M/S Salvi Chemical Industries vs M/S H.K. Medichem (P) Ltd.
2009 Latest Caselaw 1389 Del

               IN THE HIGH COURT OF DELHI

                     Co.Pet.No. 540/1998

                      Judgment reserved on : 12th March, 2009
                            Date of decision: 15th April, 2009

         M/s Salvi Chemical Industries       ... Petitioner
               through: Mr. Raja Chatterjee, Advocate

                              VERSUS

         M/s H.K. Medichem (P) Ltd.          ....Respondents

through: Mr. K.K. Jha, Advocate

CORAM:

HON'BLE MS. JUSTICE GITA MITTAL

1. Whether reporters of local papers may be allowed to see the Judgment? Yes

2. To be referred to the Reporter or not? Yes

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

GITA MITTAL, J

1. The present petition has been filed under section 433 e and f

of the Companies Act, 1956 seeking (a) winding up of the

respondent company; (b) appointment of liquidator of the

respondent company and (c) awarding cost to the petitioner.

2. The petitioner places reliance on a purchase order bearing

no. HK/96/18/1887 for the supply of 5000 kgs of ferrous fumarate

40 kg (H.D.P.E. Barrel) at the rate of Rs.53/0 per kg as per the

respondent specifications. The payment was to be made within 45

days of the delivery. Learned counsel for the petitioner points out

that there was no other stipulation in the purchase order. The

goods were dispatched by the petitioner pursuant to an invoice

dated 7th November, 1996. As per the shipping bill placed by the

petitioner on record, it has described the batch nos. of the material

as 99/96-97, 100/96-97, 101/96-97 (page 11). An invoice dated 29th

November, 1996 upon the respondent reflecting the supply of the

above material against the very batch numbers noticed above. No

complaint was made as against the supplies made by the

petitioner.

3. There is no dispute with regard to the due receipt by the

respondent of the material dispatched by the petitioner. A fax

dated 3rd February, 1997 was sent by the respondent in respect of

the said material referring to a fax received from the petitioner

dated 1st of February, 1997 and seeking the format for the no

objection certificate which was required to be addressed to the

Asstt. Commissioner of Excise. The respondent had also sought

information from the petitioner as to the other documents and

papers required for making the claim. Bills and reminders sent to

the respondent even thereafter did not provoke any positive action

towards payment. However the respondent sent the form AR-4

duly filled with regard to the purchase order to the petitioner

alongwith the communication dated 10th February, 1997 without

any kind of complaint with regard to the material. These included

the excise invoice no. 025 dated 29th November, 1996; form AR-4;

a copy of the bill of lading; no objection certificate; copy of export

promotion order and shipping bills.

4. The petitioner has drawn my attention to a letter dated 4 th

December, 1997 reminding the respondents that payment for the

supplies of 5000 kgs of ferrous fumarate supplied by invoice no.

EXP 25 dated 29th November, 1996 against the purchase order no.

HK/96/18/87 was long outstanding. The petitioner enclosed the

debit note for interest and reminded the respondent that the form

H had not been submitted. A statement of account for verification

was also enclosed.

5. The respondent failed to comply with the demand. As such

the petitioner was compelled to issue a legal notice dated 20th

February, 1998 detailing the above facts and raising a demand for

Rs.3,78,004/- upon the respondent for goods sold and delivered

and interest for the delayed payment within three weeks of the

receipt of the notice. The petitioner has notified the respondent

that it would take legal action against the respondent upon failure

to comply with demand. It was also indicated that the notice was

issued in accordance with the provisions of Section 434 of the

Companies Act. As no payment was received, despite receipt of

the legal notice, the petitioner was left with no option but to file

the present petition.

It is noteworthy that the respondent did not at any point of

time dispute its liability to the petitioner or the correctness of the

facts narrated in all communications including the legal notice

dated 20th February, 1998.

6. The respondents have entered appearance in response to the

notice issued in present proceedings and filed a detailed reply

dated 7th September, 1999. For the first time since steps were

effected in 1996, the respondent has sought to raise a bogey of

defective goods in order to defeat the claim of the petitioner. It is

urged that the respondent had also notified the petitioner in this

behalf by a fax dated 28th February, 1997. It is stated therein that

the importer has informed that the material has failed. The

respondent has stated that it notified the petitioner that this

material would be handed over back to the petitioner when it is

received from the buyer.

The petitioner has disputed receipt of this communication.

There is also nothing on record to show that any such

communication was dispatched or received by the petitioner.

7. The respondent has also placed reliance on copy of a fax

dated 31st July, 1997 to contend that it had notified the petitioner

that the material supplied by it was not matching with the inhouse

specifications and that the respondent was trying to blend and use

the same.

Again the petitioner disputes the dispatch or receipt of any

such fax and the same is not supported by any material at all.

8. Long after the filing of the counter affidavit on 7 th September,

1999, the respondent filed CA No. 678/2000 on 1st May, 2000

seeking leave to place on record an additional affidavit and

additional documents claiming to have been exchanged between

the parties which were relevant to establish the respondent's

response. These documents were permitted to be taken on record

by the order dated 14th November, 2000. The documents include

photocopies of certain correspondence purporting to be chemical

analysis results of samples from the petitioner's supplies.

9. The respondent relies on fax messages from the petitioner as

well as the invoice filed by the petitioner which refer to the

supplies of Ferrous Fumarate having been effected in the following

manner :

             Quantity                       Batch No.

             2000 kg                        99/ 96-97

             2000 kg                       100/96-97

             1000 kg                        101/96-97

Total        5000 kgs

10. To support the plea that the petitioner sent the goods to the

docks directly, the respondent has placed on record the photocopy

of a dispatch note which refers to 'dispatched from campus to

docks, Mumbai'. This document refers to the date of the dispatch

as 29th January, 1996.

11. The respondent relies on the documents placed on record to

contend that its buyer - M/s Unichem sent the goods for chemical

analysis and rejected the same vide communications dated 28th

February, 1997. The submission is that the petitioner supplied

defective material which were rejected by the buyer; that the

respondent called upon the petitioner to take the goods away and

consequently no reply was required to be sent to the petitioner's

communications.

12. Having taken such stand, a contrary position is taken to the

effect that a letter dated 16th December, 1997 is claimed to have

been sent to the petitioner. It is noteworthy that the petitioner

disputes receipt of this letter and there is no proof on record that

the same was ever sent to or received by the petitioner.

13. Before this court, the respondent has argued at length that

the petitioner did not dispatch material from the batch nos. 99 to

101/96-97 which it had promised to sent. Alongwith CA No.

678/2000, the respondent has placed a photocopy of what it claims

is the invoice dated 8th October, 1996 sent by the petitioner to it.

This invoice relates to 5000 kgs of farest fumarate USP from batch

nos. 84/96-97 to 96/96-97.

Interestingly this photocopy was never placed with the

counter affidavit before this court. The photocopy dated 8th

October, 1996 states that it is a proforma invoice and there is no

mention of any purchase order or any particulars of the dispatch of

goods etc.

14. As against this, the copy of an invoice bearing no.

EXP.025/96-97 dated 29th November, 1996 making a reference to

order no. HK/96/18/87 dated 19th September, 1996 showing the

dispatch of the goods on 29th November, 1996 has been placed

before this court by the petitioner which states the batch numbers

as 99/96-97 to 101/96-97. This document is corroborated by the

receipt issued by the Premier Roadways dated 2nd December, 1996

relied upon by the respondent which shows the date of dispatch of

the material as 29th November, 1996.

15. Learned counsel for the respondent has contended that the

petitioner has not sent supplies from batch nos. 96-101/96-97 but

from batch no. 86-87/96-97 which was not of the same quality. For

this reason, the sample of the supplies made by the petitioner

failed when it was chemically tested by the buyer.

The analytical report referred by the respondent refers to

batch no. 84-86.

16. Perusal of the test report claimed to have been received by

the respondent from its claimed buyer Unichem Pharmaceutical

would show that it does not refer to the petitioner at all.

According to the copy of the test report placed before this court, it

relates to analysis of a sample of Ferrous Fumarate which was

supplied by M/s Sakar Chemical on 31st May, 1997. No connection

is shown between the petitioner supply and this sample report

which is filed alongwith the counter affidavit to support its case.

17. There is no stipulation with regard to specifications etc and

no mention of a chemical analysis in the purchase order placed by

the respondents. The petitioner is stated to have sought benefit of

the duty draw back and has placed before this court a copy of the

challan/export application dated 7th November, 1996 for the same.

The batch numbers of the goods referred in this challan are 99,

100, 101/96-97 only.

18. The respondent has admitted that it has received an amount

of Rs.1,03,350/- for the supplies by the petitioner.

19. There is no dispute that material has been supplied by the

petitioner and the invoice raised in terms of the purchase order.

Such debt as per the invoice raised by the petitioner is for a

determined, i.e. a definite, sum of money payable immediately.

Therefore a debt is due and the respondent company is liable to

pay the same.

20. The petitioner has relied on reference on the

pronouncements of the Apex Court reported at (2005) 7 SCC 42

Mediquip Systems (P) Ltd. vs. Proxima Medical System

GMBH; (1992) 2 Comp.LJ 314 Arrow Electronics

International Inc. v. Nitul Data Systems (P) Ltd. and (1976)

4 SCC 687 M/s Mechelec Engineers & Manufacturers v. M/s

Basic Equipment Corpn.

21. In 1990 (3) Com.LJ. 342 Jayant Vitamins Pvt. Ltd. vs.

Smt. Manjulabai in similar circumstances, the court had held

thus :-

"36. I have carefully examined the documents filed by both the parties and have also gone through the various decision of the Courts wherein it has been held that in what circumstances the winding up of a company can be ordered. The petitioners in all these petitions have claimed that the company has failed to pay its debts even after the statutory notices were served on the company and the counterclaims set up by the company are mala fide and without any basis. The claims are undisputed, and if the company fails to pay the undisputed claims of the petitioners, then a presumption under the law should be drawn against the company that it is not in a position to pay its debts. From the clear wordings of the law and principle enunciated by the different high Courts in this respect, it is practically a settled decision of law that when a creditor comes

forward with a prayer for winding up of the company on the ground of the non-payment of dues, then the creditor has to establish that the debt owed by the company is clear, valid in law, unimpeachable and cannot be disputed. However, if there is a dispute about the debt, the Court has to consider all the facts placed before it, and arrive at a decision whether the dispute is genuine and has been raised bona fide. If the Court arrives at a conclusion that the disputes have been raised only for avoiding payment or raising a controversy on flimsy grounds, then the Company court can reject the contention of the company holding that the dispute has been raised only with a purpose to create a defence on flimsy grounds against the prayer of winding up.

37. The Supreme Court of India in the case of Madhusudan Gordhandas & Co. v. Madhu Woollen Industries Pvt. Ltd. (1972) 42 Comp. Cas 125 has held that where the petition for winding up of a company is based on the ground of the inability of the company to pay its debts, it is well settled that if the debt is bona fide disputed and the defence is a substantial one, the Court will not order winding up. The principles on which the Court acts are : (1) that the defence of the company is in good faith and one of substance; (2) that the deence is likely to succeed in point of law; and (3) that the company adduces prima facie proof of the facts on which the defence depends. Where the debt is undisputed, the Court will not act upon a defence that the company has the ability to pay the debt, but the company chooses not to pay that debt. Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order, but the exact amount of the debt is disputed, the Court will make a winding up order without requiring the creditor to quantify the debt precisely. It has further been held that if there is opposition to the making of a winding up order by the creditors of the company, and in that event, considering their wishes, the Court may decline to make the winding up order. But the case of the creditors has to be tested on the grounds of reasonableness; and the fact whether the matters require an enquiry and investigation. In the same judgment, the Supreme Court has further held that the allegation that the substratum of the company is gone has to be alleged and proved as a fact. The mere fact that the company has suffered trading losses will not destroy its substratum unless there is

no reasonable prospect of it ever making a profit in the future. Ont eh facts of that case, it was held that the high Court was right in refusing to wind up the company."

In para 38, the court observed that the only point which was

required to be seen by this court would be as to whether the

counter claim raised are bonafide and can be held substantial or

such on which the company is likely to succeed or is able to put up

a defense in a court of law. It is certainly not so in the instant

case.

22. In the above background, it is not possible to accept the case

set up by the respondent as a defence to the winding up petition.

The petitioner made the supply on 29th November, 1996. No

complaint was made with regard to the quality thereof either in

the fax dated 3rd February, 2000 sent by the respondent or the

letter dated 10th February, 1997 enclosing the various documents

noted hereinabove. The respondent has also not raised any

dispute with regard to the supply on receipt of reminders or the

legal notice from the petitioner.

23. The copy of the invoice relied upon by the petitioner to

support its contention that the material supplied by the petitioner

was defective, in the light of the above discussion, inspires no

confidence.

24. The defence of the material being defective at this highly

belated stage in answer to the petition seeking winding up of the

respondent company is patently dishonest and is not bonafide. As

noticed above, the documents relied upon by the petitioner inspire

no confidence at all. It is clearly evident that the dispute has been

raised only for the sake of avoiding payment and raising

controversy on baseless grounds.

25. The respondent has not cared to respond to the reminders of

the petitioner or even the statutory notice dated 20th February,

1998 as required by law stand duly served on it.In this

background, it is clearly evident that the respondent company has

neglected to pay the debt even though the statutory notice as

required by law has been served on it.

26. In view of the foregoing discussion, prima facie I find that in

the present case the respondent company owes a debt to the

petitioner and has deliberately chosen not to pay the same. As

such, interest of justice and well settled principles of law entitle

the petitioner to an order of admission for the present.

27. In view of the above, the petition is admitted.

Citation be published in the "Statesman" (English edition)

and "Jansatta" (Hindi edition) in accordance with Company (Court)

Rules, 1959.

However, publication of the citation and appointment of the

provisional liquidator is deferred and one opportunity is given to

the respondent company to pay the amount found already due and

payable to the petitioner with interest at the rate of 8% per annum

with effect from 1st October, 2007 when the legal notice was

served on the respondent company. The amount be paid within

one month failing which the petitioner shall be entitled to publish

the citation and apply for appointment of the provisional

liquidator.

List for further directions on 20th May, 2009.

(GITA MITTAL) JUDGE April 15, 2009 kr