Star Cruise Management Ltd. vs Delhi Express Travels Private Ltd
2009 Latest Caselaw 2214 Del

*         IN THE HIGH COURT OF DELHI AT NEW DELHI


+                  Company Petition No.137 OF 2007


              Judgment Reserved on : 08.05.2009
%             Judgment Delivered on : 22.05.2009

Star Cruise Management Ltd.                    .....Petitioners
                     Through:       Mr. Manoj Khanna, Advocate

                                 versus

Delhi Express Travels Private Ltd                      .....Respondent
                        Through:    Mr.    Jayant    Bhushan,      Senior
                                    Advocate with Mr. Darpan Wadhwa,
                                    Mr.Diwakar Maheshwari and Mr.
                                    Virendra Singhal, Advocates for
                                    Dex Aviation Private Ltd.
                                    Mr. Vivek Kohli, Ms. Ruchi Kohli and
                                    Ms. Pankhuri Jain, Advocates for
                                    the applicant, Mr. Vinay Singal.


CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI

1.     Whether the Reporters of local papers may      No
        be allowed to see the judgment?

2.     To be referred to Reporter or not?             No

3.     Whether the judgment should be reported        No
       in the Digest?


VIPIN SANGHI, J.

1. This petition has been filed by the petitioner under Section

433(e), 434 and 439 of the Companies Act, 1956( for short `the Act') to

seek the winding up of the respondent company, namely, Delhi

Express Travels Pvt. Ltd on the ground that the respondent company

owes a debt to the tune of Rs.1,38,83,974/- to the petitioner company

which the respondent has neglected to pay despite the service of a

statutory notice under the Act.

2. The petitioner is a company incorporated under the Laws of

the Isle of Man. The present petition has been filed through Mr.

Ghanshyam Bhardwaj, appointed as the Attorney of the petitioner

company vide resolution of the Board of Directors dated 4.5.2007 for

the purpose of filing the present petition. Copy of the extract of the

Board of Resolution dated 4.5.2007 and the Power of Attorney dated

4.5.2007 have been placed on record along with the petition.

3. The petitioner states that the respondent is a company

incorporated under the Act having its registered office at P-13,

Connaught Circus, New Delhi i.e. within the jurisdiction of this Court.

The main object of the respondent company is to carry on business of

travel agents for every mode of travel i.e by sea, air and land. The

authorized share capital of the respondent company is Rs. 50 lakhs

divided into 5000 equity shares of Rs.1,000/- each. The petitioner

states that the parties entered into a Sales Agency Agreement dated

1.4.2006 whereunder the respondent was appointed as a sales agent

to provide services in the territory of India for advertising, publicity,

marketing and obtaining bookings for cruise packages of Star Cruise

vessels, subject to the terms and conditions set out in the said

agreement. Under clause 3.1.1 of the said agreement, the respondent

has warranted and agreed to render and pay to the petitioner fair and

accurate accounts of all monies due to the petitioner in respect of any

sales, bookings, cancellation and amendment of the cruise packages.

The petitioner states that as a result of the transactions undertaken by

the respondent under the said agreement, the respondent became

liable to the tune of Rs.1,48,83,974/- towards the petitioner. The

petitioner has placed on record the statement of account pertaining to

the transactions had with the respondent beginning 31.5.2006 and

upto 12.8.2006 showing the above amount outstanding and payable by

the respondent. The petitioner has also placed on record the

correspondence exchanged with the respondent through e-mail which

was the accepted mode of communication between the parties under

the Sales Agency Agreement.

4. The respondent, through its Executive Chairman, Sh. Vipin K.

Singal sent an e-mail on 28.8.2006 to the petitioner stating that the

respondent is exploring the sale/lease of one of their branch offices

which would generate enough funds to meet the outstanding liabilities

towards the petitioner. It was assured to the petitioner that the

outstanding amount could be settled before 30.9.2006. The petitioner

sent an e-mail on 5.9.2006 enquiring from the respondent as to when

the outstanding amount would be paid. In response, once again the

respondent on 11.9.2006 stated that payment of the outstanding dues

of the petitioner was the top priority for the respondent. The

respondent stated that it was seeking to lease out one show room in

Connaught Place to liquidate the liabilities owed to the petitioner.

5. On 22.9.2006, yet another reminder was sent by the

petitioner. The Executive Chairman of the respondent again

responded on 23.9.2006 stating that a meeting had been fixed

between the brothers in management of the respondent company to

arrive at an amicable out of court settlement, which would enable

taking of immediate steps to generate funds to clear all the pending

dues in one go. From the aforesaid, it appears that there were inter se

disputes between the brothers having interest in, and managing the

affairs of the respondent company. On 25.09.2006, once again the

petitioner sent a reminder to the respondent. On 30.10.2006, the

respondent gave the details of the outstanding dues for ready

reference and reconciliation in the petitioner's office. This

communication was sent by the Executive Chairman, Mr. Vipin K.

Singal. It was stated that the apartment of the respondent company at

Mumbai could not be sold so far and neither the vacant office space at

Connaught Place could be leased out as yet. The outstanding liability

admitted by the defendant in the attachment to this communication

was Rs.1,48,93,580/-. On 21.11.2006, the respondent once again

confirmed the outstanding liability owed to the petitioner as

Rs.1,48,83,974/-.

6. The petitioner sent a notice through its advocates Bhatt &

Saldhana dated 19.2.2007 calling upon the respondent to make

payment of Rs.1,48,93,580/- with interest at the rate of 18% per

annum from 1.1.2007 till payment within three weeks of the receipt of

the notice failing which it was stated that the petitioner would initiate

appropriate legal proceedings including, but not limited to, winding up

of the respondent company. This notice was responded to by the

respondent through their advocates, Virender Sood & Co. on 12.3.2007

denying any liability towards the petitioner and instead claiming that

the respondent has to recover Rs.16,58,580 from the petitioner on

account of expenditure incurred on advertisement. The petitioner, it

appears invoked a bank guarantee for Rs.10 lakhs furnished at the

instance of the respondent on or about 12.2.2007. After adjusting the

amount of Rs. 10 lakhs received upon honour of the said bank

guarantee, the petitioner claims that Rs.1,38,83,974/-, apart from

interest at the rate of 18% per annum from 1.1.2007 is due and

payable by the respondent.

7. Upon issuance of the notice in the petition, the respondent

has filed its reply. It is stated that the present petition cannot be used

as a means of effecting recovery and the petitioner should invoke the

civil remedy instead of preferring the present petition. Various other

technical objections have been raised, none of which were argued by

the respondents at the time of argument. It is claimed that an amount

of Rs.16,58,580/- is due from the petitioner to the respondent towards

`advertisement subsidy'. It is further claimed that the petitioner is

liable to pay service tax to the respondent from September 2004 to

October 2005 to the tune of Rs.19,33,619/-. In para 9 of the reply it is

stated that earlier the business association between the parties was

running smoothly. However, due to some unavoidable situation, the

business association came under a cloud as differences arose between

the parties. It is claimed that the respondent had to recover

Rs.75,89,199/- from the petitioner besides damages. The petitioner

was accused of not settling the accounts. However the respondent has

not denied having sent the e-mail communications above referred to

wherein the respondent has repeatedly admitted its outstanding

liability from time to time to the tune of Rs.1,48,83,974/- before the

encashment of the bank guarantee of Rs. 10 lakhs by the petitioner.

8. The petitioner in its rejoinder denies that any amount is due

to the respondent company towards `advertisement subsidy' much

less to the tune of Rs.16,55,580/-. It is stated that the respondent

company had to bear all expenses towards promotional and

advertising cost under the Sales Agency agreement dated 1.4.2006.

Reference is made to clause 5.2 of the said agreement to show that

there was no such obligation cast on the petitioner to bear any liability

for advertisement subsidy.

9. The claim for the sum of Rs.19,33,619/- towards service tax

from September 2004 to October 2005 is also refuted as it was made

for the first time only after the issuance of the statutory notice. The

said amount finds no mention in the correspondence exchanged

between the parties, or in the statement of final accounts, or even in

the amount admitted to be due to the petitioner by the respondent

company.

10. A perusal of the correspondence between the parties shows

that the respondent has not really raised a genuine and bona fide

defence. The liability to the tune of Rs.1,38,83,974/- stands admitted,

and even if one were to deduct the amount of the alleged claim

towards advertisement subsidy and towards service tax liability, as

claimed by the respondent, the outstanding admitted liability is in

excess of Rs.1 Crore.

11. It has come on record that there are inter se disputes

between the family members controlling the respondent company.

This is evident from, inter alia, CA No.633/09 filed by Virender Singal

under Rule 9 of the Companies (Court) Rules, 1959 on Principles

Analogous to Order 1 Rule 10 C.P.C to seek impleadment in the

petition. The said applicant alleges gross mismanagement and

siphoning of funds of the respondent company by the other

unscrupulous Directors. Mr. Virender Singh claims to be a shareholder

to the extent of 31.31% in the respondent company and states that he

was involved in the day to day running of the respondent company

until the end of 2003 during which time the respondent company was

running into profits. From the year 2004 onwards, due to certain

personal animosity with majority directors, who include two of his

brothers, the applicant claims that he was stripped of all the banking

and executive powers in the respondent company and he lost control

in the day to day activities of the company. He states that the present

financial mismanagement is solely attributable to the current

management consisting of two of his brothers, namely, Shri Vipin

Singal and Sh. Vinay Singal. He states that the respondent company

has the assets to liquidate the dues of the petitioner company and the

same should not be wound up.

12. Having heard the counsel of the parties and perused the

record, I am inclined to allow this petition for winding up under section

433(e) of the Act. What is to be examined by the Court in these

proceedings is whether there is clear cut admission of a debt by the

respondent company and the debt, which should be in excess of Rs.1

Lakh, is not discharged by the respondent company despite a notice

issued in compliance with Section 434 of the Act. In case of a disputed

debt, the Court has to examine whether the dispute on the face of it is

genuine, or merely a cloak to cover the company's real inability or

unwillingness to pay its debts. When the debt is undisputed the Court

will order winding up and will not act upon a defense that the company

has the ability to pay the debts but the company chooses not to pay

the debt.( see Madhusudan Gorhandas and Company V. Madhu

Woollen Industries Pvt. Ltd & Ors., (1971) 3 SCC 632).

13. Admittedly the parties had a business relationship under the

Sales Agency Agreement dated 01.04.2006 whereunder the

respondent, inter alia, booked Star Cruise packages on vessels

operated by the petitioner. The respondent company was obliged to

remit the booking proceeds to and render accounts to the petitioner

under the said agreement. From the series of emails exchanged

between the petitioner and the respondent company which are placed

on record, I find that there is a clear and repeated admission of the

debt payable to the petitioner company by the respondent company to

the tune of Rs.1,48,83,974/-.

14. Neither in the reply filed by the respondent company, nor

otherwise, the genuineness of the emails exchanged between the

parties, as produced by the petitioner, has been disputed. The

petitioner company had sent various reminders through emails to

settle the outstanding amount due at earliest. The Executive Chairman

of the company, Mr. Vipin Singal in response to these emails, had

repeatedly admitted the liability of the respondent company towards

the petitioner company and has at every occasions given repeated

assurances to pay off the said admitted debts.

15. The Executive Chairman vide email dated 28.08.2006 had

confirmed the accrual of outstanding liability and in fact had given an

impression that steps are being undertaken to raise funds for clearing

the outstanding amount due to the petitioner company. The email

dated 11.09.2006 also shows that the liability due towards the

petitioner company is categorically admitted and it was represented

that efforts were being made to clear the dues of the Petitioner

company before 30.09.2006. Even in email dated 23.09.2006 it was

assured that immediate steps will be taken to generate funds to clear

all the petitioner company's dues in one go. The details of outstanding

dues for ready reference and reconciliation at petitioner's office was,

inter alia, sent vide email dated 30.10.2006. Here again it was assured

that the respondent company and the brothers (i.e. Directors) are

individually responsible to pay the amount due to the petitioner

company. Again on 21.11.2006 it was informed by the respondent via

email that the total outstanding dues which the respondent company

owes to the petitioner is Rs.1,48,83,974/- and the remittance of this

amount was a top priority for the respondent.

16. From the conspectus of these emails it is evident that the

respondent company had all along admitted the amount of

Rs.1,48,93,580/- to be due towards the petitioner and assurances were

given to remit these amount. The denial of the liability in the reply to

the legal notice of the petitioner and in the reply filed to the present

petition is, therefore, an afterthought and malafide, only to somehow

ward off the consequences of winding up. The subsequent denials

have no basis and the respondent has not attempted to explain the

circumstances in which the aforesaid categorical admissions of liability

were repeatedly made. I, therefore, reject the stand sought to be

taken by the respondent in its reply to the legal notice and in reply to

this petition.

17. It appears that there are differences between the brothers

who were managing the affairs of the company and the liability owed

to the petitioner company has not been discharged, as different

factions are trying to saddle the liability qua the petitioner upon the

other. The amount which is legally due and not disputed by the

respondent company can not be allowed to remain unpaid indefinitely

due to some internal differences between the managers/directors of

the respondent company. In these proceedings neither the creditor,

nor the Court is concerned with the internal management issues of the

respondent company. A creditor is not concerned with the inter se

disputes between the directors and cannot be expected to wait

indefinitely to receive its dues. He is legitimately interested in time

bound payment of his dues. The respondent company has, admittedly,

and in spite of repeated assurances neglected to make payment.

18. The balance sheet of the respondent company as at

31.03.2008 also shows a rather grim picture of the financial health of

the respondent company. The company suffered losses of

Rs.2,18,74,569.38 in the year ending 31.03.2007 and the losses as at

31.03.2008 stood at Rs.42,75,347.60 after exhausting the entire

general reserves of the company.

19. The counter claims raised by the respondent company is also

not legally sustainable and is a mere attempt to counter blast the

undisputed debt owed by it towards the petitioner company. The claim

of respondent company to the tune of Rs.16,55,580/- towards

advertisement subsidy clearly is an afterthought to overshadow their

failure to pay off legally admitted dues. Clause 5.2 of the Sales Agency

Agreement clearly states that any amount incurred on promotional

activities and advertisement expenses would be entirely borne by the

Sales Agent i.e. respondent company. It is only when the petitioner

company and respondent company jointly undertakes special sales

promotion, publicity or advertisement expenses are to be shared by

both the parties in accordance with agreed written terms from time to

time. The respondent company has not even pleaded that any demand

under this head was ever made to the petitioner company and was not

paid. Pertinently, it is only after the statutory legal notice was served

upon respondent company, that such a demand for advertisement

subsidy was made for the first time by the respondent. Thus, it cannot

be said that the respondent company has been able to raise a bona

fide dispute to the admitted debt by raising the above defences. For

the sake of argument, even if the amount claimed by the respondent

company towards Service Tax liability from the petitioner company

amounting to Rs.19,33,619/- is credited to the respondents' account,

even then the liability of the respondent company would be in excess

of Rs.1.28 crores.

20. The other defense raised to resist this winding up petition is

that the respondent company has the assets to liquidate the dues of

the petitioner company. Assuming that the assets of the respondent

company are sufficient to meet the liability owed to the petitioner, but

the conduct of the respondent company and the defences raised by it

show that respondent company is not ready and willing to make the

payment, so far as the debt owed to the petitioner company is

concerned. The respondent company, in spite of statutory notice and

demand, till date has neglected to make the payment. Such neglect is

clear in the facts of this case.

21. In the facts and circumstances of the case, it is just and

equitable to pass a winding up order in the present matter. There is no

material on record to exercise the judicial discretion in favour of the

respondent company. The case clearly falls within the ambit of

Sections 433 and 434 of the Companies Act and, therefore, I am

inclined to admit the petition and order the winding up of the

respondent company. It is ordered accordingly.

22. Accordingly, 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 an records of the respondent

company and proceed according to law. Citation shall published in the

'Statesman' (English) and 'Jansatta' (Hindi) for 17.07.2009. Petitioner

may take steps accordingly.

(VIPIN SANGHI) JUDGE MAY 22, 2009 as/rsk