M/S Paharpur 3P (A Division Of M/S ... vs M/S Dalmia Consumer Care Private ...
2008 Latest Caselaw 901 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI


+ Company Petition No.66/2006 & Co. App. No.508/2007

                Judgment Reserved on     : 21.01.2008
%               Judgment Delivered on    : 02.07.2008

M/s Paharpur 3P (A Division of M/s Paharpur
Cooling Towers Limited)                    .... Petitioner
                           Through: Mr.P.V. Kapur, Sr. Adv. with
                                      Mr. Amit Prasad & Chandra
                                      Shekhar, Advocates

                                versus

M/s Dalmia Consumer Care
Private Limited                             .....Respondent
                              Through: Mr. Harish Malhotra, Sr.Adv.
                                       with Mr.Sunil Kataria, Adv.

CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI

1. Whether the Reporters of local papers may
   be allowed to see the judgment?

2. To be referred to Reporter or not?             Yes

3. Whether the judgment should be reported        Yes
   in the Digest?

VIPIN SANGHI, J.

1. The petitioner seeks the winding up of the

respondent company by invoking Sections 433(e), 434 & 439 of

the Companies Act, 1956 (hereinafter called the 'Act') on the

ground that the respondent is indebted to the petitioner to the

CP No.66/2006 page 1 of 34 tune of Rs 57,42,572.41p. besides interest, which which the

respondent company is unable to pay despite service of a

statutory notice.

2. As per the averments contained in the petition, the

petitioner M/s Paharpur 3P (hereinafter called the 'petitioner'), is

a division of M/s Paharpur Cooling Towers Ltd. and is in the

business of manufacturing , marketing and exporting Flexible

Packaging laminates in Roll and Pouch form. The respondent

company, M/s Dalmia Consumer Care Pvt. Ltd. (hereinafter called

the 'company'), placed various purchase orders from time to time

on the petitioner for supply of flexible laminates and pouches ,

inter-alia, for its FMCG product "Zing" and "Chabaaza". The

petitioner supplied to the Company Flexible laminates and

Pouches as per the terms of the purchase orders to the complete

satisfaction of the company and raised the invoices amounting to

Rs.1,91,51,367.55/-. Out of the said amount, an amount of

Rs.57,42,572.41/- is outstanding, due and payable by the

company. It is further averred that the petitioner sent numerous

reminders and made personal visits to the office of the company

but to no avail. The Company vide a "Balance Confirmation

Certificate" dated 23.01.2006(Annnexure P-1 to the petition),

CP No.66/2006 page 2 of 34 admitted Rs.56,97,300/- as outstanding due and payable to the

petitioner as on 31.12.2005. The petitioner further states that a

Statutory notice dated 15.02.2006 issued in compliance of

Sections 433/434 of the Act was served on the company and

was duly received at the registered office of the company on

17.02.2006, but the company has neither replied to the said

notice nor settled the aforesaid outstanding amount, due and

payable to the petitioner.

3. In the reply filed by the respondent , it is averred

that the petitioner represented itself to be the best supplier for

packaging materials, and based upon such representations the

respondent had agreed to purchase the materials. Between

September 2004 and December 2004, various purchase orders

were placed upon the petitioner apart from one order which was

placed in May 2005. The reason for the short period, during

which business transactions took place between the parties, is

stated to be the inferior and defective quality of the packaging

materials supplied by the petitioner, which was not fit for the

intended use. It is further averred that the products of the

respondent packed in inferior quality packaging materials

supplied by the petitioner were damaged in various ways making

CP No.66/2006 page 3 of 34 the products unfit for human consumption and its intended use.

Due to such results, the product of the company was not

accepted in the market and the respondent company started

getting complaints from its customers and dealers and the

respondent was forced to stop taking regular supplies of the

packaging materials from the petitioner. The solitary exception

was the supply of packaging material in May, 2005 for a

minuscule amount of Rs.4.24 Lacs, that too, after a lot of

persuasion and assurances as to the quality of material given by

the petitioner, but even then the packaging material was of

inferior quality and suffered from all sorts of shortcomings which

were noticed in earlier supplies. No order was placed upon the

petitioner subsequent to May, 2005.

4. It is further averred that the product of the company

was a 'mouth freshner' for human consumption and thus the

inferior and defective quality of the product was intolerable.

Since the petitioner supplied inferior quality material, the

company suffered huge losses of goodwill and monetarily as well.

Till 31.03.2006, the respondent had received materials returned

from 10 of its clearing and forwarding agents (C&F Agents) and

the company has raised a debit note to the tune of Rs.68,00,985/-

CP No.66/2006 page 4 of 34 on the petitioner (Annexure A-1 to the reply). Detailed summary

of materials allegedly returned to the company along with

memos from C&F Agents, detailing the quantity of final product

returned have been placed on record (Annexure A-2 and A-3 to

the reply).

5. A demand notice dated 08.09.2006 was also

allegedly served upon the petitioner whereby the respondent

made a demand of Rs.10,58,413/- (Annexure A-4 to the reply),

which according to the respondent, had not been replied to by

the petitioner. It is also averred that a Civil Suit No.159/2006

filed by the respondent against the petitioner is also pending in

the Court of Addl. District Judge, New Delhi, for recovery of the

said amount.

6. With regard to demand raised by the petitioner, it is

submitted that the company is not indebted to the petitioner and

the petitioner is raising frivolous and false allegations and

misleading the Court. It is further contended that the claim of the

petitioner is belied by the fact that payment of Rs.70,47,432/-

was already made to the petitioner, after 17.12.2004 whereas the

claim of the petitioner to the tune of Rs.57,42,572/- is as on

CP No.66/2006 page 5 of 34 17.12.2004, thus, after the said payment, there ought not be any

outstanding even if the claim of the petitioner is accepted.

7. In relation to the "Balance Confirmation Certificate"

dated 23.01.2006 stated to have been issued by the company, it

is argued that the said letter was never issued by the company

and the same is a forged document. It is claimed that firstly,

there is no person by the name of 'Sidhartha Nanda', the

purported signatory of the letter, in the company. Moreover,

there was no such designation of 'Senior Officer Accounts', in the

company. Secondly, the company had shifted its address from

"Floor 4th, Tolstoy House, 15-17 Tolstoy Marg, New Delhi

110001" , much prior to 23.01.2006 to the present address.

Various documents in this regard are placed on record.

(Annexures A-6, A-7 & A-8 (Collectively) to the reply.)

8. The petitioner has filed a detailed rejoinder

controverting the aforesaid submissions of the respondent. It is

stated that the respondent has made various averments which

have no basis. The allegations of the respondent that the

packaging material supplied by the petitioner was of inferior

quality or was defective is belied by the fact that there is not a

CP No.66/2006 page 6 of 34 single correspondence placed on record by the respondent

making any such allegation against the petitioner. With regard to

the allegation of the respondent that the balance confirmation

certificate dated 23.1.2006 is forged and fabricated, the

petitioner has stated that the same is genuine. Reference is

made to another letter dated 4.8.2005 bearing reference

NO.DCC/ND/2005-06/3 written by Shri Amar Sinha, director of the

respondent company and two other letters dated 11.4.2005 and

31.12.2004 issued by the authorised signatory of the respondent

company on similar type of letter head as the one on which the

balance confirmation certificate was issued by the respondent.

So far as the stand of the respondent that it never had any

employee by the name of "Sidharth Nanda" is concerned, the

petitioner states that this plea of the respondent is false. This is

clear from a bare perusal of the sales tax form dated 16.12.2005

which has been issued on behalf of the respondent company by

the same Mr. Sidharth Nanda. From this it appears that even

before the Sales Tax Authorities, Mr. Sidharth Nanda is declared

to be the authorised signatory of the respondent company. Copy

of the said sales tax form dated 16.12.2005 has been filed on

record with the rejoinder. In response to the stand of the

respondent that there is no designation as "Senior Officer-

CP No.66/2006 page 7 of 34 Accounts" in the respondent company, the petitioner states that

it is not aware of or concerned the internal management and

arrangement of the respondent company, and that the balance

confirmation certificate was issued by Mr.Sidharth Nanda stating

himself to be "Senior Officer- Accounts". In response to the stand

of the company that it had shifted its registered office even

before the so called issuance of the balance confirmation

certificate, the petitioner submits that mere shifting of the

registered office does not necessarily mean that the company

cannot use its old letter heads. In any event, the petitioner is not

responsible for the respondent using a letter head showing the

earlier address of the company. The petitioner has also placed

on record various communications exchanged with the company

which, the petitioner states, completely belie the denial of liability

by the respondent-company.

9. It is submitted that in these communications there

is repeated acknowledgment of liability, apart from assurances

and promises to pay the same by the respondent company. The

petitioner has also placed on record the copy of the TDS

certificate issued by the respondent company which, the

petitioner submits, clearly show that in so far as the payments for

CP No.66/2006 page 8 of 34 which tax has been deducted at source, are concerned, the

respondent acknowledges that payments were due and payable

which is why tax has been deducted at source. Even those

amounts had not been paid. Copy of the TDS certificates have

also been placed on record. The petitioner also denied the

receipt of any debit note dated 31.6.2006 alleged to have been

issued by the respondent company. The parties have also filed

on record various documents with additional affidavits/reply to

additional affidavits. I shall refer to and deal with them as well.

The petitioner has also relied on various authorities, of which

some are relevant would be referred to and dealt with a little

later.

10. Having heard Mr. P.V. Kapur, learned senior

counsel on behalf of the petitioner and Mr. Harish Malhotra,

learned senior counsel on behalf of the respondent, I am

satisfied that the petitioner has made out a case for admission of

this petition for winding up against the respondent company.

11. The admitted position is that the petitioner has

made supplies of packaging materials to the respondent. The

receipt of the materials by the respondent for which the

CP No.66/2006 page 9 of 34 petitioner raised invoices is not in dispute. The justification given

by the respondent for the non-payment of these invoices in full is

that the materials supplied by the petitioner were defective and

substandard, which resulted in the product packaged by the

respondent from suffering various defects such as seepage of

moisture into the product, loss of flavour and freshness, the

product becoming rotten and sticking together thereby

rendering it unfit for human consumption.

12. Therefore, it needs to be examined whether there

is a bona fide dispute raised by the respondent company i.e.

whether any material placed on record by the respondent to even

prima facie conclude that the respondent has raised a defence

which requires a trial i.e. whether any complicated and disputed

questions of fact arise which may dissuade the Court from

exercising its jurisdiction under Sections 433/434 of the Act. It

also requires consideration whether there is any undisputed or

undisputable debt owed by the company to the petitioner in

excess of Rs.1 Lac, which the respondent has failed or neglected

to pay despite service of a notice under Section 434 of the Act on

the registered office of the respondent company.

CP No.66/2006                                               page 10 of 34
 13.             A    perusal   of   the   correspondence   exchanged

between the parties filed on record by the petitioner as

Annexure-R-A3 collectively with the rejoinder, and a few other

documents filed on record belie the claim of the respondent with

regard to the poor quality of the product supplied by the

petitioner. On 11.4.2005 the respondent issued a communication

to the petitioner with regard to clearance of dues stating that "As

per our records, balance outstanding to you as on March 31st,

2005 is Rs.80.97 lakhs. We would appreciate your confirming this

figure in the next 15 days." The respondent also suggested

clearing the dues over a period of six months, i.e. between April

and September, 2005 and gave a monthwise schedule for making

payments. The respondent suggested that it would pay, in the

months of April-August, 2005 Rs.13.5 lakhs each month and

would pay in the month of September, 2005 Rs.13.47 lakhs

making a total of 80.97 lakhs. The respondent further stated :

"Meanwhile, to help us maintain operation on a continuous basis, we would confirm that all purchases made from you from April onwards shall be as per the terms and conditions herein force.

We trust you will be in a position to extend your cooperation as usual and provide the materials in time to allow us to get over the current situation at the earliest."

14. Admittedly, the materials were mainly supplied

CP No.66/2006 page 11 of 34 between the period September, 2004 to December, 2004. The

case of the respondent is that it discovered the so called poor

quality of the packaging material supplied by the petitioner and,

therefore, did not take any further supplies after December,

2004. The communication dated 11.4.2005, however, is clearly

out of sync with this stand taken by the respondent. Firstly, the

respondent would not have acknowledged any outstanding

liability, much less of 80.97 lakhs as on 31.3.2005, had the

packaging materials supplied by the petitioner in fact been of

inferior quality which had caused losses and damages to the

respondent. The respondent would have claimed those loss and

damages from the petitioner by holding the petitioner responsible

for causing those losses. Moreover there would have been no

question of the respondent seeking further packaging materials

from the petitioner, much less to allow them "to get over the

current situation at the earliest."

15. The petitioner responded to the aforesaid

communicated dated 11.4.2005 on 15.04.2005. The petitioner

stated that Rs.83.18 lakhs was outstanding as on 31.3.2005 and

not Rs.80.97 lakhs as claimed by the respondent. A copy of the

ledger pertaining to the respondent was also sent by the

CP No.66/2006 page 12 of 34 petitioner. The aforesaid amount of Rs.83.18 lakhs was net of a

credit of Rs.1.78 lakhs towards TDS, the certificates for which

were also demanded by the petitioner. The petitioner also stated

that for future supplies they would need immediate payments

and could not provide further credit to the respondent since their

cash flow had been severely hit due to overdues of Rs.83.18

lakhs, in addition to interest cost thereon. The respondent sent

another communication dated 5.7.2005 to the petitioner by e-

mail. The same was sent by Mr. Amar Sinha, Director of the

respondent company. In this e-mail communication he, inter alia,

stated: "With regard to old outstanding, as I have explained to

you earlier we are in the process of taking stock of our

commitment and liabilities and once the process is completed we

shall draw up a schedule for payment of our creditors". With

regard to the current supplies he confirmed "that the terms of

payment, which have been discussed with you on the basis of 30

days for future supplies will be strictly adhere". This

communication also shows that the respondent expressed its

readiness to procure packaging material from the petitioner in

future as well. This also belies the respondents stand that the

materials supplied by the petitioner were defective or of inferior

quality.

CP No.66/2006 page 13 of 34

16. On 4.8.2005 the respondent issued another

communication through Mr. Amar Sinha its Director. He, inter

alia, stated:

"As you would know DCC has gone through a difficult phase in business in the recent past and having incurred huge losses we were almost on the verge of deciding whether to continue this business for the future. There has been no business transaction in DCC during the last 3 months, which we are sure that you are aware of. You will appreciate that if we do not revive the business of DCC, it may become very difficult for us to clear all market dues in the short term, and for this purpose we require your co-operation and support to bring the situation under control."

17. The respondent further offered that to settle its

outstandings owed to its creditors it would make payment of

amounts which are 25% more than the value of the purchase

which could be adjusted against the overdue outstanding payable

to the supplier. He further stated that in case there are supplier

who do not want to continue business with the respondent, the

respondent would be in a position to settle their claims/dues in

instalments starting from January, 2006. He further stated:

"We do realize and admire the co-operation and support that business associates like you

CP No.66/2006 page 14 of 34 have extended to us in conducting the business. We hope, you will appreciate our problems and will bear with us considering the business association we have had in the past.

We are committed to resolving all outstanding business issues with you to your satisfaction.

We are conscious of the inconvenience being caused to you, but at this stage we have no better option than to follow the above.

Please bear with us till you hear further on the matter shortly."

18. The respondent sent another communicated dated

2.1.2006 to the petitioner, similar to the earlier communication

dated 4.8.2005.

19. These communications, far from accusing the

petitioner of applying substandard or defective quality of

packaging materials which allegedly caused losses and damages

to the respondent, acknowledge and appreciate the cooperation

extended by the petitioner to the company when it was going

through difficult times.

20. From the communication dated 4.8.2005 and

2.1.2006 of Mr. Amar Sinha, the real reason for non-payment of

the dues of the petitioner comes to the surface. The non

payment of the dues owed by the respondent to the petitioner

was not on account of inferior or defective quality of the

CP No.66/2006 page 15 of 34 packaging material supplied by the petitioner, but on account of

respondent's own financial difficulties. It also appears from the

entire correspondence that the non-supply of packaging

materials by the petitioner to the respondent company after

December, 2004, with the exception of one supply in May, 2005

was not on account of the respondent company not desiring to

procure any further supplies from the petitioner, but on account

of the respondent not being in a position to make payment on

cash down basis, and the reluctance of the petitioner in taking

any further exposure from the respondent company.

21. Let me now deal with the documents sought to be

relied upon by the company to substantiate its claim with regard

to the poor quality of the packaging materials supplied by the

petitioner. Firstly, I may note that there is not a single

communication from the respondent to the petitioner making any

grievance with regard to the quality of the packaging materials

supplied by the petitioner, and for the first time this stand come

to be taken on 08.09.2006, when a legal notice was sent by the

respondent company to the petitioner, well after the notice for

winding up dated 15.02.2006 had been issued and served on the

company, and the present petition filed in March 2006. It was

CP No.66/2006 page 16 of 34 only after legal advice had poured in, that the respondent

company took the said stand in its notice dated 08.09.2006 and

soon thereafter in its reply to this petition. This demonstrates

how hollow the stand of the respondent company is with regard

to the quality of the packaging material admittedly supplied by

the petitioner. The respondent claims to have issued a debit note

for Rs.68,00,985/- dated 31.01.2006. However, nothing has been

placed on record to show how and when this debit note was sent

to and received by the petitioner. The petitioner has denied the

receipt of the said debit note. The respondent has also placed on

record certain documents as Annexure-A3 to show that from time

to time its products were returned on account of their poor

quality. A perusal of these documents shows that out of 12

delivery challans filed on record, 10 merely show the

transportation/return of some goods. The reason for the said

transportation/return of some goods is not even indicated in 10

out of the 12 documents filed on record. Only two documents

dated 29.09.2005 and 12.01.2005 state that the material is

damaged/ rejected and is not for sale. However, these

documents by themselves do not indicate either the date of

manufacture of the goods or the name of the supplier from whom

the packaging material was procured for packing these goods. It

CP No.66/2006 page 17 of 34 is not even disclosed as to what is the defect or damage, much

less the cause for the said defect or damage in the goods. The

total value of the goods covered by these two return/delivery

challans is stated to be Rs.6,31,750/- and Rs.38,520/-,

respectively.

22. From the aforesaid, it is not possible to jump to any

conclusion that the goods covered by the 12 delivery/return

challans filed on record were all defective; were all packaged in

packaging material supplied by the petitioner; were all damaged

and defective on account of the inferior quality of the packaging

material supplied by the petitioner. No independent report of any

examiner or expert in the field has ever been produced by the

respondent to substantiate its highly belatedly taken stand that

the packaging materials supplied by the petitioner were defective

or of inferior quality. In this regard reference may also be made

to the solemn statement made by Shri Yogender Goel son of Shri

Gopal Das Goel in his cross-examination in a suit filed by the

respondent against the petitioner for recovery of an amount of

Rs.10,58,413/-. The petitioner has filed on record an additional

affidavit dated 25.5.2007 along with a copy of the said

statement of Shri Gopal Das Goel. During his cross-examination

CP No.66/2006 page 18 of 34 Shri Yogender Goel has stated that he was appointed as Senior

Account Executive with the respondent company in July, 2003

and was subsequently promoted to Chief Account Executive. In

his cross-examination Mr. Goel, inter alia, states that the

company's quality control staff has informed him about the

defects in the lamination/packaging material supplied by the

petitioner herein. He stated that he is not a technical person and,

therefore, he could not explain the defects in the lamination. The

staff of the company had informed in writing that the material

supplied by the petitioner herein was defective. However, the

company had not placed any such document on record, nor

Mr.Goel produced any such document at the time of his cross-

examination. Pertinently, even in these proceedings no report of

any technical person, independent or otherwise, has been placed

on record by the respondent. He also states that there is no

order for packaging material placed by the company to which he

is not a party, meaning thereby, that he is aware of each and

every purchase order placed by the company for procurement of

packaging material. He further states that there was no order for

packaging material from any vendor from 31.12.2004 till

17.05.2005. This statement belies the claim of the respondent

company that it had stopped procurement of packaging material

CP No.66/2006 page 19 of 34 from the petitioner on account of its inferior quality or defective

nature. Had that been the case, the respondent company would

have procured the packaging materials from other suppliers.

However, it appears that the respondent was, in fact, not in need

of packaging material after December, 2004 and such need arose

only in May, 2005. He also stated that in the purchase orders,

the quality parameters of the packaging material were not

specified and that they were defined in a pro-note, a copy of

which is supplied to the vendor and the vendor is expected to

adhere the quality parameters described in the pro-note.

However, the so-called pro-note was not produced before the

Court with the plaint, nor was it produced at the time of his cross-

examination by Mr. Goel. Even in these proceedings the so called

pro-note has not been produced to demonstrate as to what were

the specifications of the raw material that the petitioner was

required to supply, and how the petitioner failed to meet those

specifications. He also admitted that the company had not got

the material supplied by the petitioner herein checked from any

independent quality checking institute. He states that the

petitioner was informed about the inferior quality of the

packaging material for the first time in May, 2005. He admits

that the company had not produced any document to this effect.

CP No.66/2006 page 20 of 34 He states that the company had informed the petitioner about

the poor quality of the packaging material verbally. With regard

to the issuance of the debit note Mr. Goel stated that the same

has been sent through courier, but admitted that the courier

receipt had not been placed on record. Pertinently, the same had

not been placed on record even in these proceedings. He admits

that the amount payable to the petitioner herein by the company

was Rs.57,42,572/-. However, the cost of the defective goods to

the tune of Rs.68,00,985/- had been debited to the petitioner and

consequently, he claimed that the company was entitled to

receive Rs.10,68,413/- from the petitioner. He admits that

mishandling of packaging machine leads to defective packaging.

23. The respondent company filed company application

No.574/2007 under Rule 9 of the Companies (Court) Rules, 1959,

to place on record 4 confirmation letters from C&F Agents in

support of its defence with regard to the inferior quality and

defective packaging material supplied by the petitioner. The 4

letters placed on record are dated 13.04.2007, 22.02.2007, nil

and 19.03.2007. Firstly, it appears that all these letters are of

dates well after the filing of the winding up petition. Secondly,

and even more importantly, what is striking is that all these

CP No.66/2006 page 21 of 34 letters are more or less identically worded. It, therefore, appears

that these letters have been procured by the respondent

company from its C&F Agents on a prescribed format only for the

purpose of building up a defence in these proceedings.

Moreover, the bald assertion made in all these communications

that "packaging of the aforesaid return "Chabaaza" was neither

air proof nor moisture proof..............." is neither here nor there.

It is not disclosed as to on what basis the authors of the said

identical letters concluded that the packaging was neither air

proof nor moisture proof. For all the aforesaid reasons and on the

basis of the materials brought on record, I reject the submission

of the respondent that the quality of the packaging materials

supplied by the petitioner can be said to be defective or of

inferior quality. I am satisfied that this defence has been raised

by the respondent merely as an afterthought and with a view to

ward of their liability owned to the petitioner as well as to defeat

these proceedings. I also draw support from the following

decisions relied upon by the petitioner, wherein it is held that

such like highly belated disputes about the quality of goods

supplied and received by the respondent would not give rise to a

bona fide dispute.

1. Tarai Food Ltd. Vs. Wimpy International Pvt. Ltd. 2005 VIII

CP No.66/2006 page 22 of 34 AD (Delhi) 131

2. Shivalik Rasayan Ltd. Vs. Pesto Chem 124 (2005) DLT 431

3. Durgapur Project Pvt. Ltd. In re [1983] 53 CC 320 (Cal)

4. Joti Prasad Bala Prasad Vs. ACT Developers Pvt. Ltd. [1990]

68 CC 601 (Delhi)

5. Straw Board Manufacturing Co. Ltd. Vs. Mahalaxmi Sugar

Mills Co. Ltd. [1991] 71 CC 544 (P&H)

24. In all the above stated cases, the stand as to

inferior quality of the goods supplied by the petitioner was taken

by the company against whom the winding up proceedings were

filed after service of statutory notice, and it was held by the

different courts that the dispute as to quality was not effectively

proved by the respondent and same was an afterthought, just to

produce a defence in the winding up proceedings. Also the

counter claim by the respondent company was held to be just a

sham defence to create a disputed debt.

25. Turning to the aspect of the alleged forgery and

fabrication of the balance confirmation certificate dated

23.01.2006 attributed to the respondent company, once again I

find that there is no reason for the Court to conclude that the

CP No.66/2006 page 23 of 34 same is forged and fabricated and that the same is not genuine.

The petitioner has placed on record its communication dated

04.01.2006 issued to the respondent calling upon the respondent

company to provide the balance confirmation certificate. From

the copy of the said communication placed on record, it appears

that the same was received and acknowledged with the seal of

GTC Industries Limited at 8B, Vandana Building, 11 Tolstoy Marg,

New Delhi-110001. To dispute the authenticity of the said

balance confirmation certificate, the respondent has raised

various pleas. Firstly, it is contended that "the respondent never

had any employee by the name of Sidharth Nanda at any point of

time". In response to this averment, the petitioner has produced,

along with its rejoinder, copy of the Sales Tax form supplied by

the respondent company bearing serial No.MAH/01/6420846

dated 16.12.2005. The said form has been signed on behalf of the

company by Sh. Sidharth Nanda, who is described as the

authorised signatory. Accompanying the form is a tabulation

giving the details of the invoice/bill numbers, date of the

invoice/bill and the amount thereof raised by the petitioner

pertaining to the year 2004-05. The same has also been signed

by Sh. Sidharth Nanda as the authorised signatory of the

company. Faced with such damning evidence the respondent

CP No.66/2006 page 24 of 34 filed an affidavit in reply to the additional affidavit of the

petitioner on 09.08.2007. The same is sworn by Sh. K.S. Anand.

He states that Sh. Sidharth Nanda was never an employee of the

respondent company. He was an employee of GTC Industries Ltd.

and was based at Mumbai. That is a separate and independent

entity. Copy of his appointment letter dated 26.08.2005 and

Form No.16AA issued by the GTC Industries Ltd., Mumbai to Sh.

Sidharth Nanda, claimed to have been obtained from him have

been annexed to this affidavit.

26. Pertinently, there is no denial of the fact that Sh.

Sidharth Nanda was acting as the authorised representative of

the company and that he had, in fact, signed the Sales Tax forms

in that capacity. The fact that Sh. Sidharth Nanda was acting for

and on behalf of the company while he was shown to be an

employee of GTC Industires Limited, shows the nexus between

the respondent company and M/s GTC Industries Limited. In case

Sh. Sidharth Nanda had absolutely nothing to do with the

respondent company, it is difficult to understand how the

respondent company has been able to persuade Mr. Sidharth

Nanda to part with his appointment letter issued by GTC

Industries Limited as well as Form No.16AA, issued under the

CP No.66/2006 page 25 of 34 Income Tax Act by GTC Industries Limited. There is another

interesting aspect which the appointment letter of Mr. Sidharth

Nanda issued by GTC Industries Limited throws up. While it is

claimed by the respondent company that it has no position with

the designation "Senior Officer - Accounts", a perusal of the

appointment letter of Mr. Sidharth Nanda shows that the

designation given to him was "Senior Officer - Accounts".

Pertinently, though the respondent has categorically and

repeatedly denied the issuance of the balance confirmation

certificate and has asserted that the same is forged and

fabricated by the petitioner, it has failed to even place on record

an affidavit sworn by Mr. Sidharth Nanda to say that the balance

confirmation certificate dated 23.01.2006 attributed to him was

not actually issued under his instructions, on his behalf and

under his authority. If the respondent company had the requisite

resource and influence to obtain Mr. Nanda's appointment letter

and the Form No.16AA issued to him by GTC Industries Limited

for the purpose of producing the same in these proceedings, it

certainly could have obtained an affidavit to that effect from Mr.

Nanda. When Mr. Nanda himself, to whom the document is

attributed, is not disputing the fact that he had issued the same,

it does not lie in the mouth of the respondent company to label

CP No.66/2006 page 26 of 34 the same as a forgery and fabrication.

27. The other contention of the respondent company to

challenge the authenticity of the balance confirmation certificate

is that the company which was a tenant in flat Nos.401-405,

Tolstoy Marg, New Delhi, had vacated the same on 15.09.2005

and the said certificate is stated to have been issued on

23.01.2006, on a letterhead, which contained the address of the

company at Tolstoy Marg and, therefore, did not reflect the

correct address of the respondent company. In support of this

submission, a host of documents have been filed to show that the

respondent company had, in fact, vacated the premises situated

at fourth floor, Tolstoy House, 15-17, Tolstoy Marg, New Delhi,

w.e.f. 15.09.2005. In my view, there is no merit in this

submission. It is wholly irrelevant whether or not the respondent

was, in fact, occupying the premises situated in Tolstoy Marg on

23.01.2006, when it issued the balance confirmation certificate.

The balance confirmation certificate does not lose its authenticity

merely because the respondent, while issuing the same, may

have used the some old stationery that may be lying with it. Had

the petitioner designed to forge and fabricate the said balance

confirmation certificate, it would have done so by fabricating the

CP No.66/2006 page 27 of 34 identical letterhead on which the respondent had been sending

its communications off late, and would not have used an

"imaginary letterhead", which the respondent had never even

used. In fact, it appears, that while issuing the balance

confirmation certificate dated 23.01.2006, the respondent may

have deliberately resorted to using some old stationery and

issued it in the name of Sh. Sidharth Nanda with some other

officer signing for and on his behalf, so that such like defences

could be raised when the same is relied upon by the petitioner in

judicial proceedings.

28. The issue with regard to the authenticity of the said

balance confirmation certificate has also to be viewed in the light

of the other surrounding circumstances of the case. The

respondent has not denied the factum of issuance of the

communication dated 11.04.2005 by it wherein, even according

to the respondent a sum of Rs.80.97 Lacs was outstanding and

payable to the petitioner, as on 31.03.2005. Thereafter, repeated

communications were issued by the respondent beseeching the

petitioner to cooperate with it to enable the respondent tide over

its financial difficulties. It is also pertinent to note that the

respondent company in its 10th annual report for the financial

CP No.66/2006 page 28 of 34 period ending 31.03.2005 showed an amount of Rs.80,74,925/-

as being the trade credit owed to the petitioner as on 31.03.2005.

The same is filed as Annexure-VII to the affidavit dated

02.12.2006 of Sh. Amar Sinha, Managing Director of the

respondent company, filed in compliance to the order dated

03.10.2006 of this Court in these proceedings. Pertinently in the

list of trade creditors as on 30.06.2006, the name of the

petitioner is conspicuous by its absence. It is not explained how

the staggering liability of over Rs.80 Lacs, admittedly due as on

31.03.2005 came to be settled. Interestingly, in the balance

sheet as at 30.06.2006, neither the amount owed to the

petitioner is reflected, nor the so-called amount claimed from the

petitioner towards losses and damages to the tune over Rs.10

Lacs is reflected. Therefore, the name of the petitioner is not

even reflected in the list of trade debtors as on 30.06.2006. From

the aforesaid facts and circumstances, I am reasonably convinced

that the balance confirmation certificate does not appear to be a

forged and fabricated document and the same is genuine and

has, in fact, been issued by the respondent company.

29. With regard to the issuance of the debit note of

Rs.68,00,985/- by the respondent company on 31.01.2006,

CP No.66/2006 page 29 of 34 learned counsel for the petitioner has brought to my notice

another important and interesting aspect. The respondent has

placed on record along with the said debit note of Rs.68,00,985/-

what it claims to be a statement showing the details of the

production of "Chabaaza" with the petitioner's laminates and

their market return on record. A perusal of the said tabulation

shows that there are 22 transactions which, according to the

respondent company have taken place between the parties for

supply of laminates by the petitioner to the respondent. It is

claimed in the said tabulation that in respect of the products

packaged by the respondent in the laminates supplied by the

petitioner after 04.11.2004 i.e. w.e.f. 03.12.2004 (at Sl. No.14 of

the tabulation) the products were returned by the market

between March 2006 and May 2006. The only exception shown

in the tabulation is at Sl. No.19, according to which the raw

materials were received by the respondent on 20.12.2004 and

the finished products were returned by the market in September

2005. The value of the goods returned in respect of the

laminates supplied w.e.f. 03.12.2004, which were returned

between March 2006 and May 2006, as extracted from the said

tabulation, is as follows: -

CP No.66/2006                                           page 30 of 34
 SL.     IGP       DATE OF    QTY (IN KGS)     QUANTITY VALUE OF          MONTH
No.     NO.        RECEIPT                       OF     RETURN             OF
                     OF                        RETURN                    RETURN
                  MATERIAL                    IN CASES
                  RECEIVED
  14      520     03.12.04       3110.00        441         912870        Apr-06
  15      521     03.12.04            66.30         -           -            -
  16      523     03.12.04       4182.08        300         621000        Apr-06
  20      567     20.12.04        853.60        100         207000        Apr-06
  17      524     03.12.04       1447.95        442         914940        Apr-06
  18      529     06.12.04        553.35        188         389160        Mar-06
  21      571     21.12.04       1153.60        200         414000       May-06
  22          8   20.05.05       1756.78            -           -            -
          TOTAL                 13123.66       1671        3458970

30. From the aforesaid extract it would be seen that

even though the goods allegedly returned after March, 2006, are

alleged to be of a value of Rs.34,58,970/-, the respondent

included even the said amounts in the alleged debit note dated

30.01.2006. How the respondent could have learnt about the

value of products which were returned much later i.e. between

March, April and May, 2006 has not been explained. This, in

fact, completely belies the so-called debit note and its

authenticity. It appears that the respondent has merely resorted

to fudging data so as to mislead the Court and to weave a totally

dishonest and false defence.

31. Learned senior counsel appearing for the petitioner

CP No.66/2006 page 31 of 34 has also drawn my attention to the auditors' report in respect of

the balance sheet of the respondent company drawn up as at

31.03.2004. The auditors' M/s Batliboi & Associates have stated

that the company has incurred losses of Rs.40,61,13,000/- during

the current year resulting in accumulated losses of

Rs.44,28,27,000/- as at 31.03.2004, which has eroded its entire

net worth. In the same report it is also stated that the company's

accumulated losses at the end of the financial year are 50% of its

net worth. The company has incurred cash losses during the year

and the immediately preceding financial year. The profit and loss

account of the company for the year ended 31.03.2004 shows

that the nominal value of its shares of Rs.10/- was only Rs.0.02

reflecting the extremely poor financial health of the respondent

company. The auditors report for the year ending 31.03.2005

also discloses that the company has incurred losses of

Rs.47,85,90,000/- during the current year resulting in even higher

accumulated losses of Rs.92,14,17,000/- as at 31.03.2005, which

has eroded its net worth. Further the company projected cash

loss for the year ended 31.03.2006.

32. Considering of the aforesaid aspects, I am satisfied

that the respondent company is unable to pay its debts since,

CP No.66/2006 page 32 of 34 despite the service of statutory notice under Section 434 of the

Act by the petitioner, on the company at its registered office

(proof of service whereof is also on record), the respondent has

neglected to pay the amount admitted to be due or to secure or

compound for it to the reasonable satisfaction of the petitioner

within three weeks from the date of receipt of the notice. The

petitioner has placed on record a copy of the notice dated

15.02.2006 sent through speed post item No.EE285750970 IN on

16.02.2006 as well as the certificate issued by the postal

authorities certifying that the speed post article had been

delivered on 17.02.2006. Even otherwise, there is no denial by

the respondent in its reply to the specific averments with regard

to the issuance and service of the notice by the petitioner.

Reference may be made to paragraph 8 of the petition and the

corresponding reply of the respondent in this regard.

33. I, therefore, admit this petition and direct that the

respondent company be wound up. The official liquidator

attached to this Court is appointed as the liquidator in respect of

the respondent company. He shall forthwith take over all the

assets and records of the respondent company and proceed

according to law. Citation shall be published in the 'Statesman'

CP No.66/2006 page 33 of 34 (English) and 'Jansatta' (Hindi) for 08.08.2008. Petitioner may

take steps accordingly.

34. List on 14.08.2008.

July 02, 2008                         VIPIN SANGHI, J.
aj




CP No.66/2006                                          page 34 of 34