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TMI Blog2001 (3) TMI 958X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause why the winding up petition filed under section 439 of the Companies Act, 1956 be not admitted for hearing on 9-3-2000. On 20-4-2000, Mr. R.P.S. Gulati, the Assistant General Manager entered appearance on behalf of the respondent-company and sought time to engage counsel to represent the respondent-company as well as to file written statement in response to the instant C.P. No. 47 of 2000. Eventually, Mr. Anand Chhiber, advocate was engaged by the respondent-company to defend it before this Court. Despite the fact that a large number of opportunities were afforded by this Court to the respondent-company, it failed to file any response. Eventually on 13-10-2000, six weeks further time was granted to the respondent-company to file written statement, subject to the payment of Rs. 5,000 as costs. However, on the adjourned date, i.e., on 10-11-2000, Mr. Anand Chhiber, advocate stated that he was not in an effective position to file written statement on behalf of the respondent-company, which fact was duly noticed by the Court in its order. It would be pertinent to mention that costs imposed by this Court vide order dated 13-10-2000 were not paid. 3. A large number of wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistrar of the Co-operative Societies, Punjab dated 9-8-2000. The aforesaid Shri B.K. Garg, who has filed the written statement (in response to the instant winding up petition), was authorised to do so by a communication dated 20-2-2001 by the said receivers. A copy of the aforesaid communication was produced by the learned counsel representing the receivers and has been marked as Annexure A and has been taken on record of this case. 6. Insofar as the merits of the instant winding up petition are concerned, the petitioner, i.e., Titan Industries Ltd. has claimed that an order dated 22-9-1998 was placed by the respondent-company, on the petitioner, for supply of 15050 Titan watches, to be delivered at different centres of the respondent-company. Out of the total consideration; 25 per cent was payable by way of advance and 75 per cent was payable after proof of despatch. In terms of the agreed price and the settled terms, an advance of Rs. 24,29,331 was to be paid by the respondent-company for the aforesaid 15050 watches. As against the aforesaid advance, payable, the respondent-company paid a sum of Rs. 15,00,000 vide cheque dated 22-9-1998. The remaining amount of Rs. 9,2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner claims that 7 post-dated cheques amounting to a total of Rs. 43 lakhs were given by the respondent-company to the petitioner in furtherance of its liability of Rs. 49 lakhs on account of the watches supplied. The said cheques, were again dishonoured and returned with the remarks insufficient funds . It is claimed that no payment was made, thereafter, despite earnest personal efforts by the representatives of the petitioner. 10. As a matter of last resort, a notice under section 434 of the Companies Act was addressed by the petitioner to the respondent-company. Despite its receipt no payment was made, eventually leading to the filing of the instant winding up petition. 11. In the written statement filed at the behest of the receivers (details already referred to above), the response in nutshell is to the following effect : ( i )The purchase orders placed by Ms. Nidhi Verma, Marketing Head of the respondent-Company appears to be in collusion with officials of the petitioner-Company to cause wrongful loss to the petitioner Company . In this behalf, it is stated that a first information report stands registered against the said Ms. Nidhi Verma; ( ii )Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Mr. Puneet Kansal, the learned counsel for the provisional liquidator (who has been appointed as liquidator consequent upon the winding up of the Punwire vide order dated 1-2-2001) has submitted that the order of appointment of the receiver dated 18-12-2000 flows out of the order of attachment dated 2-2-2000. It is submitted that the order of attachment dated 2-2-2000 being void , the order of appointment of the receiver dated 18-12-2000 by necessary implication must be deemed to be void . In this behalf, reliance has been placed on the provisions of section 537 and 441 of the Companies Act. The aforesaid two provisions have been extracted hereunder for the facility of reference : "537. Avoidance of certain attachments, executions, etc., in winding up by or subject to supervision of Court. (1) Where any company is being wound up by or subject to the supervision of the Court : ( a )any attachment, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up; or ( b )any sale held, without leave of the Court, of any of the properties or effects of the company after such commencem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the winding up. The word execution when used in its proper sense convey the meaning of carrying out some act or course of conduct to its conclusion. In my view, therefore, the execution of the order passed by this Court on 13-3-1995 is affected in view of the commencement of the winding up against the defendant No. 1 company, by virtue of section 537(1) read with section 441 of the Companies Act and the order dated 13-3-1995 cannot be executed without obtaining leave from Delhi High Court where winding up petition is pending. The plaintiffs cannot be granted any relief thus is this chamber summons and the chamber summons is liable to be dismissed." (p. 310) 16. Insofar as the instant case is concerned, it is submitted that C.P. No. 323 of 1999 titled as Century Steel Industries Ltd. v. Punwire Mobile Communications Ltd., which was a winding up petition filed against the respondent-company was placed for hearing before this Court on 24-12-1999. The order of attachment passed by the registrar, co-operative societies, Punjab is admittedly dated 2-2-2000. Consequent upon the passing of the order of attachment, the Deputy Registrar, Co-operative Societies, Ropar appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of section 537 and 441 cannot be deemed to be applicable in the facts and the circumstances of the instant case. In this behalf, it is submitted by him that in view of the fact that the order of attachment as well as the order of appointment of receivers have been passed under a special enactment namely Punjab Co-operative Societies Act, 1961 and the rules framed thereunder, the same have an overriding effect. It is contended that a special enactment cannot be given a go-bye vis-a-vis an enactment under the general law. It is submitted that the debt between the Punjab State Co-operative Bank and the respondent-company is liable to be regulated under the Punjab Co-operative Societies Act, 1961, specially in view of the terms and conditions agreed to between the Punjab State Co-operative Bank Ltd. and the respondent company. 19. To deal with the contention of the learned counsel representing the receivers, who has placed reliance on the provisions of the Punjab Co-operative Societies Act, 1961 and used the said legislative enactment as an impermeable shield to counter the proceedings initiated by the petitioner in C.P. No. 47 of 2000 under section 439 of the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of reference : "55. Disputes which may be referred to arbitration. (1) Notwithstanding anything contained in any law for the time being in force, if any dispute touching the constitution, management or the business of a co-operative society arises ( a )among members, past member and persons claiming through members, past members and deceased member; or ( b )between a member, past member or person claiming through a member, past member or deceased member and the society, its committee or any officer, agent or employee of the society or liquidator, past or present; or ( c )between the society or its committee and any past committee, any officer, agent or employee; or any past officer, past agent or past employee or the nominee, heirs or legal representatives of any deceased officer, deceased agent, or deceased employee of the society; or ( d )between the society and any other co-operative society, between a society and liquidator of another society or between the liquidator of one society and the liquidator of another society; such dispute shall be referred to the Registrar for decision and no court shall have jurisdiction to entertain any suit or other proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of a co-operative society . It is, thus, evident that the Punjab State Co-operative Societies Act, 1961 is referable to entry 32 in List-II (State List) contained in Seventh Schedule attached to the Constitution of India read with article 246 thereof. Entry 32 is extracted hereunder : "32. Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities, unincorporated trading, literary, scientific, religious and other societies and associations; co-operative societies." 22. Sections 433, 434 and 439 relate to the winding up of a company by a court and are contained in Part-VII of the Companies Act. Part-VII aforesaid includes the power to appoint a provisional liquidator under section 450. The provisions contained in Part-VII of the Companies Act, are referable to entry 43 in List-I (Union List) contained in the Seventh Schedule of the Constitution. Entry 43 is extracted hereunder : "43. Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies." 23. It has been held in Delhi Cloth General Mills Co. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the company court. In paragraph 9 of the preliminary objections, in the written statement filed on behalf of the receivers, it has been stated as under : "That the Co-operative Societies Act, 1961 is later and a special Act framed to regulate the provisions of the Cooperative Societies and its members including inter alia recovery of money due to a Co-operative Society from its members and this right being a special enactment and later enactment will oust the jurisdiction of a Company Court. On the basis of principle of law laid down in the recent Judgment of the Hon ble Supreme Court of India in case titled Allahabad Bank v. Canara Bank. " 25. There can be no doubt about the fact that Part-VII of the Companies Act is clearly relatable to entry 43 of List-I (Union List) of the Seventh Schedule of the Constitution of India. The aforesaid Parliamentary enactment which provides for winding up of a company including the appointment of a official liquidator is obviously within the ambit and scope of the powers vested in the Parliament. Even if it is accepted that the State legislation, i.e., the Punjab Co-operative Societies Act, had also been validly enacted under En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h section 537, the latter Act had to yield to the provisions of the former. The aforesaid position led to the conclusion that even during the pendency of a winding up petition against a debtor company, and even after a winding up order had been passed, leave of the company court is not necessary for initiating or continuing proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993. 28. The aforesaid judgment has no relevance insofar as the present controversy is concerned. The Apex Court in the aforesaid judgment had occasion to examine the repugnancy between two Parliamentary enactments. The controversy in this case, however, relates to an alleged conflict between an enactment promulgated by the Parliament on the one hand, and an enactment promulgated by the State Legislature on the other. The decision relied upon by the learned counsel is, therefore, irrelevant insofar as the present controversy is concerned, specially in view of the express mandate of article 246 of the Constitution. 29. The second submission of the learned counsel appearing for the liquidator of Punwire is that at the time of institution of the proceedings by the Punjab S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 30,01,98,734.47 paise plus interest @ 19% till realisation against respondent Nos. 1 and 2 and in favour of the applicant Bank. The applicant Bank would be within its right to proceed against respondent Nos. 1 and 2 to recover the due amount Announced." 30. Suffice it to notice that respondent No. 2, referred to above is none other than Punwire. In the detailed written statement filed by the Punjab State Co-operative Bank Ltd., it has not been expressly or impliedly denied, that the recovery ordered by the award of the Registrar, Co-operative Societies, Punjab dated 9-8-2000 includes within its ambit Punwire as well. 31. The learned counsel for the petitioner in C.P. No. 4 of 2001 on the basis of the factual position narrated above states that the award of the Registrar, Co-operative Societies, Punjab dated 9-8-2000 must be deemed to be an award obtained without contest, i.e., an award obtained at the back of the contesting parties. It is submitted that the aforesaid award cannot be made a basis of deprivation either against the respondent company or Punwire in the peculiar facts and circumstances of this case. 32. The learned counsel for the receivers has, however, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en found to be due by the arbitrator, i.e., the Registrar, Cooperative Societies, Punjab, the same could be ordered to be recovered from the entire assets of the respondent-company. In view of the conclusions drawn on the first issue, it is not necessary to again draw a fresh conclusion on the instant issue. The submissions recorded above have been noticed as they were advanced during the course of arguments. The said submissions are being rejected on account of the fact that the attachment order passed by the Registrar, Co-operative Societies, Punjab and the order passed by the Deputy Registrar, Co-operative Societies, Ropar appointing receivers have been held to be void in view of section 537; and also because the argument advanced by the learned counsel for the receivers based on the provisions of the Punjab Co-operative Societies Act, 1961 has not found favour. 35. Last of all, it is contended by the learned counsel for the petitioner in C.P. No. 4 of 2001 that 10 separate winding up petitions have been filed by creditors against debts allegedly due to them from the respondent company. All the said petitions have been filed by unsecured creditors. Besides, the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itten statement. It would be pertinent to notice that the petitioner is also a company registered under the Companies Act. Its audited accounts are statutorily furnished on an annual basis to the Registrar of Companies. Frivolous claims cannot be made by a company specially in respect of the subject-matter under deliberation in the instant case. As per the ordinary rules of pleadings unless an averment made in a petition is not expressly denied, the same is liable to be presumed to be correct. The aforesaid general principle which has also been incorporated in Order VIII rule 5 of the Code of Civil Procedure, requires this Court to presume by inference that in the absence of an express or implied denial of the claims made by the petitioner, the facts narrated in the petition must be taken to be admitted as the same have not been disputed. In view of the aforesaid presumption, it is inevitable to conclude that the respondent-company is not in an effective position to discharge its debts and in the peculiar circumstances of this case, specially in view of the fact that nothing whatsoever has been paid by the respondent-company to the petitioner despite the fact that the statutory not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng closed. (iv) The written statement filed by the receivers reveals that the assets of the company are being taken away either by CEAT Financial Services, or by the employees of the respondent-company itself, or by the public at large. If these activities, go on even a viable and profit earning company may wither away in no time. (v) At the present juncture, receivers appointed as a consequence of orders passed by the Registrar, Co-operative Societies, Punjab and the Deputy Registrar, Co-operative Societies, Ropar are holding the reins of the respondent-company, though, unauthorizedly as concluded above. It must be noticed that there was no-one to challenge either the award passed by the arbitrator or the order of attachment of the properties of the respondent-company, or even to assail the order of appointment of the receivers. Had it not been for the provisional liquidator appointed for Punwire. C.W.P. No. 139 of 2001 and C.P. No. 4 of 2001 would not even have been filed. (vi) It is disclosed in the written statement filed by the receivers that 12 teams of professionals had been appointed to assess the actual position/standing of the respondent-company. It has also been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be necessary to direct the Provisional Liquidator to provide an effective management to run the respondent-company during the pendency of the instant petition, if the records of the respondent-company reveal a favourable financial position. This additional responsibility is expressly vested on the provisional liquidator in the peculiar circumstances of this case. 42. The conclusions recorded above are delineated hereunder : (1)C.P. No. 4 of 2001 is allowed; the order of attachment of the properties and assets of the respondent-company by the Registrar, Co-operative Societies, Punjab vide order dated 2-2-2000; and the order of the Deputy Registrar, Co-operative Societies, Ropar dated 18-12-2000 vide which receivers have been appointed are quashed. (2)In furtherance of proceedings in C.P. No. 47 of 2000; the petition is admitted, and the factum of admission is ordered to be published. (3)During the pendency of C.P. No. 47 of 2000 the official liquidator attached to this court is appointed as provisional liquidator of Punwire Mobile Communication Ltd. 43. Further proceedings in C.P. No. 47 of 2000 are deferred to 6-7-2001. The provisional liquidator may file effect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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