Shin Satellite Public Co.Ltd vs Stv Enterprises Ltd.
2008 Latest Caselaw 880 Del

*                   HIGH COURT OF DELHI : NEW DELHI

+                         Co. Pet. No.128/05

%                   Judgment Reserved on : 04.02.2008
                    Judgment delivered on : 16.06.2008


      Shin Satellite Public Co.Ltd               ..... Petitioner
                               Through:    Mr. Nikhil Nayyar, Advocate.

                                  versus

     STV Enterprises Ltd.                        ..... Respondent
                              Through: Mr. Ashok Gurnani with Mr.
                                        Ranjan Roy, Advocates.


*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?                  No

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


VIPIN SANGHI, J.

*

1. This is a petition seeking winding up of the respondent

company under Sections 433(e), 434 and 439 of the Companies Act,

1956 (hereinafter referred to as the Act) on the ground that the

respondent company is indebted to the petitioner to the tune of

US$192343.57 which has been admitted by respondent, and not been

paid despite service of a statutory notice in terms of Section 434 of

CP No.128/2005 page 1 of 15 the Act.

2. The petitioner is a company incorporated under the

laws of Thailand. It is in the business of providing Transponder

services and has three operational satellite in the orbit namely

Thaicom-1, Thaicom-2 and Thaicom-3. The petitioner provides

broadcasting and internet services to various entities world wide.

The respondent company STV Enterprises Ltd. is a limited liability

company duly incorporated under the provisions of the Act having its

registered office at 2168, Masjid Moth, near Uday Park Market, New

Delhi-110049.

3. The respondent company had entered into an

agreement with the petitioner on 17.9.2001 to partly utilize and avail

the services of non-Preempitible unprotected extended C-Band

Regional Beam Transponder of Thaicom-3 satellite of the petitioner

for the purpose of digital broadcast applications etc. for a period of 5

years commencing from 15.11.2001. As per the said agreement the

service fees of US $49219 per quarter was payable in advance. There

is also provisions in the agreement for payment of an additional

charge, if petitioner did not receive the payment before due date.

4. The petitioner vide letter dated 16.9.2002 informed the

respondent company that they had failed to comply with clause 5.1.1

CP No.128/2005 page 2 of 15 of the said agreement in respect of the payment commitments for the

service fees and other expenses. There was a total outstanding

amount of US$ 99683. The respondent company admitted the said

outstanding amount vide their messages dated 16.9.2002 and

17.9.2002 and assured that they shall remit the amount at earliest

without failure by 30.09.2002. The payment position did not improve,

and with passage of time it only got worse. The respondent vide its

e-mail dated 10.2.2004 confirmed the outstanding balance of US$

4,32,570.97 as at 31.12.03 payable to the petitioner for rendering

various services.

5. Since the outstanding dues were not being paid by the

respondent company to the petitioner despite reminders, the

petitioner sent a legal notice through their advocate dated

19.10.2004 by registered A.D. Post at the registered office of the

respondent-company calling upon the respondent company to pay

the admitted amount of US $1,92,343.57 inclusive of late payment

charges at the rate of 12% per annum calculated till 31.8.2004 under

clause 5.1.2 of the agreement along with interest @ 18% per annum

from 1.9.2004 till realisation within 21 days of the date of receipt of

the notice. The petitioner also put the respondent company to notice

that in case the amount is not received the petitioner would initiate

proceedings for winding up of the respondent company and that the

CP No.128/2005 page 3 of 15 notice be treated as one under Section 433(e) read with Section 434

of the Act. A statement of account was also enclosed along with the

said notice. Admittedly, the notice was duly served upon the

respondent-company at its registered office. Since the amount was

not paid by the respondent company the petitioner filed the present

petition to seek the winding up of the respondent-company on

7.4.2005.

6. In response to the notice issued by the Court, the

respondent-company filed its reply. Various pleas have been raised in

the reply filed by the respondent. However, here is no dispute with

regard to the basic facts namely, that the parties entered into the

aforesaid agreement; that the respondent company failed to make all

the payments under the terms of the agreement; that the respondent

company acknowledged its liability as on 31.12.2003 at US $

4,32,570.97 vide e-mail dated 10.2.2004; that the petitioner issued

the statutory notice under Section 433 read with Section 434 of the

Act which was served on the respondent company at its registered

office, and that the respondent-company had not paid the

outstanding amount to the petitioner. The respondent-company has

also raised various legal issues with regard to the maintainability of

the winding up petition which shall be noticed and dealt with a little

later.

CP No.128/2005 page 4 of 15

7. I may now refer to the various orders passed in the

petition from time to time. On 12.7.2006 the respondent sought time

to settle the matter with the petitioner. On 18.8.2006 the

respondent made an offer for payment of the entire outstanding

amount. The said offer was for payment of the principal amount in 25

monthly instalments of US$5000 each. This proposal was not

acceptable to the petitioner. The respondent then sought further

time to file an affidavit disclosing a better offer to liquidate the entire

liability within 6 to 9 months.

8. The respondent on 30.8.2006 filed an affidavit of Shri

S.P. Gupta son of Shri B.P. Gupta, one of the principal officers and

Vice President Finance of the respondent company dated 29.8.2006

disclosing a better offer for settlement of the dues of the petitioner.

As per this offer the respondent undertook to pay US $1,25,570 as

per the schedule mentioned in the affidavit. It may be mentioned

that in the said affidavit, there was a typographical error with regard

to the amount, which was typed as US$12,570. However, the said

error was corrected and was noted in the order dated 6.9.2006. On

the same day the respondent also made a statement through its

counsel that it shall remain bound by the said schedule and that the

payment will be made to the petitioner in terms of the schedule. The

order dated 6.9.2006 reflects that the petitioner after some hesitation

CP No.128/2005 page 5 of 15 agreed to accept the payment as per the schedule mentioned in para

6 of the affidavit. It was agreed that upon the entire payment being

cleared, the matter will be fully and finally settled. The Court

accepted the undertaking given by the respondent that the

respondent would make payment of US $ 125570 as per the schedule

mentioned in para 6 of the schedule dated 29.8.2006. The said

schedule reads as follow:

i) US$ 15002 within three days from the acceptance of the proposal by the petitioner.

ii) Remaining amount within the period of nine months by making the payment on month to month basis amounting to US $ 110568 and same would be paid as per the following schedule:

US$ 5000 per month for the next three months and US$ 15928 per month for remaining six months."

9. The petition was accordingly disposed of. However, the

petitioner was given liberty to revive the company petition in case the

schedule is not adhere to and in case of default. It was further

ordered that in any such a event, the petitioner will be entitled to

claim interest.

10. Since the respondent did not adhere to the aforesaid

schedule, the petitioner moved CA No.522/2007 for seeking revival of

the company petition. The respondent accepted notice of this

application through counsel and thereafter the matter was adjourned

from time to time, once again to enable the respondent to give a

proposal for the immediate repayment of the outstanding dues. On

CP No.128/2005 page 6 of 15 11.12.2007 it was again repeated on behalf of the respondent before

the Court that the respondent shall pay 25% of the total outstanding

principal amount on or before 25.12.2007 and as regards the balance

it was left to the Court to fix the schedule on the next date to be fixed

by the Court, and the respondent stated that it would abide by the

schedule fixed by the Court. So far as the aspect of payment of

interest was concerned, it was again left to the Court to fix the rate

of interest on the next date of hearing. In these circumstances the

matter was adjourned to 9.1.2008.

11. On 9.1.2008 this Court took note of the fact that

admittedly the schedule for payment had not been adhere to, and

out of the admitted liability of US $ 1,25,750, only an amount of US

$ 72,786 was paid by the respondent within the time schedule

provided in the affidavit of undertaking. The Court also took note of

the fact that the respondent had undertaken to pay 25% of the total

outstanding principal amount on or before 25.12.2007 and that the

said assurance had also not been fulfilled inasmuch as only US $

3000/- had been paid by the respondent to the petitioner which was

far less than the 25% of the outstanding liability. In these

circumstances, this Court revived the company petition and listed the

same for hearing on 4.2.2008. The Court also issued notice to Shri

S.P. Gupta, the principal officer of the respondent company who had

CP No.128/2005 page 7 of 15 filed the affidavit giving an undertaking for payment of the

outstanding dues of the petitioner as aforesaid, to show cause as to

why contempt proceedings be not initiated against him under the

Contempt of Courts Act for breach of his undertaking to the Court.

Thereafter, the company petition was heard on 4.2.2008 and

judgment reserved.

12. From the aforesaid narration of facts and the

developments which have taken place in these proceedings from time

to time there can hardly be any dispute with regard the fact that the

respondent company is even now indebted to the petitioner for an

amount of about US $ 50,000/- at least, which translates to about

Rs.20 lakhs. The said amount had not been paid despite the statutory

notice issued by the petitioner which has admittedly been received by

the respondent at its registered office. The ingredients for invoking

the jurisdiction of the Court under Section 433(e) of the Act,

therefore, clearly exists in this case. However, as aforesaid the

respondent has raised various legal issues to the maintainability of

the petition, and I now proceed to deal with them.

13. The first submission of learned counsel for the

respondent is that the present petition is not maintainable in view of

clause 20 of the agreement between the parties according to which

the governing law in relation to the contract is the law of Republic of

CP No.128/2005 page 8 of 15 Singapore. It is, therefore, argued that the rights and obligations of

the parties have to be determined in accordance with the laws of

Singapore. This submission of the respondent in my view has no

force. Admittedly, amounts in the range of Rs.20 lakhs are even now

due and outstanding from the respondent to the petitioner as would

be evident from the aforesaid narration of facts. This Court is not

concerned with the determination of exact liability owed by the

respondent company to the petitioner. That is a matter that the

parties may resolve in appropriate proceedings. The fact remains

that the respondent has admitted its liability out of which at least

about US $ 50,000 is undeniably outstanding and payable to the

petitioner which even now has not been paid despite the statutory

notice. Moreover, the respondent is a company incorporated and

registered under the Act, and only this Court has the jurisdiction to

deal with the aspect of its winding up, since its registered office is

situated in Delhi. The courts in Singapore, and the laws of the

Republic of Singapore would have no application for seeking this

relief. There is nothing in the agreement between the parties to even

remotely suggest that they intended to bar the invocation of the

remedy under Section 433 of the Act in respect of the respondent

company. Moreover, such an agreement even if it were to exist

would per se be void.

CP No.128/2005 page 9 of 15

14. It is next argued by the respondent that the present

petition cannot be used as a measure to recover its outstanding dues

by the petitioner. In the facts of this case, I see no force in this

submission of the respondent as well. The petitioner is not seeking

the recovery of its outstanding dues in this petition. The purpose of

filing this petition is to bring to the notice of this Court the fact that

the respondent company, which is heavily indebted to the petitioner,

is not able to repay its debts despite being granted opportunities to

repay the same by serving a statutory notice at its registered office.

The policy of the law is that companies which are unable to pay their

debts should in the larger public interest, be would up so as to save

the unsuspecting members of the public from becoming victims of

the insolvent condition of the company.

15. Learned counsel for the respondent then argue that

under the agreement there is an arbitration clause which provides for

all disputes and differences between the parties being referred to,

and resolve by arbitration under the rules of United Nations

Commission on International Trade Law (UNICITRAL). The arbitration

is to be held in Singapore and the arbitrator's determination is stated

to be final and binding between the parties. It is argued that the

Arbitration and Conciliation Act is a special law whereas the

Companies Act, 1996 is a general law and, therefore, the special law

CP No.128/2005 page 10 of 15 will prevail over the general law. Reference is made to the decision of

the Supreme Court in Allahabad Bank vs. Canara Bank & Anr.

(2000) 4 SCC 406 in support of this submission. The respondent also

relies on Section 5 of the Arbitration and Conciliation Act which states

that "Notwithstanding anything contained in any other law for the

time being in force, in matters governed by this Part, no judicial

authority shall intervene except where so provided in this part." It is

argued that the expression "judicial authority" used in Section 5

would include the Court dealing with a company petition for winding

up. The respondent relies on Morgan Securities & Credit (P) Ltd.

vs. Modi rubber Ltd. (2006) 12 SCC 642 in support of this

submission. I find no merit in this submission of the respondent as

well. As I have observed earlier the scope of the present proceeding

is not to determine the inter se rights and liabilities of the parties

under their agreement. That is a matter to be determined before an

appropriate forum be it a judicial forum or quasi judicial forum like an

arbitral tribunal. The scope of these proceedings is only to ascertain

whether the respondent company is liable to be wound up in terms of

Section 433(e) read with Section 434 of the Act or not. An arbitrator

would have no jurisdiction to order the winding up of a company since

that power is conferred only on the Court by the Companies Act. In

Haryana Telecom Ld. vs. Sterlite Industries (India)Ltd. (1999)

5 SCC 688, the Supreme Court held that winding up proceeding

CP No.128/2005 page 11 of 15 cannot be stayed and be referred to an arbitration since it is only the

Court which is empowered to deal with a winding up petition. I also

see no force in the submission of the respondent based on Section 5

of the Arbitration and Conciliation Act. Merely because this Court is

exercising its jurisdiction to order the winding up of a company it

does not follow that this Court can be said to be intervening in the

arbitration proceedings that may be undertaken in terms of the

agreement between the parties. In fact, even if a winding up order in

respect of a company is passed and liquidator appointed, the

liquidator shall step into the shoes of the company and represent the

interest of the company in any arbitration proceedings that may be

pending. Even if it were to be accepted that the Arbitration and

Conciliation Act is a special law and the Companies Act is a general

law, I do not see how this submission advances the case of the

respondent that the present petition is not maintainable. The said

argument may have some relevance in case the Court dealing with

the winding up petition were to intervene in the arbitration

proceedings. However, that is not the position in the case in hand.

Reliance is placed by the respondent in Pradeshiya Industrial &

Investment Corporation of U.P. vs. North India Petrochemicals

Ltd. & Anr., (1994) 3 SCC 348 to submit that where the debt is bona

fide disputed, and the defence is a substantial one, the Court shall

not wind up the company. However, this decision is also of no avail

CP No.128/2005 page 12 of 15 in the facts of this case. As aforesaid, the debt to the tune of at least

US $ 50,000 is even now not disputed and is admittedly outstanding

and the respondent has expressed its inability to pay the same

despite repeated opportunities sought by it and granted by the Court.

16. It is also submitted by learned counsel for the

respondent that the respondent company is a running concern

engaged in the business of operating various news and other

channels. It is having strength of 300 technical and non-technical

staff and is making payment to BSNL. These fact shows that the

respondent is a commercially solvent company which is not liable to

be wound up on filing of a winding up petition by the petitioner. I do

not agree with this submission of the respondent. Even if it were to be

accepted that the respondent is a running concern, the fact of the

matter is that it is heavily indebted to the petitioner company and it is

not in a position to repay its debts to the petitioner despite being

granted sufficient time for the said purpose. In such a situation the

respondent company is deemed to be unable to pay its debts for the

purpose of Section 433(e) of the Act. The petitioner also relies on

NEPC India Ltd. vs. Indian Airlines Limited 100 (2002) DLT 14

(DB). In this decision this Court has held that it makes no differences

that the respondent company has the ability to pay its debts when,

as a matter of fact, it does not pay its admitted liability despite the

CP No.128/2005 page 13 of 15 statutory notice being served upon the company.

17. Learned counsel for the petitioner has relied on

Trafalgar House Construction India Ltd. vs. Western India

Shipyard Ltd. (1999) 4. Comp.L.J. 436 (Delhi) where under similar

circumstances the Court took note of the repeated assurances given

by the respondent company to liquidate its outstanding admitted

liabilities even during the pendency of the petition. Paragraph 18

from the said judgment may be reproduced which bears a stark

similarity to the facts of the present case.

"18. In the instant case, only on the basis of unequivocal admissions of the petition, from 1996 till 1998, the claim of the petitioners is abundantly established. This is one of those unusual cases, where even during the pendency of winding up petition in this Court, the respondent company admitted the liability of the petitioners in categoric terms. The defence as set up by the respondent is totally devoid of any merit and has not been taken in good faith. "

18. For the aforesaid reasons winding up petition is

admitted and the official liquidator attached to this Court is appointed

as a provisional liquidator in respect of the respondent company. The

official liquidator is directed to forthwith take over all the assets and

books of accounts of the respondent-company. The respondent

company is also restrained from transferring, alienating, encumbering

or dealing with any of its moveable and immoveable assets, bank

accounts and other securities, except for the purpose of, and to the

CP No.128/2005 page 14 of 15 extent it is necessary to meet the liability owed to the petitioner and

to meet the expenses in the usual course of business. Citation is

directed to be published in the newspapers Times of India and

Navbharat Times for 4.8.2007. The aforesaid order, except the order

relating to the injunction granted as aforesaid which shall come into

force forthwith, shall remain in abeyance for a period of two weeks

from today to enable the the respondent-company to pay the

outstanding debts to the petitioner as quantified on 6.9.2006 ( of

US$125,750) with interest @12% p.a. from 6.9.2006 onwards till

payment, after granting adjustment for the amount paid after

6.9.2006 from time to time within two weeks. In case the aforesaid

amount is paid, in full, this order shall stand vacated. If the entire

amount is not paid within two weeks, the order shall be complied

forthwith in its entirety. In that event, the petitioner is authorised to

take steps in co-ordination with the official liquidator for publication of

the citation.

19. For further proceedings list before the regular bench

on 18.8.2008.

                                                  (VIPIN SANGHI)
                                                       JUDGE
June 16th, 2008
aj




CP No.128/2005                                         page 15 of 15