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TMI Blog1981 (12) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... f a substantive right to a cross-claim, there is no defence to a winding-up petition. He has then contended that there is no provision in the Arbitration Act for a cross-claim. His next contention is that there is no stay of winding-up proceedings and an application for the stay of winding-up proceedings was dismissed and hence the winding-up proceedings must necessarily follow all principles analogous to the principles of res judicata. Shri Subramaniyam has also submitted that the award decree obtained by the petitioning creditor was on one contract while the award in favour of the company was in respect of a totally different contract and there being two different contracts, there could be no counterclaim to a winding-up petition and, consequently, no defence to the winding-up petition. In order to appreciate the contentions of Shri Subramaniyam, it would be necessary to state a few facts. It appears that the petitioning creditor was appointed as the commission agent of the company under two agreements both dated March 24, 1975, bearing contract Nos. 29 and 30 of 1975. There were also dealings of sale and purchase of textile goods between the petitioning creditor and the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, the petitioners served upon the company a statutory notice under section 434 of the Companies Act, 1956. This was replied to by the company by their letter dated June 19, 1981, stating that negotiations for settlement were in progress and hence the company has not preferred any appeal. This was denied by the petitioners by their letter dated June 26, 1981, and, thereafter, on July 22, 1981, the petitioners filed the petition for winding-up. Shri Subramaniyam has leaned rather heavily upon the decision of Vimadalal J. in Company Petition No. 1 of 1974, decided on March 27, 1974, Crompton Greaves Ltd., In re in support of his contentions stated above. In that case, the petitioner had paid to the company Rs. 60,500 on his tender for removal of the scrap accepted by the company. However, the company cancelled the contract and wrote to the petitioner that he should collect the amount from the company. The company, however, failed to pay the amount and, ultimately, the petitioner in that case was driven to give to the company the statutory notice under section 434(1). It was, thereafter, that the company for the first time raised a dispute that the petitioner was liable to pay to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said case that, in certain circumstances, a counter-claim may provide a reasonable excuse for non-payment by a company of a petitioner's claim, I have no quarrel with that decision. I do not think it necessary to discuss that decision any further". The decision of Vimadalal J. must, therefore, be read on the facts and circumstances of that case. The question that arises for consideration in this petition is whether the defence of the company that it has an award against the petitioners for Rs. 55,000 which is far in excess of the award decreed in favour of the petitioner and, therefore, the company is not liable to pay to the petitioners the said amount of the decree and hence the winding-up petition should be dismissed, is a bona fide defence to the winding-up petition. Section 434(1)(a) provides: "434. Company when deemed unable to pay its debts.--(1) A company shall be deemed to be unable to pay its debts-- (a)if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Rameshwar Singh, AIR 1920 Cal 1004, an argument was advanced that the company had not neglected to pay the sum demanded within the meaning of section 163(1) of the Indian Companies Act, 1913, and the Calcutta High Court quoted with approval the judgment of Sir Jessel M. R. In re London and Paris Banking Corporation [1874] LR 19 Eq. 444; 23 WR 643. In that case, Sir Jessel M. R. stated (p. 446): "Negligence is a term which is well known to the law. Negligence in paying a debt on demand, as I understand it, is omitting to pay without reasonable excuse. Mere omission by itself does not amount to negligence. Therefore, I should hold, upon the words of the statute, that where a debt is bona fide disputed by the debtor, and the debtor alleges, for example, that the demand for goods sold and delivered is excessive and says that he, the debtor, is willing to pay such sum as he is either advised by competent valuers to pay, or as he himself considers a fair sum for the goods, then in that case he has not neglected to pay, and is not within the wording of the statute". The Calcutta High Court then considered the material before it and came to the conclusion that there was a ground for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, it is not sufficient to show merely that the company has omitted to pay the debt due to the petitioner despite service of the statutory notice : it must be shown that the company has omitted to pay without reasonable excuse. The existence of valid counterclaims would clearly constitute reasonable excuse for non-payment". The Allahabad High Court has observed that (at p. 965): "...the company, by setting up counter-claims which are prima facie valid, has raised bona fide disputes regarding its liability to pay the debts claimed by all three of the petitioners. It has reasonable excuses for nonpayment and cannot be deemed unable to pay its debts on account of any legal presumption arising under section 434(1)". In the present case, I have been saved the trouble of going through the materials to find out whether the claim is a bona fide claim. The reason is that it is an admitted fact that there is already an award in favour of the company and against the petitioners for Rs. 55,000. Both these awards on the different contracts were made and published on one and the same day, viz., November 30, 1978. The arbitrators to the two awards were the same arbitrators, Mr. Shah and Mr. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Sarkar Estates ( Pvt.) Ltd. v. Kusu-mika Iron Works (Pvt.) Ltd., AIR 1961 Cal 439; [1962] 32 Comp. Cas. 575 , it was held (headnote): "The mere fact that the company has put forward a claim against the decree-holder and the claim is pending adjudication by the court, does not make the claim based on a judgment debt which arises out of a decree passed after contest, a disputed debt". In that case, an argument was advanced that the company has filed a suit against the respondent company claiming a certain sum, and if that suit, which was pending, succeeded, the appellant company would be entitled to set off the amount of the decree that may be passed against the claim of the respondent company. It was on these facts that those observations have been made by the Calcutta High Court, which are distinguishable on the facts of this case. The next case is the case of Unique Cardboard Box Mfg. Co. P. Ltd., In re [1978] 48 Comp. Cas. 599 (Cal.). In that case, it was held that (head-note) : "It is not correct to say that if there is a decree in favour of a creditor, he must execute the said decree before he can present a winding-up petition on the ground that the company is unable to p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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