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TMI Blog2015 (4) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... T : ASHIM KUMAR BANERJEE, J. I have the proud privilege to go through the well versed judgment and order of my esteem colleague My Lord justice Ashis Kumar Chakraborty. With deepest regard I have for His Lordship, and with all humility, may I say, I could not convince myself to agree with His Lordship s ultimate decision on the issue. His Lordship s appreciation of factual scenario is commendable and would need no repetition. So is the discussion on the point of law. However, my perception would give a relook to the legal proposition that would be relevant herein. In the present context, such relook would prompt me to hold otherwise. The law of winding up as I understand from the statute law so explained by the judge made law so far pronounced, would perhaps not permit the company Court to admit this petition for winding up. Let me discuss the law as I understand: In a winding up proceeding, the learned company Judge has wide discretion to exercise. Even if the learned Judge is satisfied on the claim of the creditor, it could be refused considering various other aspects. In a civil suit, where creditor seeks a debtor and the debtor has successfully proved his claim d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in Calcutta Weekly Notes 1945 volume- 45 page- 246, five criteria stipulated therein, to deal with summary proceeding that would also be available for consideration by a Company Judge dealing with a winding up proceeding, would be apt in the present case and are quoted below: a) If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend. b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign and the defendant is entitled to unconditional leave to defend. c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend that is to say although the affidavit does not positively and immediately make it clear that he had a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff s claim the plaintiff is not entitled to judgment and the defendant is entitled to leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited filed a suit and obtained injunction restraining Sett from doing so. The suit is pending as we are told. In this backdrop, Siddharth Sett would claim winding up of Globe Forex and Travels Limited for unpaid investment of ₹ 31.1 lakhs. Globe Forex and Travels Limited would deny taking plea of discord that they had with Sett on the hold-back and Travelport issue. Learned Single Judge admitted the petition for winding up on the following reasons: (i) Claim of Siddharth Sett was admitted in the latest balance sheet. (ii) Globe Forex and Travels Limited themselves contended, it was a distinct transaction. (iii) Siddharth s claim had nothing to do with hold back agreement or pendency of the suit. In the appeal before us, My Lord considered the issue and observed, the defence, that Globe Forex and Travels Limited would take, could be available on the doctrine of equitable set-off. My Lord relied on two Apex court decisions in the case of Raja Bhupendra Narain Singha Bahadur vs. Maharaj Bahadur Singh and Others reported in All India Reorter 1952 Supreme Court Page- 201 and Jitendra Kumar khan and others vs. Peerless General Finance and Investment Company Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave carefully gone through both the decisions cited at the bar and relied on by My Lord. The facts involved in Raja Bhupendra Narain Singha Bahadur (supra) could be clearly distinguished. In the said case, there were different suits on the issue of transfer of possession of land when mesne profit was being claimed by the plaintiff in the subject suit. The defendant would take the plea of set-off for the issues and profits that the defendant would claim to be entitled to. Considering the factual scenario, the Apex Court observed, it would be unjust and improper. While making such comment, the Apex Court observed, a plea in the nature of equitable set-off is not available when the cross-demands do not arise out of the same transaction. This sentence in my view, should not be read in isolation rather, paragraph 7 and 8 if read together, would describe the situation under which the Apex Court observed so. The Apex Court in paragraph 8 observed, A wrongdoer who has wrongfully withheld moneys belonging to another cannot invoke any principles of equity in his favour and seek to deduct therefrom the amounts that during this period have fallen due to him. There is nothing improper or unj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equitable set-off. It would depend upon the discretion that the Court of law while considering the lis pending before it. Proceeding for winding up is a discretionary relief. There are instances where despite the creditor having proved his claim the Court of law would deny winding up on some other context. An ultimate order of winding up would seal the fate of many people connected with the corporate entity. Their means of livelihood would be depending upon its existence. When the company Court would find any sustainable dispute between the parties on the admissibility of the claim the winding up process must not be set in motion. In a proceeding for winding up, we ordinarily face with two types of defence; one, the defence that would be existing as on the date of issuance of the statutory notice of demand and the other, concocted and/or cooked up after receipt of the statutory notice with the sole purpose to resist an order of admission of winding up when the creditor would be having an admitted due that would have no plausible ground to reject. In the instant case, the parties had discord much prior to the issuance of the statutory notice of demand. Globe Forex and Travels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated July 16, 2014 passed by the learned Company Judge admitting the application for its winding up for a sum of ₹ 31.10 lacs along with interest at the rate of 8% per annum from the date of issuance of the statutory notice till payment. The learned Company Judge, however, granted opportunity to the appellant to pay the said sum to the respondent/ petitioning creditor in six equal monthly installments failing which there would be an advertisement of the winding up application in newspapers. The appellant carries on the business, inter alia, of travel agent and tour operator. Till April 02, 2013 the respondent creditor was a director of the appellant company. Between March, 2012 and December, 2012, he lent and advanced a sum of ₹ 45.60 lacs to the appellant out of which he was refunded ₹ 14.50 lacs, by account payee cheques drawn in his name. As on the date of cessation as a director of the appellant company, on April 3, 2013 a sum of ₹ 31.10 lacs remained outstanding to him. By a notice dated January 30, 2014, under Sections 433 and 434 of the Companies Act, 1956, the respondent called upon the appellant to repay the said sum of ₹ 31.10 lacs alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase agreement. Before the learned Single Judge, the appellant contended that at the time of entering into the said share purchase agreement, the present management was not informed that the appellant company had huge outstanding dues to its vendors including a Company of United States of America, namely, Travelport (hereinafter referred to as the said Travelport ) and the assessment of the incoming dues of the company were pending and as such they were entitled to invoke Clause 9 of the said share purchase agreement for indemnification by the respondent. In support of the defence, the appellant also submitted that there was a breach of Clause 9 of the said share purchase agreement providing for negative covenant restraining, the sellers under the said agreement, carrying on same business of tours and travel and as such the appellant filed a suit together with Ramkrishna Forgrings Ltd., being C.S. No. 462 of 2013, before this Hon ble Court, against the respondent , his father Sanjay Kumar Sett, company namely Good Earth Travel Group India (P) Ltd. and its employees claiming various reliefs of permanent injunction restraining breach of the negative covenant and as also decre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said share purchase agreement, the previous management of the appellant company did not disclose the said outstanding dues of the said Travelport and as such the appellant company was entitled to invoke Clause 9 of the said share purchase agreement to claim indemnification from the respondent and his father for all the amount claimed by the said foreign company. He relied on various email communications exchanged between the appellant and the said Sanjay Sett the father of the respondent, when the said Sanjay Sett claimed that the said payment claimed by Travelport had been waived but he was unable to produce any document to prove such waiver. [Further according to the appellant, the dues of the Income Tax for the three years commencing from 2010-2011, 2011-2012 and 2012-2013 were far in excess that was represented to the new management at the time of execution of the said share purchase agreement.] Thus, Mr. Saha contended, the appellant was entitled to invoke Clause 10 of the said share purchase agreement claimed indemnification by the respondent and the respondent was not entitled to receive the said sum of ₹ 31.10 lacs from the appellant. He, however, admitted, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 161 DLT 703 (DB) , where the Division Bench set aside the order of admission of the winding up application of the petitioning creditor, passed by the learned Company Judge on the ground that the company had disclosed substantial bona fide counter-claims against the petitioning creditor arising out of the same transactions. Mr. Srenik Singhvi appearing for the respondent creditor, on the other hand, submitted, the appellant admitted to have received the loan from his client which was a transaction independent of the said share purchase agreement. He contended, the right of the respondent to recover the said sum of ₹ 31.10 lacs from the appellant was independent of the transactions under the said share purchase agreement. Mr. Singhvi relied on the balance sheet of the appellant company for the year ending March 31, 2013 acknowledging the said the dues of the respondent for ₹ 31.10 lacs. According Mr. Singhvi, from the correspondence dated June 10, 2013, August 5, 2013 and September 12, 2013 relied by Mr. Saha, it was evident, those were exchanged between the appellant and the said Sanjay Sett and not the respondent. In the said correspondence, even the said Sanjay Set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended that mere deposit of the said sum of ₹ 31.10 lacs by the appellant with the Registrar Original Side would not entitle the appellant to have the winding up application rejected and the claim of the respondent being relegated to a civil suit. In reply, Mr. Rishad Medora, on behalf of the appellant submitted that the reflection of the said amount of ₹ 31.10 lacs, remaining outstanding to the respondent only records that the company received that loan from the respondent. He did not dispute the proposition of law laid down in the aforesaid decisions cited by Mr. Singhvi. We are alive to the well settled principle that a winding up petition is not a legitimate means of seeking to enforce payment of the debt and where the company has a bona fide dispute , that is, it raises existence of a substantial ground for dispute to the claim of the petitioning creditor, the said claim should be relegated to suit for trial. Now, we proceed to find out whether the facts urged by the appellant as discussed above, constitute a bona fide dispute to resist the admission of the winding up application filed by the respondent. So far as the deposit of the said sum of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. vs. Organon (India) Pvt. Ltd.(supra). Thus, we are afraid, that we are unable to accept that filing of the said suit being C.S. No. 462 of 2013 by the appellant and the claim for ₹ 5 crores against all the seven defendants in the suit can be considered as a defence for rejecting the winding up application of the respondent. Now, we deal with the question, whether the defence of the appellant on the basis of the principle of equitable set-off, i.e., claim for indemnification from the respondent under Clause 10 of the said share purchase agreement can be treated as a bona fide defence to disentitle the respondent to maintain the winding up application. From the correspondence exchanged between the appellant and the said Sanjay Sett, as also pleadings of the parties there is no dispute that the loan transaction between the respondent and the appellant is independent from the transactions arising out of the said share purchase agreement. There is also no dispute that a substantial part of the consideration amount under the said share purchase agreement is remaining outstanding from the appellant company to the sellers. In the said letter dated June 10, 2013 addresse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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