Everett Travel Service vs Asm Shipping Ltd.
2003 Latest Caselaw 700 Bom

JUDGMENT

D.G. Karnik, J.

1. Leave under Rule 19(3) of the Company Court Rules, 1959 granted to the applicant to take out a Judges Summons in terms of draft Judges Summons handed in, Judges Summons made returnable forthwith. By consent taken up for hearing.

2. The learned counsel for the respondent files affidavit in reply sworn in by Ms. Kashmira Seth on 26th June, 2003. Affidavit is taken on record.

3. Company Petition No. 188 of 2002 was filed by the petitioner, a creditor, for winding-up of the respondent-company. After hearing the petitioner and the company, the petition was admitted by this court by an order dated 8th August, 2002 and was advertised in Free Press Journal and Janma Bhoomi. It appears that thereafter a settlement was arrived at between the petitioner and the Company. The petitioner therefore, requested the Court for permission to withdraw the petition whereupon the Court directed that an advertisement of the proposed withdrawal be published in the same newspapers. On publication of an advertisement, the present applicant appeared and opposed the withdrawal by filing an affidavit dated 28th April, 2003 and requested that it being another creditor be substituted in place of the petitioner. The applicant was directed to take out an appropriate Judges Summons which is the present one.

4. The learned counsel for the applicant invited my attention to two letters of the Company both dated 19th April, 2002, one addressed to the Principal Officer, Mercantile Marine Department, Mumbai and another addressed to the applicant itself, copies whereof are annexed as Exhibits "A" and "B" to the affidavit in support. According to the applicant, the respondent company owed to it a sum of Rs. 1,17,40,442 for the services rendered to one of the vessels of the respondent-company. The respondent-company intended to sell the said vessel which the applicant objected. Thereupon, by these two letters dated 9th April, 2002, the respondent-company admitted its liability to the extent of Rs. 1,17,40,442 and undertook to settle all outstandings within 7 days of the sale of the vessel. In the said letters, the respondent-company stated:

"We are in agreement with the above figure of Rs. 1,17,40,442 of our liability to M/s. Lily Maritime Private Limited. ASM Shipping undertake to pay few wages in full on board and further settle all the outstanding dues to M/s. Lily Maritime Private Limited within 7 days of the sale of the vessel."

5. According to the learned counsel for the applicant the vessel has since been sold but the respondent-company has only made part-payment of Rs. 67.08 lakhs between 19th April, 2002 till 28th February, 2003. According to the applicant therefore a sum of Rs. 87.64 lakhs is still due and payable by the respondent. The respondent-company is unable to pay the amount and therefore the applicant company be substituted as a petitioning creditor in place of the original petitioner in the winding-up petition.

6. The learned counsel for the petitioner submits that in addition to the sum of Rs. 67.08 lakhs, the respondent-company has already paid a sum of US$ 16,000 on 29th April, 2003. The learned counsel submits that applicant has suppressed this payment of US$ 16,000 and therefore, the application should be rejected on the ground of this suppression. According to him, the applicant has not come to the Court with clean hands and on this ground alone, application deserves to be rejected.

7. I am not inclined to reject the present application only on the ground that applicant had not disclosed a receipt of sum of US$ 16,000 on 29th April, 2003 as alleged by the learned counsel for the respondent-company. The receipt of US$ 16,000 is not admitted and no proof of payment, is not produced. Assuming that the payment of US$ 16,000 (equivalent to about Rs. 7.5 lakhs) has been made still that leaves a balance of Rs. 80 lakhs due and payable by the respondent-company.

8. In a Company Petition which is already admitted and where the original petitioner seeks leave to withdraw from the petition, the Court usually does not allow the withdrawal without insisting upon an advertisement for the proposed withdrawal being issued in the newspapers. This is because the original petitioner sues not for the recovery of its debts but for winding-up of the company on the ground that company is unable to pay its debt. The winding-up petition is admitted for the benefit of all the creditors of the company. The company cannot by settling one of the creditors who has chosen to file a winding-up petition give a preference to him especially when other creditors opposed the withdrawal. The Court would also see whether the winding-up petition would be admitted if the third party creditor who opposes the withdrawal of the winding-up petition could have independently filed a winding-up petition.

9. In Harakchand Mansraj v. Emerald Woollen Mills (P.) Ltd. [1990] 68 Comp. Cas. 702 (Bom.) relied upon by the learned counsel for the respondent, this Court observed:

"Now substitution, though permissible, is a matter in the discretion of the court. It is not automatic. It does not follow ipso facto upon a mere application in that behalf on the mere allegation, unsubstantiated even if it be, that a company is unable to pay its debts. Much depends on the facts and circumstances which would vary from case to case. Discretion, as all judicial discretion, must be exercised one way or the other, not arbitrarily or mechanically but for sound and good reasons. The court must see whether a case for substitution is made out and the paramount test is whether the application for substitution is one who could have made out a case for admission of a petition for winding up if independently filed...." (p. 703)

I would, therefore, consider whether the applicant has made out a case that the company owes to him in excess to the statutory limit of Rs. 500, whether he had made a demand of payment more than three weeks ago, and whether the respondent-company has neglected to pay the same and whether it could have independently filed a winding up petition. As stated earlier, by two letters dated 19th April, 2002, the respondent-company has admitted a debt to the extent of Rs. 1.17 crores within which only a sum of Rs. 67.08 lakhs were paid leaving a balance of Rs. 87.64 lakhs. Assuming that the respondent-company has further paid of US$ 16,000 on 29th April, 2003 that would amount to a part payment of about Rs. 7.5 lakhs and there would still be a balance in excess of Rs. 80 lakhs. This debt is not disputed. By a letter dated 24th March, 2003 (Exhibit "Y" to the affidavit) the applicant had made a demand. At the end of the said letter of demand, it is mentioned that this demand should be treated as notice under Sections 433 and 434 of the Companies Act, 1956. Despite this, only a sum of US$ 16,000 is alleged to have been paid leaving a balance of Rs. 80 lakhs. Thus, the debt is admitted and it is, not paid despite proper demand.

10. If the applicants were to file the winding-up petition for itself, there would have been no just defence available to the respondent-company for admission of the petition. Hence, the tests laid down by this Court in Harakchand Mansraj's case (supra) for allowing the substitution are satisfied.

11. In the circumstances, Judges Summons is made absolute in terms of prayer Clause (a).

Liberty to the applicant to take out appropriate proceedings in respect of other prayers.