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TMI Blog2009 (3) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... The company had agreed to pay interest at the rate of 15 per cent per annum. Thereafter on a request made by the company a further sum of Rs. 86,91,000 was paid on February, 2002, as temporary accommodation. A sum of Rs. 5,49,400 was repaid by the company on 24-4-2002. Thereafter, on 26-8-2002 a further payment of Rs. 70,000 was made to the company again as temporary accommodation loan. Over a period of time the company requested for further amounts as temporary accommodation loan which were accepted by the appellant. Consequently, between 3-1-2003 and 17-10-2003 the appellant had paid various amounts of money from time to time to the tune of Rs. 81,91,000. From time to time the company made part payments of small sums of money amounting to Rs. 49,400. Therefore, on the date of presentation of the winding up petition the outstanding was of Rs. 81,41,600. On the aforesaid amount the company was liable to pay interest in the sum of Rs. 34,17,925.86 till 19-11-2005 at the rate of 15 per cent per annum as agreed by and between the parties. The appellant has failed to repay the aforesaid amount in spite of repeated requests, reminders and personal follow ups by the representatives of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gedly done by Mr. Harsh Bajoria for adjustment of the profits of his other companies to evade tax and to play a fraud on the authorities concerned. It is also stated that Mr. Harsh Bajoria was trying to launder his money through the company's accounts which were opened, maintained and operated by Mr. Harsh Bajoria, his son Mr. Shalakia Bajoria and his other employees. Mr. Harsh Bajoria did not even stop at this. He had even passed journal entries between the other companies managed and controlled by him and the company so as to create a huge debt in the books of the company. This was done, so that Harsh Bajoria could siphon off the money from the companies owned and controlled by him. When the true state of affairs of the company came to the notice of the appellant, Mr. Harsh Bajoria was informed that, in view of the grave situation the company may be constrained to initiate legal proceedings against him. It is also the case of the company that the claim made by the appellant is a part of the money syphoned off fraudulently by Bajoria. The amounts taken from the appellants had been used for payment to Fast-track Real Estate (Rs.56,80,000) and Mitsubishi (Rs. 22,90,000). All the thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory in respect of the Bank accounts at Central Bank of India even at the time the supplementary affidavit was affirmed. It is further pleaded that upon taking up the management of the company it was discovered that compliance certificate had not been filed since 2002. Numerous other irregularities were discovered, details of which are pleaded in the affidavit. 6. The appellant submitted that the pleadings in the supplementary affidavit are wholly unbelievable. The suit had been filed only to ward off the proceedings initiated by the appellant. It was stated that Mores were firmly in control of the company even before financial year 2002-03. It was claimed that the case pleaded in the supplementary affidavit was a myth. The company had also raised the issue of limitation. This was also denied by the appellant on the ground of part payments having been made by the company. 7. The learned Single Judge notices the submission made on behalf of the appellant as follows : (1) That even though there are no documents in support of the transactions that it claims, there is no denial by the company of having received the funds. (2) That even if a petitioning creditor is required to affirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one end of the spectrum there could be a case where a petition or the claim therein is demurrable, yet the company admits it in its affidavit. Surely, such generosity of the company cannot resurrect the claim. At the other end of the spectrum there could be a one-line, unsubstantiated and improbable claim that is also greeted by an admission in the company's affidavit. The company court will then not look beyond the admission. But these are the unlikely, and somewhat theoretical, situations. The company judge is confronted daily with matters that lie in between. And in these in-between cases, the clarity of the debt has ordinarily to be apparent from the petition rather than the vagueness of, or inconsistencies in, the company's response. There is now the more engaging matter of the petitioner's claim and the company's defence that needs to be gone into. Before a company can be sent to liquidation, it must be found that it is unable to pay its debts. This would presuppose an existing debt and the company's inability to discharge it. A creditor who cannot obtain payment of his debts is entitled, as between himself and the company ex debito to an order for winding up if he brings hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner suggests, there would be no need for a Bajoria concern to stick its neck out and bear the maximum exposure for the company obtaining a loan. Just as there is merit in the petitioner's contention that the accounts at pages 79-80 of the company's affidavit show that money was received from the petitioner and the petitioner has remained unpaid in respect of its principal claim, there is also the company's counter-claim that has to be appreciated. The Company's simplistic stand that money sieved through it from one set of Bajoria entities to a second and to a third, does not fit in with the indisputable dates of the payments having made by the petitioner and undeniably received by the company. Yet, it is equally true that Bajoria was in control of the company and may be the person lurking behind the facade of the petitioner. However, improbable the company's claim in its suit, it is not impossible that a decree may be passed. The grey area between what is improbable and what is impossible belongs to the company. Once a company can show that there is likelihood of the defence succeeding, never mind the degree thereof it succeeds in resisting winding up as there is no long ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability of the company to the appellant, as the payments made to Fast-track and Mitsubishi has reduced the company's liability. (3)In reply to the statutory notice the company has admitted the receipt of the money. Therefore the suit has been filed, by impleading a Bank, challenging the credits and loans taken from the Bank. The statutory notice is dated 21-9-2004. Reply given by the company is on 5-10-2004. Thereafter in December 2004, the company filed the suit. Prior to this there was no claim by the company against the appellant. There was no counter-claim. (4)In any event the counter-claim story has been discarded by the learned Single Judge. (5)The defence about the payment to Mitsubishi is false. According to the claim made by the appellant in paragraph 12 of the petition, the total amount paid to the company is a sum of Rs. 1,85,000 till 6-3-2003. Therefore, Rs. 17,08,800 claimed to have been paid by the company to Mitsubishi on 22-5-2003, cannot be accepted. Same reasoning applies to the alleged payment of Rs. 7,81,000 on 22-5-2003. (6)No documents have been shown so far the payments to Fast-track are concerned. (7)Various contradictions in pleadings of the plaint, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e money was being routed through the company. (6)If the test in Madhusudan Gordhandas & Co.'s case (supra) is applied to the facts of this case, the petition had to be dismissed. (7)The learned counsel have also relied upon Mediquip Systems (P.) Ltd. v. Proxima Medical System GmbH [2005] 59 SCL 255 (SC). It is submitted that in this case trappings of a debt are missing in the claim of the appellant. There is no Agreement. The company was merely a conduit. The learned counsel also relies upon :- (1)Mannesmann Rexroth (India) Ltd. v. National Engg. Industries Ltd. [2007] 80 SCL 178 (Cal.). (2)SRC Steel (P.) Ltd. v. Bharat Industrial Corpn. Ltd. 2005 (4) CHN 343. 14. Mr. Pratap Chatterjee submits that the law in India is different from the principle laid down in Re Welsh Brick Industries Ltd.'s case (supra). The situation between a winding up petition and a summary suit is practically identical. Complicated questions of fact can only be adjudicated in a Civil Suit. A Division Bench judgment of this Court in the case of Dhariwal Steel (P.) Ltd. v. Bengal Rolling Shutters & Engineers Works [C.P. No. 219 of 2003, dated 1-4-2004] is relied upon in support of this submission. 15. Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties is a civil court; (ii)the existence of a dispute with regard to payment of interest cannot at all be construed as existence of a bona fide dispute relegating the parties to a civil court and in such an eventuality, the Company Court itself is competent to decide such a dispute in the winding-up proceedings; and (iii)if there is no bona fide dispute with regard to the sum payable towards the principal, it is open to the creditor to resort to both the remedies of filing a civil suit as well as filing a petition for winding up of the company. 23. The rules as regards the disposal of winding-up petition based on disputed claims are thus stated by this Court in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125 . This Court has held that if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The principles on which the court acts are :- (i )that the defence of the company is in good faith and one of substance; (ii )the defence is likely to succeed in point of law; and (iii)the company adduces prima facie proof of the facts on which the defence depends." (p. 263) 17. In our opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing, the Court is entitled to investigate whether the dispute put forward is bona fide or it has been manufactured in order to delay and defeat the realization of petitioner's dues. The Court will also enquire as to whether the defence is merely a cloak for the company's inability to pay its debt. Even at that stage the petitioner has to establish that the company has neglected to pay its debt without any justifiable cause. But the pre-condition for examination of reasonableness of the cause preferred by the company the petitioner needs to establish a clear debt owed by the company. 18. It is by now too well-established that a company's defence can be ignored if it falls within the realm of "moonshine". In other words, the defence is sham and has been pleaded only to defeat the claim put forward by the petitioner. This view of ours will find support from a Division Bench judgment of this Court in the case of Dhariwal Steel (P.) Ltd. (supra). In the aforesaid judgment the Division Bench has held that the company Court would receive a winding up petition when the company fails to raise any bona fide dispute or is merely weaving cobwebs. On the other hand, the raising of a reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int of law and thirdly the company adduces prima facie proof of the facts on which the defence depends." (p. 131) 19. Such being the settled law we fail to see how the conclusions arrived at by the Trial Court could be open to doubt at this stage. We are also of the opinion that the judgment to the Court of appeal in Re Welsh Brick Industries Ltd.'s case (supra ) would not be applicable in the facts and circumstances of this case. In that case the petitioner creditor had issued a writ in the King's Bench Division for the recovery of certain sums advanced by him to the company. Thereafter he presented, in the county court, a petition, based on the same debt for winding up of the company on the ground that it was unable to pay its debts. When the petition came up for hearing, the county court Judge found on the evidence before him that the debt was owing and that the company could not pay its debts, and he made a winding up order. The company appealed from the order. It was contended that the Judge should have dismissed the petition because the order of the Registrar giving the company unconditional leave to defend the action for repayment of the debt was in itself conclusive of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible to ignore the very relevant fact that a civil suit regarding the same transaction is pending between the same parties. Admittedly, the defence taken by the company to the winding up petition is identical to the plea raised in the civil suit. Such being the position, the learned Trial Judge, in our opinion, cannot be said to have erred in exercise of his discretion to relegate the petitioner to the Civil Court. 21. As noticed above the Trial Court after clearly stating the applicable principles of law, still examined the defence set up by the company to see if it was sham or bogus. In our opinion, that occasion would have only arisen in case the petitioning creditor had been able to prima facie show that the loan was given; the receipt of the amount was either admitted as a loan or was shown to have been received as a loan. In the present case the petitioner has miserably failed to show that the amounts claimed had actually been given as loan to the company. There is no admission of liability by the company, rather the company puts forward the defence that it has been misused by Mr. Harsh Bajoria and other persons under his control by using the company as a conduit. The Trial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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