9911796707
TMI Blog2001 (7) TMI 1205X X X X Extracts X X X X X X X X Extracts X X X X ..... he products of the petitioner-company in India under their mutual distribution agreement dated 3-9-1998 which appears to have expired on 31-3-2000. Both the parties were to abide by the terms and conditions of the said distribution agreement. The said agreement appears to have been further proposed to be modified in terms of letters dated 16-6-1999 addressed by EMI International, the principal of the petitioner-company, to the respondent company. In this proposed modification interest at the rate of 18 per cent per annum for late payments was provided. The respondents were required to confirm the said proposals. There appear to have been exchange of letters between the parties. 2. The respondents in their letter dated 4-5-2000 accepted the fact that they were liable to pay the amount of Rs. 1,51,40,590 as outstanding on 31-3-2000. However the said letter further points out that it was subject to current realities of sales return, trade receivable and amount recoverable from the petitioner-company. The respondents have therefore in their working reduced the aforesaid amount to the tune of Rs. 56,41,917.22 payable by them to the petitioners. The respondents have further assured t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter June 2000. Shri Tuljapurkar pointed out that on 4-10-2000 the respondents had sent back a truck load of material worth of Rs. 12 lakhs which his clients were not under obligation to accept and, therefore, the said amount cannot be adjusted. He has emphasised the fact from the distribution agreement that the petitioners were not bound to take back the stock from the respondents-company after 30-6-2000 and, therefore, the Petitioners were not liable to give any credit to the respondents for the goods sent back by the respondents on 4-10-2000. Shri Tuljapurkar has further submitted that under the modified agreement payment of interest was provided at the rate of 18 per cent per annum for late payments and since the respondents have made late payments the petitioners are entitled to get interest for such late payments from time to time as calculated by the petitioners. 4. Shri Tuljapurkar has taken me through the affidavit in reply filed by the respondent-company setting up its defence. Shri Tuljapurkar has pointed out that the respondent-company had no defence at all and that there was no bona fide dispute of the debt of which clear admission was given by them in their lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. According to the learned counsel, therefore, such a vague counter claim cannot be considered at all. What Chief Justice Chagla had said in the said judgment of Iron Hardware (India) Co. v. Firm Shamlal Bros. AIR 1954 Bom. 423 has been approved by the Supreme Court and it received full assent to the following statement of law laid down by the learned Chief Justice of Bombay High Court : ". . . In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party. As already stated, the only right which he has is the right to go to a Court of law and recover damages. Now, damages are the compensation which a Court of law gives to a party for the injury which he has sustained. But, and this is most important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the Court. Therefore, no pecuniary liability arises till the Court has determined th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount by a regular suit. However, he did not go into this aspect but chose to dispose of the winding up petition by dismissing the same on an erroneous basis which we have earlier indicated. If that be so, the impugned order will be required to be set aside and the petition will now go back to the company judge for reconsideration of the position and to decide whether it is required to be admitted and whether further directions after admission are required to be given." (p. 240) 5. Shri Mehta, the learned counsel for the Respondent-company has equal vehemently opposed the admission of the Petition. He has pointed out from the affidavit in reply that in fact if the accounts of both the parties are reconciled there was nothing due and payable but to the contrary it would be the respondents who would be entitled to get damages for the wrongful and injurious acts committed by the Petitioner-company causing huge losses to the respondent-company. According to Shri Mehta, though the distribution agreement between the petitioner-company was to expire on 31-5-2000 the parent company of the petitioner was in direct contact with the respondent-company and was contemplating to renew th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early admitted or liquidated. Shri Mehta has further pointed out that the petitioners have suppressed several material facts which have been brought on record on the affidavit in reply filed by the respondents. Shri Mehta has also submitted that there has been a very vast and large discrepancy between the claim put forward in the statutory notice and in the particulars of claim in the petition. Shri Mehta has further pointed out that the claim of interest is totally baseless as in the original distribution agreement there was no such condition of payment of interest on late payment. He has also pointed out that though it was proposed by the parent company of the petitioner and respondent- company had never agreed to pay any interest to the petitioner company. Shri Mehta has therefore submitted that the claim of interest is totally outside the preview of the distribution agreement. According to Shri Mehta out of the claim of Rs. 42 lakhs his clients have returned goods worth Rs. 40 lakhs and, therefore, assuming the claim of the petitioner company to be right there would be only Rs. 2 lakhs as a debt but the petitioner company has mala fide inflated the claim to show it to the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the goods returned was already adjusted and therefore the respondents cannot claim once again to adjust the said amount. I have however no doubt in my mind that the Petitioners have filed the present petition with a view to pressurise the respondent company to make payment of the demanded amount or vanish from the market. Even otherwise it appears that the parent-company of the petitioner had intention to purchase the respondent-company. In the affidavit in reply the respondent company has raised several questions of adjustments which have not been given by the petitioner-company. All these facts of allegations require evidence and they cannot be decided in a company petition for winding up. In my opinion sections 433 and 434 are not provided as a substitute or an alternative for civil suit for recovery of the debts particularly when the debts or claims are not admitted and are not crystallised and are bona fide disputed. In the present case the petitioner-company itself is not certain about its debt recoverable from the respondent-company. The petitioners have not averred or even whispered in the petition that the respondent-company has become commercial insolvent and that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted the debt to be paid to the Petitioners, they have raised the aforesaid bona fide disputes and have sought adjustments. This exercise cannot be done in this petition but will have to be done in a civil suit wherein even the question of deposit to be made by the Respondents can be considered. 7. I am fully fortified in my view that the extraordinary remedy under sections 433 and 434 is to be sparingly resorted to and not as a general provision under the general civil law. By the judgment of the Supreme Court in Hind Overseas P. Ltd. v. Raghunath Prasad Jhunjhunwalla AIR 1976 SC 565. Paragraphs 36 and 37 of the said judgment reads as under : "36. Section 433 ( f ) under which this application has been made has to be read with section 433(2) of the Act. Under the latter provision where the petition is presented on the ground that it is just and equitable that the company should be wound up, the court may refuse to make an order of winding up if it is of opinion that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. 37. Again under sections 397 and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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