Capt. Vijender Singh Chauhan vs Parsvnath Developers Ltd.
2013 Latest Caselaw 1295 Del

        IN THE HIGH COURT OF DELHI AT NEW DELHI

                                    CO. PET. No. 118 of 2013

        CAPT. VIJENDER SINGH CHAUHAN                   ..... Petitioner
                      Through: Mr. Sarat Chandra, Mr. Sachin Chandra
                               and Mr. M.B. Singh, Advocates.

                           versus

        PARSVNATH DEVELOPERS LTD.                              ..... Respondent

         CORAM: JUSTICE S. MURALIDHAR

                                     ORDER

15.03.2013

CA No. 402 of 2013 (for condonation of delay in re-filing the petition) For the reasons stated in the application the delay in re-filing the petition is condoned.

The application stands disposed of.

Co. Pet. No. 118 of 2013 and CA No. 401 of 2013 (for appointment of Provisional Liquidator)

1. The Petitioner, Captain Vijender Singh Chauhan who was working as Senior General Manager-Projects of the Respondent company, Parsvnath Developers Limited ('PDL'), seeks its winding up in this petition under Section 433(e) read with Sections 434 and 439 of the Companies Act, 1956 ('Act') on the ground of the inability of PDL to pay the debt owing to him.

2. By a letter dated 28th March 2008, the Petitioner was appointed to the above post with total emoluments of Rs.1,92,333 per month i.e. basic pay

Rs.1,28,000 and HRA Rs.64,333 per month besides medical benefits, car with driver, mobile phone and other benefits and perks as applicable to an officer of an equal rank.

3. There was a reduction of the Petitioner's salary from November 2008 to Rs.1,56,247 per month by a letter dated 21st November 2008. According to PDL the Petitioner consented to this re-fixation without any protest at that time.

4. In September 2012, the Vice President-Projects of PDL asked the Petitioner to resign with immediate effect if a lower salary was not acceptable to him. On 10th October 2012, the Petitioner sent in his resignation letter to PDL by e-mail. By a separate mail of the same date addressed to PDL he claimed the arrears of salary to the extent of Rs.52,77,987.46 by calculating the salary as originally fixed at the time of his appointment. While his resignation was accepted there was no reply by PDL as such to the other letter of the same date claiming arrears of salary.

5. On 1st December 2012, the Petitioner sent a legal notice under Sections 433 and 434 of the Act. In this notice the Petitioner claimed that he had come to know that PDL was having debts to the tune of Rs.2,000 crores and was unable to pay the salary dues of staff and debts to its other creditors. On 8th December 2012, PDL wrote to the Petitioner stating that a sum of Rs.4,45,200 was paid to the Petitioner "as full and final settlement of your claims as former employee of the company". In its reply dated 26th December 2012, PDL took the stand that it had never assured to pay the

Petitioner the arrears of salary as claimed by him. In para 7 of the above reply it was stated as under:

"7. That the contents of Para 8 of your legal notice are wrong and denied. In this regard, we would like to refer to your Client's letter dated 24.11.2012, wherein your Client has duly acknowledged receipt of Rs.4,45,200/- (Rupees Four Lakhs Forty Five Thousand Two Hundred only), which was tendered to your Client pursuant to your Client's resignation. This amount was paid to your Client in full and final settlement of all his dues and claims. It is reiterated that vide letter dated 21.11.2008, your Client's salary was re-fixed from Rs.2,08,309 (Rupees Two Lakhs Eight Thousand Three Hundred Nine Only) to Rs.1,56,247/- (Rupees One Lakhs Fifty Six Thousand Two Hundred Forty Seven Only) due to economic meltdown in the India specially in the real estate sector. It was specifically stated in the said letter that your Client's salary was being re-fixed, the other terms as contained in the Appointment letter remaining the same. It is strange that your Client remained quiet for such a long time since 2008 and now, after having tendered his resignation. Therefore, there is no occasion to make payment of any differential amount for any period, much less the amount claimed on behalf of your Client in the para under reply."

Again in para 9 it was stated as under:

"9. That the contents of Para 10 of your legal notice are wrong and denied. Our Client has already made the payment of all your Client's legitimate dues in full and final settlement. In any event, the alleged amount as claimed in the notice under reply is not debt within the meaning of Section 433 & 434 of the Companies Act, 1956 by any legal standards. Hence, it is reiterated that the provisions of Section 433 & 434 of the Companies Act, 1956 are not attracted."

6. Mr. Sarat Chandra, learned counsel appearing for the Petitioner relied on the decision of the Supreme Court in National Conduits (P) Ltd. v. S.S. Arora 1967 (37) Company Cases 786 to explain the scope of the powers of the Court in a winding up petition. He referred to Rule 96 of the Companies (Court) Rules, 1959 which reads as under:

"96. Admission of petition and directions as to advertisement - Upon the filing of the petition, it shall be posted before the Judge in Chambers for admission of the petition and fixing a date for the hearing thereof and for directions as to the advertisements to be published and the persons, if any, upon whom copies of the petition are to be served. The Judge may, if he thinks fit, direct notice to be given to the company before giving directions as to the advertisement of the petition."

7. Mr. Chandra laid emphasis on the observation of the Supreme Court to the following effect:

"When a petition is filed before the High Court for winding up of a company under the order of the court, the High Court (i) may issue notice to the company to show cause why the petition should not be admitted; (ii) may admit the petition and fix a date for hearing, and issue a notice to the company before giving directions about advertisement of the petition; or (iii) may admit the petition, fix the date of hearing of the petition, and order that the petition be advertised and direct that the petition be served upon persons specified in the order. A petition for winding up cannot be placed for hearing before the court, unless the petition is advertised; that is clear from the terms of rule 24(2). But that is not to say that as soon as the petition is admitted, it must be advertised. In answer to a notice to show cause why a petition for winding up be not admitted, the company may show cause and contend that the filing of the petition amounts to an abuse of the

process of the court. If the petition is admitted, it is still open to the company to move the court that in the interest of justice or to prevent abuse of the process of the court, the petition be not advertised. Such an application may be made where the court has issued notice under the last clause of Rule 96, and even when there is an unconditional admission of the petition for winding up. The power to entertain such an application of the company is inherent in the court, and Rule 9 of the Companies (Court) Rules, 1959, which reads: "Nothing in these Rules shall be deemed to limit or otherwise affect the inherent powers of the court to give such directions or pass such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court," iterates that power."

8. As far as the above decision is concerned, this Court would like to note that it does not suggest that once a winding up petition is filed, notice is to be automatically issued in the petition. The Supreme Court has been careful to observe that "the High Court may issue notice" to the company and "may admit the petition". In other words, nothing in the above decision suggests that issuance of a notice in a winding up petition is automatic. On the other hand, it is clear that the discretion of the Court not to issue notice if it feels that no case is made out by the Petitioner is recognised.

9. Reliance was next placed by Mr. Chandra on the decision of the Supreme Court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. 1972 (42) Company Cases 125. In the above decision, the

Supreme Court explained what would constitute inability of a company to pay its debts and observed as under:

"Two rules are well settled. First, if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. (See In re London and Paris Banking Corporation [1874 L.R. 19 Eq.

444). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed. (See In re Brighton Club and Norfolk Hotel Co. Ltd. [1865] 35 Beav. 204).

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 particular debt. (See In re A Company [1894] 94 S.J. 369). 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. (See In re Tweeds Garages Ltd. [1962] Ch.

406). The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends".

10. In the present case it is not possible to conclude at this stage and in the facts noted hereinbefore that the debt as claimed by the Petitioner is "undisputed". It is also not possible to come to the conclusion at this stage

without any further examination of evidence that the defence of PDL is not in good faith and without substance. The submission of Mr. Chandra that even at this stage the burden is on PDL to show that its defence is likely to succeed in a point of law and that it has to prima facie prove the facts on which its defence depends, is not acceptable. That stage would arrive after the Petitioner is able to satisfy the Court, even prima facie, that the debt is undisputed and that the Respondent is unable to pay the debt.

11. It is finally submitted that what is claimed by the Petitioner is not a very substantial sum and that notice should anyway be issued to PDL. A winding up petition cannot be converted into one for recovery of money without the essential conditions of Section 433 of the Act being satisfied. [See Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami (1965) 35 CC 456 (SC)].

12. For the aforementioned reasons, the Court is not satisfied that the Petitioner has made out a prima facie case under Section 433 of the Act for grant of relief. Leaving it open to the Petitioner to avail of any other remedy as may be available to him in accordance with law, the petition and the pending application are dismissed.

S. MURALIDHAR, J.

MARCH 15, 2013 dn