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TMI Blog2001 (12) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... ana, the appellant herein, and the petitioner in C.P. No. 71 of 1996, had worked as General Manager (Finance) in the respondent-company till the end of December 1994 and left the company with effect from 1-1-1995. According to him, he is entitled to receive arrears of salary for a period of five months i.e., for the period from August 1994 to December 1994 at the rate of Rs. 18,500 per month. According to him, he is also entitled for some other amounts from the respondent-company towards provident fund contribution, encashment of leave salary and medical reimbursement etc., to a tune of Rs. 1,18,900. Thus, according to the appellant, he is entitled to receive a total sum of Rs. 2,11,400 from the resondent-company. Since the respondent-company did not pay the outstanding dues, the appellant issued a notice dated 17-7-1995 to the respondent-company under section 433( e ) of the Act demanding payment of a total sum of Rs. 2,11,400 towards the outstanding dues due from the respondent-company, and as the resondent-company did not respond to the said notice nor pay the outstanding amounts to the appellant he filed C.P. No. 71 of 1996 under section 433( e ) and section 439 of the Act fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Letters Patent Act and section 483 of the Act. 5. It is stated, the question whether arrears of salary or salary due to an employee by the respondent-company, can be treated as a debt within the meaning of that term under section 433( e ) arises in C.P. Nos. 165 and 166 of 1999 also. Hence the above company petitions were ordered to be heard along with the OSA by the order of the court dated 19-4-2001. Accordingly the OSA as well as the above company petitions were placed before this Bench for hearing. Hence all the matters were clubbed and heard together and they are being disposed of by this common order. We have heard the learned counsel for the parties. 6. Sri S. Ravi, the learned counsel appearing for the appellant in O.S.A. No. 5 of 1998 would contend that admittedly the appellant/petitioner is entitled to receive the arrears of salary at least for a period of four months from August, 1994 to November, 1994 totalling to Rs. 78,000 apart from other amounts from the respondent-company towards provident fund contribution, encashment of leave salary, LTC and medical reimbursement etc., to a tune of Rs. 1,18,900, and in that view of the matter the learned single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only for enforcement of an established right in respect of a debt incurred by the company in question. The learned counsel would maintain that arrears of salary or salary due to an employee by the company cannot be considered as a debt within the meaning of that term under section 433( e ). The learned counsel would maintain that the decision of the Madhya Pradesh High Court in Pawan Kumar Khullar s case ( supra ) is good law and, therefore, no exception can be taken to the opinion arrived at by the learned single Judge adopting the ratio of the Judgment of the Madhya Pradesh High Court in Pawan Kumar Khullar s case ( supra ). 8. Sri D. Vijaya, the learned counsel appearing for the petitioners in C.P. Nos. 165 and 166 of 1999 would adopt the arguments advanced by Mr. S. Ravi, the learned counsel for the appellant in OSA. No. 5 of 1998. 9. Sri P.V. Rama Raju, the learned counsel for the respondent-company in C.P. Nos. 165 and 166 of 1999 would contend that under no circumstance salary due or arrears of salary to an employee or an officer of the company can be treated as a debt within the meaning of that term under section 433( e ) so as to enable such an e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther in the present or in the future. In a still more general sense, that which is due from one person to another, whether money, goods, or services. In a broad sense, any duty to respond to another in money, labour, or service; it may even mean a moral or honorary obligation, unenforceable by legal action. Also, sometimes an aggregate of separate debts, or the total sum of the existing claims against a person or company. Thus we speak of the natural debt , the bonded debt of a corporation, etc." 11. In Rawley v. Rawley 1 QBD 460 the word debt is defined as a sum payable in respect of a liquidated money demand, recoverable by action . In Webster v. Webster 31 Bea 393, it was held that a debt is a liquidated money obligation for which, generally speaking, an action will lie. In Webb v. Stenton [1883] 11 QBD 518, Lindley, LJ., held that an obligation arising out of debt may be either legal or equitable. The learned Judge said a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in praesenti solvendum in futur . In Booth v. Trail 12 QBD 8, Coleridge, CJ., has held that speaking gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Standing alone, the word debt is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two, we say of the former that it is a debt owing, and of the latter that it is a debt due. " (p. 1271) In Newfinds (India) v. Vorion Chemicals Distilleries Ltd. [1976] 46 Comp. Cas. 87, the Madras High Court held that a debt for the purpose of winding up of the company clearly means a definite sum viz., exceeding Rs. 500 and it includes only liquidated damages or a sum of money capable of being ascertained. In the context of section 433( e ), the Rajasthan High Court in Registrar of Companies v. S. Sohanmull Golcha (P.) Ltd. [1972] 42 Comp. Cas. 386 and the Gujarat High Court in Registrar of Companies v. Kavita Benefit (P.) Ltd. [1978] 48 Comp. Cas. 231 and the Punjab High Court in Registrar of Companies v. Atlas Transport (P.) Ltd. [1974] 44 Comp. Cas. 496 have held that when a debt becomes absolutely due, in the sense that the creditor is entitled to claim its payment presently, it is a debt which is payable by the company within the meaning of section 433( e ). 14. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the learned counsel for the respondent-company, placing strong reliance on the Judgment of the Madhya Pradesh High Court in Pawan Kumar Khullar s case ( supra ), would contend that the salary payable to a person or an employee in lieu of his services rendered by him/her by the company is a remuneration and, therefore, it can never be treated as a debt within the meaning of that term in the context of section 433( e ). It is true that in the above Judgment of the Madhya Pradesh High Court, a learned single Judge of that court in para (4) held "There is difference between debt and salary. The salary is the remuneration paid to a person or employee in lieu of services rendered by him/her whereas debt is not remuneration. Debt is something which is borrowed by a person on settled terms and conditions and settled rate of interest and can be re-settled between the parties." (P. 86) It needs to be emphasized that the learned single Judge in recording that opinion has not at all referred to or considered any of the decisions of the courts or how the term debt is understood generally or in the context of section 433( e ). With great respect, we are not in a position to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 530 deals with preferential payments in the matter of clearing the outstanding debts of the company. Section 530(1)( b ) reads : Preferential payments. (1) In a winding up, subject to the provisions of section 529A, there shall be paid in priority to all other debts ( a )****** ( b )all wages or salary (including wages payable for time or piece work and salary earned wholly or in part by way of commission) of any employee, in respect of services rendered to the company and due for a period not exceeding four months within the twelve months next before the relevant date, subject to the limit specified in sub-section (2); Section 530(1)( b ) speaks of wages in respect of services rendered to the company as a preferential charge. If wages and salary payable to an employee of the company in respect of services rendered to it is made a preferential charge under the Act, there is no good or sound reason to take out the arrears of salary or salary already due to an employee of the company from the definition or meaning of the concept debt in the context of section 433( e ). Therefore, we hold that in a given case, even arrears of salary due to an employee of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30-11-1994. The claim of the petitioner is therefore was not because of his attending office but his claim was for the period when the factory is closed when he has not attended the office. Apart from the above the petitioner had not regularly attended the office during the period August 1994 to December 1994 for which records were not made available by the erstwhile management. The salary structure of the petitioner was not even produced. A copy of the appointment order issued by the erstwhile management of the respondent company was not produced by the petitioner. Additional benefits such as leave salary, LTC etc., are not correct claims, as all the employees have been claiming them and paid as and when they were due. Even in the Statement of Liabilities prepared by the Auditors, the respondent company do not owe any amounts to the petitioner towards leave salary, gratuity etc. 8. It is further submitted that the petitioner himself was a Company Secretary of the respondent company and there was a declaration to that effect that there was no statutory dues payable and no violation of provisions of various enactments including Income Tax and other employees dues as on 30-11-1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfactory proof in support of his claim. Therefore, having regard to the totality of the circumstances and the want of proof in support of the claim of the petitioner, it cannot be said that the learned single Judge has erred in law in opining that there is a bona fide dispute between the petitioner and the management of the 1st respondent company regarding the claim made by the appellant/petitioner, and therefore, the petition under section 433( e ) is not maintainable. 17. Section 433 does not confer on any person a right to seek an order that a company shall be wound up, but it confers power on the court to pass an order of winding up in appropriate cases. However, the right to petition under section 433( e ), being a statutory right, the power vested in the court to wind up a company has to be exercised reasonably, fairly and on valid statutory grounds. The machinery for winding up will not be allowed to be utilized merely as a means for realising debts due from a company. This position is well settled by a catena of Judgments in Bukhtiarpur Bihar Light Railway Co. Ltd. v. Union of India [1954] 24 Comp. Cas. 507 (Cal.), Bengal Flying Club In re [1966] 2 Comp. LJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged debts or liabilities, the court may not entertain proceedings for winding up, much less order winding up. In Piara Singh (S.) v. S.H.R. Properties (P.) Ltd. [1993] 10 Corpt. LA 83 (Delhi), Syed M.A. Khan v. S.C. Constructions AIR 1960 Mad. 254, Amalgamated Commercial Traders (P.) Ltd. ( supra ), Paramjit Lal Badhawar v. Prem Spg. Wvg. Mills Co. Ltd. [1986] 60 Comp. Cas. 420 (All.), Lakshmiji Sugar Mills Co. (P.) Ltd. v. National Industrial Corpn. Ltd. [1966] 36 Comp. Cas. 31 (Punj.), New India Corpn. v. Nandanvan Mfrs. Traders (P.) Ltd. [1983] 54 Comp. Cas. 32 (Kar.), Shenoy (U.V.) v. Karnataka Engg. Products Co. (P.) Ltd. [1983] 54 Comp. Cas. 40 (Kar.), K.S. Trivedi Co. v. Ashok Leyland Ltd. [1989] 3 Comp. LJ 351 (Mad.), Goyal Electri-Steels Casting (P.) Ltd. v. Didwana Chemicals Ltd. [1990] 67 Comp. Cas. 305 (Raj.), Suresh Shenoy v. Cochin Stock Exchange Ltd. [1989] 65 Comp. Cas. 240 (Ker.) and Mangal Finance Ltd. v. Express Confectioners (P.) Ltd. [2000] 100 Comp. Cas. 399 1 (Pat.), where the courts found that the debt was bona fide disputed by the concerned company and where the court was satisfied with the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent company as regards the claims made by the appellant-petitioner and, therefore, it cannot be said that the learned single Judge has erred in law or acted with material irregularity in dismissing the company petition at the stage of admission itself and the order made by the learned single Judge does not call for our interference. 21. The other contention of the learned counsel for the appellant that the omission on the part of the respondent company to reply to the legal notice dated 17-7-1995 tantamounts to admission of the claim of the appellant-petitioner, is not acceptable to us. The mere omission by the respondent company either to reply or to comply with the statutory notice does not mean that the company has admitted its liability. In N.L. Mehta Cinema Enterprises (P.) Ltd. v. Pravinchandra P. Mehta [1991] 70 Comp. Cas. 31 (Bom.), the respondent company failed to raise any objection to the demand notice until it filed its affidavit in reply to the petition. The court held that the failure to raise objections earlier will not affect the merits of the company s defence or constitute an estoppel against the company. In Winco Ltd. v. Sidvink Properties (P.) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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