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TMI Blog2008 (1) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... ,50,000 equity shares of Rs. 100 each. It was incorporated with the object of manufacturing Ethanol from sweet sorgum, fruits and grains, and marketing Ethanol, rectified spirit, extra neutral alchohol, beer and other essences used in liquor and allied industries. The two petitioners allege that respondent company is unable to pay its debts to them even after issue of notice under section 434 of Companies Act, and therefore, requires to be wound up. 2. In support of the case, two petitioners - husband and wife; allege that they lent a sum of Rs. 2,07,96,031 and Rs. 66,70,000 respectively to respondent company. This was admittedly given as an unsecured loan. They had, however, option to convert unsecured loan into shares of respondent company. It is also alleged that respondent promised to allot 31 per cent shares to first petitioner and 10 per cent shares to second petitioner. They were also, as alleged, appointed as Executive Director and Director of respondent company respectively. In addition to unsecured loan, petitioners allegedly gave guarantee on behalf of respondent company to Syndicate Bank, Sanga Reddy Branch for loan facilities availed by respondent company. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent company. The allegation that petitioners gave unsecured loans and they are unsecured creditors is denied. The amounts allegedly paid were towards share application money. The amounts are coocked up amounts and they are not true. The unsecured debt is not clubbed with share capital in the Balance Sheet. The petitioners are trying to mislead the Court by calling themselves as unsecured creditors by invoking section 433 of Companies Act. The contention that petitioners gave unsecured loans is belied by their own documents including the letter addressed by them to Syndicate Bank, Sanga Reddy. As per the report of the statutory auditors, dated 31-3-2005, respondent company did not take or grant any secured/unsecured loans from companies or individuals during financial year 2004-05. As per the record and certificate issued by Syndicate Bank (secured creditor), first petitioner brought an amount of Rs. 88,00,000 on three different dates and diverted these payments to M/s. Special Tech Equipment Private Limited (STEP) though RPS did not purchase anything from them. The operation was carried out meticulously and those amounts diverted to said company were included in the account, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohn Paterson Co. (India) Ltd. v. Promod Kumar Jalan [1983] 53 Comp. Cas. 255 (Cal.) and submits that share application money is in the nature of debt of the company, and therefore petitioners being creditors can maintain the company petition. He also submits that when admittedly shares were not allotted to petitioners, petitioners now are entitled for refund paid money. Respondent company failed to discharge debt and it is liable to be wound up. Per contra, learned counsel for respondent submits that a person who applies for the shares, whether he is a Director or an outsider cannot be treated as debt. Share application money cannot be equated to debenture amount, and therefore company petition would not lie when the applicant for shares seeks winding up. He secondly submits that whether petitioners paid amount towards share application money is itself in dispute. Petitioners diverted funds for unauthorized payments and therefore, unless the account is settled, they cannot claim refund of the amount. According to learned counsel, petitioners have taken inconsistent stand with regard to nature of the contribution allegedly made by them and in any event as the Board of Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, - ( a )by the company; or ( b )by any creditor or creditors, including any contingent or prospective creditor or creditors; or ( c )by any contributory or contributories; or ( d )by all or any of the parties specified in clauses ( a ), ( b ) and ( c ), whether together or separately; or ( e )by the Registrar; or ( f )in a case falling under section 243, by any person authorized by the Central Government in that behalf. (2) A secured creditor, the holder of any debentures (including debenture stock), whether or not any trustee or trustees have been appointed in respect of such and other like debentures, and the trustee for the holders of debentures, shall be deemed to be creditors within the meaning of clause ( b ) of sub-section (1). (3) A contributory shall be entitled to present a petition for winding up a company, notwithstanding that he may be the holder of fully paid-up shares, or that the company may have no assets at all, or may have no surplus assets left for distribution among the shareholders after the satisfaction of its liabilities. (4) A contributory shall not be entitled to present a petition for winding up a company unless - ( a )either the nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even (for a public company) and below two (for a private company), petition cannot be presented by contributory. 10. The term creditor means a creditor to whom money is owed by the company whether he can claim immediate payment of debt or whether he has right to demand payment is deferred by an agreement with a company to future date ( See Guide to the Companies Act by A. Ramaiya, Sixteenth Edition, 1998, Part II). A person who has a pecuniary claim against company, Central Government, State Government, Municipal authority to whom tax is due, a receiver of creditors properties, a guarantor of company s debt, a holder of bearer debenture have been held by the Courts to be creditors. A person who has become bound by a Scheme sanctioned under sections 391 to 395 of Companies Act has been held as incompetent to file a petition for winding up. Similarly unless shares in respect of which a person is contributory holds shares at least six months during eighteen months before commencement of winding up, a petition cannot be presented. Sub-section (8) of section 439 of Companies Act provides important guidelines to the Court. It is to the effect that unless in the opinion of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date. But an applicant for debentures who made an application pursuant to an invita- tion of the company and who is not yet allotted debentures, cannot be treated as creditor. 13. In John Paterson Co. s case ( supra ), Promod Kumar Jalan paid a sum of Rs. 1,70,000 to the company repayable on demand at 18 per cent per annum. The amount was not paid. John Paterson denied receipt of payment. Subsequently, they admitted that the amount was received in respect of 170 debentures of Rs. 1,000 each. Initially, company petition was directed to be advertised. John Paterson Co., moved an application for stay inter alia contending that amount was received towards payment of debentures and that debentures were issued to Jalan and therefore, the company petition would not lie. Calcutta High Court came to the conclusion that there is a dispute as to whether the company issued debentures or not, but found that even if the debentures were issued, the company did not pay interest on debentures and therefore, they are unable to pay the debt and accordingly refused stay and confirmed advertisement of petition for winding up. The relevant observations made therein are below: "Assuming the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The money is treated as share application money and returned when the shares are not fully allotted or partly allotted. Therefore, the applicant is only entitled for refund of money. He cannot be given locus as creditor to file a petition under sections 433( e ) and 434(1)( a ) read with section 439(1)( b ) of Companies Act. 16. In this case, respondent has raised a bona fide dispute with regard to payment of money by petitioners as alleged, with regard to their allegation that money was given as share application money as unsecured creditors and with regard to utilization of amounts by petitioners. It is a bona fide dispute regarding the alleged debt. Petitioners, therefore, cannot be said to have proved prima facie case for admitting the winding up petition. 17. According to learned Counsel for respondent, an ascertained and undisputed debt is only criterion for exercising jurisdiction under section 433( e ) of Companies Act. The law is well-settled that a winding up petition is not a ground to enforce payment of a disputed debt when the respondent bona fide demurs the debt. [ See Bombay Glass Blowing Industries v. Bio Vaccines (P.) Ltd. 1998 (1) ALD 390, K ..... X X X X Extracts X X X X X X X X Extracts X X X X
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