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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 ..... ed:- 16-3-2009 - SURINDER SINGH NIJJAR AND BISWANATH SOMADDER, JJ. S.N. Mukherjee, Arindam Mukherjee, Ratnko Banerjee and S.R. Kakrania for the Appellant. Pratap Chatterjee, Abhrajit Mitra, Jishnu Chowdhury and Amit Agarwal for the Respondent. JUDGMENT Surinder Singh Nijjar, CJ. - This judgment will dispose of Appeal Nos. 277 of 2007 and 299 of 2007 as both the appeals are directed against the common judgment dated 20-4-2007 in Company Petition No. 531 of 2005. For the purposes of this judgment we shall make reference to the facts as pleaded in Appeal No. 277 of 2007. 2. The Company Petition had been filed on the allegations that the company is indebted to the appellant in a sum of Rs. 1,15,59,525.86 along with further interest. It is alleged that initially in February 2002 a short term temporary accommodation loan of Rs. 5,00,000 had been provided to the company. 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bajoria, the company claims that he was in complete control of the company and was also looking after the development of the Tea Estate belonging to the company. He had extracted huge amounts of money from Mohan Kumar More, Mr. Aditya More, Mrs. Lily More and their family members for the ostensible reason of developing the Tea garden. Ultimately, when Mores were unable to loan any further amount, Mr. Harsh Bajoria persuaded Mr. More and its family members to take a loan from the Central Bank of India. It is categorically stated that the loan amount, which was taken from Central Bank of India, was all disbursed to the companies controlled and managed by Mr. Harsh Bajoria. In the meantime Mr. Harsh Bajoria had also opened a number of Bank accounts in the name of the company with various banks which were not reflected in the books of the company nor were the same disclosed to the More family. This was allegedly 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est on judgment at the rate of 24 per cent per annum payment of receiver and grant of interim injunction. 5. Apart from the plaint, the company also relied on the supplementary affidavit filed by Aditya More, plaintiff No. 3, in the aforesaid Civil Suit. In this affidavit it is stated that defendant No. 1, Harsh Bajoria, was in control of the company till March 2004. It is also stated that the appellant held the shares in the company through his nominees, Arnav Securities (P.) Ltd., and Shree Kunj Securities (P.) Ltd., both these companies held shares till 16-8-2004. Till December, 2002 the Directors of the company s were all nominees of Harsh Bajoria. Even after December 2002 till early 2004, the active Directors were all nominees of Harsh Bajoria. Shalakia Bajoria is the son of Harsh Bajoria. He was the authorized signatory of all the Banks accounts of the company. He continued to be authorized signatory 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 ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ought to have been substantiated by primary documents by the appellant. The weakness in the company s defence cannot be used by the appellant in support of its own claim. (4) That suit filed by the company would amount to a counter-claim being cited. (5) That part payment would not keep alive a claim otherwise barred by limitation. In support of this submission the company relied on a judgment of the Supreme Court in the case of Sant Lal Mahton v. Kamla Prasad AIR 1951 SC 477. 9. Upon consideration of the pleadings and the submissions made on behalf of the parties the Trial Court held as follows : "There is no black and white answer to the argument that the petitioner makes and which the petitioner uses as its legs to carry it beyond the sparse details found in the petition: that once a company uses an affidavit, it is the defence which is to be tested as much as the initial case run by the petitioner. At the 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation Private Limited and Mitsubishi Trading Private Limited save a sum of Rs. 1,71,600 which stood transferred to the garden account of the company. The petitioner has made little attempt to disown Fastrack Realestate Construction Private Limited and Mitsubishi Trading Private Limited as being part of the group to which it belongs. The petitioner s attempt to blow away the company s defence on the strength of the company s application for loan to the bank in May, 2003 has to be discounted on account of the minor mention of the third security offered in that document by the company. Such third security, and of considerably more value than the personal worth of the two Mores, was the corporate guarantee of one Arnab Financial Services Private Limited. Such proposed corporate guarantor appears to be another in the Bajoria fold. If, indeed, Bajoria and his nominees were no longer associated with the company in May, 2003, as the 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is admitted for the aforesaid sum. The balance claim of the petitioner, for the principal sum of Rs. 79,70,000, has been relegated to a suit. Both the appellant and the company have challenged the aforesaid judgment in these two connected appeals being Appeal Nos. 277 of 2007 and 299 of 2007. In the appeal filed by the company it is stated that the Trial Court has failed to appreciate that the entire issue is pending in the Civil Suit and, therefore, could not be adjudicated in the Company Court. Number of other grounds are also pleaded against some of the incidental observations made by the learned Trial Judge. 11. We have heard the learned counsel for the parties at length. 12. Mr. S.N. Mukherjee, learned Sr. Counsel for the Appellant submits that: (1)The defence of the company should be disbelieved on the basis of the documents disclosed; (2)Even if the defence of the company is 100 per cent correct, it does not wipe away the liability 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10)The Trial Judge concludes that mere filing of the suit is not sufficient but erroneously proceeds to admit the petition for a meagre amount of Rs. 1,71,600. 13. On the other hand Mr. Pratap Chatterjee, learned senior advocate and Mr. Abhrajit Mitra submits that : (1)The Civil Suit was filed before the company petition. Therefore it cannot be said to be a counterblast. (2)Mores took over the control of the company in March 2004. Prior to that Bajoria was in control, as is evident from the development agreement signed by him on 6-4-2002. (3)Liability is not admitted. This is accepted by the learned Trial Judge. (4)Appellant is relying only on the documents given by the company and the statement of account prepared by the appellant. The Bills attached with the plaint were to show how money was syphoned off by Bajoria. (5)Judgment in Re Welsh Brick Industries Ltd. s case ( supra ) is not applicable in this case. The company has not admitted the loan. The 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction must be a determined or a definite sum of money payable immediately or at a future date and that the inability referred to in the expression unable to pay its debts in section 433( e ) of the Companies Act should be taken in the commercial sense and that the machinery for winding up will not be allowed to be utilised merely as a means for realising debts due from a company. ****** The debt under section 433 of the Companies Act must be a determined or a definite sum of money payable immediately or at a future date. We are informed that the financial position of the appellant is sound. ****** 22. The Madras High Court in Tube Investments of India Ltd. v. Rim Accessories (P.) Ltd. [1990] Comp. LJ 322, 326 has evolved the following principles relating to bona fide disputes : ( i )if there is a dispute as regards the payment of the sum towards the principal, however small that sum may be, a petition for winding up is not maintainable and the necessary forum for determination of such a dispute existing between parties 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o agreement in writing that is relied upon by the petitioner. (4)There is no demand made by the petitioner prior to the statutory notice. (5)There is no acknowledgement of indebtedness by the company or even a writing where the transaction has been referred to in passing. (6)The appellant has relied on a statement furnished by it. Its demand contained in the statutory notice and what it claims to be the baseless denial of the company s liability in response of 5-10-2004. Law (1)That the clarity of the debt has to be apparent from the petition rather than the vagueness of, or inconsistencies in, the company s response. (2)Before a company can be sent to liquidation it must be found that it is unable to pay its debt. This would pre-suppose an existing debt and the company s inability to pay it. (3)A creditor is entitled to an order of winding up under section 433( e ) and 434(1)( a ) of the Companies Act, 1956, ex debito justitiae on establishing that there is a debt owing and the company is unable or has neglected to pay the same. (4)Upon being satisfied that there is a debt owing, the Court is entitled to investigate whether the dispute put forward is bona fide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company contended that no price had been agreed upon and the sum demanded by the. creditor was unreasonable. See London and Paris Banking Corpn. In re [(1874) LR 19 Eq 444]. Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed. See Re, Brighton Club and Horfold Hotel Co. Ltd. , In re [(1865) 35 Beav 204]. 21. Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt, see Re. A. Company [94 SJ 369]. Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely see Tweeds Garages Ltd. In re [(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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the petitioning creditor seeking summary judgment against the company. On the contrary, a suit has been filed by the company claiming a decree in the sum of Rs. 3,54,50,000 against the petitioner and other defendants. The company has also made very serious allegation of fraud against the moving spirit Mr. Harsh Bajoria behind the corporate veil of all the sister concerns. The Trial Court has clearly come to the conclusion that Bajoria was in control of the company and may be the person lurking behind the facade of the petitioner. In such circumstances it would be difficult to accept the submissions of Mr. Mukherjee that the company has not bona fide disputed the debt. We may notice here that in the civil suit the company has given elaborate details of the fraud allegedly perpetrated by Harsh Bajoria and others. Such serious allegations can hardly be put in the realm of a moonshine defence. What is pleaded in the civil suit is also pleaded in the defence to the winding up petition. We may also notice here that the civil suit is filed before the petition for winding up was presented in the company Court. In such circumstances, it would not be possible to ignore the very relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the statutory accounts of the company, nor were the directors of the company even taken into confidence. Therefore, it would not be possible to discard the explanation of the company that it was used as a conduit to syphon off the money belonging to the company by Bajoria. 23. For these reasons the suit filed by the company cannot easily be discarded. The allegations made against Bajoria are very serious. There are allegations of falsification of accounts, forgery and embezzlement. The Company Court is hardly equipped in its summary jurisdiction to form a fair opinion on these matters. These are matters best left to the Civil Court to be determined in a Civil Suit. It is not unknown that Civil Suits thought to be wholly without merit have concluded in decrees being granted. 24. We are of the considered opinion that the appellants (the petitioning creditors) have failed to make out the very basic requirement for a company petition to be received. Therefore, the Trial Court, in our opinion, was not required to elaborately examine the merits of the defence. In spite of this legal position, the Trial Court examined the defence and on such examination did not find the defence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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