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TMI Blog1985 (12) TMI 345X X X X Extracts X X X X X X X X Extracts X X X X ..... PCC as its sole selling agents for the sale of its products in certain territories in India. This agreement was for a period of 5 years but subsequently it was extended till August 31, 1979. It is common ground that the agreement came to an end on August 31, 1979. Under the terms of the agreement, the PCC was responsible for the payment to the petitioner of all dues connected with the sales made by it and to indemnify the petitioner against all losses caused by any breach or non-performance of any contract entered into between the PCC and any person in respect of the sale of the petitioner's goods. PCC was liable to pay all the amounts of sale proceeds within 45 days of the date of sale whether or not it had been able to realise the proceeds from its customers and if default was made, it was liable to pay interest at 18 per cent, per annum or the prevailing bank rate, whichever was higher, on the amounts outstanding for the period during which they remained unpaid. The petitioner company claimed that as on August 31, 1980, a sum of Rs. 43,57,198-31 including interest was due to it from the PCC. This, according to a statement annexed to the petition, comprised principal amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arration of the earlier proceedings in the case is necessary. This order may also be read in continuation of the earlier orders referred to below. When the winding-up petition first came up, notice was issued to the respondent company and to the Central Government. The respondent company filed a reply to the show-cause notice. When the matter next came up, it was suggested that if the PCG would pay Rs. 5,00,000 and give a bank guarantee for Rs. 10,00,000, the petition could be admitted without citation and a chartered accountant be appointed to find out the exact amount due to the petitioner company. PCC was, however, unable to raise funds to the extent suggested. After hearing both the parties, Wad J. admitted the petition and ordered citation by his order dated May 6, 1982. PCC went in appeal (Co. A. No. 11 of 1982). The controversy in appeal mainly related to the order of citation made by the learned judge and certain interim orders passed by him. The Division Bench, by its order dated November 26, 1982, gave certain directions and was of opinion that before citation was issued, the matter needed to be examined in greater detail and remanded the case to the company judge. It h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal charges realised by PCC from customers in excess of authoriessed charges. 10,70,000.00 43,57,198.31 No arguments were urged about the third item which is very small but counsel for the respondent sought to make out that there was a genuine dispute over the other three items between the parties and his contentions in this regard may now be considered. To take up item 4 first, the petitioner's claim in this regard is contained in a letter addressed by it to PCC on February 15, 1979. It is common ground that, under the agreements between the two companies, PCC was entitled to collect from its customers incidental charges at specified rates. By this letter, the charge of the PCC was that the various branches of the PCC had recovered incidental charges in excess of the specified rates and that the amounts thus realised by the PCC during the years 1973-74 to 1977-78 amounted to Rs. 8,27,398 as per the details furnished in the letter. PCC, according to the petitioner, was not only liable to make over these amounts to the ITR but was also liable to pay interest thereon amounting to Rs. 2,52,947. The total claim on this account was thus Rs. 10, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the parties referred to in the letter of September 26, 1979. The other amounts claimed by the petitioner from the respondent represent the value of goods supplied and interest thereon. The statements of account filed with the petition do not contain a clear break-up as to the exact composition of the amount of Rs. 28,41,571 70 though it is clear that the item of Rs. 4,40,443 61 represents the claim on account of interest. Counsel for the respondent submits that the petitioner's figures in this regard have been different at different times and thoroughly inconsistent. He points out that: ( a )The auditors' report attached to the balance-sheet of the ITR for the year 1979-80 claims that the debt due from the PCC on March 31, 1980, was Rs. 28,41,571.70 against which a provision for bad and doubtful debts was made to the extent of Rs. 7,52,000 which was considered inadequate by the auditors. The corresponding figures for the year 1980- 81 were Rs. 28,46,755 and Rs. 7,52,000. ( b )As per minutes recorded by the ITR on September 6, 1979, the total due from PCC as on August 31, 1979, including incidental charges of Rs. 10.81 lakhs was only Rs. 38 72 lakhs. The principal due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Delhi Branch 3,98,821.61 "Kanpur 22,43,392.68 (as already filed) "Calcutta 2,66,626.02 Interest claim disputed (contingent) 8,51,748.55" In other words, the PCC acknowledged once again that the indebtedness of the company was of Rs. 29.08 lakhs (which includes Rs. 21.83 lakhs due to the ITR) and also stated that the interest amount in dispute was Rs. 8.52 lakhs. It is not quite clear that the interest here referred to is the interest claim of the ITR, but if it is, this indicates that, according to the PCC, the interest claim was only to the extent of Rs. 8.52 lakhs. It seems, however, likely that the interest claim referred to is that of the ITR for the figure of interest has been set out separately in this statement and since the PCC was disputing the claim of interest made by the ITR, it is extremely unlikely that the sum of Rs. 29.08 lakhs which was acknowledged as a clear liability included any interest element. It may also be pointed out that if the liability of Rs. 21.83 lakhs shown in the statement filed on October 7, 1982, and the interest amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e termination of the agency agreement. But this is no answer at all to the ITR's claim. Under the agreement, PCC was a del credere agent for ITR. It had to make good the full amount of the sale proceeds to the ITR within a stipulated period (on pain of paying interest thereafter) and this had to be done irrespective of whether it was able to recover the sale price from the customers or not. Moreover, the proviso to clause 18 A of the contract which stipulated that no commission was payable to the PCC on the direct sales made by the ITR in or outside the area of agency clearly implies that ITR was within its rights in making direct sales to customers and its doing so did not affect its right to receive from the PCC the sale proceeds of goods sold through the latter. There was equally nothing objectionable or, indeed, wrong in the ITR appointing anyone as its agent after its contract with the PCC came to an end. There is, therefore, no real or plausible answer at all on the part of PCC for not paying up the balance of the principal amount of Rs. 1,24,607 which is due to the ITR even on the best case pleaded by it. On the question of interest also, it is clear that the PCC cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lecting the sale proceeds simultaneously with the sale should be allowed a credit facility of 60 days for calculation of interest. Properly understood, therefore, the minutes, far from helping the respondent, only established that interest was payable to ITR and its request to allow larger credit facility than was provided in the agreement had not been accepted. I am, therefore, of the opinion that in addition to the admitted balance of sale proceeds, PCC was liable to pay interest to ITR and it has not been shown to me in what way the claim of the ITR is disputed. Even the statements of the PCC only show some dispute, if at all, in respect of Rs. 8 52 lakhs out of the interest claim of the ITR. Even leaving out of account the incidental charges of Rs. 1070 lakhs and this "disputed "interest of Rs. 8 52 lakhs, there is no satisfactory answer at all in respect of the balance claim of the ITR to the extent of Rs. 24'35 lakhs. The respondent company's inability, in the face of this huge liability, to comply with the directions of the courts in the first instance to pay Rs. 5,00,000 and give a bank guarantee for Rs. 10,00,000 and later on to deposit at least a sum of Rs. 5,00,000 only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in view of the orders of the civil court of March 23, 1982, and October 25, 1983, which the PCC has not challenged in appropriate proceedings and which have, therefore, become final, there are no effective arbitration proceedings pending as on date between the parties. The respondent has also not sought for stay of this petition under section 34 of the Arbitration Act or for leave under section 446 of the Act to continue the arbitration. Even if PCC had so applied, it would have been for this court to consider whether this petition should go on or whether the arbitration proceedings should continue. I am of the opinion, for the reasons already discussed, that there is a clear and substantial debt owing to the ITR from the PCC and that even on the PCC's best case, there is an outstanding debt due to the ITR of more than a lakh of rupees. I am, therefore, unable to accept the PCC's contention that a winding-up order should be held up because of the pendency of arbitration proceedings. In response to the publication of citation, certain parties have filed affidavits opposing the winding-up of the company. They are the Gwalior Sugar Co. Ltd., Sri Vikram Srivastava, Raza Textiles Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idavit on behalf of the Raza Textile Co. has been filed by one of the Shrivastavas and it is seen that this company has been defraying the expenses of PCC towards staff and running expenses. It also claims a sum of Rs. 25,000 said to have been advanced towards allocation of shares. Jwala Fabrics has also filed likewise an affidavit of opposition through Sri V. K. Srivastava and its claim is for a sum of Rs. 35,000 said to have been advanced towards purchase of equity shares. But these two advances have been made after and with the knowledge of the filing of the present winding-up petition. A perusal of these affidavits confirms the fact that the PCC has been in a bad financial position since 1980. The opposition is coming from persons belonging to the group of management of the PCC and are clearly motivated. Their desire to help the PCC is no doubt understandable but they do not come forward with any concrete proposal for the revival of the company and its financial reconstruction, particularly after the termination of its agency for the ITR. It rather seems to be an attempt on their part, as alleged by the petitioner, to utilise the staff and tenanted premises available to PCC at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1985, in Diwan Chand Kapoor v. New Rialto Cinema P. Ltd. (CP No. 60 of 1981) [1986] 60 Comp Cas 276 (Delhi) and of the Allahabad High Court in J . A. Dixit v. Official Liquidator, AIR 1963 All 284, it is contended that, whatever may have been the position in 1981 when the present petition was filed, the winding-up of the respondent company cannot be ordered now, since today, on the date on which the winding-up order is asked for or can be made, there is no subsisting claim of debt which can be got decreed by the institution of a suit therefor. On the other hand, on behalf of the petitioner, it is contended that the plea of limitation for a suit having expired will be relevant only at the date of presentation of a winding up petition, and that it will be anomalous to hold that such a plea could be raised to defeat the maintainability of a petition that has already been admitted. The decision of Anand J. (which, I was told, is under appeal) is sought to be distinguished and that of the Bombay High Court in Modern Dekor Painting Contract P. Ltd. v. Jenson and Nicholson ( India ) Ltd. [1985] 58 Comp Cas 255, strongly relied upon. It is also submitted that, in this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion though it gets time-barred by the time the winding-up order is passed. The decision of the Allahabad High Court in Jwala Prasad v. Jwala Bank Ltd. [1957] 27 Comp Cas 310 (All); AIR 1957 All 143, has been understood in some cases as leading to the same view though it has been explained differently in the recent case of Benares Cotton and Silk Mills Ltd. v. Sulbha Devi Gupta [1985] 3 Comp LJ 318; [1986] 60 Comp Cas 639 (All). On a slightly different point, it will be appreciated that these decisions have a bearing on the present issue. For, if the first line of cases were correct and if it were also to be held that the petitioner's contention is to be upheld, the result would be that the petitioner can get a winding-up order but cannot prove his debt in the winding-up. It would be indeed an odd result to say that the company can be wound up at the instance of a creditor who will not be able to get anything out of the winding-up. The view taken by Anand J. is thus quite inconsistent with the above line of decisions. Had the matter been res integra, I may have been inclined to hold that, both for purposes of passing a winding-up order as well as for purposes of proof of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in compliance with these observations that statements were filed on February 28, 1984, by counsel for the respondent which were duly signed by the accounts officer of the company. In this statement, it was reiterated that the creditors at the Delhi, Kanpur and Calcutta branches, respectively, were to the extent of Rs. 3,98,82161, Rs. 22,43,392 68 and Rs. 2,66,628 02 as per details already filed in court. As has been pointed out earlier, this list filed on October 7, 1982, showed the amount due to ITR at Rs. 21,83,162 50. In other words, in reply to specific queries by the court, the respondent company specifically admitted or acknowledged indebtedness to the petitioner to the extent of Rs. 21 83 lakhs. It is true that the affidavit filed on October 7,1982, was accompanied by a computation by which certain claims which the PCC had against the ITR are put forward as a justification for not paying the amounts claimed by the ITR. But that this will not derogate from the effect of the acknowledgment is clear from the language of section 18 of the Limitation Act itself. Under clause ( a ) of the Explanation, even a set-off effected, or claim to set off made, by the debtor will not detr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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