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TMI Blog2009 (11) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... liability. Moreover, it is not firstly possible to record a finding that a "concluded contract" had ever come into being because there is no "acceptance of proposal" to substitute the loan in consideration of allotment of shares. No concluded contract by the managing director or the directors of the company could come into being unless resolution of the company on that score was passed. No such resolution having been placed on record, no conclusion could be reached that a concluded contract has come into being. Appeal dismissed. - C.A.P.P. NO. 14 OF 2009 - - - Dated:- 10-11-2009 - M.M. KUMAR AND JASWANT SINGH, JJ. Ashwani Kumar Chopra and Ms. Rupa Pathania for the Appellant. Sudhir Makkar and R.N. Raina for the Respondent. JUDGMENT M.M. Kumar, J. - This appeal filed under section 483 of the Companies Act, 1956, read with rule 11 of the Companies (Court) Rules, 1959, has been filed challenging the order dated 22-4-2009, passed by the learned company judge in Company Petition No. 13 of 2007 ( Ratna Commercial Enterprises (P.) Ltd. v. Vasu Tech. Ltd. [2009] 149 Comp. Cas. 477 (Punj. Har.), admitting the company petition for winding up of Vasu Tech L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transferred because Mr. Pradip Burman was showing keen interest in conversion of the loans advanced by the respondent-company to the appellant-company into equity and the loans taken from time to time were to be adjusted against the shares to be transferred. 5. On 31-5-2005, Mr. Pradip Burman agreed to take over the ICICI s interest in the appellant-company and the loan amount of Rs. 2 crores, advanced by the ICICI was repaid by the respondent-company by buying the equity investment of the ICICI in the appellant-company. In that regard, a loan agreement was executed between the parties on 15-4-2005 (P4). As per the agreement, the respondent-company took over equity investment of the ICICI in the appellant-company to the tune of 7,38,234 shares for a sum of Rs. 2,25,48,000 on the understanding that it would be transferred to Mr. Dhruv Verma. On 15-4-2005, itself, another share pledge agreement was also signed between M/s. R.L. Varma and Sons, HUF as pledgers, the respondent-company as pledgee and the appellant-company as confirming party. A deed of guarantee in favour of the respondent-company was also executed. 6. The appellant-company has claimed that it was regularly pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "Dear Dhruv, Re : Your e-mail of May 9th According to my records, which has been confirmed by our office in Delhi, the outstanding loans as of 1st May, 2006, is Rs. 48.87 cr. This includes the Rs. 2.25 cr. paid to ICICI Ventures for release of your 7,38,234 shares of Vasutech, lying with me. Here are the calculation for shares : Rs. 27 cr. @ 1.5% for every crore of 7m = 2.835m Rs. 10 cr. @ 175,000 for every cr. = 1.750m Rs. 3 cr. @ 250,000 cr = 0.750m Rs. 40 cr. 5.335m Rs. 10 cr. @ 350,000/cr = 3.500m Rs. 50 cr. 8.835m Total due 8.835 (assuming 50 cr. loan) Less in had 3.450 5.385m now due Any additional loans 350,000 shares/Cr. From Vasu Corp. until your holding is 3 m. In addition 46.25 per cent of Vasutech shares to be offered at par with 2 per cent royalty on all sales connected with the VSoC. You may kindly confirm the above. With regards (Pradip Burman)." 9. It is claimed that the consolidated amount that was advanced by the respondent-company up till 30-9- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant-company from the Vasucorp Inc. and with a view to take over all the powers, management and control into their hands and to bind the promoters to refund the entire amount advanced in addition to the transfer of major share holding free of cost. The said agreements were not acceptable to Mr. Dhruv Varma. 11. On 19-12-2006, Mr. Pradip Burman resigned from the board of Vasucorp Inc. and thereafter seven cheques for a total sum of Rs. 4,31,193 were presented to the bankers, which were cleared. On 5-1-2007, a legal notice was sent by the respondent-company which was duly replied by the appellant-company on 3-2-2007. The appellant-company requested for return of post dated cheques dated 1-4-2007. However, without waiting for 1-4-2007, the respondent-company filed Company Petition No. 13 of 2007 in this court on 19-2-2007, seeking winding up of the appellant-company on the ground that it has failed to pay debts and the total amount repayable at the time of filing of the petition, which was more than Rs. 54 crores with interest at the rate of 12 per cent per annum. In the company petition the respondent-company has also asserted that the appellant-company had committed vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the allegations that it has become insolvent and that its business has come to a stand still. It was also pointed out by the appellant-company that a Civil Suit (O.S.) No. 570 of 2007, was filed by it in the High Court of Delhi seeking a prohibitory and mandatory injunction against the petitioner-respondent-company. Though, initially an interim injunction from presenting the cheques was issued, however, subsequently, the injunction was vacated by the Delhi High Court vide its order dated 15-6-2007, on an appeal preferred by the petitioner-respondent-company. Against the order of the Division Bench of the Delhi High Court, the appellant-company filed a Special Leave Petition. Initially, the Hon ble Supreme Court stayed the order of the Division Bench of the Delhi High Court. Meanwhile, the petitioner-respondent-company presented the cheques and, thus, the special leave petition was finally dismissed. The suit filed by the appellant-company was also withdrawn. 14. In the rejoinder filed by the petitioner-respondent-company, it has been admitted that two suits for recovery under Order XXXVII, rule 1 of the CPC were filed by it in the Delhi High Court, one for recovery of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the novation of contract is pleaded based upon various e-mails dealt with in detail hereinabove. However, no material has been placed on record by the respondent that number of shares equivalent to the amount of loan and interest accrued thereon have been allotted to the petitioner-company or on its behalf. The plea of novation of contract though raised, has not been substantiated on the record. To the contrary there is written loan agreement between the parties followed by various cheques issued towards its repayment. Even the attempt of the respondent-company to seek injunction against the petitioner-company from encashing the cheques issued by the respondent-company and the discharge of loan/interest has failed up to the Hon ble Supreme Court and eventually, the suit filed by the respondent-company seeking restraint order against the petitioner-company from presenting cheques for encashment has been withdrawn. The petitioner has already filed two civil suits for recovery where the leave to defend is yet to be granted by the concerned civil court. Be that as it may, the defence raised in the present petition is not a substantial one. The specific plea raised in paragraphs 20 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a regular suit instead of initiation of proceedings under section 433( e ) and ( f ) read with sections 434 and 439 of the Companies Act, 1956 and rule 9 of the Companies (Court) Rules, 1959. He has argued that the learned company judge has failed to correctly apply various propositions of law culled out from the judgments cited and considered by him. In the background of the aforesaid argument, Mr. Chopra has prayed for setting aside of the order admitting the company petition and directing its advertisement. 19. Mr. Sudhir Makkar, learned counsel for the petitioner-respondent-company has opposed the appeal and vehemently argued that there was no novation of contract because the talks through e-mails were entirely independent of the loan agreement in writing, dated 15-4-2005. He has drawn our attention to the order dated 15-5-2007, passed by the Appellate Bench of the Delhi High Court against order dated 28-3-2007, passed in a suit filed by the respondent-appellant. While referring to covering letter dated 29-11-2006, which is much after the so called novation of contract, which is alleged to have taken place on 11-10-2006, Mr. Makkar has submitted that the respondent-appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the original side of the Delhi High Court for restraining the petitioner-respondent-company from encashing the cheques was declined and the same attained finality. He has also referred to the order dated 3-9-2008, passed by the Delhi High Court in the original side suit which shows that the suit was dismissed as withdrawn. 21. Mr. Makkar has then made a reference to clause 12.5 of the loan agreement dated 15-4-2005 (P4), which in unequivocal terms states that no variation of the agreement is to bind the parties unless such variation is in writing and signed by each party. According to learned counsel no novation would be possible in the absence of any subsequent agreement in writing varying the terms of the loan agreement dated 15-4-2005. He has also placed reliance on the memorandum of understanding, dated 31-8-2006, where the loan advanced by the petitioner-respondent-company to the tune of Rs. 49,83,93,273 has been acknowledged. The clauses acknowledging the aforesaid loan amount and the future mode of payment have been read out to us and the same are reproduced as under : "(1) The borrower hereby unequivocally confirms that the lender has advanced various amounts from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed his argument by contending that the other company, namely, Vasucorp Inc. was ushered in and Mr. Pradip Burman became a founder subscriber of that company by virtue of founders agreement dated 1-7-2004, entered into amongst Mr. Dhruv Varma, Wogan Technologies Inc. and Mr. David Dell. He has pointed out that Mr. Pradip Burman has substantial equity stake in Wogan Technologies Inc. which is a corporation organised in the British Virgin Islands. The factum of attending the board and management meetings of Vasucorp Inc. by Mr. Pradip Burman have not been denied but it has been pointed out that he officially resigned from the board of Vasucorp Inc. on 19-12-2006. The founders agreement dated 1-7-2004, does not in any manner even remotely indicate that the shares were being issued in Vasucorp Inc. against the loans advanced to Vasu Tech Ltd., or that the loans advanced to Vasu Tech Ltd., were ever intended to be converted into any equity. The transfer of shares by Mr. Dhruv Varma to Wogan Technologies Inc. were in pursuance of the stock purchase agreement dated 11-3-2005, which was entered into between Wogan Technologies Inc. and Mr. Dhruv Varma. 23. Having heard learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the judgment of Hon ble the Supreme Court rendered in the case of Shakti Bhog Foods Ltd. v. Kola Shipping Ltd., AIR 2009 SC 12. 25. Section 62 of the Indian Contract Act, 1872, provides for effect of novation amongst other things. The aforesaid provision reads as under : "62. Effect of novation, rescission, and alteration of contract. If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed." 26. A perusal of section 62 of the Indian Contract Act shows that one of the essential requirements of "novation" is that there should be complete substitution of a new contract in place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties. A substituted contract should rescind or alter or extinguish the previous contract. But if the terms of the two contracts are inconsistent and they cannot stand together, the subsequent contract cannot be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden of a contract be shifted off the shoulders of a contractor on to those of another without the consent of the contractee. A debtor cannot relieve himself of his liability to his creditor by assigning the burden of the obligation to somebody else; this can only be brought about by the consent of all three, and involves the release of the original debtor." 29. In the case in hand, clause 12.6 of the loan agreement dated 15-4-2005, in unequivocal terms puts it beyond any doubt that there cannot be any assignment by shifting the obligation of the appellant-company to any other third party. The aforesaid clause 12.6 reads as under : "12.6 No assignment. Subject to the provisions of this agreement, this agreement is personal to the parties and shall not be capable of assignment, except with the prior written consent of the other party." 30. In view of the aforesaid prohibition, the appellant-company cannot assign their obligation by substituting the shares of another company for discharge of its liability. Moreover, it is not firstly possible to record a finding that a "concluded contract" had ever come into being because there is no "acceptance of proposal" to substitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the managing director or the directors of the company could come into being unless resolution of the company on that score was passed. No such resolution having been placed on record, no conclusion could be reached that a concluded contract has come into being. 33. During the course of arguments no explanation was tendered by Mr. Chopra as to why these covering letters along with cheques were issued. The letters dated 27-9-2006, 11-10-2006, 19-10-2006, 31-10-2006, 22-11-2006, 29-11-2006 and 6-12-2006, clearly acknowledge the loan amount and its repayment. All these letters except the one were subsequent to the dates of e-mails. There is not even a remote suggestion that on account of alleged concluded contract by e-mails these cheques were not to be encashed or that they were issued as a collateral security in lieu of the shares which were to be allotted to the petitioner-respondent-company in Vasucorp Inc. Therefore, it cannot be said that the liability in the shape of loan claimed by the petitioner-respondent-company has not been acknowledged. In case of triable issue, a winding up petition cannot be entertained and there cannot be any dispute with such a legal propositio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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