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TMI Blog2008 (7) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... be wound up. The official liquidator attached to this Court is appointed as the liquidator in respect of the respondent-company. He shall forthwith take over all the assets and records of the respondent company and proceed according to law. Citation shall be published in the ‘Statesman’ (English) and ‘Jansatta’ (Hindi) for 8-8-2008. Petitioner may take steps accordingly. - COMPANY PETITION NO. 66 OF 2006 CO. APP. NO. 508 OF 2007 - - - Dated:- 2-7-2008 - VIPIN SANGHI, J. P.V. Kapur, Amit Prasad and Chandra Shekhar for the Petitioner. Harish Malhotra and Sunil Kataria for the Respondent. JUDGMENT 1. The petitioner seeks the winding up of the respondent-company by invoking sections 433( e ), 434 and 439 of the Companies Act, 1956 (hereinafter called the Act ) on the ground that the respondent is indebted to the petitioner to the tune of Rs. 57,42,572.41 besides interest, which the respondent-company is unable to pay despite service of a statutory notice. 2. As per the averments contained in the petition, the petitioner M/s. Paharpur 3P (hereinafter called the petitioner ), is a division of M/s. Paharpur Cooling Towers Ltd. and is in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent was forced to stop taking regular supplies of the packaging materials from the petitioner. The solitary exception was the supply of packaging material in May, 2005 for a minuscule amount of Rs. 4.24 lakhs, that too, after a lot of persuasion and assurances as to the quality of material given by the petitioner, but even then the packaging material was of inferior quality and suffered from all sorts of shortcomings which were noticed in earlier supplies. No order was placed upon the petitioner subsequent to May, 2005. 4. It is further averred that the product of the company was a mouth freshner for human consumption and thus the inferior and defective quality of the product was intolerable. Since the petitioner supplied inferior quality material, the company suffered huge losses of goodwill and monetarily as well. Till 31-3-2006, the respondent had received materials returned from 10 of its clearing and forwarding agents (C and F Agents) and the company has raised a debit note to the tune of Rs. 68,00,985 on the petitioner (Annexure A-1 to the reply). Detailed summary of materials allegedly returned to the company along with memos from C and F Agents, detailing the qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23-1-2006 is forged and fabricated, the petitioner has stated that the same is genuine. Reference is made to another letter dated 4-8-2005 bearing reference No. DCC/ND/2005-06/3 written by Shri Amar Sinha, director of the respondent-company and two other letters dated 11-4-2005 and 31-12-2004 issued by the authorised signatory of the respondent-company on similar type of letterhead as the one on which the balance confirmation certificate was issued by the respondent. So far as the stand of the respondent that it never had any employee by the name of Sidharth Nanda is concerned, the petitioner states that this plea of the respondent is false. This is clear from a bare perusal of the sales tax form dated 16-12-2005 which has been issued on behalf of the respondent-company by the same Mr. Sidharth Nanda. From this it appears that even before the Sales Tax Authorities, Mr. Sidharth Nanda is declared to be the authorised signatory of the respondent-company. Copy of the said sales tax form dated 16-12-2005 has been filed on record with the rejoinder. In response to the stand of the respondent that there is no designation as Senior Officer Accounts in the respondent-company, the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d invoices is not in dispute. The justification given by the respondent for the non-payment of these invoices in full is that the materials supplied by the petitioner were defective and substandard, which resulted in the product packaged by the respondent from suffering various defects such as seepage of moisture into the product, loss of flavour and freshness, the product becoming rotten and sticking together thereby rendering it unfit for human consumption. 12. Therefore, it needs to be examined whether there is a bona fide dispute raised by the respondent-company, i.e., whether any material placed on record by the respondent to even prima facie conclude that the respondent has raised a defence which requires a trial, i.e., whether any complicated and disputed questions of fact arise which may dissuade the Court from exercising its jurisdiction under section 433/434 of the Act. It also requires consideration whether there is any undisputed or undisputable debt owed by the company to the petitioner in excess of Rs. 1 lakh, which the respondent has failed or neglected to pay despite service of a notice under section 434 of the Act on the registered office of the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the aforesaid communicated dated 11-4-2005 on 15-4-2005. The petitioner stated that Rs. 83.18 lakhs was outstanding as on 31-3-2005 and not Rs. 80.97 lakhs as claimed by the respondent. A copy of the ledger pertaining to the respondent was also sent by the petitioner. The aforesaid amount of Rs. 83.18 lakhs was net of a credit of Rs. 1.78 lakhs towards TDS, the certificates for which were also demanded by the petitioner. The petitioner also stated that for future supplies they would need immediate payments and could not provide further credit to the respondent since their cash flow had been severely hit due to overdues of Rs. 83.18 lakhs, in addition to interest cost thereon. The respondent sent another communication dated 5-7-2005 to the petitioner by e-mail. The same was sent by Mr. Amar Sinha, Director of the respondent-company. In this e-mail communication he, inter alia, stated : With regard to old outstanding, as I have explained to you earlier we are in the process of taking stock of our commitment and liabilities and once the process is completed we shall draw up a schedule for payment of our creditors. With regard to the current supplies he confirmed that the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials which allegedly caused losses and damages to the respondent, acknowledge and appreciate the cooperation extended by the petitioner to the company when it was going through difficult times. 20. From the communication dated 4-8-2005 and 2-1-2006 of Mr. Amar Sinha, the real reason for non-payment of the dues of the petitioner comes to the surface. The non-payment of the dues owed by the respondent to the petitioner was not on account of inferior or defective quality of the packaging material supplied by the petitioner, but on account of respondent s own financial difficulties. It also appears from the entire correspondence that the non-supply of packaging materials by the petiti-oner to the respondent-company after December, 2004, with the excep- tion of one supply in May, 2005 was not on account of the respondent-company not desiring to procure any further supplies from the petitioner, but on account of the respondent not being in a position to make payment on cash down basis, and the reluctance of the petitioner in taking any further exposure from the respondent-company. 21. Let me now deal with the documents sought to be relied upon by the company to substantiate its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the petitioner; were all damaged and defective on account of the inferior quality of the packaging material supplied by the petitioner. No independent report of any examiner or expert in the field has ever been produced by the respondent to substantiate its highly belatedly taken stand that the packaging materials supplied by the petitioner were defective or of inferior quality. In this regard reference may also be made to the solemn statement made by Shri Yogender Goel son of Shri Gopal Das Goel in his cross-examination in a suit filed by the respondent against the petitioner for recovery of an amount of Rs. 10,58,413. The petitioner has filed on record an additional affidavit dated 25-5-2007 along with a copy of the said statement of Shri Gopal Das Goel. During his cross-examination Shri Yogender Goel has stated that he was appointed as Senior Account Executive with the respondent-company in July, 2003 and was subsequently promoted to Chief Account Executive. In his cross-examination Mr. Goel, inter alia, states that the company s quality control staff has informed him about the defects in the lamination/packaging material supplied by the petitioner herein. He stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poor quality of the packaging material verbally. With regard to the issuance of the debit note Mr. Goel stated that the same has been sent through courier, but admitted that the courier receipt had not been placed on record. Pertinently, the same had not been placed on record even in these proceedings. He admits that the amount payable to the petitioner herein by the company was Rs. 57,42,572. However, the cost of the defective goods to the tune of Rs. 68,00,985 had been debited to the petitioner and consequently, he claimed that the company was entitled to receive Rs. 10,68,413 from the petitioner. He admits that mishandling of packaging machine leads to defective packaging. 23. The respondent-company filed Company Application No. 574/2007 under Rule 9 of the Companies (Court) Rules, 1959, to place on record 4 confirmation letters from C and F Agents in support of its defence with regard to the inferior quality and defective packaging material supplied by the petitioner. The 4 letters placed on record are dated 13-4-2007, 22-2-2007, nil and 19-3-2007. Firstly, it appears that all these letters are of dates well after the filing of the winding up petition. Secondly, and even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation certificate dated 23-1-2006 attributed to the respondent-company, once again I find that there is no reason for the Court to conclude that the same is forged and fabricated and that the same is not genuine. The petitioner has placed on record its communication dated 4-1-2006 issued to the respondent calling upon the respondent company to provide the balance confirmation certificate. From the copy of the said communication placed on record, it appears that the same was received and acknowledged with the seal of GTC Industries Limited at 8B, Vandana Building, 11, Tolstoy Marg, New Delhi-110001. To dispute the authenticity of the said balance confirmation certificate, the respondent has raised various pleas. Firstly, it is contended that the respondent never had any employee by the name of Sidharth Nanda at any point of time. In response to this averment, the petitioner has produced, along with its rejoinder, copy of the Sales Tax form supplied by the respondent-company bearing Serial No. MAH/01/6420846 dated 16-12-2005. The said form has been signed on behalf of the company by Sh. Sidharth Nanda, who is described as the authorised signatory. Accompanying the form is a tabulati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under his authority. If the respondent-company had the requisite resource and influence to obtain Mr. Nanda s appointment letter and the Form No. 16AA issued to him by GTC Industries Limited for the purpose of producing the same in these proceedings, it certainly could have obtained an affidavit to that effect from Mr. Nanda. When Mr. Nanda himself, to whom the document is attributed, is not disputing the fact that he had issued the same, it does not lie in the mouth of the respondent company to label the same as a forgery and fabrication. 27. The other contention of the respondent company to challenge the authenticity of the balance confirmation certificate is that the company which was a tenant in Flat Nos. 401-405, Tolstoy Marg, New Delhi, had vacated the same on 15-9-2005 and the said certificate is stated to have been issued on 23-1-2006, on a letterhead, which contained the address of the company at Tolstoy Marg and, therefore, did not reflect the correct address of the respondent-company. In support of this submission, a host of documents have been filed to show that the respondent-company had, in fact, vacated the premises situated at fourth floor, Tolstoy House, 15-17, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly due as on 31-3-2005 came to be settled. Interestingly, in the balance sheet as at 30-6-2006, neither the amount owed to the petitioner is reflected, nor the so-called amount claimed from the petitioner towards losses and damages to the tune over Rs. 10 lakhs is reflected. Therefore, the name of the petitioner is not even reflected in the list of trade debtors as on 30-6-2006. From the aforesaid facts and circumstances, I am reasonably convinced that the balance confirmation certificate does not appear to be a forged and fabricated document and the same is genuine and has, in fact, been issued by the respondent company. 29. With regard to the issuance of the debit note of Rs. 68,00,985 by the respondent company on 31-1-2006, learned counsel for the petitioner has brought to my notice another important and interesting aspect. The respondent has placed on record along with the said debit note of Rs. 68,00,985 what it claims to be a statement showing the details of the production of Chabaaza with the petitioner s laminates and their market return on record. A perusal of the said tabulation shows that there are 22 transactions which, according to the respondent company have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se defence. 31. Learned senior counsel appearing for the petitioner has also drawn my attention to the auditors report in respect of the balance sheet of the respondent company drawn up as at 31-3-2004. The auditors M/s. Batliboi and Associates have stated that the company has incurred losses of Rs. 40,61,13,000 during the current year resulting in accumulated losses of Rs. 44,28,27,000 as at 31-3-2004, which has eroded its entire net worth. In the same report it is also stated that the company s accumulated losses at the end of the financial year are 50 per cent of its net worth. The company has incurred cash losses during the year and the immediately preceding financial year. The profit and loss account of the company for the year ended 31-3-2004 shows that the nominal value of its shares of Rs. 10 was only Rs. 0.02 reflecting the extremely poor financial health of the respondent company. The auditors report for the year ending 31-3-2005 also discloses that the company has incurred losses of Rs. 47,85,90,000 during the current year resulting in even higher accumulated losses of Rs. 92,14,17,000 as at 31-3-2005, which has eroded its net worth. Further the company projected c ..... 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