Siel Ltd. vs Cosco Sales And Services Ltd.
2007 Latest Caselaw 134 Del

JUDGMENT

Anil Kumar, J.

Page 0542

1. This is a petition under Section 433(e) and (f) of the Companies Act, 1956 for winding up of the respondent company, Cosco Sales and Services Ltd.

2. The contention of the petitioner is that the petitioner is registered under the Companies Act, 1956 having its registered office at 15, Shivaji Marg, New Delhi-110015. The respondent is also a company duly registered under the Companies Act, 1956 having its registered office at New Delhi within the jurisdiction of this Court.

3. The petitioner company contended that at all relevant times it owned the industrial units, Siel Foods and Fertilizer Industries and Siel Chemical Complex. The company was manufacturing, selling supplying various Chemicals such as caustic soda etc. and the respondent was appointed as an authorized dealer.

4. The respondent was placing orders for purchase of various Chemicals as per respondent's requirement and purchasing goods under the name and style of Cosco Sales and Services Pvt. Ltd. The respondent company has its principle business at 301, AVG Bhawan, M-3, Connaught Circus, Middle Circle, New Delhi.

The name of the respondent company, according to the petitioner was changed to Cosco Sales and Services Ltd. in 1993-1994.

5. The goods were sold and delivered to the respondent by the petitioner company. The petitioner company had opened a running account in the name of respondent company in its books of accounts and the price of goods sold and delivered to the respondent used to be debited and the amounts paid by the respondent company used to be credited. At the end of financial years, accounts used to be taken. As on 19th May, 1997, an acknowledgment for the liability of Rs. 2,18,93,858/- was made by the respondent company to the petitioner.

Page 0543

6. The letter dated 19th May, 1997 by the respondent reads that as per the statement of account of the respondent as on 31.3.1997, a sum of Rs. 1,43,93,858/- was payable from the respondent to the petitioner. According to the books of accounts of the petitioner, an amount of Rs. 2,18,93,858/- was due. The respondent also claimed that an amount of Rs. 75.00 lakh was paid by the respondent to the petitioner which amount was, however, not admitted by the petitioner.

7. The petitioner has also relied on the minutes of meeting dated 9th October, 1998 which are signed on behalf of petitioner and the respondent. The minutes categorically stipulated that an amount of approximately Rs. 1.25 crore is due from the respondent to the petitioner. By another letter dated 22nd March, 2000 the respondent admitted further supplies of Rs. 1,32,92,800 and payment of Rs. 1,65,81,163. The respondent, however, alleged that the payment was towards the new supplies and therefore, an additional amount of Rs. 32,88363 had been made. The respondent claimed that for current supplies full payments will be made and 15% amount be adjusted from the additional payment made. 8. The petitioner gave a notice dated 2nd September 2002 under Section 433 and 434 of the Companies Act, 1956. The notice sent to the company was received back with the remarks ?refused?, however, the copies of notices were served on the Directors. The acknowledgment cards of the service of notice and the postal receipts have been produced by the petitioner. On failure of the respondent to pay the amount, the present petition was filed contending that the respondent company is unable to meet its liabilities and pay its debts and is liable to be wound up.

9. The respondent has filed a reply contending that the notice as provided under Section 434 of the Companies Act, 1956 was not served and no such notice dated 2nd September, 2002 was ever tendered on the registered office of the respondent company. The respondent has also contended that the transactions related to 1997 and the claim of the petitioner is barred by limitation.

10. By order dated 25th October, 2004, the respondent was directed to file an affidavit giving the particulars of payment alleged to have been made by the respondent to the petitioner along with supporting documents and three weeks' time was granted. By order dated 16th October, 2006, respondent company was granted three weeks' time to file the affidavit in terms of order dated 25th October, 2004 and subsequent orders.

11. Despite the specific orders by this Court, since 2004 nothing has been filed to show that the payments were made and nothing is outstanding from the respondent to the petitioner company.

12. I have heard the learned Counsel for the petitioner. Mr.Nitin Aggarwal had appeared on behalf of respondent and had sought a pass over, however, no one appeared after pass over on behalf of respondent.

13. The first objection of the respondent is that the statutory notice dated 2nd September, 2002 was not served at the registered office of the respondent company. Perusal of the record reveals that the statutory notice was sent to Page 0544 the registered office by speed post, acknowledgment card was returned with the endorsement of refusal. Nothing has been produced by the respondent to rebut the report of refusal. The address of the respondent company on the registered article is the address of the registered office of the respondent. In the circumstances, the plea of the respondent that the notice was not sent at the registered office of the respondent is not correct. The notices were also sent to the Managing Director and Shri Suresh Goyal as well as to two other Directors, namely Aditya Goyal and Shri Gautam Goyal. The petitioners have produced the registered A.D. card with the endorsement of receipt of the notice on behalf of Respondent's Directors. A plea has been raised that the addresses of Shri Suresh Goyal and Gautam Goyal as C-2/51, Safdarjung Development Area, New Delhi is not the addresses of Shri Suresh Goyal and Shri Gautam Goyal as they are the residents of 145 Sultanpur, Mehrauli, New Delhi. Similarly, plea has been raised on behalf of Shri Aditya Goyal that he is also not residing at C-2/51 Safdarjung Development Area, New Delhi and he is residing at S-479, Greater Kailash-II, New Delhi. However, nothing has been produced and it has not been established that the directors were not residing at the addresses at which the registered postal article were served on them. In the circumstances, the plea on behalf of the respondents is not sustainable and is rejected. The inevitable inference in the facts and circumstances is that the statutory notice was sent to the respondent and was served and despite the statutory notice, neither any reply was given to the notice refuting the pleas raised therein nor the respondent has paid the amount to the petitioner company leading to the inevitable inference that the respondent company is unable to pay its debt.

14. The next plea of the respondent is that the amounts due from the respondent to the petitioner is barred by time as the last transaction took place in the year 1997.

15. The respondent had acknowledged by letter dated 19th May, 1997 that an amount of Rs. 1,43,93,858/- is due from the respondent to the petitioner company though the respondent had taken a plea that a sum of Rs. 75.00 lakh?was also paid, however, the said fact was not admitted by the petitioner nor the respondent has produced anything to show that the said amount of Rs. 75.00 lakh was paid by respondent company to the petitioner.

16. In the minutes of meeting dated 9th October, 1998, it has been acknowledged by the respondent that approximately Rs. 1.25 crores is due from the respondent to the petitioner company. This is an acknowledgment within the period of limitation and, therefore, period of limitation will be extended for a further period. Section 18 of the Limitation Act, 1963 contemplates that where before the expiration of the period prescribed, an acknowledgment of liability is made in writing, a fresh period of limitation shall be computed from the time when the acknowledgment was signed. ?The amount which was due till 31st March,1997, an acknowledgment was made on 19th May, 1997 admitting an amount of Rs. 1,43,93,858/- due from the respondent company to the petitioner company. There has been a further acknowledgment of the liability of approximately Rs. 1.25 crores by the Director of the respondent company in the minutes of meeting dated 9th October, 1998 which will give a fresh period of limitation Page 0545 from the said date. There is yet another acknowledgment of the respondent company by letter dated 22nd March, 2000. The petitioner and the respondent had a running account and from November, 1998 to March 21, 2000, the respondent further received supplies of net value of Rs. 1,32,92,800/- against which a payment of Rs. 1,65,81,163/- was received. It was admitted by the respondent that an additional payment of Rs. 32,88,363/- has been made from November 1998 to March 21, 2000. Consequently, this cannot be refuted by the respondent that the part payments have been made by the respondent company from November, 1998 to March 21, 2000. Such part payments made on account of the amounts due and the payment towards subsequent delivery of goods will also extend the period of limitation from the time when the last time the payment was made. The extension of period of limitation can not be negated by the respondent by contending that the payment was made towards the fresh supplies and not towards the amount which had been due on account of earlier supplies. In any case the respondent had contended that the alleged additional amount be adjusted at the rate of 15%. Consequently it can not be contended by the respondent that the part amounts were not paid towards the amount due from the respondent to the petitioner.

17. The notice demanding the amount due from respondent to the petitioner was given on 2nd September, 2002 and the present petition under Section 433(e) and (f) was filed on 21st November, 2002. The statement of account filed by the petitioner of the respondent also reveals that part payment was made for Rs. 81,160/- on 6th March, 2002. These facts have not been rebutted by the respondent.

18. This court in the case of Technofab Engineering Ltd. v. Nuchem Weir India Ltd. 136 (2007) DLT 22 had considered expression ?payment? used in Section 19 of the Limitation Act and had held as under relying on Rajesh Kumari v. Prem Chand Jain holding as under:

7. ... that issuance of a cheque by a debtor is ``payment on account of a debt or interest'` and extends the period of limitation by further period of three years from the date of issue of cheque, even if the said cheque on presentation is dishonoured. Dishonour of the cheque, it has been held does not result in extinguishing the liability of the debtor and constitutes effective ``payment'` for the purpose of Section 19 of the Limitation Act. Once ``payment by cheque'` is accepted by the creditor, he is entitled to extend the period of limitation under Section 19 of the Limitation Act and the said advantage can not be wiped off and undone by tortuous act of the other side by withholding the payment.

19. In the present case the part payment has actually been made by the respondent but later on it has been contended that the part payment was towards the goods received subsequently and over payment was made and a percentage of which was to be adjusted towards the amounts due earlier. The letters and minutes of meeting also constitute acknowledgment as contemplated under Section 18 of the Limitation Act, 1963. In Hansa Industries (P) Limited v. MMTC Limited it was held:

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19. We can deduce the following principles from the aforesaid judgments which shall have to be applied in a given case to ascertain as to whether writing constitutes an acknowledgement or not:

(a) Acknowledgment means an admission by the writer that there is a debt owed by him either to the receiver of the letter or to some other person on whose behalf it is received. It is not enough he refers to a debt as being due from somebody. He must admit that he owes the debt.

(b) The statement on which a plea of acknowledgement is based must relate to a present subsisting liability though the exact nature of the specific character of the said liability may not be indicated in words.

(c) Words used in the acknowledgement indicate the circumstances of jural relationship between the parties such as that of debtor and creditors.

(d) It must appear that statement is made with the intention to admit such jural relationship.

(e) Such intention can be implied and need not be expressed in words. In construing the words used in the statement, surrounding circumstances can be considered although oral evidence is excluded.

(f) Although liberal construction is to be given to such statement but where a statement was made without intending to admit the existence of jural relationship, the Court cannot fasten such intention on the maker by an involved or far-fetched process of reasoning.

(g) In deciding the question in a particular case, it is not useful to refer to judicial decision and one has to inevitably depend upon the context in which words are used.

In the circumstances, applying these principles, it is inevitable to infer that part payments were made by the respondent and the liability was also acknowledged and consequently, the objection of the respondent that the claim of the petitioner is barred by time can not be sustainable.

20. The respondent has admitted that Rs. 2,18,93858/- was due from the respondent to the petitioner as on 31st March, 1997 out of which Rs. 75.00 lakh was paid by the respondent company at the instances of the petitioner to the corporate office of the petitioner company. However, the respondent is unable to show and produce anything to show that an amount of Rs. 75.00 lakh was paid to the corporate office of the petitioner. Despite several opportunities, no affidavit has been filed by the respondent to show that this amount of Rs. 75.00 lakh or any other amount alleged to have been paid by the respondent to the petitioner company nor any documents have been produced.

21. Even according to the averments made by the respondent, if only Rs. 69,93,858/- was liable to be paid as on 31st March, 1997, the respondent has failed to produce any document to show that the alleged amount of Rs. 69,93,858/- has been paid by the respondent to the petitioner. The plea of the respondent that the respondent had paid a surplus amount of Rs. 12,94,443/-?has also remained un-substantiated. The respondent is unable to show anything that subsequently the payments have been made on bill-to-bill basis. Even on the basis of alleged statement filed by the respondent, where the Page 0547 payment has not been made bill wise, it cannot be inferred that subsequently the payments have been made bill-wise merely on the basis of the allegation of the respondent. The respondent in his reply has not contended that the amounts were paid bill- wise subsequently. Since the amount was due as has been acknowledged in the minutes of the meeting between the representatives of the petitioner and the respondent on 9th October, 1998 and earlier it was acknowledged that an amount of Rs. 2,18,93,858 was due, the inevitable inference is that the said amount has not been paid to the petitioner.

22. For a winding up petition under Section 433(e), there must be a debt due and the company must be unable to pay the same and that due must be determined or definite sum of money should be payable immediately or at a future date. From the facts stated hereinabove, it is apparent that the respondent company has acknowledged the amount due to the petitioner company and have failed to show that the said amount has been paid despite various opportunities granted to the respondent company to file an affidavit and the documents to show that the payment was made and no amount is due to the petitioner. The disputes raised by the respondent company are not bonafide nor the defense can be considered to be substantial. The defense which has been raised by the respondent company is not likely to succeed on any point of law. In the totality of facts and circumstances, it cannot be held that the defense has been raised by the respondent company in good faith and that the defense is likely to succeed in the point of law. The respondent company has even failed to adduce prima facie proof of the facts on which their defense depends. In the circumstances, the inevitable inference is that the respondent has a debt due to the petitioner company which the respondent company failed to pay despite opportunities and despite a statutory notice which was duly served on the respondent company and consequently the respondent company is unable to pay its debts.

23. It is no more res integra that failure to pay is presumption of proof of insolvency. Under Section 434(1)(a), there is a deeming provision which gets attracted when notice is given and the company does not act within the statutory period of three weeks and neglects to make payment. During the pendency of the petition also, respondent had sought an adjournment on 10th May, 2005 on the ground that the parties are settling the matter. Even after taking an adjournment, neither the matter has been settled nor the amounts due to the petitioner company has been paid despite demands. Consequently, the inevitable inference is that the respondent company is indebted to pay a sum of Rs. 2,32,56,914.32 which also includes a sum of Rs. 1,65,52,949.32 as principal amount and Rs. 67,03,965 as interest up to 31.10.2002. The respondent is liable to pay the interest and the amount of interest was claimed in the notice which notice had not been replied. Thus the said amount the respondent company has not paid to the petitioner despite statutory notice of demand and the respondent company is unable to pay the debt due from him to the petitioner. Consequently, the said amount is the debt due and payable by the respondent company to the petitioner. Hence, in the facts and totality of circumstances, the present petition for winding up is entitled to be admitted.

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24. However, I defer orders for appointment of provisional liquidator and for issue of citations for a period of one month within which period if the respondent makes the aforesaid payment along with interest @ 9% per annum from the date of filing of the petition, no further orders will be passed and present winding up petition will be treated as disposed of. However, in case, the above payment is not paid within one month, the official liquidator of this Court will be appointed as provisional liquidator and citations will be directed to be issued on the next date of hearing. List on March 6, 2006.