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TMI Blog2011 (8) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Company Judge in C.P. Nos. 40/2004 and 41/2004, whereby the appellants' petitions seeking winding up of the respondents (Bhushan Limited in C.P. No. 40/2004 and Bhushan Steel and Stripes Limited in C.P. No. 41/2004) on the ground that the respondent companies were unable to pay their debts, were dismissed. The company petitions were founded on the basis of a compromise decree dated 19-12-1997 passed by a learned Single Judge of this court, whereunder the respondents had agreed to make payments of recurring charges which included maintenance charges in respect of the common areas and common facilities. The plea of the appellant was that since the charges specified in the decree were not being paid by the respondents, it was apparent that they were unable or had neglected to pay their debts. 2. On the other hand, the respondents had taken the plea that though they had initially made payments of recurring charges in terms of the compromise decree, they had stopped making the payments at the rates demanded by the appellant inasmuch as the maintenance charges were contrary to the provisions of the Delhi Apartment Ownership Act, 1986 as well as against public policy. It was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re : "( a )Whether the company court can go behind a compromise decree in order to ascertain as to whether a debt based on the same is legally enforceable or not and whether a bona fide dispute in respect of the debt can be raised notwithstanding the existence of a compromise decree ? ( b )Whether the recurring maintenance charges agreed to be paid by the respondent companies to the appellant in terms of the compromise decree are contrary to the provisions of the Delhi Apartment Ownership Act, 1986 ? ( c )Whether the impugned judgment of the learned Company Judge, particularly with regard to the nature of the debt and also the compromise decree, is binding on the civil court in the suits pending between the parties ?" 5. Before we examine these questions, it would be appropriate to set out the necessary facts. The appellant is in the hotel business and one of its hotels is located at Nehru Place, New Delhi adjacent to which the appellant has also built up an International Trade Tower which houses several commercial establishments. The space has been sold to such establishments by the appellant. The respondent companies also entered into 'lease' agreements dated 16-4-19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditioning facility is also agreed to be provided). ( viii ) amount due from Space in lieu of Ground Rent as specified in this Agreement from the date of execution of this Agreement." 7. Clause 14 of the said agreement sets out all the payments which are to be made by the respondent companies in the following terms : "Clause 14( a ). From the date of this Agreement, the Space Buyer would be liable to pay regularly maintenance and service charges for common areas and for the consumption of electricity and water in the common area. ( b ) In respect the spaces which are air-conditioned, the Space Buyer would be liable to pay the Company all charges such as for the consumption of electric and water and other consumables for the running of air-conditioning, plant, as well as for its repairs, maintenance, administrative expenses and management charges of the Company which are included in the Maintenance charges stipulated in Annexure. ( c ) The Space Buyer would be liable to pay annually the sinking fund for the replacement of capital goods like air-conditioning plant, generators, machinery, electrical equipments, cables ducting, transformers, pumping-sets, fire fighting e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teen thousand one hundred twenty only) per month. 9. On every 1st July commencing 1st July, 1998 the rate of Rs. 29.03 per square foot shall be revised upwards according to the living index as on that date subject, however, to a minimum increase of 9 per cent each year. 10. With effect from the date of recording of this Compromise Agreement in Court, NPHL shall be bound and obliged to supply back-up power (one kilowatt per one hundred square feet) to 131L. 13IL shall be liable to pay to NPHL at the rate of Rs. 8 (rupees Eight only) per unit. The reading of units supplied by NPHL and consumed by BIL will be recorded in sub-meter which will be installed by NPHL at the Apartments for that purpose. 11. On every 1st July commencing 1st July, 1998 the rate of Rs. 8 per unit shall be revised upwards according to the living index as on that date subject, however, to a minimum increase of 9 per cent each year." 9. On a joint application under Order 23 Rule 3 read with section 151 of the Code of Civil Procedure, 1908, and after the statements of the learned counsel for the parties were recorded, the order recording the compromise on 19-12-1997, was passed by the learned Single Judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As noted in the impugned judgment, according to the respondents, the demand raised by the appellant is illegal and contrary to the provisions of the said Act and it was submitted that the company petitions were filed to coerce the respondent companies to pay staggering amounts which would not otherwise be the liabilities of the respondents in terms of the said Act. In fact, the respondents had paid to the appellant, between 1997 and 2003, an amount of more than Rs. 2.25 crores towards maintenance charges and it was claimed that despite this, the appellant was not rendering true account of maintenance and it was alleged that the appellant would not have spent more than Rs. 40 lakhs towards maintenance during this period while it had charged Rs. 2.25 crores from the respondents. The plea taken by the respondents was that the appellant could clear the maintenance charges on actual basis and could not claim such charges by adding undue profits. 11. The learned Company Judge, after examining the rival contentions of the parties, came to the conclusion that although there was a compromise decree, it was still founded on an agreement between the parties which was evidenced by the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarification application being IA No. 5031/2005, wherein the appellant sought a clarification of an earlier order and prayed that the respondents be directed to pay the arrears of maintenance with effect from 1-1-2003 till 30-4-2005 and further sought a clarification that the rate of Rs. 29.03 per sq. ft. did not include in it other charges, such as car parking and back-up charges. By an order dated 19-3-2007, the learned Single Judge directed the respondents to pay the arrears of maintenance with effect from 1-1-2003 till 30-4-2005 totalling to a sum of Rs. 97,54,080, but dismissed the application on other aspects relating to car parking, sinking fund and ground rent. That part of the order is subject-matter of FAO (OS) No. 256/2007, which is pending before a Division Bench of this court. "Question ( a ) : Whether the company court can go behind a compromise decree in order to ascertain as to whether a debt based on the same is legally enforceable or not and whether a bona fide dispute in respect of the debt can be raised notwithstanding the existence of a compromise decree ?" 13. It was submitted on behalf of the appellant that a decree passed by a competent court can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded and, therefore, ignorance of law could not be pleaded as an excuse. 14. The learned counsel for the appellant also submitted that with regard to the amendment in Rule 3A of Order 23, which came into effect from 1-2-1997, no suit could be filed to set aside the compromise decree on the ground that it was unlawful. This also lent support to the contention of the appellant that the compromise decree could not be permitted to be overlooked. Reference was also made to the Supreme Court decision in the case of Banwari Lal v. Smt. Chando Devi [1993] 1 SCC 581, wherein on the plea that a challenge to a compromise decree could only be made with regard to the factum of compromise. It was also contended that sanctity must be accorded to court orders and that even a consent decree has the same value as a decree upon adjudication. Reliance was placed on Rama Narang v. Ramesh Narang [2006] 11 SCC 114. It was also contended that the learned Company Judge had misinterpreted the ratio of the decision of the Supreme Court in the case of Dhurandhar Prasad Singh v. Jai Prakash University [2001] 6 SCC 534 while observing that "in the case of Dhurandhar Prasad Singh ( supra ), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in bankruptcy or a winding-up court. The rationale is that a debt, which succeeds in the causing of a declaration of bankruptcy, or in the causing of initiation of the process of winding-up of a company, enures to the benefit or prejudice of not only the creditor in question, but of all other creditors and contributories, as the case might be, and at the same time causes civil death of the individual bankrupt or the wound up company, again, as the case might be, third parties are involved. Thus, the winding up court goes behind the decree wherever serious questions are raised about the decree having been obtained by fraud or collusion, or where there is a serious allegation about the lack of jurisdiction of the court passing the decree, or where a serious miscarriage of justice might, according to the winding-up court, occur, if the decretal debts were permitted to be used as a tool for winding up." It was further held in the Calcutta High Court decision that : "The position at law well-settled both in England and in India, therefore, is that a winding-up court on its own goes behind the decree in the aforesaid serious circumstances, and if it is itself dissatisfied, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment may have gone by default it may have gone by consent or it may have been procured for any other reason. In a proceeding relating to proof of debts, the question which arises being not one between the insolvent and the proving creditor alone, the rights of other creditors of the insolvent have of necessity to be considered. Even if for some reason, the debtor himself is estopped from denying the debt, there will be no estoppel against the Insolvency Court." 20. It is, thus, apparent that, on the one hand, the learned counsel for the appellant contended that a decree of the court, which includes a consent decree, cannot be overlooked by an executing court and cannot be questioned in collateral proceedings, including winding up proceedings. On the other hand, the learned counsel for the respondents submitted that, while the normal rule is that an executing court or any other court, in collateral proceedings, cannot go behind a court decree, this general rule is not applicable to the special cases of insolvency and winding up proceedings. 21. We agree with the view taken by the learned Company Judge that the company court in the course of the winding up proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced reliance on its earlier decision on the cases of Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 456 (SC), Madhusudan Gordhandas Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125 (SC) and Mediquip Systems (P.) Ltd. v. Proxima Medical Systems (GMBH) [2005] 59 SCL 255 (SC), wherein the Supreme Court held that whether the defence raised by the company, whose winding up was sought, was a substantial one and not a mere moonshine and had to be finally adjudicated upon on the merits before the appropriate forum". The Supreme Court further observed that : "23. The principles laid down in the above mentioned cases indicate that if the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of section 433(1)( a ) of the Companies Act, 1956." This takes us to the discussion of the next question. "Question ( b ) : Whether the recurring maintenance charges agreed to be paid by the respondent companies to the appellant in terms of the compromise decree are contrary to the provisions of the Delhi Apartment Ownership Act, 1986?" 24. We do not have to give a definitive answer to this ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t neither this court nor the company court was required to give any definitive finding as to whether the agreement between the parties was contrary to the provisions of the Delhi Apartment Ownership Act, 1986 or not. The respondents have only been able to establish that the dispute raised by them with regard to maintenance charges is not illusory or misconceived. "Question ( c ) : Whether the impugned judgment of the learned Company Judge, particularly with regard to the nature of the debt and also the compromise decree, is binding on the civil court in the suits pending between the parties?" 27. The answer to this question follows from the discussion above and, that is, that the decision of the learned Company Judge with regard to the debt in the backdrop of the Delhi Apartment Ownership Act, 1986 is not binding on the civil court in the pending suits. It is clear that the winding up jurisdiction of a company court is a discretionary jurisdiction and does not, in fact, adjudicate the civil rights between a debtor and a creditor. Thus, any observations made by the learned Company Judge in the impugned order with regard to the compromise decree or the compromise deed entered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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