Bombay High Court
Total Sports & Entertainment ... vs Premier Brands Private Limited - ... on 6 June, 2017
Bench: R.D. Dhanuka
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vai
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY PETITION NO.210 OF 2012
In the matter of Section 433(e) & (f) and 434 of
the Companies Act, 1956 ;
AND
In the matter of winding up of Premier Brands
Private Limited having its registered office of
the Company at 203, Ekdant Housing Society
Oshiwara, Near Oshiwara Police Station,
Jogeshwari (West), Mumbai - 400 102.
Total Sports & Entertainment India Pvt. Ltd., )
A Company registered under the Companies )
Act, 1956 and having its Registered Office )
At 601, 6th Floor, Elecon Arcade, Andheri )
Kurla Road, Marol Naka, Andheri (East), )
Mumbai - 400 059. ) ...Petitioner
Mr.Aditya Shiralkar with Mr.Hemang Raythatha and Mr.Jayesh
Mestry i/b RMG Law Associates for the Petitioner.
Mr.Raman Gandhi with Mr.A.D. Saman and Mr.Anoop Patil for the
Respondent.
CORAM : R.D. DHANUKA, J.
RESERVED ON : 3RD MAY, 2017
PRONOUNCED ON : 6TH JUNE, 2017
JUDGMENT :-
1. By this petition filed under sections 433(e) and (f) and 434
of the Companies Act, 1956, the petitioner seeks winding up of the
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respondent on the ground that the respondent is unable to pay its
debts and also on the ground that it is just and equitable that the
company should be wound up. Some of the relevant facts for the
purpose of deciding this petition are as under :
2. It is the case of the petitioner that the respondent as well
as M/s.Compact Discs India Limited through the common Managing
Director Mr.Suresh Kumar Seengal, represented to the petitioner that
the respondent had been appointed as Master Licensing and
Merchandising Partners and Sole Concessionaires for the
Commonwealth Games Delhi 2010 by the Organizing Committee.
Based on such representation, the petitioner entered into an
agreement i.e. Deal Memo dated 21st May, 2010 with the respondent
on the terms and conditions set out in the said agreement. Under the
said agreement, the respondent appointed the petitioner as its
representative to negotiate on its behalf with the potential licensing
and merchandising partners in India in relation to the Commonwealth
Games Delhi 2010. Clauses 2.1, 2.2 and 2.3 of the said agreement
are extracted as under :-
"2.1 If PBPL enters into an agreement with a
Partner/s following an introduction effected by TSEIPL
during the Representation Period, executed either
directly or until the Common Wealth Games 2010,
PBPL will pay to TSEIPL a commission of 20% of the
gross revenues due from each Parter to PBPL under
each agreement executed between PBPL and the
Partners ("L&M Agreement") for the entire duration of
the L&M Agreement or any extension and renewal
thereof (Commission).
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2.2 All deals will be signed directly between
PBPL and the potential licensee.
2.3 In all cases, PBPL shall invoice the
Partners directly and collect the payment due from the
Partners, PBNPL shall immediately then remit the
commission due to TSEIPL. TSEIPL shall bear its
own corporate taxes on the commission received from
PBPL."
3. It is the case of the petitioner that vide letter dated 26 th
May, 2010, the Organizing Committee, Commonwealth Games (for
short the said OC, CWG) also confirmed the appointment of the
respondent for the merchandising programme for Commonwealth
Games 2010 through its email sent by the Managing Director dated
26th May, 2010.
4. It is the case of the petitioner that pursuant to the said
agreement entered into between the parties, the petitioner introduced
nine clients / partners to the respondent. Out of those nine clients, the
respondent executed the agreements with eight clients for various
amounts totalling to Rs.14,47,50,000/-. It is the case of the petitioner
that the petitioner became entitled to receive from the respondent
commission at the rate of 20% of the said amount of
Rs.14,47,50,000/- i.e. a sum of Rs.2,89,50,000/-. It is also the case of
the petitioner that the respondent did not enter into an agreement
with Nestle Limited introduced by the petitioner where the amount of
contract was to be at Rs.35,00,000/-. It is the case of the petitioner
that since the respondent did not execute the said agreement with the
said Nestle Limited for which the respondent was solely responsible,
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the petitioner became entitled to the commission of Rs.7,00,000/- in
respect of the said transaction also. According to the petitioner, the
petitioner is entitled to the said commission of Rs,2,96,50,000/- under
the said agreement.
5. Some time in the month of September, 2010, the
respondent issued and tendered to the petitioner a cheque dated 27th
September, 2010 drawn on State Bank of Patiala for Rs.19,99,600/-
only towards part payment of the amount of commission to the
petitioner. The said cheque was however, dishonoured upon
presentation and was returned with the remarks "exceeds
arrangements". The said cheque was once again dishonoured upon
presentation with the remarks "payment stopped by the drawer",
inspite of the assurance made by the respondent to honour the said
cheque.
6. The petitioner issued a legal notice of demand dated 29 th
December, 2010, upon the respondent by registered A.D., U.P.C. as
well as by email calling upon the respondent to pay to the petitioner
an amount of Rs.2,96,50,000/- along with interest thereon at the rate
of 18% p.a. The said notice was duly served upon the respondent by
U.P.C. and email and registered post. The said statutory notice was
issued under sections 433 and 434 of the Companies Act, 1956.
7. On 31st January, 2011, the petitioner received a reply from
the respondent to the said statutory notice. Though the respondent
admitted the execution of the agreement between the petitioner and
the respondent, it denied various other allegations made by the
petitioner and also denied the demand made by the petitioner. Insofar
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as the cheque amount of Rs.19,99,600/- which was issued by the
respondent to the petitioner is concerned, it was alleged in the said
reply that the said cheque was issued by the respondent in the form
of guarantee and in anticipation, finalization or formalization of the
contracts with the sub-licencees / partners. The respondent denied
that any of the partners or sub-licencees made payment as alleged
by the petitioner in the statutory notice.
8. On 17th February, 2012, the petitioner filed this petition
inter-alia praying for winding up of the respondent. It is the case of
the petitioner that the respondent was duly served with the copy of
the petition and the notice at the registered office address of the
respondent, which was returned with the remarks "left" though the
same address was shown all throughout in the records of the
Registrar of Companies and also in various pleadings filed by the
respondent itself. By an order dated 17th January, 2013, passed by
this Court, this company petition came to be admitted.
9. The company petition was thereafter advertised pursuant
to the said order dated 17th January, 2013. The petitioner filed
affidavits of publication . The notice under Rule 28 of the Companies
(Code) Rules, 1959 which was sought to be served by the petitioner
on the respondent was returned with remark "left". The matter
appeared for hearing and final disposal before this Court on 14 th
November, 2014. None appeared for the respondent, though served.
By an order dated 14th November, 2014 passed by this Court, the
aforesaid company petition was allowed in terms of prayer clauses
(a) and (b) and the respondent was ordered to be wound up under
the directions of this Court and under the provisions of the
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Companies Act, 1956. By the said order, the Official Liquidator of this
Court came to be appointed as a Liquidator of the respondent with all
powers under section 457 of the Companies Act, 1956, including the
powers and authority to take charge and possession of the property
and assets of the respondent and to deal with and dispose off in
accordance with law.
10. The respondent thereafter filed two Company Applications
bearing Nos.661 of 2015 and 693 of 2015 in the aforesaid company
petition. The Company Application No.693 of 2015 was filed inter-alia
praying for leave under clause 446(1) of the Companies Act, 1956 to
implead the Official Liquidator as a party to the suit filed by the
respondent before Delhi High Court. Insofar as the Company
Application No.661 of 2015 is concerned, the same was filed for
recall and setting aside of the order dated 17th January, 2013 passed
by this Court thereby admitting the company petition and the order
dated 14th November, 2014 passed by this Court allowing the
company petition and ordering winding up of the respondent.
11. By an order dated 24th November, 2016, this Court
observed that the notice issued to the company at its registered
address must be deemed to be delivered even if it is returned
unclaimed. This Court adverted to the judgment of the Supreme
Court in case of K.Bhaskaran vs. Sankaran Vidhyan Balan, (1999)
Supp.(3) SCR 271 and held that just as notice at the correct address
of the addressee refused by the addressee is presumed to be served
on him, a notice returned as unclaimed also similarly raises a
presumption under section 27 of the General Clauses Act that the
notice is duly served on the addressee.
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12. This Court however, considered the peculiar facts of the
present case that there was already a pending suit, which is being
contested between the parties, there was an arbitration reference
pending between the respondent company and Commonwealth
Games Committee, involving a large claim and held that though there
is presumption of law concerning deemed notice, interest of justice
requires that the final winding up order passed in the petition is
recalled and set aside in the peculiar facts and circumstances of the
case and the petition accordingly came to be restored to file at the
stage of hearing and final disposal. This Court directed that the
Official Liquidator who was already appointed in the matter and who
was incharge at the liquidation proceedings, shall continue to operate
for the time being as the Provisional Liquidator.
13. It was clarified that the arbitration reference pending
before Shri Justice D.P. Wadhwa, a retired Judge of the Supreme
Court between the respondent herein and the Commonwealth Games
Committee shall be prosecuted by the directors of the respondent in
presence of the Official Liquidator as Provisional Liquidator and his
presence came to be dispensed with.
14. The respondent thereafter filed affidavit in reply in this
company petition dated 16th December, 2016. The petitioner filed a
rejoinder dated 11th February, 2017.
15. During the pendency of this winding up petition, the
petitioner herein filed a suit (1091 of 2013) before the Delhi High
Court against the respondent inter-alia praying for an amount of
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Rs.2,97,78,800/- from the respondent to the petitioner under the said
Deal Memo. On 16th September, 2016, the respondent filed a writ
petition under section 482 of the Criminal Procedure Code against
the petitioner before the Punjab & Haryana High Court in the
proceedings filed under section 138 of the Negotiable Instruments Act
by the petitioner for dishonour of part payment of Rs.19,99,600/-. In
the said writ petition, there was a reference made by the respondent
to the pendency of this company petition.
16. Some time in the year 2014, the respondent filed a Civil
Suit bearing No.159 of 2014 against the petitioner before the Delhi
High Court inter-alia praying for a declaration that the Deal Memo
dated 21st May,2010 was frustrated and unsuccessful. It is the case
of the petitioner that the address of the respondent mentioned in the
said suit was the same as its registered office address at which the
petitioner had sent the papers and proceedings and the notices of the
winding up petition which were returned with the remarks "left or
unclaimed". In the said suit filed by the respondent, the petitioner
herein filed an application under Order 7 Rule 11 of the Code of Civil
Procedure, 1908. The said application filed by the petitioner is
rejected. The Delhi High Court has closed the right of the petitioner to
file a written statement in the said suit. The petitioner has filed an
application for recall of the said order passed by the Delhi High Court.
The suit filed by the petitioner and the suit filed by the respondent are
pending before the Delhi High Court.
17. Mr.Shiralkar, learned counsel appearing for the petitioner
invited my attention to the Deal Memo dated 21st May, 2010 and
submits that under the said agreement entered into between the
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parties, the petitioner had introduced nine clients i.e. partners / sub-
licencees to the respondent. The respondent executed the
agreements with the eight clients introduced by the petitioner for an
aggregate amount of Rs.14,47,50,000/-. He submits that the
respondent deliberately did not execute an agreement with Nestle
Limited which contract was to be for Rs.35,00,000/-. The petitioner is
entitled to 20% commission on that amount also.
18. It is submitted by the learned counsel for the petitioner that
under clause 2.3 of the said Deal Memo, the respondent had agreed
to enter into an agreement with the partners introduced by the
petitioner directly. It was agreed by the parties that in all cases, the
respondent shall invoice the partners directly and collect the payment
due from the partners. The respondent further agreed that the
respondent shall immediately then remit the commission due to the
petitioner. It was agreed that all the deals will be signed directly
between the respondent and the potential licencees. Under clause
2.1, the respondent agreed to pay to the petitioner the commission of
20% of the gross revenue due from each partner to the petitioner
under each agreement executed between the respondent and the
partners for the entire duration of the agreement or any extension or
renewal thereof.
19. It is submitted by the learned counsel that the role of the
petitioner was to introduce a party. He submits that the petitioner was
only required to bring the partners / sub-licencees and once an
agreement was executed between the respondent and such
partners / sub-licencees, the petitioner became entitled to receive
20% of the consideration amount as its commission. The petitioner
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was not required to do anything else. He submits that the claim for
commission of the petitioner was not dependent upon the successful
execution and or performance of the contract by the respondent with
those partners / sub-licencees or with the said O.C., C.W.G. The
petitioner having introduced such clients and the respondent having
executed the agreements with such partners / sub-licencees, the
petitioner became entitled to be paid such commission at the rate of
20% of the amount mentioned in the agreements entered into
between the respondent and such partners / sub-licencees.
20. Learned counsel for the petitioner invited my attention to
the averments made in paragraph 8 of the affidavit in reply filed by
the respondent setting out the names of seven clients introduced by
the petitioner with whom the respondent has admittedly executed the
agreements for various amounts. He submits that it is the case of the
respondent itself that the respondent had received a sum of
Rs.4,75,32,060/- from those partners / sub-licencees introduced by
the petitioner. He submits that the respondent has not paid even 20%
of the said amount which is admittedly received by the respondent
from those clients / sub-licencees introduced by the petitioner.
21. Learned counsel for the petitioner invited my attention to
the reply dated 31st January, 2011 sent by the respondent to the
statutory notice issued by the petitioner. He submits that though the
respondent admitted execution of the agreement between the
petitioner and the respondent, however falsely alleged that the
payment of commission to the petitioner was contingent upon the
award of licence by Commonwealth Games and consequently formal
contracts being finalized between the respondent and the other sub-
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licencees. It was alleged in the said reply that the sub-licencees
mentioned by the petitioner had either not made such payments or
payments made by few others were not for complete amount as
stipulated in contract. It was further alleged that the sub-licencee,
who had made partial payment were raising disputes and were
asking for refund of amounts paid by them. He submits that the
defence raised in reply to the statutory notice that the cheque for the
amount of Rs.19,99,600/- issued by the respondent to the petitioner
was in the form of guarantee is frivolous. Learned counsel invited my
attention to the order passed by the Punjab & Haryana High Court
recording the statement made by the respondent that there was no
dispute in respect of the payment of the said sum of Rs.19,99,600/- to
the petitioner under the said Deal Memo.
22. Learned counsel for the petitioner invited my attention to
some of the defences raised in the affidavit in reply and would submit
that such defences are extraneous to the claim of the petitioner and
are totally frivolous and moonshine. He submits that the petitioner is
not concerned with the case of the respondent that the said O.C.,
C.W.G. had filed an arbitration proceedings against the respondent or
that the respondent has filed a counter claim in the said arbitration
proceedings against the said O.C., C.W.G. He submits that merely
because the petitioner as well as the respondent has filed two
separate suits before the Delhi High Court, filing of such suits would
not be a bar against the petitioner from prosecuting this company
petition filed inter-alia praying for winding up of the respondent.
23. It is submitted by the learned counsel for the petitioner that
the civil suit filed by the respondent before the Delhi High Court is
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totally frivolous and is filed as the counter-blast to the suit and the
company petition filed by the petitioner against the respondent. He
submits that the respondent never terminated the Deal Memo dated
21st May, 2010 and on the contrary has acted upon the said Deal
Memo and accepted the moneys to the tune of Rs.5,27,00,000/- from
various partners / sub-licencees introduced by the petitioner under
the said Deal Memo.
24. Learned counsel for the petitioner invited my attention to
the balance sheet of the respondent for the financial year 2013-2014
showing negligible bank balance in the account of the respondent.
He submits that the respondent has siphoned off huge amount
recovered from the partners / sub-licencees introduced by the
petitioner and did not pay any amount except Rs.19,99,600/- to the
petitioner. It is submitted that the enquiry made by the Official
Liquidator pursuant to an order of appointment made by this Court
also clearly shows that the respondent does not have its registered
office on ownership basis now but there is a leave and licence
agreement by the owner in some one else's name in respect of the
registered office premises claimed by the respondent.
25. Learned counsel invited my attention to the balance sheet
of the respondent as at 31st March, 2014 showing extremely poor
financial position and nil revenue between 2013-2014. The only
transaction entered into by the respondent appears to be between
2009 and 2014. The balance sheet of the respondent also indicates
that the respondent had accepted and received the moneys to the
tune of Rs.5,27,00,000/- from various licencees introduced by the
petitioner under the Deal Memo. He submits that the learned
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arbitrator has suspended the counter claim of the respondent on 16th
March, 2015 on the ground of non-payment of the arbitrator's fees. It
is submitted that the respondent is thus unable to pay its debts and
thus deserves to be wound up on that ground and also on the ground
of just and equitable.
26. Mr.Gandhi, learned counsel for the respondent on the
other hand submits that under clause 2.3 of the Deal Memo, unless
the respondent would have received the claim and cleared the
amounts from the partners / sub-licencees introduced by the
petitioner, the respondent was not liable to pay any commission to
the petitioner. He invited my attention to some of the notices issued
by some of the partners / sub-licencees introduced by the petitioner
and would submit that such partners / sub-licencees introduced by
the petitioner have called upon the respondent to return the amount
paid by them to the respondent. He submits that the petitioner thus
cannot make any demand in respect of the amount paid, if any, by
such partners / sub-licencees introduced by the petitioner from the
respondent.
27. It is submitted by the learned counsel for the respondent
that if the respondent subsequently found that the said O.C., C.W.G.
did not have any authority to award any rights in favour of the
respondent. He submits that another entity incorporated in Singapore
has claimed rights vide an agreement dated 25th July, 2007. He
submits that the said O.C., C.W.G. had committee fraud upon the
respondent. He submits that the said O.C., C.W.G. has also filed the
arbitration proceedings against the respondent which are pending
before the learned arbitrator, a former Judge of the Supreme Court.
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He submits that the respondent has made a substantial counter claim
of about 75,00,00,000/- against the said O.C., C.W.G.
28. Learned counsel for the respondent submits that at the
instance of the said O.C., C.W.G., the entire matter is also referred to
the C.B.I., who has also filed an F.I.R. against the respondent and
several others. He submits that the petitioner also has filed a civil suit
against the respondent in addition to this winding up petition and also
the proceedings under section 138 of the Negotiable Instruments Act.
29. Learned counsel for the respondent submits that in view of
pendency of several proceedings in respect of the same transaction
pending before different Courts, including criminal proceedings, the
petitioner cannot pursue this winding up petition against the
respondent. He submits that if the petitioner obtains no objection from
those partners / sub-licencees, that they would not make any claim
against the respondent arising out of those agreements which are
entered into between the respondent and those partners / sub-
licencees, the respondent can make some payment to the petitioner.
30. It is submitted by the learned counsel for the respondent
that the respondent also has filed a separate suit against the
petitioner inter-alia praying for a declaration that the said Deal Memo
is void and is not binding upon the respondent. The respondent has
also prayed for recovery of the amount paid by the respondent to the
petitioner. He submits that the right of filing of the written statement in
the suit filed by the respondent before the Delhi High Court is already
closed. He submits that the agreement with those partners / sub-
licencees introduced by the petitioner are not fructified and thus no
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order of winding up can be passed by this Court in this petition.
31. It is submitted by the learned counsel for the respondent
that the petitioner has suppressed the fact of filing a suit before this
Court while obtaining an order of admission of the company petition
and also an order of winding up against the respondent. He submits
that if the petitioner would have disclosed the factum of filing a civil
suit for recovery of the amount under the said Deal Memo, this Court
would not have passed an order of admission of the petition or of
winding up of the respondent. He submits that since the petitioner did
not approach this Court with clean hands and have committed fraud
upon the respondent, the petitioner cannot be granted any
discretionary relief by this Court. In support of this submission,
learned counsel for the respondent placed reliance on the judgment
of the Supreme Court in case of Manohar Lal vs. Ugrasen & Ors.
(2010) 11 SCC 557 and in particular paragraphs 48 to 52, the
judgment of the Supreme Court in case of S.P. Chengal Varaya
Naidu vs. Jagannath & Ors. (1994) 1 SCC 1 and in case of State
of U.P. & Ors. vs. Ravindra Kumar Sharma & Ors. AIR 2016 SC
690.
32. Learned counsel for the respondent states that since the
license which was to be granted by the O.C., C.W.G. did not fructify,
the respondent suffered very heavy loss. The counter claim made by
the respondent against the said O.C., C.W.G. is pending before the
learned arbitrator. He submits that in this situation, the contract
entered into between the petitioner and the respondent has been
frustrated and cannot be enforced. He submits that the company
petition thus cannot be entertained in view of the frustration of
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contract under section 56 of the Indian Contract Act, 1872. In support
of this submission, he placed reliance on the judgment of the
Supreme Court in case of Har Prasad Choubey vs. Union of India
& Anr. (1973) 2 SCC 746 and in particular paragraph 9, in case of
Smt.Sushila Devi & Anr. vs. Hari Singh & Ors. AIR 1971 SC 1756
and in particular paragraphs 5, 7, 11 and 12, and in case of Rozan
Mian vs. Tahera Begum & Ors. AIR 2007 SC 2883 and in particular
paragraphs 9 to 11.
33. It is submitted by the learned counsel for the respondent
that no contract between the Organizing Committee, Commonwealth
Games and the respondent came to be signed. Only a draft of the
agreement was exchanged.
34. Learned counsel for the respondent placed reliance on the
judgment of the Supreme Court in case of IBA Health (India) Pvt.
Ltd. vs. Info-Drive Systems SDN. BHD., (2010) 10 SCC 553 and in
particular paragraphs 9, 11, 18, 20 to 24, 29 to 31 and would submit
that since there is substantial dispute between the parties in respect
of the alleged entitlement of the petitioner of the commission, this
company petition inter-alia praying for winding up cannot be
entertained. He submits that the suit of the respondent having been
filed first in point of time, both the suits are already tagged and are
pending before the Delhi High Court. The next date of hearing in
those suits is 4th July, 2017.
35. Mr.Shiralkar, learned counsel appearing for the petitioner
in rejoinder submits that the Deal Memo entered into between the
parties is not frustrated but is acted upon. The respondent has
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already made part payment to the petitioner. He submits that the
petitioner is not concerned with whether the respondent received the
entire amount from the partners / sub-licencees introduced by the
petitioner or not. The petitioner was entitled to be paid the
commission upon the respondent having executed the agreements
with those partners / sub-licencees and the said commission was not
dependent upon the actual receipt of such amounts were actually
recovered by the respondent from those partners / sub-licencees or
not or whether the contract entered into by and between the
respondent and the partners / sub-licencees or that the said O.C.,
C.W.G. were frustrated or successfully performed or not. The liability
of the respondent to pay to the petitioner was on the basis of the
amount due under the said agreements entered into between the
respondent and the partners / sub-licencees introduced by the
petitioner.
36. It is submitted that in clause 2.3 of the Deal Memo, the
parties had provided the mode and manner of the payment which
was not based on the entitlement of the respondent to recover the
same from those parties or on the basis whether the respondent
earned any profit or recovered any amount from those parties or from
the said O.C., C.W.G. or not. The liability of the respondent had
already triggered upon the execution of the agreements between the
respondent and those partners / sub-licencees introduced by the
petitioner.
37. It is submitted by the learned counsel for the petitioner that
that even if the said O.C., C.W.G. has terminated the contract
awarded, if any, to the respondent or even if those partners / sub-
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licencees have called upon the respondent to return the amounts
paid by them, the same would not have any bearing on the obligation
of the respondent to pay the commission charges to the petitioner
under the said Deal Memo. He submits that even if the contracts
entered into between the respondent and those partners / sub-
licencees or between the respondent and the O.C., C.W.G. are
frustrated, the respondent itself was responsible for such frustration
and thus cannot refuse to comply with its obligation to pay the
commission charges to the petitioner on that ground. He submits that
section 56 of the Indian Contract Act, 1872 thus would not be
attracted to the facts of this case.
38. Insofar as the submission of the learned counsel for the
respondent that the contract between the parties hereto is frustrated
on the ground that the partners / sub-licencees introduced by the
petitioner are demanding refund of the amount paid by them, from the
respondent is concerned, it is submitted that the petitioner is not
concerned with any such legal notices alleged to have been sent by
those parties. He submits that in any event the respondent has not
produced any proceedings, if any, filed by those parties against the
respondent for seeking refund of the said amounts. He submits that
the claims, if any, of those parties, are already barred by limitation.
He submits that the respondent has also not produced any reply to
those notices sent by the respondent and are suppressed by the
respondent. He submits that it is not the case of the respondent that
such amounts demanded by those partners / sub-licencees from the
respondent are kept in escrow.
39. Learned counsel for the petitioner distinguished the
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judgments cited by the respondent on the ground that none of those
judgments would assist the case of the respondent on the ground that
the facts in those matters were totally different than the facts of this
case.
40. Learned counsel for the petitioner invited my attention to
the balance sheet of the respondent for the year ending 31st March,
2014, which would indicate that the respondent had received various
advances from those partners / sub-licencees introduced by the
petitioner. He submits that the bank balance as at 31st March, 2014 of
the respondent is shown at Rs.6,900/- and the cash amount is shown
at Rs.1,12,070/-. The respondent has been suffering losses. Balance
sheet does not show any reserve and surplus. The value of the fixed
assets shows very negligible amounts. He submits that it is thus clear
that though the respondent had recovered more than
Rs.5,00,00,000/- from various licencees being siphoned of the said
amount.
41. It is submitted by the learned counsel that the respondent
itself had filed affidavits before the Punjab & Haryana High Court on
25th March,2013 and 16th September, 2013 and was fully aware of
this winding up petition but did not appear in these proceedings
deliberately. The respondent had suppressed about those
proceedings and affidavits filed by the respondent before this Court in
the company application filed by the respondent for recall of the order
passed by this Court. He also invited my attention to the papers and
proceedings in Criminal Miscellaneous Application No.13870 of 2014
filed by the respondent in which the respondent itself has made an
averment that the respondent was proposing to file a suit against the
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petitioner. He submits that the petitioner did not suppress any facts
as alleged by the respondent.
42. It is submitted that the suit filed by the petitioner was after
filing of the company petition and thus could not have been
mentioned in the company petition. He submits that the petitioner is
entitled to prosecute the company petition as well as the suit and both
are maintainable. He submits that even if the petitioner would have
disclosed about the pendency of the suit when the company petition
was initially admitted and was allowed subsequently, filing of the suit
by the petitioner would have no bearing on the said order. He submits
that even today the registered office of the respondent is at the same
address at which the petitioner had sent the papers and proceedings
and the said addressed continued on the records of the Registrar of
Companies. Even in the plaint filed by the respondent against the
petitioner, the respondent has shown the same registered office
address. Learned counsel tenders a copy of the record of Registrar of
Companies issued in the month of February, 2017 showing the same
registered office address of the respondent.
43. Learned counsel for the respondent submits that since this
Court has already set aside the ex-parte order, this Court cannot now
re-open that issue. He submits that one of the partner introduced by
the petitioner has filed a suit against the respondent inter-alia for
recovery of Rs.1,50,00,000/-.
REASONS AND CONCLUSIONS :
44. There is no dispute that the parties had executed Deal
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Memo dated 21st May, 2010, by which the respondent had appointed
the petitioner as its representative on non-exclusive basis to
negotiate on behalf of the respondent with potential licensing and
merchandising partners in India in relation to the Commonwealth
Games Delhi 2010 on the terms and conditions recorded in the said
agreement. It is the case of the respondent that the said O.C.,
C.W.G. had granted licensing and retail rights in favour of the
respondent vide letters of acceptance dated 19th May, 2010, 28th May,
2010 and 29th June, 2010. According to the respondent, the said
O.C., C.W.G. however, did not have any authority to award such sites
in favour of the respondent and such rights were already having been
awarded in favour of another entity incorporated in Singapore,
M/s.Sports Marketing and Management as far back as on 25th July,
2007. The said O.C., C.W.G. had no right to grant a license in favour
of the respondent. It is not in dispute that the respondent did not
terminate the said Deal Memo executed with the petitioner at any
stage till today.
45. A perusal of the affidavit in reply filed by the respondent
clearly indicates that even according to the respondent, pursuant to
the said Deal Memo executed between the petitioner and the
respondent, the respondent has executed the agreements at least
with seven partners / sub-licencees who were introduced by the
petitioner having the contract value aggregating to Rs.14,47,50,000/-
and the respondent had received a sum of Rs.4,75,32,060/- from
those seven partners / sub-licencees though the respondent has
denied having received a sum of Rs.14,47,50,000/- from the
partners / sub-licencees introduced by the petitioner, the respondent
has admitted the receipt of Rs.4,75,32,060/- from those seven
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partners / sub-licencees introduced by the petitioner.
46. It is not in dispute that the respondent has already paid a
sum of Rs.19,99,600/- to the petitioner under the said Deal Memo
executed by and between the parties. The respondent has now given
up the plea that the said amount was not paid by the respondent to
the petitioner under the said Deal Memo. The respondent has refused
to pay the balance amount on the ground that the agreements
entered into between those partners / sub-licencees introduced by
the petitioner with the respondent and between the respondent and
the said O.C., C.W.G. did not fructify and as a result thereof the
transaction between the petitioner and the respondent were frustrated
within the meaning of section 56 of the Indian Contract Act, 1872.
The respondent has refused to pay the balance amount to the
petitioner also on the ground that the respondent had not received
the entire amount from those seven partners / sub-licencees
introduced by the petitioner and on the ground that those parties had
asked for refund of the amounts paid by them to the respondent. One
of those parties has also filed a suit for recovery of the said amount
from the respondent.
47. A perusal of the Deal Memo entered into between the
petitioner and the respondent clearly indicates that the respondent
had represented and had given the guarantee in the said Deal Memo
that they had exclusive rights to be the sole concessionaire including
brand licensing and merchandising rights holder of the
Commonwealth Games 2010 and all rights and benefits were granted
by the licensor to the licencee i.e. the petitioner herein. Clause 1.2 of
the said agreement provides that the said agreement shall be in force
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upon execution by both the parties and unless terminated in
accordance with the provisions of the said Deal Memo for one year.
48. Clause 2.1 of the said agreement provides that the
respondent will enter into agreement with a partner/s following an
introduction effected by the petitioner during the Representation
Period, executed either directly or until the Common Wealth Games
2010 was over and will pay to the petitioner commission @ 20% of
the gross revenue due from each partner to the respondent under
each agreement executed between the respondent and the Partners
for the entire duration of the L & M Agreement or any extension and
renewal thereof. Clause 2.2 provides that all deals will be signed
directly by the respondent and and the potential licencee. Clause 2.3
provides that in all cases, the respondent shall invoice the Partners
directly and collect the payment due from the Partners and the
respondent shall immediately then remit the commission due to
petitioner.
49. A conjoint reading of clauses 2.1 to 2.3 makes it clear that
the respondent was entitled to sign all the deals directly with the
potential partners / sub-licencees introduced by the petitioner and to
collect the payment due from those partners / sub-licencees. The
respondent had also agreed to pay the commission @ 20% of the
gross revenues due from each partner to the respondent under each
agreement executed by the respondent and partners. It is clear that
the said commission @ 20% payable to the petitioner by the
respondent was of the gross revenues due to the respondent from
each partner introduced by the petitioner and was not dependent
upon the full amount to be received by the respondent.
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50. In my view, the entitlement of the petitioner of the
commission was under clause 2.1 of the said agreement, whereas
the mode and manner of payment was agreed under clauses 2.2 and
2.3 of the said agreement. The respondent has admittedly executed
at least seven such L & M agreements with the partners / sub-
licencees introduced by the petitioner which agreements showed
various amounts due and payable to the respondent by those
partners / sub-licencees. It is not the case of the respondent that the
amounts mentioned in those agreements were not due to the
respondent from those partners / sub-licencees introduced by the
petitioner. It is also not in dispute that the respondent had recovered
substantial amount from those partners / sub-licencees under those
seven agreements. The liability of the respondent to pay the
commission @ 20% of the gross revenues from each partner to the
respondent was thus crystallized under clause 2.1 when the petitioner
had introduced those parties to the respondent and the agreements
were executed between the respondent and those partners / sub-
licencees introduced by the petitioner.
51. In my view, merely because the respondent did not
recover or could not recover the balance amount, if any, from those
partners / sub-licencees under those agreements for whatsoever
reasons alleged in the affidavit in reply or merely because there was
a dispute between the respondent and the said O.C., C.W.G. or on
the ground that the respondent also had made a counter claim
against the said O.C., C.W.G. before the learned arbitrator, the
obligation of the respondent to pay the commission @ 20% on the
gross revenues due from each partner to the respondent would not
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frustrate under the said Deal Memo entered into between the
petitioner and the respondent.
52. In my view, the petitioner is not concerned with the out
come of the arbitration proceedings filed by the said O.C., C.W.G. or
any counter claim filed by the respondent against the said O.C.,
C.W.G. before the learned arbitrator. In my view, even if the
partners / sub-licencees introduced by the petitioner do not pay the
balance amount to the respondent, the said event also will not
frustrate the obligation of the respondent to pay the commission @
20% on the gross revenues dues from each partner / sub-licencee to
the respondent and such commission is being payable to the
petitioner. The petitioner has already complied with its part of
obligation under the said Deal Memo by introducing the partners /
sub-licencees and became entitled to claim the commission @ 20%
of gross revenues due from each partner to the respondent under
those agreements. In my view reliance placed on section 56 of the
Indian Contract Act, 1872 by the respondent to dispute the claim of
the petitioner is totally misplaced and is not attracted to the facts of
this case.
53. It is matter of record that the respondent had already paid
a sum of Rs.19,99,600/- to the petitioner under the said Deal Memo
and refused to pay the balance amount. It is thus clear that the
parties have acted upon the said Deal Memo and thus there is no
question of any frustration of the said Deal Memo as canvassed by
the learned counsel for the respondent.
54. In my view the judgment of the Supreme Court in case of
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Smt.Sushila Devi & Anr. (supra) and in case of Har Prasad
Choubey (supra) would not assist the case of the respondent. The
Supreme Court in case of Smt.Sushila Devi & Anr. (supra) had
considered a situation of partition of India on 15 th August, 1947 and
as a result thereof, one of the Tehsil became part of Pakistan. After
considering the evidence led in that case to establish that even
before the actual partition of India took place, because of the serious
communal troubles, it was not possible for the respondents to go to
that Tehsil either to cultivate the lands or even to collect the rent from
those who were cultivating the lands, the Supreme Court held that it
was impossible for the plaintiff to even get into Pakistan in view of the
prevailing circumstances, to either take possession of the properties
intended to be leased or even to collect rent from the cultivators and
for that situation the plaintiffs were not responsible in any manner
whatsoever. It is held by the Supreme Court that section 56 of the
Indian Contract Act lays down a rule of positive law and does not
leave the matter to be determined according to the intention of the
parties. In my view, the said judgment of the Supreme Court is clearly
distinguishable in the facts and circumstances of this case.
55. In this case, the obligation of the respondent to pay a
commission to the petitioner was crystallized on the petitioner
introducing those partners / sub-licencees to the respondent and on
the respondent having executed the agreements with them. The
amount of 20% of commission was payable on the basis of the
amount due to the respondent by those partners / sub-licencees
introduced by the petitioner. A perusal of the record indicates that the
respondent has already recovered substantial amount from those
parties introduced by the petitioner but did not pay any amount to the
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petitioner towards commission. The respondent is thus benefited out
of those agreements entered into between those partners / sub-
licencees and the respondent. In my view, if a party who is himself
responsible for frustration of the contract, if any, he cannot take
benefit out of such default on his part and cannot refuse to perform
his part of obligation under the agreement on the ground of alleged
frustration of the contract under section 56 of the Indian Contract Act,
1872.
56. Insofar as the judgment of the Supreme Court in case of
Har Prasad Choubey (supra) relied upon by the learned counsel for
the respondent is concerned, the said judgment of the Supreme
Court would assist the case of the petitioner and not the respondent.
57. Merely because the other parties have filed some
proceedings against the respondent or the respondent having filed
the counter claim against those parties, cannot exempt the
respondent from complying with its obligation to pay the commission
to the petitioner. This Court cannot go into the merits of those
proceedings filed by the O.C., C.W.G. against the respondent or visa
versa or decide the validity of the demand notices issued by some of
the partners / sub-licencees demanding refund of the amount paid by
them to the respondent in this petition.
58. In my view, the out come of those pending proceedings or
the demands as the case may be against the respondent would not
have any bearing on the obligation of the respondent to pay
commission charges to the petitioner since the said obligation to pay
the commission charges was crystallized upon the petitioner
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introducing those partners / sub-licencees and upon the respondent
executing the agreement with them. In my view, this defence of the
respondent is totally frivolous and is moonshine.
59. Insofar as the submission of the learned counsel for the
respondent that the suits filed by the petitioner against the
respondent for recovery of amount and the suit filed by the
respondent against the petitioner for a declaration that the said Deal
Memo was pending and thus this company petition cannot be
entertained is concerned, in my view, there is no bar against the
petitioner from filing winding up petition against the respondent on the
grounds permissible under section 434 of the Companies Act, 1956
even if civil suit for recovery of money is filed. The winding up petition
is not for recovery for any amount. In the civil suit filed by the
petitioner, the petitioner has prayed for a decree for recovery of the
commission amount with interest payable by the respondent to the
petitioner. Both the proceedings can be simultaneously proceeded
with.
60. Insofar as the submission of the learned counsel for the
respondent that the petitioner has lost its right to file a written
statement in the said suit filed by the respondent for a declaration and
for refund of the amount paid by the respondent to the petitioner is
concerned, it is not in dispute that the application for recall of the said
order passed by the Delhi High Court closing the right of the
petitioner to file a written statement is pending. Be that as it may, this
petition for winding up cannot be dismissed on the ground that the
petitioner has alleged to have lost its right to file a written statement in
the said suit filed by the respondent. The Delhi High Court has
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clubbed both the suits filed by the parties inter-se against each other
for hearing and final disposal. There is no merit in this submission
made by the learned counsel for the respondent. This Court cannot
decide the merits of the said application for recalling of the order
passed by the Delhi High Court.
61. In my view, there is no merit in the submission made by
the respondent that the petitioner had suppressed any facts from this
Court and more particularly about filing of the civil suit filed by the
petitioner against the respondent when the aforesaid company
petition was heard at the stage of admission and also at the stage of
final hearing. When the company petition was filed by the petitioner,
the said civil suit for recovery of money was not even filed by the
petitioner and thus there was no question of the petitioner disclosing
about the said suit against the respondent. In my view even if the
petitioner did not inform this Court at the time of admission or at the
time of final hearing that the petitioner had already filed a suit for
recovery of the amount, the said information would not have any
bearing upon the merits of this company petition. The petitioner is
entitled to pursue a civil suit for recovery of money as well as winding
up petition. Both the proceedings are for different reliefs and are
maintainable at the same time.
62. On the contrary, a perusal of the record indicates that the
respondent had suppressed the facts before this Court that the
respondent was fully aware of the pendency of this petition for
winding up when the respondent applied for setting aside ex-parte
orders passed by this Court. A perusal of the pleadings filed by the
respondent before the Punjab & Haryana High Court clearly indicates
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that the respondent was fully aware of the pendency of this company
petition at that time.
63. Insofar as the judgment of the Supreme Court in case of
Manohar Lal (supra), in case of S.P. Chengal Varaya Naidu
(supra), in case of Ram Chandra Singh (supra) and in case of State
of U.P. & Ors. (supra) relied upon by the learned counsel for the
respondent in support of the submission that the petitioner had
alleged to have suppressed about filing of the civil suit for recovery of
money against the respondent and thus no relief of any nature
whatsoever shall be granted by this Court in favour of the petitioner is
concerned, there is no dispute about the proposition of law laid down
by the Supreme Court in the aforesaid judgments holding that a party
who approaches the Court has not only to approach with clean hands
but also clean mind, clean heart and clean objection.
64. It is held by the Supreme Court in case of S.P. Chengal
Varaya Naidu (supra) that non-disclosure of relevant and material
documents with a view to obtain advantage amounts to fraud on
court and a judgment and order obtained by playing fraud is a nullity
and non-est in the eyes of law. In my view, since the petitioner did not
suppress any material facts from this Court when this Court admitted
the company petition in absence of the respondent and passed a final
order of winding up against the respondent when the respondent did
not appear though was served and had knowledge of pendency of
the proceedings, the judgment of the Supreme Cort in case of S.P.
Chengal Varaya Naidu (supra) would not assist the respondent. The
registered office address of the respondent continued to be the same
all through out,even till today at which the petitioner had sent papers
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and proceedings and the notices to the respondent. The same
registered office address was disclosed by the respondent even in
the proceedings filed by it against the petitioner. Though this Court
noticed these facts in the order passed by this Court on 24 th
November, 2016, this Court gave an opportunity to the respondent to
defend the company petition on merits.
65. A perusal of the financial documents i.e. the balance sheet
as on 31st March, 2014 produced on record by the petitioner of the
respondent clearly indicates that the respondent has been suffering
from losses. Though the respondent admittedly received more than
Rs.4,00,00,000/- from those partners / sub-licencees introduced by
the petitioner, the cash and the bank account of the respondent as on
31st March, 2014 showed as Rs.1,18,970/-. There is no revenue from
the operations as on 31st March, 2013 and also 31st March, 2014.
There is no other income as on 31st March, 2014. There is a loss of
Rs.23,52,697/- as on 31st March, 2014 and Rs.3,68,587/- as on 31st
March, 2013. The balance sheet of the respondent further indicates
that as on 31st March, 2014, there is no General Reserve. The
opening balance of the net loss is Rs.3,07,66,772/- as on 31st March,
2014. The respondent has reflected the receipt of advances from the
licencees as on 31st March, 2014 as Rs.5,23,79,940/-. The value of
tangible and intangible assets is also very negligible.
66. Insofar as the judgment of the Supreme Court in case if
IBA Health (I) Pvt. Ltd. (supra) relied upon by the respondent is
concerned, the Supreme Court in the said judgment has held that the
dispute would be specific and genuine if it is bonafide and not
spurious, speculative, illusory or misconceived. It is held that the
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grounds of dispute, of course, must not consist of some ingenious
mask invented to deprive a creditor of a just and honest entitlement
and must not be a mere wrangle.
67. It is held that if the creditor's debt is bona fide disputed on
substantial grounds, the court should dismiss the petition and leave
the creditor first to establish his claim in an action, lest there is danger
of abuse of winding up procedure. The Company Court always
retains the discretion, but a party to a dispute should not be allowed
to use the threat of winding up petition as a means of forcing the
company to pay a bona fide disputed debt. The Supreme Court has
also held that if there is no dispute as to the company's liability, the
solvency of the company might not constitute a stand alone ground
for setting aside a notice under section 434(1)(a), meaning thereby, if
a debt is undisputedly owing, then it has to be paid. If the company
refuses to pay on no genuine and substantial grounds, it should not
be able to avoid the statutory demand. The law should be allowed to
proceed and if demand is not met and an application for liquidation is
filed under section 439 in reliance of the presumption under section
434(1)(a) that the company is unable to pay it debts, the law should
take its own course and the company of course will have an
opportunity on the liquidation application to rebut that presumption.
68. In my view, in this case the defence of the respondent is
totally spurious, speculative, illusory or misconceived and moonshine
and not bonafide dispute on specific ground. The respondent is not
able to avoid statutory demand by raising any specific dispute and
thus deserves to face consequence of winding up on the ground that
the respondent is unable to pay its debts. A perusal of the record
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clearly indicates that the respondent is unable to pay its debts and
deserves to be wound up.
69. I therefore, pass the following order :-
a). The Company Petition No.210 of 2012 is made absolute in
terms of prayer clauses (a) and (b). The Official Liquidator already
appointed by an order dated 14th November, 2014 to continue as
Liquidator of the company.
b). The Official Liquidator to act on the authenticated copy of
this order.
c). There shall be no order as to costs.
(R.D. DHANUKA, J.)
