Niti International Ltd. vs Shree Sagarmatha Distributors ...
2013 Latest Caselaw 19 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+                                  CO.PET. 149 of 2005

        NITI INTERNATIONAL LTD.                  ..... Petitioner
                      Through: Mr. Tarun Gupta, Advocate.

                          versus

        SHREE SAGARMATHA DISTRIBUTORS
        PVT. LTD.                                ..... Respondent
                    Through: Mr. Rajiv Bahl, Advocate for Official
                             Liquidator.

        CORAM: JUSTICE S. MURALIDHAR

                                    ORDER

% 03.01.2013

1. This is a petition under Section 433 (e) of the Companies Act, 1956

seeking the winding up of the Respondent Shree Sagarmatha Distributors

Private Limited.

2. None appears for the Respondent despite one pass over. It requires to

be noted that the attempts made by the parties to settle their disputes

during the pendency of the present petition were not successful.

3. This Court has heard the submissions of Mr. Tarun Gupta, learned

counsel for the Petitioner and has perused the documents placed on

record. The reply filed by the Respondent has been considered.

4. The facts in brief are that the Petitioner, a company registered in Hong

Kong was supplying to the Respondent computer peripherals and digital

cameras. The practice between the parties was that part payments were

allowed by the Petitioner to be made by the Respondent. The payments

were permitted on D/A basis within 90 days from the date of bill of

lading. These transactions commenced from November 2003 onwards. A

copy of the bill of lading dated 5th November 2003 and the invoice

concerning supplies of the above items by the Petitioner to the

Respondent has been placed on record. On 29th November 2003 by

another invoice a further consignment of digital still cameras was supplied

by the Petitioner to the Respondent. A copy of the said invoice has also

been placed on record.

5. The case of the Petitioner is that in respect of the invoices dated 5th and

29th November 2003 US Dollars ('USD') 25,467.90 and USD 26,159.00

were due respectively from the Respondent. The said amounts were

payable with interest @ 15% per annum from the expiry of 90 days as

stipulated in the invoices. It is stated that as on 28th February 2005 a sum

of USD 59,743.90 (i.e., USD 51,626.90 as principal and USD 8,117 as

interest) was outstanding.

6. According to the Petitioner, messages were sent by the Petitioner's

banker to the Respondent between January and June 2004 reminding it of

the payment of overdue bills. Despite the messages payments were not

forthcoming from the Respondent. It is stated that when the Petitioner

approached the Respondent for realization of the outstanding payment,

false assurances were given that the monies shall be released. It is alleged

that in order to create a false dispute the Respondent purportedly returned

some goods by way of Delivery Note No. 2430 dated 26th October 2004 to

the Petitioner. However, none of the items supplied by the Petitioner

under the two invoices were returned. Further, the goods for the value of

only USD 4055.00 were returned. Consequently on 2nd November 2004 a

notice was sent by the Petitioner to the Respondent as well as its various

Directors setting out the details of the transactions and the outstanding

amount. It is stated by the Petitioner that till that stage there was no

protest lodged by the Respondent regarding the quality of the goods

supplied. However, in reply to the notice an unsubstantiated plea was

raised by the Respondent about the goods supplied by the Petitioner being

defective. Further, a plea of warranty for supplies was raised even though

no such warranty had been furnished.

7. In the above circumstances, the present winding up petition was filed

under Section 433 (e) of the Act on 26th April 2005. While directing

notice to issue to the Respondent on 27th April 2005 this Court restrained

the Respondent "from selling, alienating, transferring or parting with the

immovable assets without the leave of the Court."

8. In its reply to the petition, the Respondent does not deny the receipt of

goods from the Petitioner or any of the transactions. But certain

preliminary objections have been raised. The first is that the petitioner has

being signed or verified in accordance with the relevant statutory

provisions. The second is that the petition not being signed, verified and

filed by a competent person since there is no authorization placed on

record. The third is that the Petitioner has not complied with the

provisions of the Act.

9. In the rejoinder to the above reply, the Petitioner has enclosed a copy of

the authorization issued by the Petitioner in favour of Mr. Ashish Mittal to

sign, verify and file pleadings in the Court. It is further stated that the

Petitioner which is registered in Hong Kong has complied with the

requirements of the local law. The Court is satisfied with the above

explanation and rejects the preliminary objections of the Respondent.

10. As far as the merits of the petition are concerned, it is stated by the

Respondent in its counter affidavit that Director of the Petitioner, Mr.

Ramesh Kumar Sawarthia and Mr. Bijendra Kumar Kedia, Director of the

Respondent are relatives. It is acknowledged that both the parties had

negotiated for trading in certain computer and electronic equipments. It is

further acknowledged that with effect from April 2003 supplies were

made by both Nitin International Limited, (the Petitioner in Co. Petition

No. 149 of 2005) and Win Jing Industry (H.K.) (the Petitioner in the

companion petition Co. Petition No. 150 of 2005). With a view to

countering the Petitioner's case that there was no warranty, the

Respondent has annexed with the reply copies of certain cartons in which

the goods were purportedly sent. The Petitioner has, however, pointed out

in its rejoinder that the cartons of which photocopies have been filed were

not those in which the goods in question were dispatched but the

Respondent's own cartons.

11. In para 3 (v) of the reply it is stated as under:

"3(v) The pattern for payment clearly proves that the payments made to the Petitioner was running payment. During the period from August 2001 to November 2003, the Petitioner had supplied goods worth Rs. 24.01 crores and against this delivery, in all payment of Rs. 23.78 crores has been released. Thus, assuming but not admitting that the claim amount as stated in the petition is of USD 51,626.90. This amount represents less than 1% of the total transaction amount between the Petitioner and the Respondent. The release of Rs. 1.79 crores of payment after the date of the said two invoices of November 2003 itself shows fairness on the part of the Respondent company. It also evidences that the Respondent company always have the intention of making payment provided the same falls due and payable. In the instant case, the goods supplied by the Petitioner over a period of time were defective, low quality and sub-standard goods. The defects in some goods were visible while in others, it was latent. For example, when the defect in the CDs is visible by a naked eye when this defect is a manufacturing defect. In other computer parts, which expressly carried a warranty, the stockiest, dealers and consumers have during this period of warranty returned the goods being defective or unworkable."

12. As far as the question of defects is concerned, the Respondent has not

placed on record any document to substantiate such plea. Also it does not

appear that the Respondent raised any such protest contemporaneously

with the receipt of supplies from the Petitioner. Such defence appears to

have been taken for the first time in the reply to the legal notice sent by

the Petitioner to the Respondent.

13. In para 3 (vii) of the counter affidavit the Respondent states that the

Director had himself suggested that the goods supplied by the Petitioner

to the Respondent be sold to M/s. Himalayan Time (P) Limited. This is

denied by the Petitioner who points out that the letter dated 31st March

2005 purportedly written by M/s. Himalayan Time (P) Limited is in fact

addressed to the Respondent.

14. In para 3 (viii) of the counter affidavit the Respondent has purportedly

quantified the losses suffered by it on account of supply of defective/low

quality/sub-standard goods. However, there is no document to substantiate

these averments of the Respondent either.

15. The Petitioner pointed out the goods purportedly returned by the

Respondent were not those supplied by the Petitioner under the two

invoices which form the subject matter of the present petition. Further,

learned counsel for the Petitioner refers to the Respondent's

acknowledgement in its balance sheet that the Petitioner is a creditor and

as on 31st March 2006. According to the Respondent, an outstanding

amount of Rs. 23,42,856 was still owing to the Petitioner and Rs.

46,51,702 was due to Win Jing Industry (Hong Kong). It is acknowledged

that the outstanding amount as on 31st March 2006 to both Petitioners is

Rs. 69, 94,558.

16. In the circumstances, the Court is satisfied that the Respondent is

unable to liquidate its debts owed to the Petitioner and that a case has

been made out for the appointment of a provisional liquidator (PL) to take

over the assets of the Respondent.

17. At this stage Mr. Rajiv Bahl, learned counsel appearing for the

Official Liquidator ('OL') draws the attention of the Court to a decision

dated 29th November 2011 of the Division Bench of this Court in

Company Appeal No. 33 of 2011 (Modi Entertainment Network v.

ESPN Software Private Limited). In the said decision the Division Bench

partly set aside the order dated 2nd March 2009 of the learned Company

Judge appointing the PL on the ground that no application had been

actually filed by the creditor seeking such appointment either along with

the winding up petition or thereafter. It was further observed that the

learned Company Judge had not, in terms of the requirement of Section

450 (2) of the Act read with Rule 106 of the Companies (Court) Rules,

1959 ('Rules') given any 'special reasons' for dispensing with the

requirement of issuing notice to the Respondent prior to the appointment

of the PL. In the circumstances, the Court set aside the order under

challenge only to the extent of the appointment of the PL.

18. Turning to the present case, it is seen that along with the main

petition, the Petitioner filed Co. Application No. 590 of 2005 seeking the

appointment of a PL. At the hearing on 22nd November 2011, more than

six years after the filing of the petition and after attempts at settlement

failed, a statement was made on behalf of the Petitioner that he did not

wish to press the application at that stage. Accordingly, the said

application was disposed of. On the same date the Court made absolute

the interim order dated 27th April 2005 restraining the Respondent "from

selling, alienating, transferring or parting with the immovable assets

without the leave of the Court". Co. Application No. 591 of 2005 was

disposed of.

19. Although the Petitioner has not subsequently filed any fresh

application under Section 450 of the Act seeking the appointment of a PL,

considering the fact that the present petition has been pending for more

than seven years and none has been appearing for the Respondent for the

last two hearings since 31st August 2012, the Court is of the view that any

further delay in the appointment of a PL will defeat the ends of justice. It

is imperative to secure the assets of the company at the earliest to ensure

their availability to meet the dues of the creditors upon proof of their

claims. It is not as if the company was unaware of the petition and the

applications. Pursuant to the notice issued to it the Respondent has been

appearing and contesting the petition for the last over seven years.

However, for the last two hearings none has been appearing for the

Respondent for reasons that are not discernible. Even today despite a pass

over none appeared for the Respondent. The position remained unchanged

even after lunch when the petition continued to be heard. In the

considered view of this Court, these are sufficient 'special reasons' for the

Court to dispense with notice to the Respondent prior to the appointment

of the PL in terms of Section 450(2) of the Act read with Rule 106(1) of

the Rules. In addition, the Court would like to refer to Section 443 (1)(d)

read with Rule 9 of the Rules which permits the Court to pass any order to

secure the ends of justice.

20. In the considered view of this Court, in the absence of Respondent

denying its liability which is reflected in its audited balance sheet as on

31st March 2006, the entry in the books of accounts of the Respondent that

the aforementioned amounts were outstanding to the Petitioner should be

taken to be acknowledgment of the debt. In the above circumstances, this

Court is satisfied that the Respondent is unable to liquidate its debts

within the meaning of Section 433 (2) of the Act.

21. Accordingly, the petition is admitted. The OL is appointed as PL of

the Respondent. The PL is directed to take over the assets of the

Respondent together with its books of accounts and other relevant records

as may be available at the registered office of the Respondent. The OL is

permitted to seek police assistance where required.

22. The OL will file a status report in this Court within four weeks. The

OL will, in his report, also confirm that the interim order passed by the

Court on 27th April 2004, and made absolute on 22nd November 2011,

restraining the Respondent 'from selling, alienating, transferring or

parting with the immovable assets without the leave of the Court', has

been duly complied with. The OL will take necessary steps to ensure

compliance with this direction by the Director of the Respondent. The

Petitioner is directed to effect publication of the citation of this petition in

the official gazette, 'Statesman' and 'Danik Jagran' in terms of Rule 24 of

the Rules.

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

the requirements of Section 454 of the Act 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.

24. List on 4th March 2013.

S. MURALIDHAR, J.

JANUARY 03, 2013 Rk