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TMI Blog2009 (2) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,53,500 was payable per month towards the use of the licensed premises, the furniture, fittings, equipment, etc., therein, and the car parking spaces in the compound of the building. Section 9, clauses 5, 6 and 7 of the agreements read as under :- "SECTION 9 5. This licence is granted for a fixed period of 60 months ending 30-4-2013. The first 36 months ending 30-4-2011, shall be a lock-in-period for both parties. 6. The liability of the licensee to pay the licence fee for the entire duration of the lock-in-period and notice period of this agreement is absolute and the same shall not be varied or reduced even if any item of the said furniture, fixture, fitting or equipment is damaged, destroyed or discarded. 7. If the licensee shall terminate this agreement prior to expiry of lock-in-period or subsequent notice period then in that event the licensee shall be liable to pay to the licensor a sum equal to the balance period left of the lock-in-period or notice period licence fee. The licensor shall be entitled to recover such amount from the security deposit." 4. The petitioners paid stamp duty of Rs. 50,100 in respect of each of the agreements. The company paid a sum of Rs. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. There is a fundamental difference between an agreement coming into existence and the date for the performance thereof. Merely because obligations under an agreement are to be performed at a future date, it does not follow that the agreement has not come into existence upon the execution thereof or upon the terms and conditions thereof being agreed upon. 11. Significantly, even the company advocate's letter dated 16-4-2008, did not suggest the same. The second paragraph of the letter which is contrary to Mr. Seervai's submission, reads thus :- "As per the agreements, the term of the license would have commenced from 1-5-2008, upon us being put in possession of the premises at Solitaire 7 and 8." 12. The letter in fact admits the existence of the agreements. It correctly states that only the term of the licence would have commenced on 1-5-2008. 13. Mr. Seervai's reliance upon the company's e-mail message dated 1-5-2008 (exhibit 1 to the further affidavit filed on behalf of the company) is of little assistance to the company, in respect of the contention merely because it states that the license as contemplated under the agreements had not yet commenced. 14. I am unable, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n section 55(2) refers to contentions of fact and not of law. Construction of the terms and conditions of a contract are questions of law. A Court cannot be bound by an erroneous construction of the contract. 19. In this case, there is no dispute between the parties as to the terms of the agreements. It is not the company's case that any terms other than those contained in the said leave and licence agreement were agreed upon between the parties. In other words, the submission was not based on the existence of an independent term. The first contention raised by Mr. Seervai was based on the construction of admitted terms. I have held this construction to be erroneous. There is nothing in section 55 which remotely suggests that even an incorrect interpretation of an agreed/admitted term is binding on the licensor. 20. Mr. Seervai further submitted that even between May, 2008 and September, 2008, the prices had remained the same. Therefore, the petitioner ought to have mitigated the loss by entering into leave and licence agreements with other parties. To substantiate the contention that the prices were the same, Mr. Seervai relied upon paragraph 6 of a further affidavit filed on be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts for the sale of goods or properties. In an agreement for sale it is normally easy to ascertain the damages, if any. In the case of leave and licence agreements, it is not so. Whereas, a party may be willing to sell an asset to anyone, a party would be particular about the person with whom he enters into a leave and licence agreement. In an agreement for sale it would not normally matter who pays the consideration so long as it is paid or payment is secured. On the other hand, a party may understandably and justifiably insist on several terms in a leave and licence agreement other than the term as to the price/compensation. The choice of the licensee itself is of crucial importance to any licensor. The mere fact that a particular licensor offers a better price is not the sole consideration. The licensee may well refuse to enter into the agreement with a particular licensor for a variety of reasons, including his reputation, his financial capacity to honour the terms of the agreement throughout the tenure of the agreement and the purpose for which the premises are to be used. On the contrary, a licensor may well agree to a lower license fee for a particular licensee for a variety ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33. It is important to note in the present case that the company refused to pay not only the amount due under the lock-in clause but even the difference between the rate stipulated in the contract and a rate which may be arrived at upon termination thereof by it. There is a blanket and an absolute refusal to pay any amount on the ground that the agreement had not come into existence. This contention has already been rejected. 34. It is not even the company's case that there is no difference in the rates. It is also pertinent to note that the petitioner has in fact invited offers from third parties albeit after the filing of this petition and after the matter had been argued on an earlier occasion, but had received no offers. The company has not attempted to establish that offers would be received. By an order dated 23-1-2009, I recorded that the petitioner was agreeable to the company procuring any offer from any third party to take the premises on leave and licence basis. The respondent did not avail of this offer. 35. Thus, in the facts and circumstances of this case, the petitioner's case cannot be rejected on the ground that it did not mitigate the loss or that the loss could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is not such as to be unable to pay its debts. The petitioner's debt is an undisputed debt and, as stated in Palmer's Company Law, 20th edition, page 697, the Court will not listen to such a defence where the debt is undisputed. In the judgment delivered by me in Advent Corpn. (P.) Ltd., In re [1969] 39 Comp. Cas. 463 (Bom.), I have taken the view that once there is non-compliance with a statutory notice, and the Court comes to the conclusion that there is no bona fide dispute in regard to the petitioner's debt, the creditor is entitled to a winding up order ex debito justitiae...." (p. 476) 40. In Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125 , the Supreme Court held :- "Two rules are well-settled. First, if the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company. The Court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable (see London & Paris Banking Corpn., In re [1874] L.R. 19 Eq. 444). Again, a petition for wind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellant was liable as a debtor. In paragraph 22 of the judgment, the Supreme Court noted clause 31 of the agreement and observed that since the agreement had been cancelled the appellant, i.e., the company therein, was not liable to discharge any of its obligations thereunder. In paragraph 23, the Supreme Court held that there was a substantial dispute. (C)The doubt in this regard is set at rest as, in fact, the Supreme Court referred to the judgment in Madhusudan Gordhandas & Co.'s case (supra) and cited with approval paragraphs 20 and 21, I have quoted above. (D)Paragraph 25 in Pradeshiya Industrial & Investment Corpn. of Uttar Pradesh's case (supra) strongly relied upon by Mr. Seervai, reads as under :- "The defence of the appellant in relation to non-payment is a bona fide defence. Whatever it may be, the liability of the appellant is yet to be determined. It is in this factual background that we will deal with legal aspect of the matter. Section 433 of the Act says :- 'A company may be wound up by the Court,- (e )if the company is unable to pay its debts; . . .' From the above it follows :- (1)There must be a debt; and (2)The company must be unable to pay th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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