Alka Exim Pvt. Ltd. vs M/S. Crest Export Pvt. Ltd.
2013 Latest Caselaw 5722 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI

                                          Reserved on: 23rd September, 2013
%                                     Date of Decision: 11th December, 2013

+      CO. PET. 206/2010 & CA No.532/2012

       ALKA EXIM PVT. LTD.                               ..... Petitioner
                    Through:           Mr.Subhiksh Vasudev and Mr.
                                       Srivats Kausal, Advocates.

                    versus

       M/S. CREST EXPORT PVT. LTD.            ..... Respondent
                     Through: Mr.Vikram Dholakia, Advocate.

CORAM:
HON'BLE MR. JUSTICE R.V.EASWAR

                               JUDGMENT

R.V. EASWAR, J.:

1. This is a petition filed by Alka Exim Pvt. Ltd. under Section 433(e)

and (f) of the Companies Act, 1956 (hereinafter referred to as the "Act")

seeking winding-up of the respondent-company for non-payment of

`2,55,11,173/- which includes the principal amount of `2,18,43,881/- and

interest of `36,67,292/-.

2. The petitioner is a private limited company carrying on business in

the supply of fabrics and allied items. The respondent-company was

carrying on business in fabrication/ exports. The directors of the

respondent-company used to purchase fabrics on credit from the

petitioner-company. The purchases so made between 17.10.2007 and

08.06.2009 amounted to `2,18,43,881/- and together with interest, the

amount debited in the books of the petitioner to the account of the

respondent-company came to `2,55,11,173/- as on 12.10.2009. The

respondent company sought to discharge the dues to the petitioner by

issue of post dated cheques but all these cheques were returned without

being honoured. Therefore, a legal notice was sent by the advocate of the

petitioner on 09.11.2009 threatening action against the respondent under

Section 138 of the Negotiable Instruments Act, 1881 as well as Section

417/ 420 of the Indian Penal Code, 1860. Complaints were also filed

with the Tis Hazari Courts, Delhi under Section 138 of the NI Act. In the

reply to the aforesaid notice written by the respondent-company on

23.11.2009, it was pointed out that payments amounting to `1.73 crores

were made in 2009 including the issue of some debit notes, that the

cheques were not honoured because the mode of operation of the account

was changed from single signatory to joint signatory in September, 2009

and that the respondent had requested the petitioner to return the cheques.

3. On 11.12.2009 the statutory demand notice under Section 434

(1)(a) of the Act was issued by the advocate of the petitioner to the

respondent-company calling up the latter to pay the sum of

`2,25,11,173/- together with interest @ 24% till date of payment along

with costs of `11,000/- within a period of 21 days from the receipt of

notice, failing which legal proceedings for the recovery of the amount,

including winding-up proceedings were threatened to be taken.

Receiving no reply to the statutory demand notice, the petitioner has filed

the present petition in April, 2010.

4. In support of the winding-up petition, it is submitted on behalf of

the petitioner that the respondent-company has not even complied with

the order passed by this Court on 29.11.2010 in terms of Section 439A of

the Act. It is submitted that the fabrics were sold on credit between

October, 2007 and June, 2009 and the post dated cheques issued by the

respondent were all dishonoured. It is further submitted that the debt was

acknowledged by the directors of the respondent-company. It is

contended that the debit notes annexed to the reply filed by the

respondent-company (to the company petition) were false and no such

debit notes were sent by the respondent-company. These debit notes

were sought to be contrasted with the debit notes annexed as Annexure-

A2 to the rejoinder, which are admitted by the petitioner. It is pointed out

that the debit note placed as Annexure-A2 to the rejoinder was duly

signed by a director of the respondent-company with his seal and was

also taken note of in the ledger account of the respondent-company borne

in the books of the petitioner whereas the debit notes attached to the reply

filed by the respondent to the company petition did not bear the signature

of the director along with the seal, nor did these debit notes contain any

details of the fabric returned by the respondent-company, as was the case

in the debit note annexed to the rejoinder. It was further pointed out that

the debit note annexed to the rejoinder was supported by printed challans

issued by the respondent-company containing complete details of the

goods returned whereas the debit notes attached to the reply filed by the

respondent-company were not in printed form, nor were they supported

by challans containing the full details of the fabric said to have been

returned. According to the learned counsel for the petitioner, these were

false debit notes. My attention was also drawn to the copies of the ledger

account of the respondent-company in the books of the petitioner which

showed a debit balance of `2,18,43,881/- which figure was also duly

reflected in the balance sheet as on 31.03.2010 as part of the sundry

debtors. The copies of the ledger account and the balance sheet as on

31.03.2010 are annexed to the rejoinder. The learned counsel for the

petitioner submitted that as per his information the directors of the

respondent-company are absconding and, therefore, filing a suit for

recovery of the amount would be an ineffective remedy.

5. In his reply, the learned counsel for the respondent refuted all the

contentions and submissions of the petitioner. He submitted that the

petitioner has concealed the relevant and material facts and if the debit

notes are taken into account, there was no amount outstanding. He

submitted that since the goods supplied by the petitioner were defective,

debit notes aggregating to `70,52,864/- were issued by the respondent-

company, copies of which are placed in Annexure-R2 to the reply. He

further submitted that the entries made in the ledger account of the

respondent-company in the books of the petitioner were unilateral, false

and fabricated. By way of example he submitted that the statement of

account attached to the company petition shows an amount of

`19,00,000/- as having been received by the petitioner on different dates,

whereas the respondent had paid an amount of `76,25,000/- through cash/

RTGS, which has not been accounted for. My attention in this

connection was drawn to Annexure-R1 to the reply, which is a copy of

the ledger account of the petitioner in the books of the respondent-

company for the period from 13.05.2009 to 26.07.2009.

6. The learned counsel for the respondent-company further contended

that one Mr. Rajiv Gupta of the petitioner-company was informally

inducted into the respondent-company so as to share in its profits and was

made an authorised signatory of the respondent-company. Undated

cheques were given to him as security during the year 2008. The

petitioner-company filled up the dates and presented these cheques to the

bank, even after receiving payments for the goods supplied, in full and

final settlements. According to the learned counsel for the respondent-

company, the undated cheques were not issued for any existing debt. It

was pointed out that the cheques relate to a period much prior to their

date of presentation.

7. A further contention of the learned counsel for the respondent-

company was that there was no stipulation for any interest on account of

delayed payment. The receipt of the legal notice under Section 434(1)(a)

was denied. It was also denied that the respondent-company was

commercially insolvent.

8. The learned counsel for the respondent-company also drew my

attention to the glaring difference between pages 10 to 16 of the company

petition, which contain the statement of outstanding balance on the one

hand and the copy of the ledger account of the respondent-company in the

books of the petitioner. The suggestion was that certain invoices were

falsely added in the ledger account of the respondent-company in the

petitioner‟s books and it was this copy of the ledger account which was

annexed to the rejoinder. The submission was that the petitioner had

included further false debits to the account of the respondent-company to

cover up the payment of `76,25,000/- made by the respondent-company

through cash/ RTGS. The learned counsel for the respondent-company

strongly objected to false documents being annexed to the rejoinder

merely to support the false claim made by the company petition.

9. Another submission made on behalf of the respondent-company

was that the petitioner claimed to have sold more goods than what it had

purchased, which is impossible. My attention in this behalf was drawn to

Annexure-C to the financial statements for the year ended 31.03.2010,

which is part of the balance sheet as on 31.03.2010 and gives the

quantitative details of principal items of goods traded during the financial

year which ended on 31.03.2010.

10. In support of the aforesaid submissions, the learned counsel for the

respondent-company cited the following authorities: -

(i) Madhya Pradesh Iran and Steel Co. vs. G.B. Springs (P) Ltd. & Mehta Bright Steel (P) Ltd. : (2003) 117 Comp. Cas. 327 (Delhi)

(ii) DCM Financial Services Ltd. vs. Praxis Consulting and Information Services (P) Ltd. : (2005) 4 Comp. LJ 586 (Delhi)

11. In his rejoinder, the learned counsel for the petitioner drew my

attention to paragraph 14 of the reply filed by the respondent-company in

which it was admitted that the respondent-company was facing financial

turbulence. It was further submitted that a few transactions/ entries were

cherry-picked by the respondent-company out of the ledger account of the

petitioner in its books to mislead the Court. The debit notes claimed to

have been issued by the respondent-company were all false and fabricated

as they were not in the printed form nor did they contain any details of

the fabrics claimed to have been returned; they were also not supported

by the goods returned challan. It was also pointed out that payments

amounting to `75,75,000/- have been taken into account by the petitioner

and even then amounts were due by the respondent-company as claimed

in the petitioner. My attention was also drawn to the affidavit of Mr.

Vipul Gupta annexed with the rejoinder along with the board resolution

authorising the same.

12. I have carefully considered the facts in the light of the rival

contentions. The first objection of the respondent which is to be dealt

with is that the petitioner did not account for the non-cash payment of

`75,75,000/- (wrongly mentioned in the reply as `76,25,000/-). A

verification of the copy of the ledger account of the petitioner in the

books of the respondent-company with the copy of the ledger account of

the respondent-company in the books of the petitioner shows that this is

an incorrect submission. I find that the following cheque payments were

made by the respondent-company to the petitioner between 13.05.2009

and 28.07.2009: -

              Date                                Amount paid
       13.05.2009                                     42,00,000
       24.06.2009                                       7,75,000




          07.06.2009                                        6,00,000
         13.07.2009                                        5,00,000
         28.07.2009                                      10,00,000
         28.07.2009                                        5,00,000
                    Total                                75,75,000

13. All these payments are duly reflected in the ledger account of the

respondent-company in the books of the petitioner (page 35-36 of

Annexure P-2 colly.).

14. Coming now to the debit notes claimed to have been issued by the

respondent-company to the petitioner which allegedly were not taken

note of by the petitioner, I find from Annexure R-2 to the reply that the

respondent claims to have returned goods of the value of `70,52,864.82

paise. A tabular statement containing the date, particulars, voucher

number and the amount of the debit note is found at page 25 of Annexure

R-2. From the next page upto page 50, copies of the debit notes, which

according to the respondent-company have not been credited in the ledger

account of the respondent-company in the books of the petitioner are

enclosed. These debit notes are not in printed form. They are signed by

an authorised signatory without any seal. They do not contain any details

of the bill/ invoice sent by the petitioner. They do not contain any

detailed description of the quantity, etc. of the goods alleged to have been

returned. The only description in all the debit notes is "Raw Mtr. Fabric

(central)". Moreover, no copy of the covering letter, to which the debit

notes were enclosed, has been filed. This is in stark contrast to the debit

notes which were in fact sent by the respondent-company and which find

credited to the account of the respondent-company in the books of the

petitioner. At page 16 of Annexure P-1 (colly.), there is a letter dated

10.05.2008 sent by the respondent-company to the petitioner stating that

an amount of `3,64,081/- has been debited to the account of the

petitioner, being the value of fabric returned to the petitioner. This

covering letter is signed by a director of the respondent-company with his

seal. The covering letter itself mentions the relevant challan numbers

under which the goods were returned. It also describes the goods in

detail. For example challan No.11412 is the relevant challan for return of

3 items: -

(i) Polyster printer 52" 516.75 Mtr. at 44.00 per Mtr. for

`22,737/-;

(ii) Polyster printer 42" 2897 Mtr. 39.50 per Mtr., `1,11,534/-;

(iii) Solid blue colour 2358.65 Mtr., 40.00 per Mtr., `93,146/-.

15. The relevant challan which is attached at page 17 of Annexure P-1

(colly.) is in printed form with the sales tax registration number and

address, phone number, e-mail Id, etc. of the respondent-company. The

challan is numbered and dated and gives the serial number, particulars

and quantity of the goods returned and a description of the goods in

detail. The vehicle number in which the goods were returned is also

mentioned in the challan. The amount of `3,64,081/- mentioned in the

covering letter dated 10.05.2008 is found credited to the account of the

respondent-company on the same day in the books of the petitioner with

the narration "By sales return" along with details of the goods returned as

stated in the letter. Similarly, the debit note dated 07.07.2009 in the

amount of `1,33,282/-, supported by the relevant details of the goods

returned and the vehicle number is found credited to the account of the

respondent in the books of the petitioner on the same date with similar

narration and details. It is, therefore, difficult to believe the authenticity

of the debit notes allegedly issued by the respondent-company to the

extent of `70,52,864/-, the details of which are given in Annexure R-2 to

the reply. I cannot believe that the same respondent-company would give

different types of debit notes, one set with full details supported by

challans, vehicle number, etc. and another set of debit notes without such

supporting documents/ details/ description. It appears to me that this

story of debit notes is an afterthought. Consequently, I cannot also accept

the claim of the respondent that false invoices were raised by the

petitioner to cover-up the debit notes raised by the respondent to the tune

of `70,52,844/-.

16. One of the objections raised by the respondent-company was that

there was glaring difference between pages 10 to 16 of the company

petition which contain the statement of outstanding balance and the copy

of the ledger account of the respondent-company in the books of the

petitioner (Annexure P-2 colly.). This statement of outstanding balance

annexed to the company petition gives full details such as the date, bill

number, amount, etc. which totals to `2,18,43,881/- which is the same

figure as shown by the copy of the ledger account of the respondent-

company in the books of the petitioner. The statement of outstanding

balance also gives the calculation of the interest on the late payments

after 60 days and such calculations show that the petitioner charged

interest of `36,67,292/-. The principal amount and the interest aggregate

to `2,55,11,173/-. The statement of outstanding balance along with

calculations of interest for the delay has been done in a detailed manner

giving the number of days for and the outstanding amount for which

interest is calculated. This is not a copy of the ledger account of the

respondent-company but it is a statement showing the working of the

interest on each and every bill which was not paid by the respondent-

company. The claim of the respondent-company that there are glaring

differences between the two is absolutely off the mark. Moreover, in the

statement of account the payments made by the respondent between

13.05.2009 and 28.07.2009 are not separately shown in the first two

pages since the transactions shown in these pages took place prior to the

above dates. The payments have been duly credited in the ledger account

of the respondent before arriving at the outstanding balance of

`2,18,43,881/-. There is thus no difference in the principal amount

outstanding which is the same in both. This contention of the respondent-

company, therefore, fails.

17. A contention was raised that the petitioner could not have sold

more goods than what it had purchased and in support of the said

contention, my attention was drawn to Annexure-C to the balance sheet

of the petitioner as on 31.03.2010 which is attached to the rejoinder.

Annexure-C to the balance sheet contains the particulars of quantitative

details of principal items of goods traded during the said financial year.

This is a statement which has to be furnished as part of the balance sheet

and on which the statutory auditor has to report. According to Annexure-

C, there are 30 items in which the petitioner traded during the year ended

31.03.2010 and the combined opening stock (in Mtrs.) was 23,264.34.

The petitioner purchased 14,22,907.64 Mtrs. of all the items combined. It

sold 12,29,550.60 Mtrs. (combined) during the said year thus leaving a

closing stock of 2,16,621.38 Mtrs. (combined). From the said annexure, I

am not able to find any single item out of the 30 items, in respect of

which the sales were more than the combined figure of opening stock and

purchases. I am unable to uphold the objection which seems to be

without any basis.

18. Whatever may be the reasons for the dishonour of the cheques

issued by the respondent-company, the fact remains that the cheques were

not honoured and were returned. It can be due to insufficient funds or

defective signatures. If the signatures were defective, they could have

been rectified and properly signed cheques could have been issued by the

respondent-company. This was not done.

19. Thus none of the factual objections taken before me on behalf of

the respondent-company appears to be with any merit.

20. In view of the foregoing I do not see any merit in the submissions

made on behalf of the respondent-company. I, therefore, admit the

winding-up petition. A copy of the petition and this order be served on

the Official Liquidator („OL‟) attached to this Court within five days.

21. The OL attached to this Court is appointed as the Provisional

Liquidator („PL‟) of the Respondent. The OL is directed to take over all

the assets, books of accounts and records of the Respondent forthwith.

The OL shall also prepare a complete inventory of all the assets of the

Respondent before sealing the premises in which they are kept. He may

also seek the assistance of a valuer to value the assets. He is permitted to

take the assistance of the local police authorities, if required.

22. Publication of the citation of the petition be effected in the Delhi

Gazette, "The Statesman" (English) and "Veer Arjun" (Hindi) in terms of

Rule 24 of the Companies (Court) Rules, 1959 („Rules‟), by the

Petitioner. The petitioner is also directed to furnish a complete set of

petition to the official liquidator.

23. The Directors of the Respondent are directed to strictly comply

with the requirements of Section 454 of the Companies Act, 1956 and

Rule 130 of the Rules and furnish to the OL a statement of affairs in the

prescribed form verified by an affidavit within a period of 21 days from

today. They will also file affidavits in this Court, with advance copies to

the OL, within four weeks setting out the details (including their value

and location) of all the assets, both movable and immovable, of the

Respondent company and enclose therewith the balance sheets and profit

and loss accounts for the past three years and copies of the statements of

all the bank accounts for the last one year. The respondent is also

directed to furnish the names, address and telephone number etc. of its

directors including the Managing Director, Chairman, if any, to the

official liquidator along with the statement of affairs. The respondent

shall also furnish the name, address and telephone number of its company

secretary. It shall also file the details of its debtors and creditors with

their complete address and the details of its workmen and other

employees and the amount, if any, outstanding to them. All these shall be

filed with the OL.

A report be filed by the OL before the next date of hearing.

Renotify on 15.04.2014.

(R.V. EASWAR) JUDGE DECEMBER 11, 2013 hs