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TMI Blog2007 (9) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... with sections 433( e ) and 434 of the Companies Act, 1956, for winding up of the present appellant-company and directing the advertisement of such petition. The present respondent had filed such company petition. 2. The appellant-company was initially incorporated as a private limited company, which was subsequently converted to a public limited company. The present respondent (the petitioner in the company petition) is an international firm of aviation consultants. The appellant-company, with a view to start business relating to aviation, had engaged the present respondent as consultants since 1992. For the purpose of convenience, the respondent, who had filed the company petition for winding up, is referred to as "the petitioner" and the present appellant is referred to as "the company". 3. According to the case of the petitioner, the services of the petitioner were availed by the company as consultants. The terms reflected in the correspondence between the two were accepted as apparent from the confirmation letter dated 3-5-1993. The rate of consultancy fees had been fixed as per the letter of the company dated 12-4-1993 and the reply of the petitioner dated 13-4-1993. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the fact that the petitioner was engaged as an air travel consultant through the letter of confirmation dated 3-5-1993, has been admitted. Nevertheless, it has been stated : "12. . . . It is false to allege that the consultancy fees was finalised by the parties as set out in the respondent s letter dated 12-4-1993, and the petitioner s reply dated 13-4-1993 . . ." 8. It has been further stated : "12. . . . The respondent states that while it is true that the services of the petitioner were engaged by the respondent to negotiate on their behalf with Aircraft Financing and Trading BV and United Airlines, by their letter dated 17-1-1997. The respondent had made it very clear that they would pay a sum of US dollars 10,000 whether the deal is successful or not and pay additional performance payment of US dollars 50,000 per aircraft if the deal is successful. The respondent states that the petitioner failed to settle disputes that arose between the respondent and the Air Financing and Trading BV and United Airlines. Both Air Financing and Trading BV and United Airlines have filed proceedings in this Hon ble Court. The respondent states that inasmuch as the petitioner had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that a petition for winding up by a creditor can be entertained and admitted and advertisement can be issued only if there is prima facie case to come to the conclusion that there is a debt due from the company to the creditor and the company neglects to clear such debt and where there is a bona fide dispute relating to the liability of the company itself, such proceedings should not be initiated only with a view to recover the money claimed by the creditor. It has been submitted by him, in the present case, the company had raised bona fide dispute regarding the amount claimed by the petitioner and, therefore, the learned Single Judge was not justified in admitting the company petition and directing publication of the advertisement. 14. Learned counsel appearing for the respondent has submitted that the materials on record clearly indicate that the company had failed to pay the dues of the petitioner, in spite of several opportunities and, therefore, the learned Single Judge was justified in admitting the company petition and directing publication of the advertisement. He had further stated that even during the pendency of the appeal, the company had failed to pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee Tweeds Garages Ltd., In re [1962] 32 Comp. Cas. 795 (Ch. D.); 1962 Ch. 406). The principles on which the Court acts are first that the defence of the company is in good faith and one of substance, 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. " [Emphasis supplied] (p. 2704) 17. Learned counsel appearing for the appellant has also placed reliance upon the decisions of the Supreme Court in Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 456 and Pradeshiya Industrial Investment Corpn. of Uttar Pradesh v. North India Petro Chemical Ltd. [1994] 79 Comp. Cas. 835 ; [1994] 3 SCC 348 in support of his contention that where there is a bona fide dispute relating to debts, recourse to winding up proceedings may be inappropriate. The decision of the Supreme Court in Amalgamated Commercial Traders (P.) Ltd. s ( supra ) was relied upon in the subsequent decision of the Supreme Court in Madhusudan Gordhandas Co. s case ( supra ). The subsequent decision of the Supreme Court in Pradeshiya Industrial Investment Corpn. of Utta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some consideration because our co-operation should not stop with this. We want to have long-term relation with you. Moreover once you are in India, you can have many other opportunities also. Keeping all these factors in mind, please give your best offer for second stage immediately so that we can go ahead in full swing . . . ." 21. It is also admitted that the petitioner replied by letter dated 13-4-1993. The relevant portion is as follows : " Fees and expenses. Consulting fees will be at a rate of either : ( a )dollars 740/day for Jonathan M. Gordon ; or ( b )dollars 3,135/week for ABC Consultants on the basis of 6 days on, one day off. Expenses whilst away from UK base on NEPC business : ( a )Hotel accommodation in five star. ( b )All subsistence. ( c )Air travel. ( d )All out of pocket expenses whilst away from UK base on NEPC business. ( e )Professional disbursements as deemed necessary. Payment terms A dollars 20,000 retainer (u-front payment deposit) would be required. Invoices would then be presented monthly in arrears for all fees and expenses payment required within seven days of invoice. As involvement diminishes the retainer would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son I have also shown 1995 consultancy and expenses to reflect the reduction this year, particularly after our talk in August. With all inputs considered your account is currently dollars 289,912 in debt. My bank overdraft is currently pounds 148,300 overdrawn which is US dollars equivalent to dollars 244,695. The situation is dire." It is also to be noticed that along with such a letter, the break-up had been given. 26. At this stage, it is appropriate to recollect that as per the letter dated 13-4-1993, which was the offer of the petitioner and apparently accepted by the appellant on 3-5-1993, it had been indicated that invoices would be presented monthly in arrears for all fees and expenses and payment should be made within seven days of invoice. Even though it is being argued in the course of hearing of appeal that mere raising of invoices would not indicate existence of debt or payment of amount, it must be noticed that there is no whisper anywhere that the company had uttered or raised any protest regarding the claim made by the petitioner. Even subsequently, when a specific notice was served, no specific reply was given, even though the contents of the notice have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the subsequent invoices, which have not been explained. However, as observed by the Supreme Court in the decision reported in Madhusudan Gordhandas and Co. s case ( supra ), if the dispute is relating to the exact amount payable, still it can be said that there is a debt outstanding. Learned counsel for the appellant has placed reliance upon subsequent decision of the Supreme Court in Pradeshiya Industrial Investment Corpn. of Uttar Pradesh s case ( supra ) and contended that the term "debt" means that an ascertained sum payable. The petitioner has quantified the amount which is payable. The claim is not relating to any unliquidated damages. The admitted correspondence clearly indicates that for the consultancy service rendered from January to October, 1996 the amount was outstanding. The petitioner was repeatedly asking about the payment of such amount but the appellant-company has maintained a sphinx like silence. In such a background, the ratio of the subsequent decision of the Supreme Court relied upon by the appellant-company is not applicable to peculiar facts of the present case. 30. Learned counsel for the appellant has also pointed out that so far as the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch an on-going company. At the present stage, we are only concerned with the question as to whether the learned Single Judge was right in admitting the company petition and directing issuance of advertisement. The order itself does not amount to a direction regarding liquidation. It is only initial, albeit an important step. At the stage of considering these aspects, obviously, the Court is only required to come to a prima facie conclusion regarding the existence of debt and neglect on the part of the company to pay such amount in spite of statutory notice. It is no doubt true that by publication of the advertisement the company s reputation is likely to be tarnished and, therefore, the company court requires existence of a strong enough prima facie case for initiating such proceedings. 33. In the peculiar facts and circumstances of the present case, we find that the learned Single Judge, after taking into account the relevant facts and circumstances, has admitted the company petition and has directed for issuance of the advertisement. Such an order is essentially discretionary in nature and in the absence of strong enough reason, we are not inclined to differ from such co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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