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TMI Blog2004 (8) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of law already placed on that high pedestal. But at the stage of the hearing of the winding up petition, the company has already, to a certain extent split up into the creditors and the contributories who come and make representations on their own behalf and by themselves, even apart from the submission which might be made by the company. The parties are different and many more than were present at the stage of admission. After hearing all those parties the Company Court could, at the final stage, take different view as to the debt than it has taken at the stage of admission. The admission stage view bound the company and the petitioning creditor finally, but not the others, and therefore not the Company Court also, when hearing the matter finally. But this is an exclusive and sole prerogative of the Company Court only. This is so, because before no other Court the creditors or contributories of the company have a locus standi to make separate representations about the binding nature of a debt alleged to be owed by the company. The rule in Foss V. Harbottle would prevent such a separate representation. Therefore, until the company comes up for the decision whether it is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .4pt 0cm 5.4pt; mso-para-margin-top:0cm; mso-para-margin-right:0cm; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0cm; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin; mso-fareast-language:EN-US;} <![endif]--> A N RAY AND A K MITRA, JJ. JUDGMENT Ajoy Nath Ray, A.C.J. 1. This is an appeal from a receiving order passed by the Company Court on the 22nd of July, 2004, whereby the respondent's petition for winding up of the appellant company was admitted and directions for advertisement were given. 2. The statutory notice dated 31st July, 2003 had been served on the appellant company for a debt of ₹ 52.33 lac approximately. The case of the respondent in the statutory notice as well as in the winding up petition was put very simply. According to them during the period October, 2001 and January, 2003 they had supplied the company diverse quantities of steel plates and H.R. Coils, and upon such supplies being made and received they also raised upon the company the corresponding bills from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coils. However, the full supplies were not made. More than 1500 metric tonnes of steel coils agreed to be supplied, only 443 metric tonnes were actually obtained by the company. The company claimed damages at the rate of five rupees per kilogram for the unsupplied items. Needless to mention, 1000 kilograms made one metric tonne. 8. In the answer to the statutory notice which was given on the 16th of August, 2003 these details were not given in extenso but a reference was made by the company to a suit which it has filed more than two months before the date of the statutory notice, to be precise, on the 23rd of May, 2003, in the plaint of which the company had put forward the claim for damages as mentioned in its affidavit-in-opposition. 9. The petitioning creditor took, in that suit, the step of praying for an extension of time for filing a written statement and then on the 12th of August, 2003 delivered a counter-claim in its written statement, wherein it claimed the said identical amount of ₹ 52.33 lac and claimed for a decree. 10. Under Order 8 Rule 6 of the Code of Civil Procedure the counter-claim is almost identical to a plaint. 11. The position, therefore, is that both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions excepting of the challans, delivery orders and the bills. According to him all discussion was oral. He pointed out that there is not a single letter of demand from the petitioning creditor before the service of the statutory notice. 16. The fact of the case is that challans, delivery orders and bills apart, the first writing which, in the transactions of the parties, saw the light of the day was the plaint filed by the company. In these circumstances, Mr. Mukherjee invited us to opine that the suit is not a bogus suit, that oral evidence in the suit has to be given and what the result of oral evidence will be is not possible to predict on affidavit evidence. 17. On this short but sufficient description of the basic facts of the case, the legal position and the different legal points might be discussed. The first point which arose before us was whether the petitioning creditor was entitled to pursue the remedy in winding up, without in any manner having given up its choice of making a counter-claim before the suit Court. We are of the clear opinion that there is no bar either in the Companies Act or in the general body of our Civil Code governing and regulating suits in Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion until the suit is disposed of, even at this stage. 21. In our opinion, both Mr. Mukherjee and Mr. Sen are right in their submissions in this regard. It is both true that the petitioning creditor can file a winding up petition and at the same time present the counter-claim audit is also true that in fit and appropriate cases the Company Court has both the power and the duty not to proceed with the winding up application until the suit has been disposed of. Similarly, we are also of the opinion that the Company Court could, in appropriate cases, proceed with the winding up petition in preference to the suit and in that case, should it so think fit, restrain the parties from proceeding with the same claim or claims in the Suit Court. In short, the Company Court can stay its own proceedings which are pending before it, or, in the alternative, restrain the parties who are appearing before it from proceeding elsewhere. We do emphasise that it is, in general, not proper that the same claim be tried in parallel proceedings. Only in the most extraordinary and rare cases which exhibit special features like difference of parties of a substantial type, might the Courts feel helpless and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the question, whether the winding up petition itself is a properly presented and a properly constituted one or not. If the Company Court is satisfied that the winding up petition should proceed, then and in that event, such satisfaction positively most arise upon the primary and preconditional finding of the Company Court that the nature of the debt put forward by the petitioning creditor is indisputable. Once that finding is reached it would be within the power and also the duty of the Company Court to restrain parties before it, in the very large majority of ordinary cases, from proceeding with any adjudication of that very claim, which has been found by the Company Court to be indisputable, in the Suit Court or practically before any other forum. The problem of whether to go up with the winding up application or with the suit, thus gets solved at the same time when the Company Court solves its primary and basic problem as to whether it should or should not entertain and receive the winding up application. 25. Even in the later stages of the proceeding, after it has assumed representative capacity after advertisement, the position is quite clear and there can be but only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to refer to only two cases, apart from the case of Rameshwar Singh already mentioned above which is also an authority for this proposition. The reference of Rameshwar's case is 23 CWN 844. 30. There are passages also to this effect, in the case of Federal Chemical reported at 34 Company Cases page 963 and also in the Single Bench judgment of our Court given in the case of Bhart Vegetable, reported at 56 CWN page 29. 31. The problem is not a problem of law, when we decide whether the counterclaim of the company is a valid defence in law or not. The problem is the problem of assessment and determination of the bona fide nature of the company's counter-claim, which happens really to be the claim in the suit. 32. The law as to how far the company has to go, to establish the bona fide nature of its defence, has been expounded in many cases. Some of the cases show what is not a bona fide defence and some other cases show what is a bona fide defence. A good starting point in this regard today in India would be the case of Meehalic, reported at . That dealt with a situation of a summary decree and in delivering the judgment for the Court, Beg, J. extracted five heads which were fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the bona fides of the defendant and its intention to put up a genuine defence which will naturally delay the suit for a long time. 35. The Company Courts position is different. A Division Bench of our Court has opined thus in the case of Dunlop India Ltd., reported at 1994(1) CHN 409. The decision in that case is that the Company Court has no jurisdiction to call for security; it can cither admit the winding up petition or not admit it. It has to come to a conclusion whether the debt is bona fide disputed or whether it is not bona fide disputed. Fine distinctions of more or less bona fide dispute or so, on the basis of which the Court calls for either full security or a large percentage of it, are not to be made by the Company Court. Security is an appropriate remedy which a plaintiff might obtain but which is not available to the petitioning creditor. 36. We are not concerned with the question of ordering any security here as, upon instructions, learned Counsel for the Company had submitted before the first Court that the company was not prepared to furnish security for the petitioning creditor's claim. We have not heard any contrary submission before us during the long ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable ground for not paying the claimed debt of the petitioning creditor. This is the case of London and Paris Banking Corporation, reported at 19 Equity Cases 444 and an important passage of the Master of the Rolls is quoted in Rameswar Singh's case mentioned above; the passage would be found at page 446 of 19 Equity Cases. The quotation given in Rameswar Singh's case is at 23 CWN, at page 857 left column. 43. Sir George Jessel said that a company cannot be held to have failed and neglected to pay a debt, if it has a reasonable ground for not paying it. In such a case, no doubt the company fails to make the payment as claimed by the petitioning creditor, but it cannot be said that it has also neglected to pay it. There is no negligence in the company in not paying a debt, if it is withholding payment on a reasonable ground, such as a reasonsable counter-claim. The passage of the Master of the Rolls is fully applicable in India as Section 434(1)(a) raises the presumption of inability to pay debts only when the company has neglected to pay the sum. 44. The basic question accordingly is the company's suit a bogus suit or is there some reasonable ground, however thin, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply in spite of assurances caused loss to the company. It is not that the balance debit of about ₹ 50,00,0007- arose for the first time in January, 2003 when the supplies stopped. Even in March, 2002 there was a debit balance to that extent. The lack of documentary evidence is there on both sides. There is no paper to substantiate that the petitioning creditor would be entitled to its 2% commission. It has to be worked out from the delivery orders by calculating that percentage on the aggregate of the ex-stockyard price sales tax thereon. The agreement being oral, evidence would also be oral. The suit cannot be said to be absolutely bogus just yet. 47. On the basis of the above arguments, we have thought out the matter in the following way. Although this thought process is short, it has proved to be of crucial importance to us in our own minds. We had also spoken this out aloud so that we had the advantage of hearing learned Counsel on this aspect also. Our thought process is this. It is not possible for lawyers and Judges to predict, on the basis of documents and pleadings available to them, what exactly the oral evidence is going to be, when the dramatis personae in flesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts were considered by His Lordship, and the law on the subject was perfectly laid down and adverted to and His Lordship's short summary of the judgments cited is, with respect, a good model as to how a painstaking judgment should be written. 51. Should we then, not interfere with the exercise of His Lordship's discretion? The confusion which occurs, occurs at this stage. The admission of a winding up petition is a discretionary order no doubt, but the stage of exercise of that discretion comes, after and only after a finding of the bona fide nature of the company's defence has been arrived at. The finding of the bona fide nature of the defence is made on affidavits and although it is a mixed question of law and fact, it is primarily a fact finding and fact assessing procedure. That finding of fact is made by the Court not by examining witnesses or by looking at their demeanour and thus forming an opinion on their credibility, but by looking at affidavit evidence only. In such cases the Appeal Court re-assesses the fact itself and it can, perfectly properly, and in accordance with law, make a different assessment from the one made by the Trial Court. The Trial Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the company's inability to pay debt, if a good statutory notice is not complied with. That the Company Court has a discretion in the matter of admission of the winding up petition even after the proof of debt and the proof of the company's neglect to pay is a law which is nonetheless a good and as well-settled as the express provisions of the Companies Act or the framed rules made by the Supreme Court. 55. There is yet another more point which is to be mentioned about the impugned judgment. It is a carefully and painstakingly written judgment but, with respect, it contains a certain view, which requires correction and clarification. It is quite a serious point in Company matters. 56. His Lordship proceeded to admit the company petition on the basis that His Lordship was forming a prima facie view as to whether the debt of the company was of an indisputable nature. However, various cases have already held, and His Lordship himself has also held, in other parts of the judgment, that for admission of a winding up petition, the debt owed by the company has to be indisputable, and not merely owing prima facie. In our considered opinion, something cannot both be prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but it is, both logically and as matter of law already placed on that high pedestal. 61. But at the stage of the hearing of the winding up petition, the company has already, to a certain extent split up into the creditors and the contributories who come and make representations on their own behalf and by themselves, even apart from the submission which might be made by the company. The parties are different and many more than were present at the stage of admission. After hearing all those parties the Company Court could, at the final stage, take different view as to the debt than it has taken at the stage of admission. The admission stage view bound the company and the petitioning creditor finally, but not the others, and therefore not the Company Court also, when hearing the matter finally. 62. But this is an exclusive and sole prerogative of the Company Court only. This is so, because before no other Court the creditors or contributories of the company have a locus standi to make separate representations about the binding nature of a debt alleged to be owed by the company. The rule in Foss V. Harbottle would prevent such a separate representation. Therefore, until the company c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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