Bombay High Court
Sicom Limited vs Entertaiment World Devlopers Pvt ... on 23 June, 2016
Bench: B.P. Colabawalla
SICOM 903.cp.625.13.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY PETITION NO. 625 OF 2013
SICOM Ltd ..Petitioner
Vs.
Entertainment World Developers
Pvt Ltd ..Respondent
Mr. Rohan Rajadhyaksha a/w Mr. Dhirajkumar Totala, Mr. Kunal
Katariya i/b AZB and Partners, for the Petitioner.
Mr. Rohan Cama a/w Mr. Mihir Mody, Mr. Ashraj Patel i/b M/s K.
Ashar and Co, for the Respondent.
CORAM :- B. P. COLABAWALLA , J.
DATE :-JUNE 23, 2016.
ORAL JUDGMENT:-
1 This Company Petition has been filed seeking to wind
up the Respondent Company-Entertainment World Developers Pvt
Ltd on the ground that it is unable to pay its debts. It is the case
of the Petitioner that the Respondent Company is indebted to it in
the sum of Rs.52.80 Crores and Rs. 23.33 Crores (aggregating to
Rs.76.13 Crores) as on 12th December, 2012. After the Petition
was filed, an affidavit-in-reply opposing the Petition was tendered
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to the Court on behalf of the Respondent Company. Thereafter, a
further affidavit dated 2nd February, 2016 has been also filed on
behalf of the Petitioner revising their claim. In the further
affidavit it is mentioned that as on 31st July, 2015, a sum of Rs.
58.24 Crores and Rs. 36.13 Crores (aggregating to Rs.94.37
Crores) is due and payable by the Respondent Company to the
Petitioner. It is the case of the Petitioner that these amounts have
not been paid and/or secured to the satisfaction of the Petitioner
and therefore the present Company Petition.
2 The brief facts giving rise to the present controversy
are that, the Petitioner had sanctioned financial assistance to one
Nanded Treasure Bazaar Private Limited (hereinafter referred to
as "Borrower No.1") and Treasure World Developers Private
Limited (hereinafter referred to as "Borrower No.2") from time
to time and as per the terms and conditions of the respective loan
documents. As far as this Petition is concerned, the Respondent
Company is sued in its capacity as a Guarantor to the loans given
by the Petitioner to the said Borrower Nos.1 and 2.
THE TERM LOAN OF RS.35 CRORES SANCTIONED AND
DISBURSED TO BORROWER NO.1 :-
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3 On 30th July, 2009, the Petitioner sanctioned a Term
Loan for Rs. 35 Crores to Borrower No.1. This loan was disbursed
on 28th August, 2009. It is the case of the Petitioner that this
Term Loan was availed of by Borrower No.1 for partly repaying
the outstandings under another Term Loan that they had availed
of from the Housing and Urban Development Corporation
(HUDCO) and part to finance the capital expenditure for Borrower
No.1's property at Nanded, Maharashtra. This Term Loan of Rs.
35 Crores was inter alia secured by an Indenture of Mortgage
dated 27th August, 2009 (Exhibit-D to the Petition) as well as two
separate Deeds of Guarantee executed by one Mr. Manish Kalani
as well as the Respondent Company on the same date. The
relevant clauses read as under:-
"1. If at any time default shall be made by the Company in the
repayment of the said Term Loan of Rs.35,00,00,000/- (Rupees Thirty
Five Crores Only) lent and advanced to be lent and advanced by
SICOM to the Company or any part thereof or interest thereon or any
other moneys for the time being due and owing by the Company to
SICOM under the said Mortgage, the Guarantor will without demur pay
to SICOM on demand at Mumbai the said loan together with interest
thereon and all other moneys which shall then become due to SICOM as
aforesaid and all costs, charges and expenses whatsoever which SICOM
may incur by reason of any default on the part of the Company its
successor or successors and assigns and will indemnify and keep
indemnified, saved harmless and defended SICOM at all times
hereinafter against any loss or damage which SICOM may suffer by
reason of any default by the Company in repayment to SICOM of the
said loan or any part thereof and/or payment of interest thereon or any
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other moneys for the time being due and payable by the Company to
SICOM under the said Mortgage and all costs, charges and expenses
whatsoever which SICOM may incur by reason of any default on the
part of the Company its successor or successors and assigns.
5. The Guarantee herein contained is irrevocable, absolute and
independent of any rights and remedies, which SICOM may have
against the Company and shall be enforceable against the Guarantor
notwithstanding that the securities or any of them specified under the
said Mortgage shall at the time when the proceedings are taken against
the Guarantor or any of them hereunder be outstanding or unrealised.
6. The Guarantor hereby agrees and declares that its liability under
these presents shall be irrevocable joint and several with the liability of
the Company for repayment of the said loan together with interest,
costs, charges and expenses.
9. The Guarantee herein contained shall be enforceable against the
Guarantor notwithstanding that no action of any kind has been taken by
SICOM against the Company and an intimation in writing sent to the
Company and/or the Guarantor by SICOM that a default or breach has
occurred, shall be treated as final and conclusive proof as to the facts
stated herein.
10. The Guarantee herein contained is a continuing one for all amounts
lent and advanced and/or to be lent and advanced by SICOM to the
Company under the said Mortgage as also for all interest, costs,
charges and expenses and all other moneys which may from time to time
become due and payable and remain unpaid for the time being to
SICOM under the said Mortgage and shall remain in force until the said
loan shall be paid off in full with interest and all costs, charges and
expenses and all other moneys as aforesaid.
16. The Guarantor further declares that as between SICOM and the
Guarantor, the Guarantor will be treated as principal debtor jointly
with the Company and accordingly the Guarantor shall not be entitled
to and the Guarantor hereby waives all the costs conferred on the
Guarantor by Sections 133, 134, 135, 139 and 141 of the Indian
Contract Act. "
(emphasis supplied)
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4 Thereafter, on 27th April, 2010, the Petitioner
sanctioned another Term Loan of Rs. 12 Crores to Borrower No.1.
This loan was disbursed in two tranches of Rs. 5 Crores each on 6 th
May, 2010, and one tranche of Rs. 2 Crores on 17 th May, 2010.
This loan of Rs. 12 Crores was also secured inter alia by a Deed of
Mortgage dated 4th May, 2010 as well as a personal Guarantee of
one Mr. Manish Kalani. It is not in dispute before me that as far as
this loan of Rs.12 Crores is concerned, the Respondent Company
has not executed any corporate Guarantee to secure the same.
5 Be that as it may, in relation to the Term Loan of Rs.35
Crores, Borrower No.1 continued to pay the EMI's on a regular
basis for the first few installments (from January 2010 to
December 2011) and thereafter committed default in making
payment of the EMI's. Accordingly, the Petitioner issued a demand
notice on 17th April, 2012 calling upon Borrower No.1 to pay the
over due amount of Rs.2.45 Crores on or before 3 rd May, 2012.
Borrower No.1 even failed to pay this over due amount, and
therefore, the Petitioner issued a recall notice dated 30 th May,
2012 recalling the entire outstanding of Rs.47.54 Crores (as on
29th March, 2012) under the Term Loan of Rs.35 Crores as well as
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the Term Loan of Rs.12 Crores. As far as the Term Loan of Rs. 35
Crores is concerned, the recall notice itself states that the
principle amount outstanding is Rs. 33.28 Crores and interest
over due is Rs. 2.03 Crores totaling to Rs. 35.31 Crores. The
reason why I have mentioned this over here is because the
Respondent Company was not a Guarantor in relation to the Term
Loan granted of Rs. 12 Crores to Borrower No.1.
In view of the fact that the Respondent Company failed
to make payment, the Petitioner by its notice dated 16 th July,
2012 invoked the Guarantees executed by the Respondent
Company as well as one Mr. Manish Kalani. The said notice,
though giving a break up of the amounts due under the Term Loan
of Rs. 35 Crores as well as the Term Loan of Rs. 12 Crores, claimed
the entire sum due from both the Guarantors. I must mention
here that Mr. Rajadhyaksha, the learned counsel appearing on
behalf of the Petitioner has fairly stated that as far as the
Respondent Company is concerned, they are liable as Guarantors
only for the dues that are payable under the Term Loan of Rs. 35
Crores, which on the date of the notices came to approximately Rs.
36.35 Crores.
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7 In view of the fact that the Respondent Company as
well as Borrower No.1 failed to pay the outstanding amounts, the
Petitioner initiated recovery proceedings against Borrower No.1
as well as the Respondent Company in the Mumbai Debts
Recovery Tribunal by filing Original Application No.206 of 2013.
In this Original Application, the claim made against the
Respondent Company is only with reference to the Term Loan of
Rs. 35 Crores.
This Original Application is pending before the
DRT.
8 In addition thereto, on account of the failure of the
Respondent Company to pay the outstanding amount under the
Term Loan of 35 Crores, on 31 st January, 2013, the Petitioner
issued a statutory notice to the Respondent Company calling upon
it to pay its outstanding dues. The Respondent Company replied
to the same by their letter dated 2nd February, 2013 and refuted
the claim of the Petitioner on the grounds more particularly set
out therein. As mentioned earlier, according to the Petitioner, as
on 31st July, 2015, an amount of Rs. 58.24 Crores is outstanding
as due and payable by the Respondent Company against the Term
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Loan of Rs. 35 Crores.
TERM LOAN OF RS.25 CRORES SANCTIONED TO
BORROWER NO.2.
9 On 21st June, 2010, the Petitioner sanctioned an inter
corporate deposit by way of a Short Term Loan for Rs. 25 Crores to
Borrower No.2. This loan was inter alila secured by an indenture
of mortgage dated 25th June, 2010. To secure this loan of Rs. 25
Crores, the Respondent Company executed a Deed of Guarantee
dated 26th June, 2010 in favour of the Petitioner (Exhibit-K to the
Petition). The terms and conditions of this Guarantee are almost
identical to the Deed of Guarantee executed by the Respondent
Company in relation to the loan sanctioned by the Petitioner to
Borrower No.1 (for the Term Loan of Rs. 35 Crores).
10 On 25th August, 2010, the terms and conditions of the
Rs. 25 Crore loan were further modified, first on 24 th June, 2010
and thereafter again on 25th August, 2010 inter alia to change the
nature of the facility from an inter-corporate deposit to a Medium
Term Loan for a period of three years. Further, this loan was
made repayable in a single installment at the end of 180 days from
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the date of disbursement under every rotation. It was specifically
stated in this modification letter that all other terms and
conditions of the sanction letter dated 21st June, 2010 and
modification letter dated 24th June, 2010 were to remain
unchanged.
11 Thereafter, this Term Loan of Rs. 25 Crores was
further modified by a further modification letter dated 16 th
November, 2011. It was specifically stated even in this letter that
all the terms and conditions of the sanction in respect of the Rs. 25
Crore loan shall continue to be valid and in force. This
modification letter dated 16th November, 2011 has been duly
executed and signed by Borrower No.1 as well as the Respondent
Company in its capacity as a Guarantor. Pursuant to this letter
dated 16th November, 2011, the Petitioner eventually disbursed
Rs.20 Crores (as against the sanctioned limit of Rs. 25 Crores) in
two tranches of Rs. 10 Crores each (on December 27, 2011 and
December 29, 2011 respectively).
12 Since Borrower No.2 defaulted in making payment of
the Petitioner's dues, the Petitioner issued a demand notice on
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17th April, 2012, calling upon Borrower No.2 to pay an over due
amount of Rs.54.82 Lakhs on or before 3 rd May, 2012. Since this
requisition was not complied with, the Petitioner thereafter issued
a recall notice dated 31st May, 2012 to Borrower No.2 recalling the
entire outstanding amount of Rs.20.82 Crores (as on 29 th May,
2012). In view of the fact that Borrower No.2 did not pay the
outstanding dues, the Petitioner by its notice dated 16 th July,
2012, invoked the Guarantee given by the Respondent Company
(dated 26th June, 2010) and called upon the Respondent to pay
the outstanding amount to the Petitioner.
13 It is the case of the Petitioner that since the
Respondent Company failed to make payment under the
Guarantee that was executed by them, the Petitioner on 24 th
January, 2013, issued a statutory notice under Sections 433 and
434 of the Companies Act, 1956 to the Respondent calling upon
them to pay the outstanding amount. As far as this loan is
concerned, it is the case of the Petitioner that as on 31 st July,
2015, an amount of Rs. 36.13 Crores is outstanding and which is
due and payable by the Respondent Company to the Petitioner. It
is in these circumstances that the present Company Petition has
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been filed.
14 In this factual background, Mr. Rajadhyaksha, the
learned counsel appearing on behalf of the Petitioner, submitted
that the dues of the Petitioner and as claimed in their further
affidavit dated 2nd February, 2016, are really undisputed. He
submitted that there is no dispute with reference to the fact that
both these loans (Term Loan of Rs.35 Crores and Term Loan of Rs.
25 Crores), have been availed off by Borrower Nos.1 and 2. It is
not in dispute that to secure these loans, the Respondent Company
executed two Deeds of Guarantee dated 27th August, 2009 and 26th
June, 2010 respectively. He submitted that the terms of these
Guarantees clearly stipulate that if the borrowers default in
repayment of the loans sanctioned to them, the Respondent
Company will without demur, pay to SICOM on demand at
Mumbai, the said loans together with interest thereon. He
submitted that these Guarantees are also irrevocable, continuing,
and which entitled the Petitioner to treat the Respondent
Company as a principal debtor. He was at pains to point out that
the Guarantees further provide that the Guarantees will be
enforceable against the Guarantor notwithstanding that no action
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of any kind can be taken by the Petitioner against the borrower
and intimation in writing is sent to the Borrower and/or the
Respondent Company that a default has occurred which shall be
treated as final and conclusive proof as to the facts stated therein.
He further stated that these Guarantees clearly stipulate that the
Respondent Company waives all the rights conferred on the
Guarantor by Sections 133, 134, 135, 139 and 141 of the Indian
Contract Act, 1872. It was his submission that there is no dispute
with reference to the execution of these Guarantees and/or terms
and conditions stipulated therein. He submitted that these
Guarantees have been invoked by the Petitioner, and the
Respondent Company has failed to make payment as required
under the said Guarantees. He therefore submitted that this is a
fit case where the Company Petition ought to be admitted and
directions be issued regarding its advertisement etc.
15 On the other hand, and despite several defenses being
raised in the Affidavit in reply, Mr. Rohan Cama, the learned
counsel appearing on behalf of the Respondent Company,
canvassed only the following defenses:-
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(a) The entire claim of the Petitioner is fully secured by a
mortgage of an immoveable property, the value of
which is far more than the claim of the Petitioner;
(b) The Petitioner is guilty of suppression, and therefore,
is not entitled to any equitable orders from this Court
in company jurisdiction. To elaborate this point
further, Mr. Cama submitted the following instances of
suppression:-
(i) Despite the fact that the Respondent Company
has not executed any Guarantee for the Term
Loan of Rs.12 Crores sanctioned to Borrower
No.1, this fact has been suppressed in the
Petition and a claim with reference to this loan
has also been made against the Respondent
Company despite them not being Guarantors in
relation to this loan;
(ii) the Petition proceeds on the basis that the Term
Crores whereas in fact only a sum of Rs. 20
Crores was disbursed to Borrower No.2;
(iii) a sum of Rs. 9 Crores was paid by Borrower No.2
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on/about March, 2013 which fact is suppressed
in the Petition and no credit for the same is given
to the Respondent Company;
(iv) even though the Petitioner has filed proceedings
in the DRT for recovery of their dues in respect
of both these loans, the same is suppressed in the
Company Petition.
(c) Since a substantial portion of the debt is disputed by
the Respondent Company, this Court, in the peculiar
facts of this case, ought not to enter upon any
adjudicatory process which is in the exclusive domain
of the DRT, by virtue of the provisions of the Recovery
of Debts Due to Banks and Financial Institutions Act,
1993;
(d) The Deeds of Guarantee are not adequately stamped
under the provisions of the Maharashtra Stamp Act,
1958 and are therefore inadmissible in evidence; and
(e) The Respondent Company is a profit making company
and is a running concern, and therefore, it ought not be
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wound up.
16 I must mention here that Mr. Cama fairly stated that
the issue of stamping has not been pleaded in the Affidavit in reply
filed on behalf of the Respondent Company and hence he is not
pressing this point. He, on instructions, states that this point shall
be raised by his clients in the proceedings pending in the DRT. Be
that as it may, for all the aforesaid reasons Mr. Cama submitted
that the debt of the Petitioner is bonafide disputed and therefore
this Petition be dismissed and the Petitioner be left to prosecute
the recovery proceedings already initiated by the Petitioner in the
DRT.
17 I have heard the learned counsel at length and perused
the papers and proceedings in the Company Petition and the
Annexures thereto. The first contention raised by Mr. Cama was
that the Petitioner is adequately secured by virtue of the fact that
the Petitioner had in its favour a mortgage of an immoveable
property of a piece and parcel of land admeasuring about 10,947
square meters and thereabouts situated on Nanded Latur Road
within the limits of Village Vasarni Taluka, and District Nanded,
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together with buildings, structures and superstructures thereon
(hereinafter referred to as the "mortgaged property" ). He
submitted that the possession of this mortgaged property has been
taken over by the Petitioner by exercising rights under Section 29
of the State Financial Corporation Act, 1951 and they have an
unfettered right to sell the same. He submitted that pursuant to
the order of this Court dated 1 st September, 2014 read with order
dated 25th September, 2014, a valuation of the mortgaged
property was done and the same was valued at approximately Rs.
74 Crores. He submitted that in this view of the matter, the
Petitioner was fully secured as contemplated under Section 434
(1) (a) of the Companies Act, 1956, and therefore, this Company
Petition was not maintainable because the deeming fiction as set
out in the said Section was not attracted.
18 I am unable to agree with this submission for more
than one reason. Firstly, this property wasn't mortgaged by the
Respondent Company. It was mortgaged by Borrower No.1.
Section 434 stipulates that the Company shall be deemed to be
unable to pay its debts if inter alia, a creditor to whom the
company is indebted in a sum exceeding one lakh rupees then due,
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has served on the company, by causing it to be delivered at its
registered office, by registered post or otherwise, a demand under
his hand requiring the company to pay the sum so due and the
company has for three weeks thereafter neglected to pay the sum,
or to secure or compound for it to the reasonable satisfaction of
the creditor. It is undisputed that the Petitioner qua the
Respondent Company is an unsecured creditor. The Respondent
Company has not given any security by way of mortgage or
otherwise to secure the dues of the Petitioner. Section 434
contemplates that the Company who is called upon to pay
pursuant to the notice issued thereunder has to either pay or
secure the dues to the satisfaction of the person giving the notice.
Therefore, at least, prima facie, I am unable to accept the
submission of Mr. Cama that the Petitioner is fully secured as
contemplated under Section 434 (1) (a) of the companies Act,
1956. Secondly, even otherwise, it is not in dispute before me that
after valuation of the mortgaged property (valued at approx Rs.74
Crores) was done by this Court, it was put up for sale. Despite this
valuation, the highest bid received was only for a sum of Rs.22.82
Crores. In view of the fact that the valuation of the said property
was much higher, the parties agreed that the same should not be
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sold for Rs. 22.87 Crores. Thereafter, two further attempts were
made to sell the mortgaged property. The first attempt was made
on 15th July, 2015, fixing the reserve price at Rs. 31 Crores.
During this attempt, not a single bid was received. Thereafter
another attempt was made on 15th October, 2015, when the
reserve price fixed was Rs.25 Crores even though the distress
value of the mortgaged property was Rs. 31 Crores. The Petitioner
received a bid only for Rs.25.25 Crores and therefore decided not
to sell the mortgaged property.
ig As rightly submitted by Mr.
Rajadhyaksha, the maximum bid that has been received for the
sale of the mortgaged property, despite three attempts, is
approximately Rs.25 Crores. This, at least at this stage, would
indicate that notwithstanding the valuation, the realisable value of
the mortgaged property is much lower than the claim of the
Petitioner. In these circumstances, and considering these facts, at
least, at this stage, it cannot be said that the value of the
mortgaged property is more than the claim of the Petitioner or
that the claim of the Petitioner is adequately secured as
contemplated under section 434 (1) (a) of the Companies Act,
1956. In any event, I find that the question whether the security is
adequate or otherwise is something that would be investigated by
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this Court at the hearing and final disposal of the Petition. At this
stage and when I am hearing the Company Petition for admission,
prima facie, on the facts narrated above, I am not satisfied that the
security is sufficient to cover the claim of the Petitioner. This view
that I have taken, is also supported by a decision of a Division
Bench of this Court in the case of Bharat Overseas Bank
Limited v/s Shree ARCEE Steels Pvt Ltd .1 The relevant
portion of the said decision reads thus:
" We are of the opinion that bearing in mind the clear provisions
of the Companies Act and the principles which have been
discussed in detail in the Madras High Court and the Calcutta
High Court judgments above-cited, the rejection of the petition in
this case at the stage of admission was not at all justified. The
petition was required to be admitted and advertised and it is at
that stage that the court could go into the question as to whether
the security is sufficient or not and exercise its discretion to
accept the petitioning creditor's claims and request for winding
up or to reject the same on judicial consideration."
19 This being the position, I am unable to accept the
submission of Mr. Cama that the claim of the Petitioner is
adequately secured, and therefore, the Company Petition ought to
be dismissed.
20 The next argument canvassed by Mr. Cama was that
the Petitioner was guilty of suppression, and therefore, not
1 (1985) 58 Company Cases 174
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entitled to any equitable reliefs in company jurisdiction. The
instances of suppression narrated by Mr. Cama have been set out
by me earlier. In the facts of the present case and on going
through the Petition as well as the affidavits filed, I do not find
that there has been any suppression as contended by Mr. Cama. It
is true that in the Petition, none of these facts have been disclosed.
However, before the matter was argued for admission, the
Petitioner has filed a further affidavit dated 2nd February, 2016
making clean breast of affairs and have revised their claim as
mentioned in their further affidavit. It has been clearly disclosed
in the said affidavit that the Respondent Company was not a
Guarantor in relation to the Term Loan of Rs. 12 Crores granted
by Borrower No.1 and therefore the claim to that extent stands
reduced against the Respondent Company. In the further
affidavit it has also been stated that even though the loan
sanctioned to Borrower No.2 was for Rs.25 Crores, only a sum of
Rs. 20 Crores has been disbursed and details thereof have also
been set out in the said affidavit. The fact that a sum of Rs. 9
Crores has been paid by Borrower No.2 to the Petitioner and how
the same has been appropriated has also been disclosed along with
the fact that proceedings have been filed in the DRT against the
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Respondent Company as well as Borrower Nos.1 and 2. It is true
that this further affidavit has been filed after the affidavit-in-reply
was filed by the Respondent Company. In my view, it would be an
extremely hyper-technical approach to reject this Petition on the
ground that these facts were not initially disclosed in the
Company Petition and have been brought to the notice of this
Court only after the affidavit-in-reply of the Respondent Company
was filed. Mr. Rajadhyaksha and in my view correctly so,
submitted that these omissions in the Company Petition were not
to gain a march or advantage over the Respondent Company. It
was a genuine mistake because the notice of invocation of the
Deeds of Guarantee in relation to Borrower No.1 was a
consolidated notice issued to the Respondent Company as well as
one Mr. Manish Kalani. Even though the Respondent Company
stood as a Guarantor only for the Term Loan of Rs.35 Crores, Mr.
Kalani stood as a Guarantor for both the loans (Term Loan of
Rs.35 Crores and Term Loan of Rs.12 Crores) sanctioned to
Borrower No.1. This is the reason why even the claim against the
Respondent Company in relation to the Term Loan of Rs. 12
Crores was included in the Company Petition despite the fact that
the Respondent Company is not liable as a Guarantor to the said
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loan. What is important to note is that the notice invoking the
Guarantee (in relation to the loans given to Borrower No.1)
specifically sets out the dues that are payable with reference to
the Term Loan of Rs. 35 Crores as well as the Term Loan of Rs. 12
Crores. Since the said letter was addressed to both Guarantors
and one of them being liable for both the loans, is why this mistake
has crept in. I do not think that every mistake would amount to
suppression. It is also important to note that all these facts have
been specifically disclosed in the further affidavit dated 2 nd
February, 2016. The Respondent Company was given an
opportunity to respond to the said affidavit, if it so chose.
However, it chose not to controvert any of the contents made in
the said further affidavit. I therefore do not find that the
Petitioner is guilty of suppression on this count.
21 As far as the issue of not giving credit of Rs.9 Crores is
concerned (even though the same was paid before filing of the
Company Petition), Mr. Rajadhyaksha submitted that this mistake
occurred because the claim made in the Petition was as on 12 th
December, 2012 (as mentioned in the particulars of claim)
whereas the payment of Rs.9 Crores was made only sometime in
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March 2013. He very fairly did not try to justify this and in fact
submitted that the particulars of claim in the Petition ought to
have been set out as on the date of filing of the Company Petition.
However, this was not done and this is why a mistake was made in
not giving credit of Rs.9 Crores to the Respondent Company in the
Company Petition. He however submitted, and in my view rightly
so, that credit for the same has in fact now been given to the
Respondent Company which is duly reflected in the further
affidavit dated 2nd February, 2016 filed on behalf of the
Respondent Company. He submitted that even if one were to
reduce the claim of the Petitioner by Rs. 9 Crores, there is still a
huge amount due and payable by the Respondent Company to the
Petitioner which would entitle the Petitioner to a winding up
order. I find considerable force in this submission. In company
jurisdiction, I am not adjudicating the claim of the Petitioner and
neither am I passing any decree. As laid down by the Supreme
Court in the case of M/s Madhusudan Gordhandas and Co
v/s Madhu Woollen Industries Pvt Ltd. 2 it is well settled
that the Court will not act on a defense that the Company has the
ability to pay the debt but it chooses not to do so. Where there is
no doubt that the Company owes the creditor a debt entitling him
2 (1971) 3 SCC 632
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to a winding up order but the exact amount of the debt is disputed,
the Court will make a winding up order without requiring the
creditor to quantify the debt precisely. This proposition has been
laid down at paragraph 21 thereof which reads thus:-
"21. Where the debt is undisputed the court will not act upon a
defence that the company has the ability to pay the debt but the
company chooses not to pay that particular debt, see Re. A
Company. [94 SJ 369] Where however there is no doubt that the
company owes the creditor a debt entitling him to a winding up
order but the exact amount of the debt is disputed the court will
make a winding up order without requiring the creditor to
quantify the debt precisely See Re Tweeds Garages Ltd. [1962
Ch 406] The principles on which the court acts are first that the
defence of the company is in good faith and one of substance,
secondly, the defence is likely to succeed in point of law and
thirdly the company adduces prima facie proof of the facts on
which the defence depends."
(emphasis supplied)
22 Therefore, even if one was to reduce the claim of the
Petitioner by Rs.9 Crores in view of the fact that no credit of the
same was given in the Company Petition, I find that a substantial
sum is due and payable by the Respondent Company to the
Petitioner. This would entitle the Petitioner to seek a winding up
order from this Court. In this view of the matter, the argument of
Mr. Cama that payment of Rs.9 Crores is suppressed in the
Petition pales into insignificance.
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23 In view of what I have held, I find that the reliance
placed by Mr. Cama on the decision of the Supreme Court in the
case of S. P. Chengalvaraya Naidu ( Dead) by LRS v/s
Jagannath (Dead) by LRS and Others 3 is wholly misplaced.
The facts of this case would reveal that a partition decree was
obtained from the Court by suppressing a vital document, namely
the "release deed." It is in these circumstances, that the
observations of the Supreme Court as set out in paragraphs 5 and
6 have to be read and understood. In fact, the short question
before the Supreme Court was whether in the facts of that case
Jagannath had obtained a preliminary decree by playing a fraud
on the Court. It is in these circumstances that the Supreme Court
held that non-production and even non-mentioning of the "release
deed" at the trial tantamounted to playing a fraud on the Court.
When a party withholds a vital document in order to gain an
advantage on the other side then he would be guilty of playing a
fraud on the court as well as on the opposite party, is what was
held by the Supreme Court in the said decision. I do not see how
this decision advances the case of the Respondent Company any
further. In the facts of the present case, before this Company
3 (1994) 1 SCC 1
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Petition was heard for admission, the Petitioner has filed a further
affidavit disclosing all the facts to this Court. It is only after
considering all these facts that I have heard the matter, and I
therefore do not find that there is any suppression as contended
by Mr. Cama which would dis-entitle the Petitioner from
approaching this Court in its company jurisdiction. On the same
parity of reasoning, I find the reliance placed by Mr. Cama on the
judgment of the Supreme Court in the case of Ram Chandra
Singh v/s Savitri Devi and Others, 4 also wholly misplaced. I
therefore have no hesitation in rejecting the argument of Mr.
Cama that the Petitioner is guilty of any suppression, and
therefore, this Company Petition ought be dismissed.
24 The next contention raised by Mr. Cama was that there
was a serious dispute with reference to the debt owed by the
Respondent Company to the Petitioner. He submitted that even as
disclosed in the further affidavit dated 2nd February, 2016, it is
now admitted that the Respondent Company is not liable as
Guarantor for the Term Loan of Rs.12 Crores sanctioned to
Borrower No.1. He further submitted that in the Company
Petition as originally filed no credit of Rs. 9 Crores was given to
4 (2003) 8 SCC 319
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the Respondent Company when in fact now it is clear that the said
payment has in fact been made and that too before filing of the
Company Petition. He would therefore submit that there is serious
dispute with reference to the amounts payable by the Respondent
Company to the Petitioner and this being the case, this Company
Petition ought not to be entertained. In this regard, Mr. Cama
relied upon the decision of the Supreme Court in the case of
Mediquip Systems (P) Ltd v/s Proxima Medical System
GMBH. 5 Mr. Cama relying upon the aforesaid decision, contended
that if there is a dispute as regards the payment of the principal
sum, however, small that sum may be, a Petition for winding up is
not maintainable and the necessary forum for determination of
such a dispute is a Civil Court. I will deal with this decision of the
Supreme Court a little later in this Judgement.
25 It is true that in the Company Petition as originally
filed, the claim made against the Respondent Company was also
with reference to the Term Loan of Rs.12 Crores for which
admittedly the Respondent Company was not a Guarantor.
However, as far as the Term Loan of Rs. 35 Crorers is concerned,
Mr. Cama has not raised any defense in relation to the same. The
5 (2005) 7 SCC 42
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fact that the Guarantee was executed by the Respondent
Company in relation to the Term Loan of Rs. 35 Crores has been
very fairly admitted by Mr. Cama before me. In the further
affidavit, a specific statement has been made on behalf of the
Petitioner that the Respondent Company is not a Guarantor in
relation to the Term Loan of Rs. 12 Crores that was sanctioned by
Borrower No.1. After excluding the amounts that were due under
the Term Loan of Rs. 12 Crores, the Petitioner has specifically
stated in the further affidavit that an amount of Rs. 58.24 Crores,
as on 31st July, 2015, is due and payable by the Respondent
Company in relation to the Term Loan of Rs. 35 Crores. This
statement has remained uncontroverted and I find from the
record that in relation to the Term Loan of Rs. 35 Crores, the
Respondent Company as a Guarantor, has absolutely no defense.
26 As held by the Supreme Court in the case of M/s
Madhusudan Gordhandas and Co 2 it is now settled law that
where there is no doubt that the Company owes the creditor a debt
entitling him to a winding up order but the exact amount of the
debt is disputed, the Court will make a winding up order without
requiring the creditor quantifying a debt precisely. The principle
2 (1971) 3 SCC 632
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on which the Court acts are that the defense of the company is in
good faith and one of substance; the defense is likely to succeed on
a point of law; and the Company adduces prima facie proof of the
facts on which the defense depends. In a nutshell, at the
admission stage, what the Company Court has to see is whether
the Company is indebted to the Petitioner in excess of a sum of Rs.
1 lakh as more particularly set out in Section 434 (1) (a) of the
Companies Act, 1956. If this requirement is met, it is not
necessary for the Petitioner to quantify the debt precisely. This
proposition has been consistently followed by this Court. In the
case of Pfizer Limited v/s Usan Laboratories Pvt Ltd. 6 a
Division Bench of this Court held as under:-
"6. The short question we are considering is the position of the
notice or of the subsequent petition when a part of the claim
made by the creditor is seriouly in dispute, but the remaining
portion which prima facie would appear to be in order exceeds
the limit of Rs. 500/- indicated in section 434. Shri Tulzapurkar
submitted that the position is not res integra being concluded by
the decisions both of the English Courts and of the Calcutta High
Court, which decisions have taken view contrary to the view
which found favour with the learned Company Judge. Our
attention was invited to these decisions and it becomes necessary
therefore to refer to them.
7. In point of time, the first of the decisions in the decision given
by Plowman J. in In re Tweeds Garages Ltd., [(1962) 1
Chancery 406.] The relevant observations are to be found at
pages 413 and 414 of the report. An opinion has been expressed
in the said judgment that it would be quite unjust to refuse a
6 (1985) Mh. L. J. 554
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winding-up order to a petitioner who is admittedly owed moneys
which have not been paid merely because there is a dispute as to
the precise amount owing.
8. Almost to the same effect are the observations in Cardiff
Preserved Coal and Coke Company v. Norton, [(1866-1867) 2
Law Reports Chancery Appeals 405.] . A contention had been
advanced before the appellate Court that the winding-up order
which was being considered was bad because the creditor had
demanded a sum of £628, and it appeared that he was entitled
only to £411 7s. 9d. This argument has been decisively rejected
by Lord Chelmsfore, L.C. speaking for the Bench at page 410 of
the report. It has been observed that even if the creditor has
made a demand upon the company for payment of more than was
due, that per se will not make the notice or the consequential
winding up order bad or invalid, provided that there was a debt
in exeess of £50 due to the creditor.
9. Both the above decisions have been cited and followed by a
Single Judge of the Calcutta High Court in Ofu Lynx
Ltd. v. Simon Carves India Ltd. [AIR 1970 Cal. 418.] The
learned Single Judge was considering the validity of a notice
under section 434 of the companies Act, 1956, and the contention
raised was that the notice must be deemed to be bad because a
portion of the claim in respect of which notice had been given
was disputed and prima facie the dispute was required to be
upheld. It was observed:
"I, therefore, hold that notice under section 434 of the
companies Act, 1956 will not be rendered invalid only
because of the fact that the amount of debt mentioned in
the notice may not be exactly the correct amount of the
debt due, provided the amount mentioned in the notice
includes the debt due and exceeds the sum of Rs. 500/-."
10. In our opinion, the aforesaid decisions set out the correct
principle and once we have reached the conclusion, it will have
to be held that the dismissal of the winding-up petition on the
basis indicated in the impugned order would be clearly bad and
order required to be set aside. Merely because there could be a
serious dispute as to the liability to pay interest at all or at the
rate of 18% would not render the statutory notice invalid or
result in a dismissal of the winding-up petition. The Company
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Judge was required to consider the claim of the petitioners in
respect of the principal amount and to come to a conclusion
whether or not there was any real substantial dispute with regard
to the said claim. If there was a genuine and bonafide dispute,
then certainly it was within his discretion and jurisdication to
dismiss the petition and relegate the petitioners to claim the
amount by a regular suit. However, he did not go into this aspect
but chose to dispose of the winding-up petition by dismissing the
same on an erroneous basis which we have earlier indicated. If
that be so, the impugned order will be required to be set aside
and the petition will now go back to the Company Judge for
reconsideration of the position and to decide whether it is
required to be admitted and whether further directions after
admission are required to be given."
ig (emphasis supplied)
27 The second decision is in the case of Tata Finance
Ltd v/s Kanoria Sugar and General Manufacturing
Company Ltd., Mumbai. 7 The relevant portion reads thus:-
"8. It is well settled that a winding up petition should not be
allowed to be taken as a means to recover debt from the
company. It is not a legitimate way to enforce payment of debts
which are bona fide disputed by the company and cannot be used
as a weapon to pressurise and coerce the company to make
payments. But it is also equally well settled that when the debt is
undisputed and the defence is not bona fide and genuine, the
Court will not act upon a defence that the company has liability
to pay but chooses not to pay and the creditors will, in such case,
be entitled to a winding-up order. This is clear from the
following observations of the Supreme Court in Madhusudan
Gordhandas and Co. v. Madhu Woollen Industries, (1972) 42
Comp Cases 125:
"Two rules are well settled. First, if the debt is bona
fide disputed and the defence is a substantial one, the Court
will not wind up the company. The Court has dismissed a
7 (2002) 1 Mh. L. J. 617
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petition for winding-up where the creditor claimed a sum for
goods sold to the company and the company contended that
no price had been agreed upon and the sum demanded by the
creditor was unreasonable. (See London and Paris Banking
Corpn., Re. 4) Again, a petition for winding-up by a creditor
who claimed payment of an agreed sum for work done for the
company when the company contended that the work had not
been done properly was not allowed. (See Brighton Club and
Horfold Hotel Co. Ltd. Re. 5)
Where the debt is undisputed the Court will not act upon a
defence that the company has the ability to pay the debt but
the company chooses not to pay that particular debt. (See A
Company, Re. 6) Where, however, there is no doubt that the
company owes the creditor a debt entitling him to a winding-up
order but the exact amount of the debt is disputed the Court
will make a winding-up order without requiring the creditor to
quantify the debt precisely. (See Tweeds Garages Ltd., Re. 7).
The principles on which the Courts acts are first that the
defence of the company is in good faith and one of substance,
secondly, the defence is likely to succeed in point of law, and
thirdly, the company adduces prima facie proof of the facts on
which the defence depends."
9. In United Western Bank Ltd.'s case, (1978) 48 Companies
Cases 378 (Bom), Kania, J. (as he then was) observed that when
the defence is that the debt is disputed, the Court has to see first
whether the dispute on the face of it is genuine or merely a cloak
to cover company's real inability to pay the debts. The inability is
indicated by its neglect to pay the debt within three weeks, after
proper demand was made. He added that neglect is to be
assessed on the facts of each case.
10. In Goel Bros, and Co. Pvt. Ltd.'s case, 1979 Mh. L.J. 607 :
(1980) 50 Comp Cases 356 (Bom.), another Single Judge of this
Court, Agarwal, J. held that after the creditor establishes that the
debt is clear, valid in law, unimpeachable and indisputable, the
creditor is entitled to a winding up order ex debito justitiae. But
if the debt is disputed and the dispute is bona fide and genuine,
no winding up order can be made. He clarified that neglect to
pay is not equivalent to omission to pay for it requires that such
omission is without reasonable cause or valid excuse.
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11. Applying now, the law as above, to the case in hand, can it be
said that the defence raised by the company is legitimate and the
debt of company is bona fidedisputed. In the instant case, the
Company's case is that the total amount of more than Rupees
Two crores is payable by the company. It is true that there is
some dispute about the claim of enhanced lease rentals on
account of disallowance of claim of depreciation by the Income
Tax department. There is, however, absolutely no dispute for the
outstanding lease rentals which are in the range of nearly
Rupees Thirty Lakhs. The terms of agreement are also very clear
and in case of default, the company is liable to pay the service
charges. When a part of claim made by the creditor is seriously
disputed but the remaining portion is prima facie appear to
exceed the limit of Rs. 500/- indicated in section 434 of the Act, it
would be unjust to refuse wind up order on the ground that there
is dispute as to precise amount owned.In re Tweeds Garages
Ltd., (1962) 1 Ch. 406: it was clearly held that it would be unjust
to refuse a winding up order to the petitioner who has admittedly
owned moneys which have not been paid merely because there is
a dispute as to the precise amount owning. Almost to the same
effect are the observations in Cardiff Preserved Coal and Coke
Co. v. Norton, (1867) 2 Ch. App. 405.
12. The learned single judge of Calcutta High Court in Ofu Lynx
Ltd. v. Simon Carves India Ltd., (1971) 41 Comp Cas 174 has
observed:
"I, therefore, hold that a notice under section 434 of the
Companies Act, 1956, will not be rendered invalid only
because of the fact that the amount of debt mentioned in the
notice may not be exactly correct amount of the debt due,
provided the amount mentioned in the notice includes debt
due and exceeds sum of Rs. 500/-."
13. The Judgment of single judge of Calcutta High Court has
been cited with approval by the Division Bench of this Court
in Pfizer Ltd. v. Usan Laboratories P. Ltd., 1985 Mh. L.J. 554 :
1985 (57) Comp Cas 236. Therefore, merely because a part of
the claim was disputed by the company, the defence cannot be
said to be legitimate and bona fide."
(emphasis supplied)
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28 In view of this clear enunciation of the law, I find that
the defense raised by the Respondent Company is neither in good
faith nor bonafide. As stated earlier, as far as the debt of the
Respondent Company in relation to the Term Loan of Rs. 35
Crores is concerned, there is absolute no dispute and in fact none
has been canvassed before me by Mr. Cama. In this view of the
fact, on this count alone, and considering the fact that substantial
amounts are due and payable by the Respondent Company to the
Petitioner in relation to this Term Loan, the Petitioner would be
entitled to an order of admission of the Company Petition.
29 Even in relation to the Term Loan of Rs. 20 Crores
disbursed to Borrower No.2 (and for which the Respondent
Company stood as a Guarantor), I find that even if one gives credit
of Rs. 9 Crores entirely to the Respondent Company in relation to
the said loan, substantial amounts would still be outstanding and
payable by the Respondent Company to the Petitioner. In this
view of the matter, I find no substance in the contention of Mr.
Cama that there is a serious dispute with reference to the claim
made in the Petition.
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30 Ancillary to this argument, Mr.Cama sought to
contend that the Petitioner is a financial institution as
contemplated under the provisions of the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 ("RDDB Act") which
alone has exclusive jurisdiction to adjudicate upon the claims
made by the Petitioner, and therefore, this Court cannot
adjudicate and/or compute any dues that may be allegedly
payable by the Respondent Company to the Petitioner. He
submitted that from a plain reading of the provisions of the RDDB
Act (namely Sections 17 and 18 thereof), it is clear that the Debt
Recovery Tribunal has exclusive jurisdiction to adjudicate upon
the claim made by the Petitioner. The Company Court's
jurisdiction therefore is clearly ousted from entering upon any
such exercise. He submitted that in view of the dispute raised in
relation to the claim made by the Petitioner, this Company
Petition ought to be dismissed.
31 I find this argument to be wholly misconceived. It is
now well settled that the Company Court does not adjudicate the
claim of the Petitioner nor does it pass any decree ordering the
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Respondent Company to pay the sum claimed in the Company
Petition. It only has to come to the conclusion that the Respondent
Company is indebted to the Petitioner in a sum exceeding to Rs. 1
lakh as more particularly set out in Section 434 of the Company
Act, 1956 before passing an order of winding up. Any findings
given by the Company Court in relation to the indebtedness of the
Respondent Company to the Petitioner would certainly not be
binding on the Civil Court or the DRT whilst adjudicating the claim
made by the Petitioner as to what is the exact amount due and
payable by the Respondent Company. If I was to accept the
submissions of Mr Cama as canvassed earlier, it would effectively
mean that no bank or the financial institution would be able to file
a Company Petition and seek orders of winding up. This is not how
I understand the law to be. In fact, a Division Bench of this Court
in the case of Viral Filaments Ltd. Vs Indusind Bank Ltd. 8
has categorically held that the exclusion of jurisdiction as set out
in Sections 17 and 18 of the RDDB Act of all other Courts and
authorities is only to the extent of the jurisdiction specifically
vested in the Debt Recovery Tribunal. The jurisdiction to wind up
a Company is not available to the Debt Recovery Tribunal. In this
regard, the observations of the Division Bench in paragraph 4,5
8 2001(3) Mh.L.J. 552
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and 6 are apposite:-
"4. Mr. Shah, learned Counsel appearing for the Appellant,
strenuously contended that the judgment of the Supreme Court
in Allahabad Bank v. Canara Bank, (2000) 4 SCC 406, supports
the proposition canvassed by him. He contends that this
judgment of the Supreme Court holds that once a bank or
financial institution, which is entitled to move the Tribunal
constituted under the RDB Act for recovery of debt, has moved
the DRT, then a winding up petition is totally barred. We shall
shortly examine whether this contention or has merit.
5. Section 18 of the RDB Act provides that, on and from the
appointed day, jurisdiction of Courts and other authorities in
relation to matters specified in section 17 is barred. Section 17
provides that on and from the appointed day, a Tribunal
constituted under the RDB Act shall exercise the jurisdiction,
powers and authority "to entertain and decide applications from
the banks and financial institutions for recovery of debts due to
such banks and financial institutions." Thus, it is obvious that the
exclusion of the jurisdiction of all other Courts and authorities is
only to the extent the jurisdiction is specifically vested in the
DRT. That jurisdiction under section 17 is only the jurisdiction to
entertain and decide applications from banks and financial
institutions for recovery of debts due to them. On first principles,
we are unable to agree with the learned Counsel that a Petition
presented under section 433(e) of the Companies Act, 1956 for
winding up of a Company is or equivalent to an application
seeking recovery of debt due to the petitioning creditor. In the
first place, section 433 of the Companies Act, 1956 is not
intended to supplant the jurisdiction of a Civil Court to
adjudicate a money suit. Section 433(e) vests in the Company
Court the jurisdiction to wind up a Company, inter alia, under
Clause (e), if the Company is unable to pay its debts. Section 434
creates a statutory fiction that if the creditor has issued a
prescribed notice to the Company to pay up the debt and the
Company fails to do so or fails to secure the said debt within the
prescribed time, the Company shall be deemed to be unable to
pay its debt. Once such a contingency has arisen, and the
statutory fiction has come into play, it is perfectly open to the
Company Court to entertain the petition under section 433(e) of
the Companies Act, 1956.
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6. The argument of Mr. Shah that what could be done by the
Company Court can equally be done by the DRT under the RDB
Act is erroneous. There is no provision in the RDB Act
empowering the Tribunal to wind up a Company which owes the
debt to the applicant financial institution. The jurisdiction of the
Tribunal under the RDB Act is only to adjudicate the liability of
the respondent before it, ascertain the "debt" due to the
bank/financial institution and issue a certificate for recovery
thereof. Once such a certificate of recovery is issued to the
Recovery Officer, the Recovery Officer is empowered to execute
the same in the manner prescribed under the RDB Act. We find
that the jurisdiction to wind up the Company is wholly
unavailable to the DRT. Hence, what could be done by the
Company Court under section 433(e) could obviously not be
done by DRT."
ig (emphasis supplied)
32 In this view of the matter, I find no merit in this
contention and it is accordingly rejected.
33 The last argument canvassed by Mr. Cama is that this
Company is a profit making Company and is a running concern
and therefore should not be wound up. In this regard, Mr. Cama
relied upon two decisions of a Single Judge of this Court (Kochar
J. as he then was) in the case of QSS Investors Pvt Ltd v/s
Allied Fibers Ltd. 9 and in the case of Dalmia Cement
(Bharat) Ltd v/s Indian Seamless Steels and Alloys
Limited. 10 To canvass this proposition, I find the only averment
9 (2001) 107 Company Cases 587
1 0 (2002) 112 Company Cases 314
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made in the affidavit-in-reply is at paragraph 6 which inter alia
states that the Respondent Company is a profit making company
having significant assets and investments. Apart from this
statement, I find in the affidavit-in-reply, there are absolutely no
details with reference to these averments. It is merely a bald
statement made in the affidavit without any particulars. Be that
as it may, in any event of the matter, once I have come to the
conclusion that substantial amounts are undisputedly due and
payable by the Respondent Company to the Petitioner, there is no
question of dismissing this Petition merely on the ground that the
Respondent Company is a profit making company. If I was to do
so, I would be acting contrary to the law laid down by the Supreme
Court in the case of M/s Madhusudan Gordhandas and Co. 2
as well as two Division Bench decisions of this Court in the case of
Pfizer Limited 6 and Tata Finance Ltd. 7 In this view of the
matter, I find no merit in this contention also. As far as the two
decisions relied upon by Mr. Cama are concerned, on going
through the same, I find that they turned on their own facts and
do not in any way lay down any general proposition of law that
merely because the Respondent Company is a profit making
2 (1971) 3 SCC 632
6 (1985) Mh. L. J. 554
7 (2002) 1 Mh. L. J. 617
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company, an order of winding up cannot be passed. Therefore
these two decisions do carry the case of the Respondent Company
any further.
34 This only leaves me to deal with decision of the
Supreme Court in the case of Mediquip Systems (P) Ltd . 5 The
facts of this case would reveal that the Respondent therein
(Proxima Medical System GMBH) issued a legal notice to the
appellant company under Section 434 of the Companies Act, 1956,
mentioning that the Appellant Company (Mediquip Systems Pvt.
Ltd. ) was liable to pay to the Respondent a sum of US$ 5000 and
US$ 11000 aggregating to US$ 16,000. Since, this payment was
not made, the Respondent filed a winding up petition against the
Appellant Company praying that the Company be wound up. The
Company Judge disposed of the winding up petition holding inter
alia that sofar as US$ 5000 was concerned, there was a serious
dispute raised by the Appellant Company. However, in sofar as
the amount of, US$ 11,000 was concerned, the learned Company
Judge directed the Appellant Company to deposit US$ 11,000 in
the Company Court. This order of the Company Judge was
challenged before a Division Bench of Calcutta High Court without
5 (2005) 7 SCC 42
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any success. Being aggrieved thereby, the Appellant Company
approached the Supreme Court. The Supreme Court after
considering the facts of the case held that, even with reference to
US$ 11,000 there was a bonafide dispute raised by the Appellant
Company. This is evident from paragraph 15 and 16 of the said
decision. On going through the aforesaid decision, I do not find
that the Supreme Court has held that the dispute with reference to
the principal sum, however small, would render a Petition for
winding up as not maintainable.
ig The Supreme Court has only
referred to the judgment of the Madras High Court in the case of
Tube Investments of India Ltd. Vs. Rim and Accessories
(P) Ltd. [ (1990) 3 Comp L.J. 322 ] . It has by no means held
so. In fact in this very judgment, the Supreme Court has also
referred to the decision of Madhusudan Gordhandas and
Co. 2 . I, therefore, do not think that this decision of the Supreme
Court, in any way furthers the submissions made by Mr Cama. As
the facts reveal, before the Supreme Court, the entire debt claimed
by the Respondent therein was bonafide disputed by the Appellant
Company. The observations made by the Supreme Court,
therefore, have to be read and understood in the facts, that were
before it.
2 (1971) 3 SCC 632
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35 It is now too well settled a proposition that the ratio of
any decision must be understood in the background of the facts of
that case. It has been said a long time ago that a case is only an
authority for what it actually decides and not what logically
follows from it. If one must refer to any authority on this subject,
the Supreme Court in the case of Sarva Shramik Sanghatana
(KV) v/s State of Maharashtra reported in (2008) 1 SCC 494
has very succinctly and eloquently reiterated the said proposition.
Paragraphs 14 to 18 of the said judgment read thus :-
"14. On the subject of precedents Lord Halsbury, L.C., said
in Quinn v. Leathem[1901 AC 495 : (1900-1903) All ER Rep 1
(HL)] : (All ER p. 7 G-I)
"Before discussing Allen v. Flood [1898 AC 1 : (1895-
1899) All ER Rep 52 (HL)] and what was decided therein,
there are two observations of a general character which I
wish to make; and one is to repeat what I have very often
said before--that every judgment must be read as
applicable to the particular facts proved or assumed to be
proved, since the generality of the expressions which
may be found there are not intended to be expositions of
the whole law, but are governed and qualified by the
particular facts of the case in which such expressions are
to be found. The other is that a case is only an authority
for what it actually decides. I entirely deny that it can be
quoted for a proposition that may seem to follow logically
from it. Such a mode of reasoning assumes that the law
is necessarily a logical code, whereas every lawyer must
acknowledge that the law is not always logical at all."
(emphasis supplied)
We entirely agree with the above observations.
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15. In Ambica Quarry Works v. State of Gujarat [(1987) 1 SCC
213] (vide SCC p. 221, para 18) this Court observed:
"18. The ratio of any decision must be understood in the
background of the facts of that case. It has been said
long time ago that a case is only an authority for what it
actually decides, and not what logically follows from it."
16. In Bhavnagar University v. Palitana Sugar Mill (P)
Ltd. [(2003) 2 SCC 111] (vide SCC p. 130, para 59) this Court
observed:
"59. ... It is also well settled that a little difference in facts
or additional facts may make a lot of difference in the
precedential value of a decision."
17. As held in Bharat Petroleum Corpn. Ltd. v. N.R.
Vairamani [(2004) 8 SCC 579 : AIR 2004 SC 4778] a decision
cannot be relied on without disclosing the factual situation. In
the same judgment this Court also observed: (SCC pp. 584-85,
paras 9-12)
"9. Courts should not place reliance on decisions without discussing
as to how the factual situation fits in with the fact situation of the
decision on which reliance is placed. Observations of courts are
neither to be read as Euclid's theorems nor as provisions of a statute
and that too taken out of their context. These observations must be
read in the context in which they appear to have been stated.
Judgments of courts are not to be construed as statutes. To interpret
words, phrases and provisions of a statute, it may become necessary
for judges to embark into lengthy discussions but the discussion is
meant to explain and not to define. Judges interpret statutes, they do
not interpret judgments. They interpret words of statutes; their words
are not to be interpreted as statutes. In London Graving Dock Co.
Ltd. v. Horton [1951 AC 737 : (1951) 2 All ER 1 (HL)] (AC at p. 761),
Lord MacDermott observed: (All ER p. 14 C-D)
'The matter cannot, of course, be settled merely by treating
the ipsissima verba of Willes, J. as though they were part of
an Act of Parliament and applying the rules of interpretation
appropriate thereto. This is not to detract from the great
weight to be given to the language actually used by that most
distinguished Judge, ...'
10. In Home Office v. Dorset Yacht Co. Ltd. [1970 AC 1004 : (1970)
2 WLR 1140 : (1970) 2 All ER 294 (HL)] Lord Reid said,
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SICOM 903.cp.625.13.doc
'Lord Atkin's speech ... is not to be treated as if it were a statutory
definition. It will require qualification in new circumstances.' (All ER p.
297g)
Megarry, J. in Shepherd Homes Ltd. v. Sandham (No. 2) [(1971) 1
WLR 1062 : (1971) 2 All ER 1267] , observed: (All ER p. 1274d)
'One must not, of course, construe even a reserved judgment of even
Russell, L.J. as if it were an Act of Parliament;'
And, in British Railways Board v. Herrington [1972 AC 877 : (1972) 2
WLR 537 : (1972) 1 All ER 749 (HL)] Lord Morris said: (All ER p.
761c)
'There is always peril in treating the words of a speech or a judgment
as though they were words in a legislative enactment, and it is to be
remembered that judicial utterances are made in the setting of the
facts of a particular case.'
11. Circumstantial flexibility, one additional or different fact may
make a world of difference between conclusions in two cases.
Disposal of cases by blindly placing reliance on a decision is not
proper.
12. The following words of Hidayatullah, J. in the matter of applying
precedents have become locus classicus: (Abdul
Kayoom v. CIT [AIR 1962 SC 680] , AIR p. 688, para 19)
'19. ... Each case depends on its own facts and a close
similarity between one case and another is not enough
because even a single significant detail may alter the entire
aspect, in deciding such cases, one should avoid the
temptation to decide cases (as said by Cardozo) by matching
the colour of one case against the colour of another. To
decide therefore, on which side of the line a case falls, the
broad resemblance to another case is not at all decisive.'
***
'Precedent should be followed only so far as it marks the path of
justice, but you must cut the dead wood and trim off the side
branches else you will find yourself lost in thickets and branches. My
plea is to keep the path to justice clear of obstructions which could
impede it.' "
(emphasis supplied)
18. We have referred to the aforesaid decisions and the
principles laid down therein, because often decisions are cited
for a proposition without reading the entire decision and the
reasoning contained therein. In our opinion, the decision of this
Court in Sarguja Transport case [(1987) 1 SCC 5 : 1987 SCC
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SICOM 903.cp.625.13.doc
(Cri) 19 : AIR 1987 SC 88] cannot be treated as a Euclid's
formula."
36 In these circumstances, I find that the reliance placed
by Mr Cama on the decision of the Supreme Court in Mediquip
Systems(P)Ltd 5 is wholly misplaced and in the facts and
circumstances of the present case, is of no assistance to the
Respondent.
For all the aforesaid reasons, I find that the substantial
sum is undisputedly due and payable by the Respondent Company
to the Petitioner which would warrant admission of the Company
Petition. In this view of the matter, the following order is passed:-
(i) The Company Petition is admitted and made
returnable on 16th August, 2016.
(ii) The learned counsel appearing on behalf of the
Respondent Company waives service of the
Company Petition under rule 28 of the Company
(Court) Rules, 1959.
(iii) The Company Petition shall be advertised in two
local newspapers viz. (i) Free Press Journal
5 (2005) 7 SCC 42
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(in English) and (ii) Navshakti (in Marathi) as
also in (iii) Maharashtra Government
Gazette. Any delay in publication of the
advertisement in the Maharashtra Government
Gazette and any resultant inadequacy of notice
shall not invalidate such advertisement or notice
and shall not constitute non-compliance with this
direction or with the Companies (Court) Rules,
1959.
(iv) The Petitioner shall, on or before 8 st July, 2016
deposit a sum of Rs.10,000/- towards publication
charges with the Prothonotary and Senior
Master, under intimation to the Company
Registrar, failing which the Company Petition
shall stand dismissed for non-prosecution
without further reference to the Court. After the
advertisements are issued, the balance, if any,
shall be refunded to the Petitioner.
38 It is clarified that the proceedings filed by the
Petitioner against the Respondent Company in the DRT for
recovery of its dues, shall be decided by the DRT on its own merits
and without being influenced by any observations made in this
order.
( B. P. COLABAWALLA, J.)
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