M/S. Agrozan India Pvt. Ltd vs M/S. Agritrade India Services ...
2017 Latest Caselaw 3312 Bom

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           IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                  ORDINARY ORIGINAL CIVIL JURISDICTION

                         APPEAL NO. 675 OF 2016
                                    IN
                     COMPANY PETITION NO. 916 OF 2014

M/s. Agrozan India Pvt. Ltd.                                                    ..Appellant
      Vs
M/s. Agritrade India Services Pvt. Ltd.                                         ..Respondent


Mr. Shreyas Jayasimha with Namit Oberoy i/b. Shivam Singh for
Appellant.
Mr. Zal Andhyarujina and Ms Shruti Sardesai, Mr. S. B. Rao i/b.
India Law for Respondent.

                            CORAM : SHANTANU S. KEMKAR &
                                    M. S. SONAK, JJ.

DATE : JUNE 19, 2017

ORDER : (Per : M. S. Sonak, J.)

Heard learned counsel for the parties.

2] The challenge in this Appeal is to the order dated 29 th August

2016 made by the learned Single Judge dismissing Company Petition

No. 916 of 2014, seeking winding up of M/s. Agri Trade India Services

Pvt. Ltd. ( Company).

3] Mr. Shreyas Jayasimha, learned counsel appearing for the

Appellant very ably submits that the material on record was more

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than sufficient to establish that the Company is due and payable to

the Appellant (Petitioning Creditor) a sum of approximately Rs.3.92

Crores, towards the purchase of 11,637.203 MT of Yellow Peas. Mr.

Jayasimha submits that there is acknowledgement that the cargo was

duly supplied in a good condition and the outstanding balance

towards such supply is approximately Rs.3.92 Crores. Mr. Jayasimha

submits that the Company has raised false and frivolous defences,

including, some defence by involving a third party. Mr. Jayasimha

submits that such defences are really in the nature of "moonshine"

and therefore, following the dictum of the Hon'ble Supreme Court in

the case of Madhusudan Gordhandas & Co. vs. Madhu Wollen

Industries Pvt. Ltd.1 and Karnataka High Court in the case of Hegde

and Golay Limited vs. State Bank of India 2, the learned Single

Judge ought to have admitted the winding up petition.

4] Mr. Jayasimha, learned counsel for the Appellant has submitted

that the debit note received along with emails dated 11 th March 2014

and 13th March 2014 is a document of doubtful veracity and therefore,

no reliance could have been placed upon the same. He points out

that the debit note, records a debt in an amount of Rs.3,52,50,000/-

1 AIR 1971 SC 2600
2 ILR 1987 Karnataka 2673






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as on 20th            September 2013,                       whereas on the Company's own

showing, an amount of Rs.40,00,000/-, admittedly paid earlier finds

no reflection in the said debit note. For this reason, as well, Mr.

Jayasimha submits that the petition for winding up of the Company

was required to be admitted.

5] Ms Shruti Sardesai, learned counsel for the Company, has also

relied upon the dictum of the Hon'ble Supreme Court in the case of

Madhusudan Gordhandas (supra) to submit that in this case, there

are no dues payable to the Appellant or in any case, this is a case

where there is a bona fide dispute. In such circumstances, Ms

Sardesai submits that the petition seeking winding up of the

Company was rightly dismissed. Further, Ms Sardesai points out

that the debit note in question, was admittedly forwarded to the

Appellant along with emails dated 11 th March 2014 and 13th March

2014. Ms Sardesai submits that therefore, it was the duty of the

Appellant to have disclosed such factum in the petition seeking

winding up of the Company. She submits that this is a case of

suppression of relevant and vital documents and therefore, an order

of winding up, which is, even otherwise a discretionary order was

rightly denied to the Appellant. Ms Sardesai points out that the

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Appellant has already instituted a suit to recover the amounts

allegedly claimed as due from the Company. She points out that there

is no material on record to establish that the Company is

commercially insolvent or otherwise unable to pay its admitted dues.

On these grounds, Ms Sardesai submits that the present Appeal may

be dismissed.

6] Rival contentions now fall for our determination.

7] The legal position with regard to the winding up companies at

the instance of the petitioning creditors is quite well settled. In

Madhusudan Gordhandas (supra), the Hon'ble Supreme Court has

held that two rules are well settled in this regard. First, if the debt is

bona fide disputed and the defence is a substantial one, the Courts

will not wind up the Company. The second is that where the debt is

undisputed, the Courts 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. 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 a point of law

and thirdly the Company adduces prima facie proof of the facts on

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which the defence depends.

8] Besides, it is also well settled that an order of winding up is

discretionary, in the sense, such order, cannot be insisted upon by a

petitioning creditor as a matter of right. The discretion, is no doubt a

judicial discretion which is to be exercised upon taking into

consideration the host of relevant factors, including, inter alia, the

conduct of the petitioning creditor and the nature of dispute raised.

The machinery of winding up will not be allowed to be utilised merely

as a means for realising debts said to be due from a Company. In

Amalgamated Commercial Traders (P) Ltd. vs. Krishnaswami

(A.C.K.)3, the Hon'ble Supreme Court has quoted with approval

passage from Buckley on the Companies Acts (13 th Edition, Page

451) to the effect that a winding up petition is not a legitimate means

for seeking to enforce payment of debt which is bona fide disputed

by the Company. A petition presented ostensibly for a winding up

order but really to exercise pressure will be dismissed, and under

circumstances may be stigmatised as a scandalous abuse of the

process of the Court. At one time petitions founded on disputed debt

were directed to stand over till the debt was established by action. If,

3 (1965) 35 Com. Cases 456 (SC)

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however, there was no reason to believe that the debt, if established,

would not be paid, the petition was dismissed. The modern practice

has been to dismiss such petitions. If a debt is bona fide disputed,

there cannot be 'neglect to pay' within meaning assigned to this

expression under section 434(1) (a) of the Companies Act. If there is

no neglect, the deeming provision does not come into play and the

ground of winding up, namely, that the company is unable to pay its

debts is not substantiated.

9] The petitioner, seeking winding up of a company is duty bound

to make full and true disclosures of all facts and circumstances, in

relation to the debt claimed. Where the petitioner concealed the fact

that the Company had responded to the statutory notice and also

made part payment, the refusal by the Company Judge in his

discretion to pass a winding up order was held not to be suffering

from any error in P & O Container Ltd. vs. Balwant Textile Mills

Ltd.4 Further, in Agarwal Industries Ltd. vs. Golden Oil Industries

P. Ltd.5, this Court held that it is not of excuse for a party practising

concealment or misrepresentation of facts to say that it was not

aware of the importance of the facts which it omitted from its

4 2000 (24) SCL 426 (Bom.) 5 2001 (106) Com. Cases 78 (Bom.)

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pleadings. This was a case where the petitioner failed to disclose

that he had filed a summary suit and an interim order in that suit had

already secured his interest.

10] Applying such principles to the facts and circumstances of the

present case, there is no case made out to interfere with the

impugned order made by the learned Single Judge refusing to admit

the petition for winding up of the Company.

11] In the first place, there is no dispute that debit note, recording a

debit of Rs.3,52,50,000/- was in fact received by the Appellant along

with emails dated 11th March 2014 and 13th March 2014. In paragraph

12 of the impugned order, the learned Single Judge has in fact

recorded the statement made by the learned counsel appearing for

the Appellant that such debit note was indeed received by the

Appellant. There was however, no disclosure as regards such debit

note in the petition seeking winding up of the Company. The learned

Single Judge has rightly held that the explanations in the affidavit in

rejoinder belatedly made, inspire no much confidence and the

explanation is feeble. The learned Single Judge has also noted the

contradictions in the affidavit in rejoinder. On the one hand, the

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Appellant, denies suppression of material facts, but, in the same

breath, admitted the commercial relationship between Tiryaki,

Agrozan Dubai and Agrozan Singapore. Then again, there is a bare

denial regards relevance of such commercial relationship to the

transaction of supply of Yellow Peas.

12] Secondly, the Company along with its affidavit in reply as well

as affidavit in sur rejoinder has produced documents which, prima

facie suggest that the issues in relation to the supply of Yellow Peas,

were required to be governed by such documents. In paragraphs 14

to 16 of the impugned order, the learned Single Judge has made brief

reference to such documents and on the basis of the same, has held

that this was not a case of any admitted liability, but rather, the

alleged debt, is bona fide disputed.

13] In a petition seeking winding up of a Company, the Company

Court will go into the question of genuineness or otherwise of the

dispute raised. If the Company Court is satisfied that the dispute

raised is bona fide, the Court will normally not embark upon a

detailed examination of the disputes in a winding up petition. In that

sense, the procedure involved in a petition seeking winding up of a

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company, is of a summary nature. Accordingly, the learned Single

Judge, exercised discretion based upon relevant considerations in

declining to admit the petition for winding up of the Company.

14] Apart from the two decisions referred to earlier, Mr. Jayasimha,

learned counsel for the Appellant has also relied upon the decisions

in Pipe Distributors vs. Commercial Tax Officer & Ors. 6, Paharpur

3P vs. Dalmia Consumer Care Pvt. Ltd. 7, Nepa Ltd. vs.

Jnanamandal Ltd.8, and National Small Industries Corporation

Ltd. vs. Bassein Metals P. Ltd. 9 in support of the Appeal. All these

decisions, besides turning on their own facts, reiterate the principle in

Madhusudan Gordhandas (supra). Applying the said principles,

there is really no case made out to interfere with the impugned order.

As held by the learned Single Judge, this cannot be regarded as a

case of undisputed debt. Rather, this is a case where the debt is

bona fide disputed by the Company and in the facts and

circumstances of the present case, it cannot be said that the defence

raised by the Company is in the nature of a 'moonshine'.

6 2008 (1) KLT 303 7 (2008) 3 Comp.L.J 554 (Delhi) 8 (2001) 107 Company Cases 240 (Allahabad) 9 (2008) 143 Company Cases 194 (Bombay)

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15] Accordingly, we see no reason to interfere with the impugned

order made by the learned Single Judge. However, we would only

like to clarify that the observations in the impugned order, or for that

matter the observations in the present order are for the limited

purpose of deciding whether any case exists to order the winding up

of the Company. Accordingly, the observations, need not influence the

decision in the suit already instituted by the Appellant seeking

recovery of the amounts, which form the subject matter of the petition

seeking winding up.

16] With the aforesaid clarification, this Appeal is dismissed. There

shall however be no order as to costs.

   (M. S. SONAK, J.)                                      (SHANTANU S. KEMKAR, J.)




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