheque as the price of the land, and the balance amount was paid by cheque but not as land price. After a survey in May 2014, it was found that the land measured 2.73 acres, leading to an agreement to refund ?1 Crore to the petitioner. The company refunded ?1 Crore, with ?52 lakhs repaid by the company and ?48 lakhs by ATC Logistics Pvt. Ltd.

3. Admission of Winding Up Petition:
The court noted that for admitting a winding-up petition, it must be satisfied that there is a neglect to pay a debt. The refusal to pay on legitimate grounds cannot constitute neglect. The court must find if there is a plausible explanation for non-payment. The company set up a defense of a sale transaction and disclosed its balance sheet showing a profit from the sale of land. However, the independent auditor's report did not disclose pending litigation. The court referred to several judgments, including the Supreme Court's decision in IBA Health (India) Pvt. Ltd. Vs. Info Drive Systems SDN. BHD, which emphasized that a bona fide dispute over debt negates the neglect to pay.

The court found the company's explanation of a sale transaction and refund agreement difficult to accept. The survey conducted without notice to the petitioner and the absence of documentation supporting the company's claims were noted. The court concluded that the company must pay ?86 lakhs to the petitioner and furnish cash security for ?52 lakhs within four weeks. If the petitioner fails to file a suit for the remaining balance within four weeks, the Registrar, Original Side, High Court, Calcutta, will refund the amount to the company. In default of compliance, the petition will be advertised, and the matter will be heard in court.

Conclusion:
The court ordered the company to pay ?86 lakhs to the petitioner and furnish cash security for ?52 lakhs within four weeks. The petitioning creditor must file a suit for the remaining balance within four weeks. In default, the petition will be advertised, and the matter will be heard in court. No order as to costs was made.