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TMI Blog2002 (4) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in default of payment the creditor would be at liberty to publish advertisement in daily Newspapers for the winding up of the company. 3. Being aggrieved, the company has preferred this appeal. By an order dated November 15, 1999 the appeal was admitted and operation of the impugned order was stayed on the condition that the company would furnish security for a sum of Rs. 2,89,646 by way of Bank guarantee. We are informed that the security was duly furnished. 4. In the winding up petition, the creditor made out a case which is to the following effect. 5. It was a distributor of Indian Oil Corporation. On September 16, 1997 it entered into an agreement with the company for supplying on credit basis H.S.D., M. Oil, lubricants, etc. for the tea garden of the company. The price of products supplied up to march 31, 1998 was Rs. 10,39,775.80 and the said amount was duly paid in full by the company. During the period from April 30, 1998 to September 21, 1998 it supplied products worth Rs. 11,15,676. Out of that the company paid Rs. 8,26,030 leaving an unpaid balance of Rs. 2,89,646. By letters dated September 3 and 26, 1998 it demanded the payment from the company. The Man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad never made excess payment and that the creditor had not supplied adulterated products. The letter of the company dated 6-10-1998 had also not been served and the creditor s seal as also the signature of one Ram Singh appearing thereon were fabricated. The company had sought intervention of North Bengal Dealers Association to resolve the dispute. The said association after thorough investigation had opined that the claim of the creditor for a sum of Rs. 2,89,646 was legitimate. The association by its letters dated 18-12-1998 and 7-1-1999 directed all suppliers not to supply any product to the company even against cheques. 8. By a supplementary affidavit dated 19-7-1999 the company stated that it had sent to the creditor a letter dated 7-9-1998, under registered post with acknowledgement due. Copies of the said letter and a letter dated 7-7-1999 stated to be written by the company to the postal department regarding non-receipt of the acknowledgement card, were annexed to the said supplementary affidavit. By a supplementary reply the creditor denied the receipt of the said letter and also disputed the genuineness thereof. 9. As noted herein earlier, the learned Company Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in any way. The case of the company that the creditor had supplied the products at its garden was also not accepted by the learned Company Judge on the ground that such claim was made without any particulars. The failure on the part of the company to reply to two letters dated 18-12-1998 and 7-1-1999 of the association also persuaded the learned Company Judge to turn down the case of the company. Lack of particulars in the company s affidavit-in-opposition about the point of time of its knowledge that the materials were spurious, was also noticed by the learned Company Judge. 13. Mr. Lahiri appearing for the appellant company submitted at the first instance that having regard to the position of law and the facts and circumstances of the case, the learned Company Judge was wrong in admitting the creditor s winding up petition. He had extensively taken us through the pleadings of the parties and the documents relied on by the parties in support of their respective cases. He submitted that the mate- rials on record would go to show that the company raised a bona fide dispute about the genuineness of creditors claim; and that the counter claim made by the company was neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1978] 48 Comp. Cas. 378 (Bom.). 17. The Apex Court of our country held in Madhusudan Gordhandas Co. s case ( supra ) that while dealing with a petition for winding up by a creditor the principles on which the Court acts are first that the defence of the company is in good faith and one of substance, and secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends. Again while dealing with the scope of section 433( e ) of the Act the Supreme Court held in the case of Pradeshiya Industrial Investment Corpn. of Uttar Pradesh v. North India Petro Chemical Ltd. [1994] 79 Comp. Cas. 835 (SC) that an order under clause ( e ) of section 433 was discretionary, and it was beyond dispute that the machinery for winding up would not be allowed to be utilized by a creditor merely as a means for realising his/its debts due from a company. 18. Section 433 of the Act mentions certain circumstances in which a company may be wound up by the Court and one of those circumstances as mentioned in clause ( e ) thereof is that the company is unable to pay its debts. Therefore, if a company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the creditor s own vehicles (tankers). 22. By relying on the creditor s letter dated 11-8-1998 the learned Company Judge appears to have held that once the petroleum products were taken away from the creditor s pump, there was no scope to dispute the quality and thereof by the company. The contents of the said letter dated 11-8-1998, however, do not justify the findings recorded by the learned Company Judge. The supplies, in respect of which the dispute arose between the parties, were connected with the six bills dated 24-6-1998, 18-7-1998, 24-7-1998, 6-8-1998, 11-8-1998 and 20-8-1998. It appears from the letter dated 11-8-1998 that the creditor was writing the same to the company s Managing Director regarding the procedures to check quality of petroleum products to be supplied by the creditor in future; and the letter was written as a follow up action of an earlier discussion held between the parties on 7-8-1998. It was mentioned in the said letter that regarding quality of products to be supplied to the tea garden, on the company s being dissatisfied, the company would be entitled to return the vehicle (tanker) without unloading the product. In any event, in the instant c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had denied the receipt of company s letter dated 7-9-1998. The creditor had, however, not said that it received some other postal articles from the company under registered post with acknowledgement due. The company produced a letter dated 7-7-1999, written to the Post Master of the concerned post office for supplying information about delivery of the company s said registered letter. The company stated that the acknowledgement card was not received back from the postal authority. The learned Judge had brushed aside the company s letter to the Post Master on the ground that it should have been written to the Post Master General. It has remained unclear to us as to why the letter was required to be written to the Post Master General and not to the Post Master of the concerned post office. For the simple reason that the creditor denied receipt of said registered letter and the company failed to produce the acknowledgement card, in our view, it cannot be said with certainty that the said letter was not received by the creditor. On the contrary it should be held that the postal receipt and the letter to the postal authority were enough prima facie proof adduced by the company of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gations made by the parties regarding this document were serious in nature. If the company s version was correct, then it would have led to a finding that the creditor filed the petition dishonestly and with improper motive. On the contrary, if the creditor s version would have emerged to be the correct one, then the company besides facing winding up order would have faced other consequences as well. The gravity of the dispute was such that, in the absence of the other evidence, only on affidavit evidence in the nature of oath versus oath, it was not at all safe to draw a just conclusion on such disputed fact. In our view, there was no scope to ignore this aspect while dealing with the petition presented by the creditor, particularly having regard to the facts that the Court was exercising a discretionary power and that the case of one of the parties could be found to be false only after a full-scale trial in a civil suit. 27. The contents of the association s letters dated 18-12-1998 and 7-1-1999 read with the creditor s letter and particularly letter dated 11-8-1998 prima facie prove one fact that the company was disputing its liability on account of the products, related t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt should not interfere. 31. We are unable to accept Mr. Bose s contention. The appeal Court s power to interfere with such an order cannot be restricted to the formula of "patent error" only for the simple reason that in an appeal the appellant has the right to challenge the impugned decision both on facts and in law, unless specifically restricted by Statutory provision. As for the instant case, the order is, however, patently erroneous. The learned Company Judge applied total wrong tests to ascertain whether the company s defence was bona fide or not. The Company was required to adduce only prima facie proof of the facts on which its defence depended and not irrefutable proof. The learned Company Judge declined to accept proof of defence adduced by the company as they did not emerge irrefutable. An order admitting a winding up petition, being fraught with serious consequences, as far as the company is concerned, does not wear a protective shield of the shape as visualized by Mr. Bose. 32. For the reason recorded hereinabove we do not think the respondent creditor s petition for winding up merited admission. Accordingly the impugned order is set aside. The present ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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