Delhi High Court
Smt. Urmila Devi And Ors. vs Shankar Trading Co. (P) Ltd. And ... on 4 July, 2005
Author: A Sikri
Bench: A Sikri
JUDGMENT
A.K. Sikri, J.
1. Eleven petitioners have filed this joint petition seeking winding-up of the respondent No. 1, namely, Shankar Trading Pvt. Ltd. (hereinafter referred to as the 'Company'). Petition is filed under Sections 433, 434 and 439 of the Companies Act (in short the 'Act') on the ground that the company owes these petitioners substantial amounts which are not paid by the company in spite of service of statutory notices and therefore it be deemed that it is unable to pay these "debts".
2. It is the case of the petitioners that the company being in the image of partnership with shareholding of two groups. The founder directors were Sh. Bishan Das Mehta, Raj Kumar Mehta and Kishori Lal Vashisht. Sh. Kishori Lal Vashisht was the brother of the wife of Sh. Bishan Lal Mehta. Sh. Raj Kumar Meht was the nephew, i.e. sister's son of late Sh. Kishori Lal Vashisht. 3.It is stated that although this company was incorporated in the year 1972, till 1987 it did not declare any dividends and only in the year 1987 the company showed some nominal profits. Therefore, the petitioners representing Sh. Kishori Lal Vashisht (hereinafter referred to as the 'Vashisht group') decided to withdraw from the control and management of the company. The petitioner had also deposited various amounts in the company, details of which are as under:-
Name of Party Deposit as on Amount deposited
Smt. Urmila Devi 1.4.89 482761.46
Smt. Sandhya Devi 1.4.89 273472.46
Sh. Nal Kumar 1.4.89 35849.53
Smt. Pushpa Vashist 1.4.89 82261.70
Km. Mamta 1.4.89 52994.30
Son Kumar 1.4.89 183413.11
Sh. Raghunandan 1.4.89 23054.39
-do-
sole Prop. M/s.
Raghu Enterprises 1.4.89 624252.37
M/s. Kamal Katha Supplier
Prop. Sh. Kamal Dev 1.4.89 104614.70
Sh. Vinod Kumar Vashist 1.4.89 24577.70
Smt. Swarna Vij 1.4.89 3087.32
Smt. Suman Vashisht 1.4.89 163034.98
4. The petitioners claim refund of these deposits. Petitioner No.1 sent demand notice dated 3rd October 1981 claiming back her deposit of Rs.482761.46 along with interest @ 18% per annum. Company vide its reply dated 17th October 1991 admitted its liability and failed to pay the amount on flimsy ground putting a pre-condition to payment, i.e. execution of certain documents and discharge of deposit receipts, which could be given only on payment of the amount. Similar notices were sent by the petitioner No. 2 to 6 evoking same kind of response from the respondent company, namely, putting the same pre-condition. Petitioner No.7 also sent demand notice and in reply the company acknowledged the amount but stated that it was lying with it as security against supply of goods for orders being placed on the respondent No.7. Case of the petitioner No.7 is that the company could not compel him to purchase any goods and, therefore, this defense taken in the reply was mala fide. Similar replies were given to the notices sent by the petitioner No.8. In respect of the petitioners No.9 to 11 it is stated that they have also been demanding the refund of their deposits but the respondent company failed to pay the same. It is further claimed that all debts of the petitioners No. 1 to 11 are admitted by the respondent company in its balance-sheet as on 31st March 1989, but as the company is commercially insolvent, it has neglected and failed to pay the amount and, therefore, it be deemed that it is unable to pay the same.
5. In addition to the aforesaid grounds, the petitioners also stated that that the petitioners No.3 and 10 are the shareholders of the company but are denied access to the affairs of the company. No board meeting or AMG have been held since 1978; substratum of the company has gone; funds of the company are being appropriated by its directors, namely, respondents No.2 to 6; the total liability as on 31st March 1991 is Rs.37,14,731.97 as against liquid assets, including cash and bank balance of Rs.13,71,86.90. Thus, it is stated that apart from liability of the petitioners to the tune of Rs.34,50,428.40, it would be even otherwise just and equitable to wind-up this company.
6. Mr. Nayar, learned counsel appearing for the petitioner, referred to the statutory notices and replies in support of the aforesaid averments and submitted that the debt was duly acknowledged by the company and admitted at various places, which would be clear from the following:-
A) In reply to statutory notice of Ms. Urmila Devi the company vide its letter dated 17th October 1981, inter alia, stated "In this connection we invite your kind attention to our previous correspondence exchanged by the Company with you wherein you have been advised to lodge the documents duly discharged with the Company. It is a matter of great regret that you have opted to put your part of failure on us. At no occasion the Company have deprived of you to utilise your money but the delay for remittance of amount is attributable on your part on account of your failure of non-execution of documents and deposit of documents duly discharged, the condition precedent to become eligible to demand the refund."
B) In reply dated 17th October 1991 to the notice of the petitioner No.7 the company stated "It is true that the Company has not accepted any loan from your firm and the credit amount (to be ascertained after reconciliation of accounts) is lying as "Security" kept by the Company against the supply of goods (Katha) xxxxx Although you have earned interest till 31.3.1991 but no further interest has been allowed on the said security." It is submitted by Mr. Nayar that the deposit is accepted but false story is created by the company to deny the refund of the amount.
C) The company had deducted tax at source on the accrued interest. Interest was credited up to 31st March 1992 in the books of accounts of the respondent company. TDS certificate was issued even in April 1992.
7. The case of the respondents, on the other hand, in the reply filed by them is that the petitioners have suppressed relevant and material facts. Petitioners themselves agreed that the company was owned by the members of the two families, who are close relations. It is stated that Sh. Bishan Das Mehta and Sh. Girdhari Lal Vashisht established business under the name of style of "Bishan Das Mehta and Company" in the year 1950. This firm was re-constituted as M/s. Bishan Das Girdhari Lal in the year 1953 in which share of Mehta family was -9 Annas (56%) and that of Vashisht family -7 Annas (44%). The two families thereafter established various businesses, some functional and some non-functional, with varying constitutions like sole proprietary concern, partnership concerns etc. M/s. Shankar Trading Pvt. Ltd. (respondent herein) as well as M/s. Gurung Katha Udyog Pvt. Ltd. were also incorporated. The shareholding of the two companies in these companies was as under:-
a) M/s. Shankar Trading Co. Pvt. Ltd.
i) Mehta family 7260 66.83%
ii) Vashisht family 3605 33.17%
b) M/s. Gurung Katha Udyog Pvt. Ltd.
(a) Nepalese counterpart 51%
(b) Indian counterpart 49%
(i)Mehta family: 35% of 49%
(ii)Vashisht family: 14% of 49%
8. The aforesaid businesses continued till 1989 when family partition/agreement-memorandum of understanding dated 7th December 1989 was signed between Mehta faction and Vashisht faction.
9. The Petitioners No.1 and 5 to 9 signed on behalf of Vashisht group. However, according to the respondent, by this settlement all the members of the respective families were bound, irrespective of their signing or not signing the same. For reaching settlement, value of all businesses were valued under 3 lots, namely:-
i) Ganesh Katha Factory (BDGL) 525 lacs
ii) Shankar Trading Co. Pvt. Ltd. 300 lacs
iii) Gurung Katha Udyog Pvt. Ltd. 159.25 lacs
(49% of total value of Rs.325 lacs)
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984.25 lacs
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Share receivable by respective family as per recorded constitution in above businesses.
Mehta family:
a) BDGL (GKF) being 9 Annas Rs. 294.00 lacs
b) STCO P. Ltd. (MU) being 66.83% Rs. 200.49 lacs
c) GKU P. Ltd. being 35% of 49% Rs. 113. 75 lacs
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Rs. 608.24 lacs
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Vashisht family:
i) BDGL (GKF) being 7 Annas. Rs. 231.00 lacs
ii) STCO (MU) being 33.17% Rs. 99.51 lacs
iii) GKU Pvt. Ltd. being 14% of 49% Rs. 45.50 lacs
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Rs. 376.01 lacs
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10. As per the respondent's explanation, without going into the constitution of the various businesses, for reaching the family settlement party agreed to share the tendered values in the ration of 9 Annas (Mehta group):7 Annas (Vashisht group) and as perthis ratio Mehta group, Mehta group was to get Rs.551.25 lacs whereas the share of Vashisht group was Rs.433 lacs. In this manner Vashisht group was get Rs.56.99 lacs more than their entitlement on documents (Rs.433 lacs (-) Rs.376.01 lacs) and correspondingly share of Mehta group was Rs.56.99 lacs less than their entitlement (Rs.608.24 lacs (-) Rs.551.25 lacs). Further, as per the family settlement, Vashisht group decided to take over Ganesh Katha factory valued at Rs.525 lacs and Mehta group were to take over M/s. Shankar Trading Co. Pvt. Ltd. and M/s. Gurung Katha Udhyog Pvt. Ltd. compositely valued at Rs.359.25 lacs. Since share of Vashisht group as per the settlement was Rs.433 lacs and Vashisht group got the business valued at Rs.525 lacs, Vashisht group was to pay difference of Rs.92 lacs to Mehta group.
11. It is also explained by the respondents that pursuant to the take over of the companies by Mehta group in consideration of payments described in the settlement, clauses 4.2.3, 2.2.2. and 2.2.7 provided that Vashisht group shall transfer all shareholding in favor of Mehta group in the said two companies. Even the registered office of the respondent company was got shifted to the premises belonging to Mehta group, namely, B-208, Ashok Vihar, Phase I, New Delhi, with effect from 13th December 1989. hereafter by taking over this company Mehta group increased its authorised capital from 15 lacs to 40 lacs by subscribing fully to the authorised capital. Petitioner No.9 Mr. Vinod Kumar signed the balance-sheet of the respondent company for the period 1st March 1990 as a Director on 30th August 1990. However, thereafter pursuant to the settlement he resigned from the Board of Directors with effect from 13th November 1990. The respondents have further stated that pursuant to the settlement, steps were also taken to relinquish the interest of the Mehta group in the company taken over by the Vashisht group. However, since Vashisht group had to make payment of Rs.92 lacs to Mehta group as per settlement and it was not paid, Mehta group filed Suit No. 22/92 on the original side of this court for recovery of Rs.80 lacs consisting of Rs.71.40 lacs towards principal and Rs.8.60 lacs towards interest. Other prayers flowing from the deed of dissolution were also made in the suit. After the filing of this suit, on 28th February 1992 Vashisht group delivered draft/cheque of further sum of Rs.32.40 lacs to Mehta group. While receiving this amount Mr. Raj Kumar Mehta of the respondent company addressed letter dated 28th February 1992 transferring the deposit of the petitioners (which is the subject-matter of the petition) in favor of S/Sh. Bishan Das Mehta and Raj Kumar Mehta. This was done pursuant to clause 2.2.2 of this settlement, as specifically recorded in the said letter. Even the receipt given for acknowledging the amount of Rs.32.40 lacs records that the amount received is in part consideration of the amount payable by Vashisht group to Mehta group and the proceeds shall be discharged first towards the interest accrued on belated payments. According to the respondents, this conduct of the petitioners clearly showed that they had to make substantial payments to the respondents under the settlement and part payments were made. Payments which were to be received by the petitioners from the respondent company were transferred in the name of Mehta group and, therefore, no payment was due thereafter. However, still, after making this payment and as counter blast to the suit filed by Mehta group, present company petition was filed by the petitioner on 23rd March 1992. It is also the submission of the respondents that Vashisht group has thereafter filed Suits No.544/92, 4617/92, 4618/92 and 1016/93 making various claims. Even Suit No.596/95 has been filed on the original side of this Court for recovery of Rs.55,25,207.52 against the respondent company for recovery of the same amount which is the subject-matter of this petition. All these suits have been ordered to be tried together in view of commonality of the subject-matter arising out of the aid family settlement. On the basis of aforesaid averments in the reply, the submission of the respondents is that the present company petition is not maintainable due to the following reasons:-
(i) Petitioners are left with no right in deposits appearing in their names in books of company under the family settlement;
(ii) Filing of petition is abuse of the process of the Court;
(iii) In case held otherwise by deciding above ground(s) if petition filed on the basis of deposits appearing in the books of respondent company as on 31.3.1989 is otherwise maintainable in view of alleged deposits otherwise undergoing change during subsequent years and with no amount left payable after 28.2.1992;
(iv) The right, if any, can be adjudicated upon only by forum of Civil Court, as stands elected by such persons by filing Civil Suits;
(v) There is no proper petition filed before this Court;
(vi) Even otherwise, no petition in the name of petitioners No. 8 to 11 is maintainable, in view of there being no notice of demand mandated under Section 433 of the Companies Act;
(vii) In any event, there is no clause to petitioners to state inability to pay debts against dues of respondent company in view of solvency and substratum held and enjoyed by the company.
12. In support of the submission that the present petition is abuse of the process of the Court reliance is made upon the following observations of the Supreme Court in the case of S.P. Chengalvaraya Naidu (dead) by LRs v. Jagannath (dead) by LRs and Ors., AIR 1994 SC 853:
"xxxxx The principle of 'finality of litigation cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties.
One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property grabbers, tax evaders, bank loan dodgers and other unscrupulous persons from all walks of life fid the court process a convenient lever to retain the illegal/gains indefinitely. We have no hesitation to say that a person whose case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation. xxxxx A litigant, who approaches the court, is bound to produce all the documents executed by him which are relevant to the litigation. If he withholds a vital document in order to gain advantage on the other side than he would be guilty of playing fraud on the court as well as on the opposite party."
13. It is also argued that there is no cause to refer to deposits in the name of the petitioners in the company's accounts books as on 31.3.1989 as these deposits underwent change by virtue of operation of such accounts. The deposit position was as on 31.3.1989 (Rs.23,18,378.52), as on 31.3.1990 (Rs.22,49,993.56), as on 31.3.1991 (Rs.20,32,299.43) and that on 4.3.1992 was nil. The petition as filed is dated as 23.3.1992. The affidavit in support of petition is of petitioner No.1 scribed in Hindi vernaculars language sworn/attested before Notary Public on 18.3.1992. The frame of petition is not in accordance with the provisions of the Companies Act and the Companies (Court) Rules. The form of affidavit to accompany a petition under Section 433 of the act is prescribed in Form No. 3 under the Companies (Court) Rules, which mandates that affidavit is to affirm the statements made in the petition and the petition to be made a part of the affidavit. Petition dated as 23.3.1992 ex facie cannot be read as part of the affidavit sworn and attested on 18.3.1992. Petition as framed is not maintainable in view of Mool Chand Wahi v. National Paints (Pvt.) Ltd. and Anr., [1986] 60 Comp Case 402, Registrar of Companies, Punjab v. New Suraj Financiers and Chit Fund Co. Pvt. Ltd., [1990] 69 Comp Case 104 and Abdul Rashid v. Calcutta Municipal Corporation and Ors., AIR 1990 Calcutta 37. It was also argued that the company has enough solvency which is demonstrated by following details:-
Assessment Year Sales Profit
1989-90 75.27 lacs 14.52 lacs
1990-91 115.71 lacs 12.98 lacs
1991-92 355.71 lacs 27.15 lacs
1992-93 229.24 lacs 38.40 lacs
1993-94 1167.53 lacs 241.00 lacs
1994-95 1784.00 lacs 404.35 lacs
14. In so far as replies to the legal notices are concerned, according to the respondents, they cannot be relied upon as they were not signed by the person competent to do so. It was sought to argue that manner of postage of the notices of demand and the preparation of replies, including postage thereof cast doubt on their authenticity.
15. After considering the respective submissions the position which emerges can be summarised as follows:-
16. The two groups were doing the business together for which various firms and companies were floated. They are related to each other as well. In 1989, however, they decided to part ways and family settlement/memorandum of understanding was arrived at between the parties. As per the settlement, business interest of the two groups in all the firms/companies were settled and the respective shares allocated, on the basis of which even businesses were partitioned. However, there were certain deposits by the petitioners herein belonging to Vashisht group, in the respondent No. 1 company. The respondent No. 1 company came to the kitty of Mehta group. Thus, Mehta group became liable to pay the amount due to the petitioners. On the other hand, as per the memorandum of understanding, which was a complete package in so far as sharing of the businesses between the two groups is concerned, Vashisht group had to make certain payments to Mehta group. It is because of the fact that the business of Ganesh Katha Factory was taken over by Vashisht group which was valued at more than the share which this group had to receive under the family settlement. According to the respondents, part payments were made by Vashisht group to Mehta group, though belatedly, and as far as payments which were made by the respondent No. 1 company to the petitioners herein were also transferred to Sh. Bishan Das Mehta and Sh. Raj Kumar Mehta. Thus, these deposits underwent change and, therefore, even if in the balance-sheet as on 31st march 1989 these deposits were shown in the name of the petitioners, the same underwent change by virtue of operation of the accounts and as on 4th March 1992 all the deposits were adjusted by transferring the deposits in the name of Mehtas. Learned counsel for the petitioners although disputed the alleged transfer and submitted that balance-sheet ending on 31st March 1990 showed the petitioners as creditors and even the interest was added, he could not dispute that there was adjustment made in the accounts of the respondent company thereafter.
17. Admitted position is that the deposits of the petitioners were not the subject-matter of family settlement/memorandum of understanding. Even as per the respondents, these payments were to be made by the respondent company to the petitioners. However, defense of the respondents is that the respondent had to receive Rs. 92 lacs from the Vashisht group and, therefore, these deposits were got transferred, as part payment, in the name of Sh. Bishan Das Mehta and Sh. Raj Kumar Mehta. However, it is also undisputed that Vashisht group had made the payments to Mehta group under the settlement. Payment made from 20th December 1990 to 5th March 1991 was Rs. 57.60 lacs and thereafter from 17th May 1991 to 8th November 1991 Rs. 34.40 lacs for which receipt date 28th February 1991 was given. In this way Vashisht group has made payment of Rs. 92 lacs to Mehta group and, therefore, the case of the petitioners is that the deposits given to the respondent No. 1 company were to be refunded. On the other hand, according to the respondents, although payment of Rs. 92 lacs is made under the memorandum of understanding, since it was made belatedly, the Mehta group became entitled to interest thereon as well and, therefore by making payment of Rs. 92 lacs entire debt under the memorandum of understanding does not stand discharged. According to the respondents, it was for this reason that in receipt dated 28th February 1991 it was specifically mentioned that the amount paid would first be appropriated towards interest. It is also their case that for this very reason letter of the same date was written by Sh. Raj Kumar Mehta clearly transferring the same in the name of S/Sh. Bishan Das Mehta and Raj Kumar Mehta. According to the respondents, still amount is payable and the respondents' Suit No. 252/92 is pending wherein claim of Rs. 80 lacs is made.
18. The petitioners on the other hand contend that entire payment of Rs. 92 lacs is made and, therefore, payment to the petitioners by the respondent company is to be made which is even acknowledged by the respondent company in its balance-sheet as on 31st March 1989 as well as 31st March 1990. Even TDS certificates were issued by the respondent company in favor of the petitioners. Therefore, according to the petitioners, if the respondent company made the changes in the account books thereafter, such elf-serving changes would not ensure to their benefit and their conduct is deplorable as the respondent company filed revised returns after making the changes in the account books which is an afterthought and should not be believed. Fact, however, remain that there are serious disputes between the parties. The defense raised by the respondent company cannot be treated as sham, particularly when the revised returns were accepted by the Income-Tax authorities and assessment orders passed. Further, admittedly, both the parties have filed suits against each other. These suits are pending for many years now and would be at the advance stage. Whether there was any manipulation by the respondents in the account books of the respondent company by squaring us the debts payable to the petitioners and adjusting the same against the money payable by Vashisht group to Mehta group or it was a bona fide act on the part of the respondent can be tested by leading evidence in the said case. Categorical finding in this behalf cannot be returned in these proceedings which are of summary nature. Complex issues of facts raising claims and counter claims by the two groups against each other are the subject matter of various suits filed by the two groups against each other. In this view of the matter it may not be proper to exercise discretionary jurisdiction more particularly when the respondents have also produced on record to show that it is a viable company and its substratum has not been lost. The company petition is accordingly dismissed leaving the parties to bear their own costs. All pending applications also stand disposed of.
