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TMI Blog1988 (4) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,68,670.02 which were received by the company on March 31, 1986. The petitioning creditor states that the company made a part payment of Rs. 50,000 on September 20, 1986, and, thereafter, no payment has been made towards the said bills by the company. On demand being made for payment of the outstanding dues, the company, by letter dated December 11, 1986, informed the petitioning creditor that the company had received the necessary sanction from financial institutions regarding their project which was explained to the representatives of the petitioning creditor. It was stated in the said letter that the company was expecting to receive funds in the month of January, 1987, and will be releasing payments to the petitioning creditor in the month of January, 1987. Thereafter, on January 28, 1987, the company again wrote to the petitioning creditor reiterating the statements made in their letter of December 11, 1986, but due to delay in receiving the sanctioned letter from the Industrial Credit and Investment Corporation of India and processing delay, the company were yet to receive the fund and expected to receive the same within February/March, 1987, but in case they received the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )( a ) of the Act hereinbelow : "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 requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor ;" Mr. Sarkar submitted that, whether or not any period is mentioned in the notice or even where a lesser period is mentioned in the notice for the company to pay off its dues, that will not materially affect the validity of the notice. The requirement of the Act is that the company shall have to keep the demand made in the notice outstanding for a period of three weeks after the same was served on the company in order to make them liable or to brand the company as being unable to pay off its debts within the meaning of the said provision as quoted above. Mr. Sarkar submitted that the true import of the said provision is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment soon. The notice sent on October 20, 1962, requested payment within one week of its receipt. The third notice dated October 5, 1963, again asked for payment within four days of its receipt. Learned counsel urges that the notices are hence invalid. Section 434(1)( a ), Companies Act, 1956, asked a creditor to serve on the company a demand requiring the company to pay the sum due. The company is deemed to be unable to pay its dues if it neglects to pay the same for three weeks thereafter. This provision does not require the notice to contain any period for paying the debt. The notice need not mention any time. The mention of any period not being of the essence, the recital of any period will not nullify the notice. The creditor is only to make a demand for payment. The demand will remain a good demand, no matter whether any specific period for its payment is stated on the face of the notice or not. The provisions of law give the company three weeks to pay. If it takes three weeks for payment, it cannot be castigated as being unable to pay its debts. There is thus a statutory period of three weeks fixed for the company. If the notice fixed any other time, such specification will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said contention of the company contained in the said letter January 28, 1987, is set out hereinbelow : "Ref : SM/FIN/3954/87Date 28-01-1987 To M/s. N.K. Gossain Co. Private Ltd. 13/7, Ariff Road, Calcutta-700 067. Dear Sirs, This has reference to our letter No. SM/FIN/SKG/86, dated 11th December, 1986, regarding outstanding payment. We had mentioned in our abovementioned letter that we are expecting to receive the funds in the month of January and will be able to make payment in the month of January, 1987. But due to delay in receiving the sanction-letter from the Industrial Credit and Investment Corporation of India, vide their reference BOD/ 2434, dated 9th January, 1987, and processing delay, we are yet to receive the funds and expect to receive the same during February/March, 1987. In case we receive the money at an earlier date, we shall make payment forthwith. This is for your information and regret the inconvenience caused to you. Thanking you, Yours faithfully, for Dytron (India) Limited. (S. Mukhopadhyay), Deputy Finance Manager". Therefore, Mr. Sarkar submitted that it was a proved fact that an admission had been made on behalf of the company b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd. v. Union of India, AIR 1954 Cal 499 ; [1954] 24 Comp. Cas. 507 (Cal), headnote 'A' of AIR 1954 Cal of which is set out hereinbelow : "If a notice of demand is to operate as a valid statutory notice under section 163(1)( i ), it is to be delivered to the company at its registered office. A letter addressed to a place other than the company's registered office cannot be relied upon by the creditor for the purposes of section 163(1)( i )". This was a case under the old Act. Mr. Mitra next had submitted that the admission by the company in the letters annexed to the petition was no proof of insolvency and that admission by the company of its indebtedness in the letters did not prove its inability to pay or its insolvency. Negligence to pay was not to be equated with the inability to pay. Mr. Mitra contended that nothing had been shown by the petitioner that the company was unable to pay its debts or to meet its present liabilities. Mere alleged admissions in the letters written by the company could not entitle the petitioning creditor to present a winding up petition without sufficient proof that the company was commercially insolvent. In this connection, Mr. Mitra cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tenor of section 434(1)( a ) of the Companies Act. On the question as to extraneous evidence to be taken to prove the service of the notice, Mr. Sarkar submitted that certainly the acknowledgment card evidenced the service of the notice and could not be looked into by the court when it involved a question as to its sufficiency. On the next question whether the petitioner can come within the ambit of section 434(1)( c ) of the Companies Act by way of an alternative remedy, Mr. Sarkar has referred me to various admissions made by the company in the letters annexed to the petition and to the fact that the company did not. reply to the statutory notice. Reliance was placed in this connection upon the case of Gulamhussein Ahmedalli and Co. v. Canhag P. Ltd. [1972] 42 Comp. Cas. 136 (Bom), the headnote of which is set out hereinbelow. "Where, in spite of service of a statutory notice under section 434(1)( a ) of the Companies Act, 1956, the company failed and neglected to pay to the substituted creditors a sum of Rs. 24,000 due to them with interest and failed to secure or compound for it to the reasonable satisfaction of the creditors, it was a clear case where the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is fit and proper in the interest of the creditors and the shareholders not to allow it to function further as a company. When there has been a failure to pay a debt in accordance with a statutory notice of demand, insolvency is to be presumed, but it may also be proved in other ways. The basis of a winding up order on the ground of a company's inability to pay its debt is, however, always insolvency". In this connection, Mr. Sarkar further relied upon the case of T.P. Sahu and Sons Private Ltd., In re [1982] 52 Comp. Cas. 182 (Cal), the headnote of which is set out here in below : "In a winding up petition, where a company accepted the supply of goods by a petitioning creditor without any objection as will appear from the challan, weighment certificate and bill and there was no difference in the description of the goods between the petitioning-creditor and the company and in fact the company never raised any objection and it also never raised any objection to the bill at any point of time and various dates were given by the company asking the petitioning-creditor's representative to call for payment, as would appear from the endorsement on the said bill cover and, only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present a winding-up petition. Therefore, it is wholly immaterial and unnecessary whether any period is mentioned in the notice under section 434(1)( a ) of the Act. The only requirement of the said section is that the notice has to be served at the registered office of the company and that the right of action of the creditor is only postponed till three weeks from the date of service of such notice. Reading the language of the section and while agreeing with the cases relied on by Mr. Sarkar and considering the surrounding circumstances under which the notice was issued, I hold that the notice in the instant case is a good one and a valid notice and the instant winding-up petition is sustainable on the basis of such notice. In view of my holding in favour of the submissions made by Mr. Sarkar on the notice under section 434(1)( a ) of the Act, it is not necessary for me to discuss and consider the further submission of Mr. Sarkar that if his contention as to the sufficiency and legality of the notice failed, this petition could as well be sustainable under section 434(1)( c ) of the Act. While disposing of this application, I must record my disapproval of the way learned advoc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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