Gujarat High Court
Ambica Ginning Pressing Pvt Ltd vs Amazon Ceramics Limited on 5 February, 2025
Author: Biren Vaishnav
Bench: Biren Vaishnav
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/O.J.APPEAL NO. 17 of 2014
In
R/COMPANY PETITION NO. 86 of 2010
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE DEVAN M. DESAI
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Approved for Reporting Yes No
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AMBICA GINNING PRESSING PVT LTD
Versus
AMAZON CERAMICS LIMITED
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Appearance:
MR.PAVAN GODIAWALA, ADVOCATE for RC JANI & ASSOCIATE(6436) for
the Appellant(s) No. 1
MR.JAY KANSARA, ADVOCATE for M/S WADIAGHANDY AND CO(5679)
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE DEVAN M. DESAI
Date : 05/02/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This OJ Appeal has been filed by the original
petitioner Ambica Ginning Pressing Pvt. Ltd.
challenging the oral order dated 15.10.2013
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passed by the learned Single Judge, by which,
the Company Petition filed by the appellant was
dismissed.
2. Facts in brief are as under:
2.1 The appellant company registered under the
Companies Act, 1956, ('the Act' for short)
approached this Court by filing a petition under
Sections 433 and 434 of the Act. It was the case
of the appellant company that since the
respondent company was in need of financial
help and as one of the directors of the petitioner
company was also one of the directors of the
respondent company, financial help of Rs.1.25
crores was given by way of seven different
cheques on 01.04.2004 and 31.03.2005. It was a
case of the appellant company that out of the
said amount, only Rs.35 lakhs has been repaid by
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the respondent company. According to the
appellant therefore since the respondent
company had not paid the outstanding dues, it
was unable to pay its debts and the appellant
filed the captioned company petition after giving
a statutory notice under the provisions of the
Act.
3. After hearing learned counsel for the respective
parties, the learned Single Judge dismissed the
petition holding that the legal notice dated
05.04.2010 as well as notice dated 19.04.2010
were not notices in compliance of provisions of
Section 434 as the notices were defective and it
was not the company who has given such notices
but an individual Mr.N.P.Patel and similarly the
recipient of the notice were also individuals who
were described as Directors and it was not to the
respondent company.
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4. On the second aspect, the learned Single Judge
held that the petition involved disputed questions
of facts and therefore it was not possible to reach
to a conclusion that the amount which the
appellant claims has, in any manner and in any
terms become due and payable.
5. Mr.Godiawala learned counsel for R.C.Jani &
Associate learned advocates for the appellant
made the following submissions:
5.1 Taking us through the order of the learned
Single Judge, and thereafter reading the notices
dated 05.04.2010 and 19.04.2010, Mr.Godiawala
learned counsel for the appellant would submit
that the learned Single Judge committed an error
in holding that the notices were issued by the
individual and not the company. Mr.Godiawala
would submit that reading the notice as a whole
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clearly indicated that the notice in fact was
issued after the resolution authorizing Shri
Narsinhbhai Patel was passed by the company
and the notice therefore categorically pointed
out that amounts were due and payable to the
company Ambica Ginning Pressing Pvt. Ltd. from
the respondent Eureka Tiles Ltd. The notice was
therefore in compliance with the statutory
provision, particularly Section 434(1)(a),
434(1)(c) of the Act.
5.2 Mr.Godiawala would submit that the
unjustified emphasis by the learned Single Judge
on the language of the notice "My client
Narshibhai Patel and such emphasis highlighted
by the learned Single Judge to conclude that the
notice was given by an individual Narshibhai
Patel and not the petitioner company is clearly
misconceived.
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5.3 Mr.Godiawala would further submit that the
finding of the learned Single Judge that there
was non-compliance as the notice was not served
on the respondent company, but to the Directors
of the company is misconceived and must
therefore be set aside.
5.4 Mr.Godiawala would further submit that the
learned Single Judge had inherently contradicted
himself in ousting the petitioner from this
preliminary ground and then while going into the
merits held that even on merits the appellant had
no case and the finding of the the learned Single
Judge that since the disputed questions are
involved, the petition be dismissed is a finding
contrary to law and facts. He would submit that
the transactions of loan advanced to the
respondent was clearly admitted. He would take
us to the affidavit where TDS certificate was
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annexed showing tax deducted at source on the
interest amount issued. The notes forming part
of the account for the year ended 31.03.2009
also reflected the outstanding amount. Reading
the MOU dated 25.08.2009, learned counsel
Mr.Godiawala would submit that clause 4 of the
agreement categorically stated that postdated
cheques were issued in favour of the appellant.
There was no defense to the statutory notice and
the only response that the appellant company
received is that the respondent's directors were
not in debt to the appellant company.
5.5 Mr.Godiawala would further submit that
even otherwise if a notice was issued in the name
of Narshibhai Patel, admittedly the individual
work of the directors of the company and the
notice is deemed to be issued by the appellant
company and not an individual. There was full
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compliance of the statutory mandate under
Section 433 of the Act. There was also
compliance of the provisions in as much as on
demand being made and in absence of any
defense, a statutory presumption did arise that
the company was unable to pay its debts. The
documents produced by the appellant company
were overlooked.
5.6 Mr.Godiawala in support of his submissions
would rely on the following decisions:
I. In case of Harinagar Sugar Mills Ltd. v.
M.W. Pradhan reported in AIR 1966 SC 1707.
This decision was relied upon in order to support
his submission that when a demand has been
made, it need not be made that the demand
should specify that the creditor is entitled on
amounts from the company and only the creditor
should be paid.
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II. In case of Luxmi Industrial Gases Private
Limited v. Punjab Chemi Plant International
Ltd. reported in [2001] 103 Comp Cas 429
(P&H), relying on head note he would submit
that even if the notice is served through the
directors, it satisfies the substantial compliance
of the provisions of Section 434 of the Act.
III. He would rely on this judgement to support
his case that there was no reasonable defense
and the learned Single Judge committed an error
in coming to the conclusion that the petition
involved the disputed question of facts. Relying
on para 25 of the aforesaid decision,
Mr.Godiawala would submit that once
indebtedness is proved, a petition cannot be
thrown out on the preliminary issue.
IV. Relying on the said decision Mr.Godiawala
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would submit that the learned Single Judge
overlooked the documents on record which
clearly demonstrated that the debt had become
due and payable. He would submit that the
learned Single Judge overlooked the contents of
the notice as a whole. He would submit that the
statutory demand notice fulfilled the mandatory
criteria and a demand was unequivocally made in
the notice and served on the registered premises
of the company.
V. Relying on the observations of the
Charlsworth's company law, Mr.Godiawala would
submit that the creditor must prove that the
demand notice was left at the company's
registered office if it is put in post, it is properly
served if delivery is accepted or proved. He
would therefore submit that the learned Single
Judge ought to have allowed the petition.
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6. Mr.Jay Kansara learned counsel for M/s
Wadiaghandy and Co. learned advocates for the
respondent would make the following
submissions:
6.1 Mr.Kansara would submit that the learned
Single Judge committed no error in dismissing
the company petition. He would submit that,
reading the notice dated 05.04.2010 and
19.04.2010 would apparently indicate that the
mandate of Section 434 of the Indian Companies
Act, 1956 was not complied with. Evidently,
from reading the notices, it was clear that it was
given by one Narshibhai Patel, an individual and
not by the company. Moreover, the recipients of
the notice to whom it was addressed were
individual directors one amongst them being the
Managing Director, the notice was not addressed
to the company at registered office which was a
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second breach of a mandatory nature. He would
rely on the reply filed by the company-
respondent to make his submissions. He would
submit that the proceedings were misconceived
at the hands of one Shri J.B.Patel - a director who
was removed from the company as he was
working against the interest of the company and
its shareholders and investors.
6.2 Mr.Kansara would further submit that
reliance placed on the MOU is misconceived as
the company has never entered into any MOU
with the petitioner company. On merits,
Mr.Kansara would submit that no legitimate
debts are due and payable to the petitioner
company. The entire amount received from the
petitioner company had been paid and therefore
there was no outstanding amount payable to the
petitioner.
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6.3 Mr.Kansara would also rely on the affidavit
filed pursuant to an order dated 12.08.2011. He
would submit that as per the order dated
12.08.2011 where the company was directed to
produce the certificate issued by the bank,
statements from Punjab National Bank, HDFC
Bank, State Bank of India, Bank of India and
Union Bank of India suggested that amount has
already been paid.
6.4 In support of his submissions, Mr.Kansara
would rely on the following decisions to submit
that provisions of Section 434 are mandatory in
nature. That when there is evidence on record
to suggest that debt shall be paid, the learned
Single Judge committed no error that there was a
bona-fide dispute with regard to the liability and
hence the appropriate forum to settle the dispute
will be a Civil Court. Especially emphasizing on
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a decision of the High Court of Delhi in case of
Sanjiv Kumar Mittal v. Deputy
Commissioner (TRC), CGST
Commissionerate, Delhi South and others
reported in (2021) 84 GSTR 124, Mr.Kansara
would submit that it is well settled that a
company is a distinct juristic entity and therefore
the distinction between the company and the
director cannot be jettisoned.
7. Having considered the submissions made by the
learned counsel for the respective parties, the
preliminary issue on which we are called upon to
decide is a question whether the notice dated
05.04.2010 and 19.04.2010 issued by the
appellant company can at all be said to be a
notice given by the company-appellant herein.
7.1 In accordance with provisions of Section
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434(1a) of the Act, it is clear that if a creditor to
whom is company is indebted has served on the
company by causing to be delivered at its
registered office a demand under his hand,
requiring the company to pay the sum so due and
the company has for three weeks thereafter
neglected to pay the sum, a company petition can
be filed if there is no defense from the debtor
company. Admittedly the case set out by the
appellant is that the company viz. Ambica
Ginning Pressing Pvt. Ltd. had advanced
financial assistance to the respondent company
through various cheques for the period from
1.4.04 to 31.3.05. Undisputably therefore it was
a company therefore which has let out the
assistance and not any individual. Though
admittedly there is a resolution of the appellant
company entitling Shri Narshibhai P. Patel a
Director of the company auhtorizing him on
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behalf of the company to present a petition for
winding up of the respondent company, one
needs to undertake the exercise of appreciating
the language of two notices. We have the
benefit of such dissection of the language of the
notices which has been carried out by the
learned Single Judge and it will be in the fitness
of things to set out the extract of notice and the
reasoning in that context by the learned Single
Judge. Paras 7 to 9.5 read as under:
"7. In the notice dated 5.4.2010, it is
mentioned, inter alia that:-
Under the instructions and documents supplied
by my client Narsinhbhai Pathubhai Patel, aged
55 years, Director of Ambica Genning Pressing
Pvt. Ltd. situated at Idar Himmatnagar
Highway, Saparwada-383430 Tal: Idar, Dist.
S.K. (Gujarat) herein, I am addressing you as
under.....
(emphasis supplied)
7.1 The said notice further recites, in
paragraph No.1, that:-
1. My client being a Director of Ambica
Genning Pressing Pvt. Ltd. had given an
amount by way of a loan by 7 (seven) separate
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cheques for which, the details are mentioned
below.......... (emphasis supplied)
7.2 In the said notice it is further mentioned
that:-
10. My client had issued a legal notice by RPAD
on 7.10.2008 for calling upon you to discharge
the account and you did not reply to the same
and therefore my client was constrained to file
a Company Petition No. 19/09 before the
Hon'ble High Court under the provisions of
Section 433 and 434 of the Companies Act,
1956. (emphasis supplied)
7.3 From the above mentioned averments in
the notice dated 5.4.2010 it becomes clear
that notice is given by and on behalf of and
in the name of individual i.e. Narsinhbhai
Pathubhai Patel and not by the petitioner
company.
7.4 Therefore, the said notice dated
5.4.2010 cannot be said to have been issued
and served by the petitioner company.
7.5 Furthermore, the said Mr.N.P. Patel has
described himself as director of the
company, however any resolution
authorizing the said Mr. N.P. Patel to give
financial help on behalf of and from the
funds / accounts of the petitioner company
in the sum of Rs.1.25 Crores to the
respondent company is not placed on
record.
7.6 Actually that is not even the case of the
petitioner in the petition.
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7.7 There is no material to show that the
said Mr. Patel was duly authorized by
company to enter into the said transaction
and the petitioner has not even made such
case in the petition.
7.8 Moreover any resolution authorizing the
said person Mr. N.P. Patel to issue notice on
behalf of the petitioner company is also not
placed on record.
8. Besides this, the averment made in
paragraph No.1, 10 and 12 clearly
demonstrate that the notice has been issued
in the name of and on behalf of and by the
said individual Mr. N.P. Patel and not by the
petitioner company. It is pertinent that in
paragraph No.12 it is averred that:-
12. My client Mr. N.P. Patel obtained a
data from the ROC, Ministry of Corporate
Affairs and came to know from the balance
sheet dated 31.3.2009 that the funds and
fixed assets were shown as Net block of
Rs.23,91,23,297/- wherein the loan funds
(secured loan and unsecured loan) were
shown as Rs.28,11,28,748/- and current
liability loan was shown as
Rs.4,95,41,798/-. It also came to know
from the records that since last 5 years,
the company is not able to meet with the
liabilities as you have submitted the
income tax return to the ROC is shown as
under:-
8.1 Then in paragraph No.13 it is further
alleged that:-
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13. Hence, my client is calling upon by
this notice that in view of the last demand
for the year 2009-2010 of Rs.98,12,599/-
which is yet unpaid though three MOU
were executed between the parties, you
have sent 48 cheques of Rs.2,00,000/-
each without signatures and which was
sent to you for signature, you have
engaged a lawyer who filed a reply but
under the company law notice is required
to be served to you at the registered office
of my client has withdrew the earlier
notice.
8.2 From the said averments it emerges that
it was the said individual who claimed the
amount and who issued the Notice and who
called upon the respondent by Notice and
not the petitioner company.
9. More important part of this defect is that
from the title of the notice dated 5.4.2010 it
also emerges that the notice is addressed to
individual who are described as Directors.
However, in the manner in which the notice
is addressed, it cannot be said that the
Notice is issued, to and against, the
respondent company.
9.1 In paragraph No. 1 of the notice it is
averred that My client being a Director of
Ambica Genning Pressing Pvt. Ltd. had
given an amount by way of a loan by 7
(seven) separate cheques for which, the
details are mentioned below.
9.2 Thus, from plain reading of the said
averement it emerges that it is clearly
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claimed and asserted that it is Mr.
Narsinhbhai Pathubhai Patel who had given
the said cheques by way of loan.
9.3 Thereafter, in paragraph No. 10 it is
averred that My client had issued a legal
notice by RPAD on 7.10.2008...... It is also
mentioned in the said notice dated 5.4.2010
that under the instructions and documents
supplied by my client Mr. Narsinhbhai
Pathubhai Patel..... When the said
averments in paragraph No.10 are read
conjointly with the submission made in
preamble of the notice then it emerges that
the expression my client is related to the
name which is mentioned in the preamble of
the notice i.e. Mr. Narsinhbhai Pathubhai
Patel.
9.4 Thereafter from the averments in
paragraph No.12, the aforesaid aspect
becomes more clear because it is averred
that My client Mr. Narsinhbhai Pathubhai
Patel obtained data from ROC........"
9.5 Thus, it is clear that the notice is given
by and on behalf of and in the name of said
Mr. Narsinhbhai Pathubhai Patel."
7.2 On the first aspect on the company having
issued a notice, what is evident is that what is
perceived by the learned Single Judge and in our
rightly so is that the notice was issued by the
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individual Narshibhai Patel by and in his name
and not by the company.
7.3 Mr.Godiawala learned counsel for the
appellant would want us to accept his submission
that though the notice was addressed by a
company to a company on account of the title of
the notices and expect us to accept his
submission that the director issuing a notice and
the recipient be addressed as the Managing
Director being admitted his substantial
compliance of the provisions of Section 431 of
the Companies Act for which he has relied on the
decision of Punjab and Haryana High Court in
case of Luxmi Industrial Gases Private
Limited (supra), one cannot loose sight of the
fact that it is well settled that the company is a
distinct juristic company separate from its
director. The decision pressed into service by
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Mr.Kansara of Sanjiv Kumar Mittal (supra).
Paras 20 and 21 of the judgement read as under:
"20. It is well-settled that a company is a
distinct juristic entity, separate from its
Directors. In Bacha F. Guzdar, Bombay vs.
Commissioner of Income Tax, Bombay, AIR
1955 SC 74, the Supreme Court has held as
under:- "9. It was argued that the position of
shareholders in a company is analogous to
that of partners inter se. This analogy is
wholly inaccurate. Partnership is merely an
association of persons for carrying on the
business of partnership and in law the firm
name is a compendious method of
describing the partners. Such is, however,
not the case of a company which stands as a
separate juristic entity distinct from the
shareholders. In Halsbury's Laws of
England, Vol. 6 (3rd Edn.), p. 234, the law
regarding the attributes of shares is thus
stated: "A share is a right to a specified
amount of the share capital of a company
carrying with it certain rights and liabilities
while the company is a going concern and in
its winding up. The shares or other interest
of any member in a company are personal
estate transferable in the manner provided
by its articles, and are not of the nature of
real estate." (emphasis supplied)]
21. From the above extract, it is apparent
that the distinction between a company and
its Director cannot be jettisoned unless
there is a specific statutory provision to the
contrary or till a case for lifting of the
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corporate veil is made out. Section 87(b)(i)
of the Finance Act provides for a garnishee
order only - i.e. provides for attachment of
funds of an assessee lying with third parties.
There is no provision in the Finance Act
making an ex-director, even if having
knowledge of affairs of the company,
vicariously or jointly liable for the dues of
the company."
7.4 Apparently therefore, when reading the
statutory notice expressly indicates that it was by
an individual to an individual and not from a
company to a company, the mandate of Section
434 was not complied with.
7.5 It was in this background that the learned
Single Judge, in our opinion, rightly so came to a
conclusion that when the statutory notice was
not in compliance from the mandate, it cannot be
said to be a valid notice so as to trigger the filing
of a winding up petition. In coming to this
conclusion, we also have a benefit of the
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judgement of the very same learned Single Judge
in case of HBO+EMTB Private Limited v.
rendered in Company Petition No.120 of
2011, wherein, referring to Section 434 of
Companies Act, the learned Single Judge held
thus:
"13. So as to appreciate this aspect, it is
necessary to take into account the provision
under Section 434 of the Act, which reads
thus:-
"Section 434. Company when deemed unable to
pay its debts-
(1) A Company shall be deemed to be unable
to pay its debts-
(a) if a creditor, by assignment or otherwise,
to whom the company is indebted in a sum
exceeding (One Lakh Rupees) then due, has
served on the company, by causing it to be
delivered at its registered office, by
registered post or otherwise, a demand under
his hand requiring the company to pay the
sum so due and the company has for three
weeks thereafter neglected to pay the sum, or
to secure or compound for to the reasonable
satisfaction of the creditor; (Emphasis
supplied)
14. On perusal of the provision, it
becomes clear that the Section postulates,
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as condition for maintaining petition for
winding up, that the claimant-creditor
(a) must serve a demand to the debtor
company, and;
(b) such demand must be made in
writing/under his hand and the company
must be asked to pay the dues, and;
(c) such demand, issued/made in aforesaid
manner, must be served "On the company"
(i.e. not on any person like any
Officer/Manager/Director/Employee etc. but
only on the company), and;
(d) such demand must be delivered at the
"Registered Office" of the company.
14.1 Thus, not only the demand must be
made in the manner aforesaid by the
claimant-creditor under his hand and it
must be also served on the company and it
must also served and delivered "on the
company", but, it must be also served
delivered only at its "registered office".
Now, so far as "Registered Office" is
concerned, the provision under sub Section
3 of Section 10 of the Act defines the term
"Registered Office" for the purpose of
winding-up proceedings/petition. The
relevant part of said section 10 reads thus:-
Section 10. Jurisdiction of Courts:-
(1) The Court having jurisdiction under this Act
shall be -
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(a) .....
(b) .....
(2) ......
(a) .....
(b) .....
(3) For the purpose of jurisdiction to wind up
companies, the expression "registered office"
means the place which the longest been the
registered office of the company during the six
months immediately preceding the presentation
of the petition for winding up.
In the present case, even according to the
petitioner, the registered office of the
respondent company has always been at
Ahmedabad at the address mentioned in the
petition.
Thus, the notice-demand must have been served-
delivered only at "Registered Office" i.e. at
Ahmedabad.
14.2 Hence, for determining the issue about
maintainability of petition seeking winding-up, it
is necessary to ascertain whether the demand is
made by the creditor in the manner
contemplated under Section 434 or not and
whether the demand was made "on the
company" and whether it was duly delivered at
its "Registered Office" (as defined under Section
10 of the Act) or not.
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14.3 This aspect is important also because even
the territorial jurisdiction of the Court depends
on the location of "Registered Office" (as per
Section 10 of the Act).
14.4 The delivery of the demand i.e. the
statutory notice at "Registered Office" (as
defined under Section 10 of the Act) mandatory
and service-delivery of the demand (i.e. the
statutory notice) at any place-office other than
"Registered Office" is not and can not be treated-
termed as proper service-delivery and/or
compliance of the statutory obligation-condition
prescribed by law.
14.5 In view of specific requirement regarding
"service-delivery" of statutory at "Registered
Office" (as defined-contemplated under Section
10 of the Act) mandated by virtue of Section 434
of the Act as contemplated under Section 434 of
the Act at any place-office other than the
Registered Office (as defined and contemplated
under Section 10 of the Act) can not be treated
or even deemed as "proper service" as required
by law.
14.6 In light of settled position that when the
statute requires particular act to be done only in
particular prescribed manner then it must be
done only in that manner and not otherwise,
when in present case, the provision (Section 434
of the Act) requires delivery of statutory notice
and also requires such delivery service in
particular manner and/or at particular place then
the service-delivery must be effected only in that
manner and not in any other manner. The defect
cannot be treated as more irregularity and it can
be cared only after service-delivery of the
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statutory demand-Notice in prescribed and
specified manner. A winding up petition can be
maintained only thereafter.
15. So far as the issue about "Statutory Notice"
i.e. demand and its service delivery at
"Registered Office" is concerned, it is also
noticed that even the invoice nos. 7 & 8 dated
06.06.2008 and 25.08.2008 and the letter dated
19.06.2009 (Annexure-E, Page-45) were also
forwarded at the Mumbai office. Besides this the
Notice (styled as statutory notice under Section
434 of the Act) dated 03.08.2009 (Annexure-F
Page-48) also was forwarded to Mumbai Office
i.e. at Mumbai address and not at Registered
Office. The C.C. was also sent to Mumbai even
the invoice no.10 (dated 03.09.2009) was
forwarded to Mumbai Office/at Mumbai address.
Similar is the fact related to the Notice dated
23.09.2010 (Annexure-H, Page-52), which also
was sent to Mumbai office/at Mumbai address.
The letter dated 21.10.2010 was also forwarded
to respondent's Mumbai office/at Mumbai
address. Subsequently the Notice (which also
was styled as Statutory Notice under Section 434
of the Act) dated 22.11.2010 (Annexure-J, Page-
56) also was forwarded at respondent's Mumbai
office/Mumbai address. All the aforesaid
correspondence, invoices and "Notice/s" were
forwarded to respondent's address/at Mumbai
office and not at the Registered Office and still
for some undisclosed reasons, the petition is filed
in in this Court. The Statutory Notice is not
delivered-not even forwarded at the Registered
Office of the respondent-company. Then comes
the letter dated 20.12.2010 (Annexure-L, Page-
60) wherein at the end of the letter, it is stated
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that it is "Notice" under Section 434 of the Act",
which contains reference/mention of both
addresses. However, the Notice which was
forwarded at the address/premises (at
Ahmedabad), which the petitioner claims to be
the Registered Office of respondent-company
(address of its Registered Office) has not been
served and according to the petitioner, it is
returned unserved. Only on the strength of the
said letter dated 20.12.2010 (Pg.60) wherein at
the end, it is stated that the said letter is notice
under Section 434 of the Act, the petition is filed
in this Court.
16. Learned advocate has, to assert that it is
returned unserved, relied on the document at
Page-62 (Annexure-M), which carries a remark
"no such C/o." Whether the remark is put/made
by postal person/authority or not, actually what
is the meaning of the abbreviation/remark "C/o"
etc. are subject matter of evidence.
17. It is alleged and claimed that it is put by
posted authorities however, the said remark
does not bear or is not accompanied by any
signature and/or date, thus, it cannot establish
that "When" and "By Whom" such remark is
made. Hence, it cannot be construed as "due
service/delivery or "deemed service/delivery" as
recognized by law.
18. In the present case the statutory notice is
not duly served at respondent's Registered
Office. Therefore, petition is not maintainable
and does not deserve to be entertained. Actually
it is not maintainable mainly on two counts.
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(A) Statutory notice is not served and
delivered at the "Registered Office" of
the Company.
(B) Respondent's reply in response to
petitioner's notice gives out, and it
transpires from respondent's reply that
there is dispute about alleged dues and
is raised contemporaneous and the
dispute prima-facie does not appear to
be sham and it also appears that the
dispute would require evidence, oral
and documentary, to establish the claim
and to prove the defence.
19. So far as the reason at point number
(A) above is concerned, as noted above, the
learned advocate for petitioner is relying on
the document at Page.62, which merely
records the remark "No such C/o". The said
remark by the courier does not indicate that
and cannot be construed as the service nor
does it indicated and cannot be construed
that the delivery of notice was "refused".
19.1 The petitioner is unable to get the
notice duly served cannot be treated as
refusal or proper service. The petitioner has
not come with the case that the Company
has closed down its affairs and/or closed
down its registered office, and therefore,
notice was not served.
19.2 The petitioner has not asserted or
averred that the respondent has shifted its
Registered Office (as contemplated under
and within the meaning of Section 10 of the
Act) within last six months. There are
neither sufficient averment and/or material
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to warrant and justify inference of refusal,
which would tantamount service. Thus, the
fact remains that the notice is not served
and cannot be treated or deemed to have
been served as required and contemplated
by Act.
20. Beside aforesaid aspects, so far as the
reason at point number (B) is concerned, it
is relevant to note that in response to the
rd
petitioner's letter dated 23
September,2010, the Respondent-Company
appears to have given reply vide its
th
communication dated 9 December,2010,
wherein the respondent-Company has,
interalia, stated that :-
"At the very outset, we are shocked
and surprised to receive your notice
under reference as after various
meetings and negotiations
regarding the pending payments to
your client. We had mutually agreed
and arrived at an amount of
Rs.39,21,345 as full and final
payment to your client; and the
same was recorded by your client
st
vide their letter dated 21
October,2010, and its attached
claim no.10. Please note that we
have paid AUD$ 86078.30, which is
equivalent to Rs.39,21,345 at
current exchange rate and which is
already agreed by your client.
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The said amount of Rs.39,21,354
st
was paid by us on 21
October,2010, the copy of the proof
of the payment made to your client
is attached herewith for your ready
reference.
In the circumstances, we deny that
we are liable to make any payment
to your client, as alleged by you in
your Notice. We are not replying to
your notice paragraph wise but
nothing contained in your Notice
under reference be deemed to be
admitted or accepted by us."
(Emphasis Supplied)
20.1. Upon consideration of the above noted
response by the Opponent-Company, it
prima-facie appears that there is an existing
dispute between the parties, which would
necessitate evidence, oral as well as
documentary by both the contesting parties
to establish the claim and to prove the
defence, in as much as the respondent-
company has, interalia, claimed that amount
of Rs.39,21,345/- i.e. AUD$ 86,078.30/- was
the amount, which was agreed between the
parties as the amount to be paid in full and
final settlement of claim whereas it is the
case of the respondent that the said amount
has been paid by it, and therefore, the
payment has to be considered as full and
final payment.
20.2 The fact that the opponent has paid the
said sum of Rs.39,21,345/- is admitted by
the petitioner.
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20.3 Now that therefore, whether the
Opponent-Company was required to pay the
said amount of Rs.39,21,345/- in foreign
currency i.e. Australian Dollars or in Indian
Currency and if in Forex then whether the
equivalent Australian Dollors (i.e. equal to
Rs.39,21,345) was agreed to be calculated
for the purpose of payment at the exchange
rate, which was prevailing on the actual
date of payment or at the rate prevailing on
the date on which the agreement was
arrived at between the parties, do not come
out clearly from the material placed on
record by Petitioner-Company. However, the
petitioner Company seeks to claim that (a)
the balance of amount was to be paid in
Forex and that the petitioner is short paid.
Whereas the respondent company has
claimed that the amount agreed to be paid
in full and fixed payment of pending claim,
has been paid by it pursuant to and as per
the agreement hence, the allegation about
the pending claim is incorrect. Thus, (a) the
said aspects-details are matter of evidence;
and (b) The said issues constitute bonafide
dispute and consequently a triable defence."
7.6 That brings us to the second aspect on
which the learned Single Judge has opined that
the notice was also not delivered to the
registered office of the company. Reading the
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notice dated 19.04.2010, it becomes expressly
clear that the notice was addressed to the
individuals and it was C/o M/s.Eureka Tiles Ltd.)
Apparently therefore the notice was not
addressed to the company at the registered
office. In this context, we have the benefit of the
reasoning set out by the learned Single Judge.
Paras 9.6 to 9.21 read as under:
"9.6 Besides this, as mentioned earlier the
said notice is addressed to individual and
not to the respondent company.
9.7 Meaning thereby, the statutory
requirement of issuing and serving Notice to
the debtor defendant company is not
complied. Notice to the directors cannot be
termed as Notice to the company.
9.8 Similarly a Notice by an individual
director and that too without proper
authorization by the company cannot be
said to be notice by the company.
9.9 Likewise advance / loan given by an
individual / a director without authorization
by the company cannot be said to be loan /
advance given by the company.
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9.10 It appears that the respondent replied
the said notice vide communication dated
26.4.2010 which reads thus:-
Dear Sir,
We are in receipt of your legal notice given
through Mr. Rashmin Jani, Advocate thereby
requiring us to pay an amount of Rs.98,12,599/-
alleged to have been given as loan to us.
In this connection, please be informed that as per
our record no amount as loan or otherwise has
ever been received from Mr. Narsinhbhai
Pathubhai Patel. Therefore, your notice is illegal
and we request you to withdraw the same
forthwith to avoid legal action that may be taken
against you in the matter for demanding an
amount which was never due and payable to you
from us.
9.11 From the said communication it
emerges that even the respondent
considered the said notice as having been
given on behalf of the said individual i.e. Mr.
Narsinhbhai Pathubhai Patel.
9.12 It appears that subsequently another
notice dated 19.4.2010 came to be issued.
The description of the said notice dated
19.4.2010 read thus:
To,
Eureka Tiles Ltd.
(Having its registered office
Registered under the Companies Act, 1956)
At:208 Sharthik-II, Opp. Rajpath Club,
S.G. Highway,
Ahmedabad-54
9.13 The said notice is issued to the
respondent company however, the said
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notice dated 19.4.2010 is also issued in the
name of and on behalf of Mr. Narsinhbhai
Pathubhai Patel i.e. individual and not the
petitioner company.
9.14 If the Notice is issued in name of and
by an individual, then he who issued and
serve the Notice can be the petitioner and
not the company which has not issued any
notice and has not made any claim.
9.15 In the opening part of preamble of the
said notice dated 19.4.2010 it is mentioned
that:
Under the instructions and documents supplied
by my client Mr. Narsinhbhai Pathubhai Patel.......
(emphasis supplied)
9.16 Thus, even the said notice dated
19.4.2010 cannot be construed as notice
issued by the petitioner company.
9.17 Like in the previous notice, in the
notice dated 19.4.2010 also, in paragraph
No.10 it is averred that:-
10. My client had issued a legal notice by RPAD on
7.10.2008...... (emphasis supplied)
9.18 Thereafter in paragraph No.12 of the
notice dated 19.4.2010 again it is mentioned
that
My client Mr. Narsinhbhai Pathubhai Patel obtained a
data from the ROC..... (emphasis supplied)
9.19 Said averments are followed by
averment in paragraph No.13 which reads
thus:-
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13. Hence, my client is calling upon by this notice that
in view of the last demand for the year 2009-2010 of
Rs.98,12,599/- which is yet unpaid though three MOU
were executed between the parties, you have sent 48
cheques of Rs.2,00,000/- each without signatures and
which was sent to you for signature, you have engaged
a lawyer who filed a reply but under the company law
notice is required to be served to you at the registered
office of my client has withdrew the earlier notice.
(emphasis supplied)
9.20 In the last paragraph i.e. paragraph
No.14 of the said Notice dated 19.4.2010
again it is mentioned that:-
Therefore, in view of the above mentioned facts
my client is giving this notice.... (emphasis
supplied)
9.21 Thus, from the notice dated 19.4.2010,
it becomes clear that the term my client
refers to Narsinhbhai Pathubhai Patel and
not the petitioner company and that
therefore said notice cannot be said to have
been issued by the petitioner company.
The aforesaid aspect is one of the major
defects in the petition."
7.7 The learned Single Judge, on the submission
of Mr.Godiawala, apart from dismissing the
petition on this preliminary ground, has
contradicted inasmuch as considered the merits
of the case. We with respect do not agree with
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the submission of Mr.Godiawala for the
appellant. As is evident from para 15.1 of the
decision of the learned Single Judge, it is very
categorically stated by the learned Single Judge
and in the words of the learned Single Judge we
say so. Para 15.1 of the judgement of the
learned Single Judge reads as under:
"15.1 It is also clarified that the Court has
not entered into merits of the petition and
the observations made in this order are only
for the purpose of ascertaining the issue
about maintainability of the petition in light
of the provisions under the Act and not
about the maintainability or otherwise of the
petitioner's claim."
7.8 It is therefore evident on reading the said
para that the merits have only been considered
for the purposes ascertaining about the
maintainability of the petition. We have been
taken through the record and having perused the
same extensively when it is the case of the
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appellant company that an amount is outstanding
from the respondent company towards the
financial assistance that is extended to the
respondent company, a counter has been filed by
the respondent company before the learned
Single Judge. Reading of the affidavit in reply
would indicate that apart from denying the
insistence of the MOU it is the case of the
respondent that by account statements produced
before the learned Single Judge it has been
pointed out that no legitimate dues have been
paid by the respondent company. We have also
been taken through the additional affidavit filed
pursuant to the order dated 12.08.2011 where
account statements have been produced to
indicate payments made by cheque to the
appellant company and discharge of the so called
financial assistance. It is therefore clear case in
which the amount of debt cannot be said to be
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undisputed. This very defense has been set out
by the respondent company and though
Mr.Godiawala would want us to accept his
submission in light of the decision of the Gujarat
High Court (sr. No.4), it is not a case where it
was a petition for enforcing a payment of a just
debt. When a valid defense has been raised by
a company and material is produced on record to
indicate full discharge, we do not find any error
in the learned Single Judge holding that it was
not a case befitting interference in a company
petition. In the case of B. Viswanathan v.
Seshasayee Paper and Boards Ltd. reported
in 1991 SCC OnLine Mad 525, we need to
reproduce paras 18 to 29 which read as under:
"18. It is also well-settled that, in a
summary proceeding like winding up, a
detailed investigation and adjudication of
the dispute should be avoided. This
principle has been laid down in the case of
G. Loganayaki v. Moolangudi Chit Funds P.
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Ltd [1979] 49 Comp Cas 644 (Mad) as
extracted above.
19. It is also equally well-settled that a
winding up petition is not a legitimate
means of seeking to enforce payment of a
debt which is bona fide disputed by a
company. A petition presented ostensibly for
a winding up order but really to exercise
pressure will have to be dismissed. This
principle has also been laid down in
Amalgamated Commercial Traders P. Ltd. v.
A. C. K. Krishnaswami [1965] 35 Comp Cas
456 (SC) as extracted above.
20. Therefore, I am of the opinion that the
debt is bona fide disputed by the respondent
and, therefore, it is not a fit case for
ordering winding up of the respondent-
company.
21. The notice dated September 9, 1989,
marked as exhibit P-9, issued by the
petitioner through his lawyer is addressed
to the managing director of the respondent-
company. The following is the address given
in the said notice:
"To
The Managing Director,
Seshasayee Paper and Boards Ltd.
Erode 638 007."
22. In this context, it is useful to reproduce
section 434 of the Act, which is as under :
"434. Company when deemed unable to
pay its debts. - (1) A company shall be
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deemed to be unable to pay its debts -
(a) if a creditor, by assignment or
otherwise, to whom the company is
indebted in a sum exceeding five
hundred rupees then due, has served on
the company, by causing it to be
delivered at its registered office, by
registered post or otherwise, a demand
under his hand requiring the company to
pay the sum so due and the company has
for three weeks thereafter neglected to
pay the sum, or to secure or compound
for it to the reasonable satisfaction of the
creditor;
(b) if execution or other process issued
on a decree or order of any court in
favour of a creditor of the company is
returned unsatisfied in whole or in part;
or
(c) if it is proved to the satisfaction of the
court that the company is unable to pay
its debts and, in determining whether a
company is unable to pay its debts, the
court shall take into account the
contingent and prospective liabilities of
the company.
23. Under section 434 of the Act, the
deemed inability to pay the debts will arise
when a creditor to whom the company is
indebted in a sum exceeding Rs. 500 has
served on the company by causing it to be
delivered at its registered office a demand
notice requiring the company to pay the
sum so due, and the company has, for three
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weeks thereafter, neglected to pay the sum
or to secure or compound it to the
reasonable satisfaction of the creditor.
Unless the statutory notice is in conformity
with the mandatory requirements of section
434(1)(a) of the Act, the presumption of
inability cannot be raised. In the present
case, the notice is addressed only to the
managing director and not to the company.
The registered office of the company is at
Pallipalayam, Salem District, as can be seen
from the postal index number code of
delivery post offices in Tamil Nadu circle,
marked as exhibit R-6; the pin code number
of Pallipalayam is 638 006. The notice
purporting to have been issued under
section 434 is not only one addressed to the
managing director, but also the pin code
number given is 638 007. Therefore, the
statutory exhibit P-9 notice does not
conform to the mandatory requirements of
section 434(1)(a) of the Act. The
consequences of the statutory notice not
being in accordance with the mandatory
requirements of section 434 of the Act is
that the presumption contemplated under
the said section cannot be raised against the
respondent. But the does not preclude the
petitioner from still proving by other
evidence that the company is unable to pay
its debts. That appears to be the view taken
in Bukhtiarpur Bihar Light Railway Co. Ltd.
v. Union of India [1954] 24 Comp Cas 507
(Cal) which is as follows (headnote) :
"The appellant-company which was
formed for constructing and maintaining
a railway established a railway. The
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railway line was connected with the East
Indian Railway and there was
interchange of coaching and goods
traffic between the two railways. The
Union of India representing the East
Indian Railway served a notice of
demand addressed to the Patna office of
the company on June 6, 1950, claiming
the sum of Rs. 5,22,313 due as a result
of interchange of coaching and goods
traffic. The company replied giving
reasons as to why it was not liable, in
any event, for the whole of the demand.
Another notice dated June 30, addressed
to the registered office of the company,
was served claiming payment of two
sums of Rs. 5,23,203 and Rs. 61,530. On
July 18, the Union of India made an
application for winding up the company
alleging that in spite of the two letters of
demand, no payment had been made;
that the railway had been taken over by
a local authority and that a sum of about
Rs. 10 lakhs had been paid by that
authority as compensation. Winding up
was asked for on the grounds that the
company was unable to pay its debts and
that the substratum of the company was
gone;
Held, (i) that the first notice was not a
valid notice of demand inasmuch as it was
not addressed to the company's registered
office; and that because the interval
between the second notice and the making
of the winding up petition was less than
three weeks there was no valid statutory
demand."
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24. And in Tripura Administration v.
Tripura State Bank Ltd. AIR 1959 Tripura
41; [1960] 30 Comp Cas 324, which is as
follows (headnote of AIR);
"A proper demand made in accordance
with the provisions of section 434(a) only
gives the benefit of the presumption that
arises under it, but if the demand is found
to be invalid for any reason then it is still
open to the creditor to fall back upon
section 434(c) and prove that the company
cannot pay its debts. Indian Companies
Act, 1913, In re, AIR 1948 Cal 335; [1949]
19 Comp Cas 1 and Bukhtiarpur Bihar
Light Railway Co. Ltd. v. Union of India,
relied on."
25. In the present case, there is no
evidence at all to establish that the
respondent-company is unable to pay its
debts. Hence, the present petition is also
liable to be dismissed on the ground that the
statutory notice issued by the petitioner
does not meet the requirements of section
434 of the Act.
26. It is a settled principle of law that the
relief of winding up is a discretionary relief
and the court has to find out whether
winding up would be in the interest of
justice and also in the public interest. The
following principle has been laid down in
the case of Bhalchandra Dharmajee Makaji's
case [1972] 42 Comp Cas 190, 195) as has
been extracted above.
27. The decision in Nopany and Sons P.
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Ltd. In re [1991] 70 Comp Cas 262 (Cal) can
also be usefully applied to the facts of the
present case, wherein the learned single
judge of the Calcutta High Court held as
under (headnote) :
"The basic requirement of the provisions
of section 434 of the Companies Act,
1956, is the existence of a debt due and
payable by the company to the
petitioning creditor. Where the
petitioning creditor establishes such a
claim though prima facie, the question of
the maintainability of the petition under
the provisions of the Companies Act for
winding up of the company cannot be
doubted. The burden lies on the
company to satisfy the court as to the
existence of a bona fide dispute in regard
to the matter in issue and where a debt
is bona fide disputed, the proper course
would be for the law courts not to
proceed with the winding up
proceedings further and give leave to the
petitioning creditor to file a suit for the
adjudication of the disputes in the matter
in issue. Where a debt is disputed, it is
the duty of the court to go into the
question of the genuineness or otherwise
of the dispute and, in the event the court
is primarily satisfied as regards its
genuineness and bona fides, the court
ought not itself to embark upon a
detailed adjudication of the disputes
between the parties. Conversely,
however, in the event the dispute raised
by the company does not seem to be
genuine, it is a plain exercise of the
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judicial power to direct winding up of the
company."
28. In the present case, the respondent has
discharged its burden and satisfied the
court as to the existence of a bona fide
dispute in regard to the matter in issue.
Under these circumstances, the proper
course, in my opinion, would be for the law
courts not to proceed with the winding up
proceedings further and give leave to the
petitioning creditor to file a suit for the
adjudication of disputes in the matter in
issue. Hence, it is open to the petitioning
creditor to file a suit for the adjudication of
disputes in the matter in issue, if he so
desires. Learned counsel for the petitioner
invited my attention to the decision in Of
Lynx Ltd. v. Simon Carves India Ltd. [1971]
41 Comp Cas 174 (Cal). The passage
extracted hereunder has been relied on for
the purpose of this case by learned counsel
for the petitioner (headnote) :
"Whether the disputes which are raised
or sought to be raised are bona fide or
not and whether the same have been
manufactured for the purpose of
resisting a case for winding up of the
company will have to be considered and
determined by the court on the basis of
the facts of each particular case and on
the basis of the materials that may be
available to the court at the time the
court is called upon to decide the
question."
29. There is no dispute with regard to the
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proposition laid down by the Calcutta High
Court. But, however, as rightly held by the
Calcutta High Court, each case will have to
be considered and determined by the court
on the basis of the facts of each particular
case and on the basis of the materials that
may be available to the court at the time the
court is called upon to decide the question.
As already observed by me on the facts and
circumstances of the present case, there is a
bona fide dispute with regard to the debt
which forms part of the subject-matter of
the winding up proceedings. This court will
not entertain any winding up petition on the
basis of the said disputed debt and hence,
the only option left to this court is to grant
leave to the parties to resolve the disputes
in appropriate proceedings in the
appropriate forum. Mr. Jayachandran,
learned counsel for the petitioner, has next
relied on the recent judgment of the Punjab
and Haryana High Court in Northern India
Iron and Steel Co. Ltd. v. Haryana Ispat (P.)
Ltd. [1990] 68 Comp Cas 42 for the purpose
of showing that the respondent company
has not produced the extracts from its
ledgers, account books, balance-sheets, etc.
As has been already observed by me, the
respondent-company has filed the necessary
documents in this court and it is not for this
court to express any opinion at this stage,
when both parties are granted leave to
agitate their respective claims before the
appropriate forum."
8. In light of the aforesaid, we see no other reason
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to take a view different than the one taken by the
learned Single Judge and the OJ Appeal is
accordingly dismissed.
(BIREN VAISHNAV, J)
(D. M. DESAI,J)
ANKIT SHAH
