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TMI Blog2002 (10) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... that the respondent- company refunded a sum of Rs. 2 crores and requested the petitioners to continue the said portfolio deposit in respect of the balance amount of Rs. 3 crores for a further period of one year. The said relationship between the two began in February, 1993, and the refund of Rs. 2 crores was made in April, 1994. On May 19,1994, the respondent-company paid to the petitioners a sum of Rs. 22 lakhs towards part payment of the income/returns accrued on the funds deployed. It further appears that the respondent-company had confirmed on June 30,1994, and August 31,1994, that there was a balance sum of Rs. 3 crores lying as deposit under the scheme, it further appears that on October 3, 1994, the respondent-company paid to the petitioners a sum of Rs. 51,50,351 towards part payment of the income/returns accrued on the funds deployed. It is the case of the petitioner-company that by a letter dated October 8, 1994, the respondent-company had informed the petitioners that the company had worked out the returns on the sum of Rs. 5 crores accrued in favour of the petitioners for the year 1993-94 being sum of Rs. 88,22,465. On March 16, 1995, the balance sum of Rs. 3 crores wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 90,62,269 in para. 4 of their affidavit dated September 25, 2002. I have heard both learned counsel for their parties at length. Shri Sekseria for the petitioner submitted that the debt is an ascertained and admitted sum and since the company has failed and neglected to pay its debts, and has lost its substratum it deserves to be wound up under section 433( e ) and ( f ) read with section 434(1)( a ) of the Companies Act, 1956. He has also submitted that the company has incurred net loss to the tune of Rs. 36.10 crores and that its liabilities have for exceeded its assets. He pointed out that its total loans during the financial year 2001-2002 are Rs. 86 crores as against the total net assets and investments (Rs. 9.5 + Rs. 16 crores) are Rs. 25.5 crores only. He further submitted that its financial position is worsening day-by-day as every year there are net losses in addition to the accumulated losses. He has, therefore, urged that the company has not only failed and neglected to pay the debt of the petitioner but has also lost its substratum and its net worth has eroded to an irretrievable extent and, therefore, according to him it would be just and equitable to order wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has paid the whole amount of returns on the initial deposit of Rs. 5 crores as also on the balance of Rs. 3 crores. From the very nature of the investment in the share market, there cannot be a fixed or determined amount of profit or return on the investment as it would depend upon the fluctuations in the share prices. It is totally unreasonable to construe the letters written by the company in the normal course of the business as a statute and to tie down the company on the basis of language loosely written by the writer. It is unthinkable and unreasonable to construe that the company had agreed in its two letters dated October 8, 1994, that it would pay the return on the basis of Rs. 5 crores though it had the balance of deposit of Rs. 3 crores. If in fact there was such an agreement both the parties would have to adduce oral/documentary evidence. The company court cannot enter into such a controversy to determine the amount of debt when the petitioner has failed to establish the amount of debt payable by the company. According to the company it has paid the whole amount of the returns accrued on the amount of Rs. 5 crores and thereafter on the balance of Rs. 3 crores proportion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find full support in my view from the judgment of the Madras High Court in the case of G. Loganayaki [1979] 49 Comp. Cas. 644 , 648 as under: "In any event, it is said that the claim is not only premature but the debt is also disputed and if at all the debt is refundable, it could only be after a full and complete investigation into the rights and obligations of the parties, as reflected in the chit fund agreement, and, in that view, the company court cannot maintain this petition and adjudicate on that main issue which is the foundational issue for further exercise of the jurisdiction to wind up a company incorporated under the Act. It is fundamental that in order to sustain a case for winding up of an incorporated company on the ground that it is unable to pay its debts, the debt which is the substratum of the action either under section 433( e ) on its own or under section 433( e ) read with section 434(1)( a ) of the Act is not a disputed debt or a debt which could be found after an investigation and adjudication on the claims made inter se between the so called creditor and the debtor company. Any such investigation which would involve the determination of the quantum a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (page 186): It is the case of the creditors that the company is unable to pay its debts and that it is just and equitable that the company should be wound up. The circumstances call for no proof of inability on the part of the company to pay its debts as such inability is self-evident on the admitted facts. There are huge debts, secured as well as unsecured, which, as matters stand, are far beyond the means of the company to meet. Even so, a court will exercise a sound discretion in deciding whether to wind up a company or not and in doing so consider many relevant factors. It may be that despite the inability to pay its debts, a company has still prospects of coming back to life and if the court is told of any specific proposal, which in the opinion of the court is likely to materialise, the court will be inclined to give a chance to resurrect the company. It should be the policy of the court to attempt to revive though at the moment the company may not be solvent and may not be able to meet its obligations to its creditors. But this should be only if it is shown that there is reasonable prospect for resurrection and survival. It may be easy for a court when once it is shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the company. It would not, therefore, be right to wind up the company merely because the company is unable to pay its debts so long as it can be resurrected by a scheme or arrangement." The decision in the case of Bombay Cotton Manufacturing Co. Ltd., In re [1909] 11 BLR 1302 relied on by Shri Sakseria has neither relevance nor application to the present case where the company has bona fide disputed the alleged debt on the solid foundations. Similarly, the judgment of the Kerala High Court in the case of M. V. Paulose [1992] 73 Comp. Cas. 362 does not assist the petitioner as in that case debt was admitted but dispute was in respect of payment made to the company or to its director personally. The facts are different in our matter. Even the third judgment of the Delhi High Court in Indana Spices and Food Industries Ltd.'s case [1997] 89 Comp. Cas. 570 will not help learned counsel as in that case the plea of limitation that the debt was time-barred was viewed as not bona fide . The debt was admitted by the company but it was pleaded that there was sufficient security therefor. In our case the debt is not admitted but is bona fide disputed. In the aforesaid circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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