9911796707
TMI Blog1992 (6) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... er, T. P. S. Lakshmanan, was the managing director of the company till June, 1988. According to him he has advanced a sum of Rs. 6,75,000 to the company during the period from November 21, 1987, to January 30, 1988, for its business. The above sum reflected in the day book and the ledger maintained by the company in its usual course of business. Out of the said sum of Rs. 6,75,000, a sum of Rs. 1,50,0001 has been paid by the company to the first petitioner on February 3, 1988, leaving the balance of Rs. 5,25,000. The above amount carried interest at the rate of 18 per cent, per annum. Further, petitioners Nos. 1 to 6 have also advanced on various dates between April 1, 1983, and January 30, 1988, a sum of Rs. 5,11,763 as detailed hereunder : (Rs.) T. P. S. Lakshmanan 84,466 T. P. S. L. Gnanamani 1,27,620 Geethamani 44,699 L. Manoharan 1,25,011 L. Sethuammal 81,421 M. Sakila 48,546 Total 5.11.763 The said sum of Rs. 5,11,763 is credited in the books of the company in favour of the petitioners. The company is liable to pay interest at the rate of 18 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the respondent, the respondent-company is not aware of the alleged receipt and payment to the petitioners as stated in paragraph 5 of the petition as the first petitioner is wrongfully withholding the books of account, records and other documents of the company. The respondent also denies about the alleged advance amount of Rs. 511,763 , made by the petitioners. Since the books of account, etc., have been retained by the first petitioner, the accounts of the company could not be finalised. The allegation that the respondent-company is due a sum of Rs. 10.36 lakhs to the petitioners is false and denied. There had been a dispute in relation to the management of the company on account of the mismanagement and the negligent attitude of the first petitioner. It is in those circumstances, the board of directors of the company met on January 7, 1988, and elected L. K. A. Jayaraman as the managing director of the company with effect from February 1, 1988. The allegation made in paragraph 6 in regard to the alleged settlement before the mediators has also been denied as false. The respondent submits that the petitioners have not established their case of inability of the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thheld by him. For reasons best known to PW-1, he has not produced the account books before this court. The books of account are the basic documents which should have been produced to substantiate the claims of the petitioners that a sum of Rs. 5,11,763 has been credited in the account books of the company. The petitioners have produced exhibits P1 to P5, the copies of the balance-sheets for years ending March 31 1983and exhibit P-6, a letter dated December 21,1987, given by L.K.A. Jayaraman (RW 1) to the company. In my view, without producing the account books and without placing any records to show that exhibits P1 to P5 were approved by the board of directors of the company as required .under section 215 of the Companies Act, no reliance can be placed on exhibits P1 to P5. Further, PW-1 in his cross-examination has categorically admitted that the amount is due to him up to the period March 31, 1987. This answer of PW-1 falsifies his case that a sum of Rs. 5,25,000 was advanced by him to the company for its business between November 21, 1987, and January 30, 1988. It is worthwhile to refer to the questions and answers put to PW-1 in the cross-examination, on this aspect of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be completed. Sales tax records could not also be submitted. Central excise returns also could not be submitted. Annual balance-sheet could not be submitted to the Registrar of Companies. Outstanding dues could not also be found out and no loan could be obtained for the development of the company. Q : If proper accounts are submitted by the first petitioner, then the first petitioner becomes liable to pay ? A : The first petitioner has to pay money to the company if proper accounts are submitted." RW-1 in his evidence has stated that no amount was due to the petitioners as on the date of filing of the company petition for winding up. Equally, it is not the case of the petitioners that the amounts were due as on the date of the winding up petition. Apart from the above, there is no acceptable evidence to hold that the sum of Rs. 5,11,763 is due from the company to the petitioners. I am unable to attach any importance to exhibits P-1 to P-5, which were not only not approved by the board of directors as required by law but also the petitioners have been deliberately withholding the original books of account which are admittedly in the custody of PW-1 as could be seen fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough the company petition refers to the original notice dated March 2, 1989, as having been filed along with the petition, in fact, no such document has been filed or marked in court during trial. Confronted with this situation, Mr. A.K. Mylswami, learned counsel for the petitioners, made a faint attempt to sustain his case under section 434(l)(c) of the Companies Act. I am unable to accept this plea put forward at the time of hearing for more than one reason. First of all, specific reference is made only to section 434(1)( a ) of the Companies Act, and no reference has been made to section 434(1)( c ) of the Companies Act at all in the company petition. Section 434 of the Companies Act as a whole is the section which creates a fiction with regard to the inability of the company to pay its , debts. Unless the conditions precedent for invoking the legal fiction created under the said section are satisfied, the fictional inability would not arise. Therefore, there is no scope for invoking the provisions of sub-clause ( c ) of sub-section (1) of section 434 of the Companies Act. I have already found that the petitioners have not placed materials to substantiate their claim under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to control the company. It passes my comprehension as to why PW-1 who was the ex managing director of the company, should file a petition for winding up of the company which was managed by him till 1988. I am unable to exercise my discretion in favour of the petitioners and there are strong reasons indicated by me earlier to exercise the discretion in favour of the respondent. The Supreme Court in the case of Amalgamated Commercial Traders (P.) Ltd. v. A. C. K. Krishnaswami [1965] 35 Comp. Cas. 456, has clearly laid down that an order of winding up will not be made where a debt is bona fide disputed by the company and the court is satisfied with the company's defence. It is well settled that a winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances, may be stigmatised as a scandalous abuse of the process of the court. If a debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of section 434(1)( a ) of the Companies Act, 1956.' If there is no ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a facie a debt against the respondent. But when a claim or debt is disputed, the proper forum for that is a civil court. Where, therefore, admittedly, there was a genuine dispute as to the liability of the respondent-company to pay the difference between what has been admitted and what has been claimed, it would not be proper to decide the case in the summary proceedings under section 433." Learned counsel for the parties invited my attention to the following authorities. Learned counsel for the petitioners cited the decisions in Steel Equipment and Construction Co. (P.). Ltd., In re [1968] 38 Comp. Cas. 82 (Cal.), Bharatpur Oil Mills (P.)Ltd., In re [1969] 39 Comp. Cas. 670 (Raj.), Raja of Vizianagaram v. Official Liquidator, Vizianagaram Mining Co. Ltd. [1952] 22 Comp. Cas. 1 (Mad.), State Bank of India v. Hegde and Golay Ltd. [1987] 62 Comp. Cas. 239 (Kar.), Siddhartha Apparels (P.)Ltd., In re [1986] 59 Comp. Cas. 435 (Cal.), Darjeeling Bank Ltd., In re [1949] 19 Comp. Cas. 1 (Cal), Tripura Administration v. Tripura State Bank Ltd. [1960] 30 Comp. Cas. 324 (JCC Tripura), B. Viswanathan v. Seshasayee Paper and Boards Ltd. [1992] 73 Comp. Cas. 136 (M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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