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TMI Blog2010 (3) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... t) Rules, 1959, the company incorporated under the Act, namely, Inox Air Products Ltd. (for short "the petitioner-company") prays that Kalyani Gerdau Steels Ltd. (formerly known as SJK Steel Plant Ltd.) (for short "the respondent-company"), a company incorporated under the Act, be wound up as it is unable to pay its debts. 2. The case of the petitioner-company is that the petitioner-company has entered into a supply agreement with the respondent-company with regard to supply of gas continuously without any interruption and the terms of the supply agreement were reduced into writing on September 4, 2003. The recitals of the supply agreement are self-explanatory. Pursuant to the said terms of supply agreement, the petitioner-company installed and erected cryogenic air separation plant/s at the plant of the respondent-company. As the respondent-company defaulted in clearing the outstanding dues for the supplies made, the petitioner-company filed O. S. No. 132 of 2006 on the file of the Second Additional Chief Judge, City Civil Court, Hyderabad, on April 19, 2006, for recovery of money. The petitioner-company secured certain interim orders and thereupon, the respondent-company file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany to the petitioner-company comes to Rs. 3,91,69,885 along with interest at 15.25 per cent, up to January 18, 2009 and at 14.75 per cent, from January 19, 2009 to March 31, 2009. As the respondent-company failed and neglected to pay the outstanding amount of Rs. 3,91,69,885 along with interest, the respondent-company deserves to be wound up under the Companies Act, 1956. 3. Notice to the respondent has been ordered on July 16, 2009. The respondent-company entered appearance through a counsel and filed counter-affidavit. 4. One J. Visvanathan, vice-president, finance, of the respondent-company has sworn to the counter-affidavit. Existence of the supply agreement and filing of O. S. No. 132 of 2006 on the file of the Second Additional Chief Judge, City Civil Court, Hyderabad, and subsequent dismissal of the suit as withdrawn are not disputed. The respondent-company disputed its liability to pay the basic facility charges for the shut down period. It is also stated in the counter-affidavit that the arbitration application filed by the petitioner-company ended in dismissal and thereupon, the petitioner-company filed an appeal being Appeal No. 198 of 2009, wherein a consent o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors is denied as incorrect and false. As submitted here-in above, the respondent-company has denied their very liability to pay the amount claimed by the petitioner. The respondent-company is also undertaking the other activities but has only shut down the steel melting shop for which purpose the agreement was entered into with the petitioner." 5. The petitioner-company filed a reply affidavit. It is stated in the reply affidavit that the matter referred for adjudication before the learned arbitrator Mr. Justice B. N. Srikrishna (Retd.) is no way connected with the present company petition. The petitioner-company is entitled to receive payments from the respondent-company for the shut down period also in accordance with clause 5.2 of the supply agreement, which was reconfirmed in the modification agreement. As the respondent-company has not cleared the pending bills, the petitioner-company was constrained to suspend supply of gases to the respondent-company as specifically provided under clause 10.7 of the supply agreement read with clause 11 of the modification agreement. It is further stated in the reply affidavit that the e-mail correspondence between the parties speaks of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany had accumulated losses to a tune of Rs. 357 crores as on March 31, 2009, which indicates high indebtedness of the petitioner-company to various creditors. Much emphasis has been laid on paragraph 4( j ) of the reply filed by the respondent-company before the sole arbitrator, which reads as hereunder : "The respondents who had accumulated losses to the tune of almost Rs. 357 crores as on March 31, 2009, were compelled to shut their plant due to their poor financial condition. The claimants were informed of the same by the respondents vide their e-mail/letter dated September 2, 2008. The claimants were at all material times aware of the force majeure conditions that prevailed." 9. In support of his submissions, reliance has been placed on the decisions in Madhusudan Gordhandas Co. v. Madhu Woollen Industries (P.) Ltd. [1971] 3 SCC 632; [1972] 42 Comp. Cas. 125 , Haryana Telecom Ltd. v. Sterlite Industries ( India ) Ltd. [1999] 97 Comp. Cas. 683 ; [1999] 5 SCC 688, Resham Singh and Co. (P.) Ltd. v. Daewoo Motors India Ltd. [2003] 116 Comp Cas 529 (Delhi) and Ritika (P.) Ltd. v. Omaxe Construction Ltd. [2010] 153 Comp Cas 573 (Delhi). 10. In Madhusu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of the Companies Act, a presumption of the indebtedness can be legitimately drawn by the court where no reply to the statutory notice is forthcoming. The risk of the admission of the petition, as well as the appointment of a provisional liquidator is thus broodingly and ominously present in all those cases where the respondent-company neglects to send any reply to the winding up notice. But this is as far as the danger extends. My attention has been justifiably drawn to the decision of the single judge of this court in Wimco Ltd. v. Sidvink Properties (P.) Ltd. [1996] 86 Comp. Cas. 610 (Delhi), where it has been held by P. K. Bahri, J. that where a bona fide dispute had been shown to the court, the question of applying the deeming provision should not automatically arise. I continue to be in respectful agreement with this view. Applying this ratio to the facts of the present case, without in any manner diluting or undermining the significance of the failure of the respondent-company to respond to the statutory notice, this factor will be duly kept in perspective when the conspectus of facts is considered." 12. In Ritika (P.) Ltd. v. Omaxe Construction Ltd. [2010] 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concerned. Finally due to the non-co-operative attitude of the claimants and as merely running a pig iron plant is not commercially viable for the long run, the respondents were compelled to shut down the pig iron plant in March, 2009. The losses of the respondents had thereafter multiplied manifolds and the claimants are, inter alia , responsible for the same. All reasonable offers made by the respondents to the claimants have been rejected by the claimants. ( s ) In the meantime, inter alia , on account of the non-cooperative attitude of the claimants and the persisting global recession, after convincing their bankers who have agreed to restructure the respondents debt and infuse further funds to make the plant commercially viable, the respondents have commenced Capex Programme as a part of the backward and forward integration process. This Capex Programme would take approximately 18 more months and the plant would remain shut for the said period. ( t ) In the meantime, the claimants have initiated the proceedings against the respondents. However, the respondents in good faith and in a proper business like manner, in order to avoid commercial hardship and losses to both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edure under section 433 of the Companies Act is summary. When the company produces prima facie proof of the facts on which the defence depends and which is probable and there is likelihood to succeed in point of law, it cannot be said that the company has neglected to pay within the meaning of section 434(1) ( a ) of the Companies Act. Where the debt is in dispute, the company court should not proceed further unless it comes to the conclusion that the dispute in regard to the debt is not based on either tenable defence or not a bona fide denial of the debt. In the summary procedure, which the company court must follow, if the court is satisfied, prima facie , that the defence raised in the circumstances of the case is bona fide and is likely to succeed in a civil court, that would constitute sufficient reason for the court to reject the petition, relegating parties to the civil court. Where a bona fide dispute has been shown to the court, the question of applying deeming provision should not automatically arise. 17. Indisputably, an arbitrator came to be appointed on a joint memo filed by the parties in Appeal No. 198 of 2009 in Arbitration Petition No. 170 of 2009 on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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