1988 (2) TMI 416 - HC - Companies Law

Court orders respondent to pay 12% interest on overdue amount, citing Companies Act.

The court found the respondent liable to pay interest at 12% per annum on the principal amount owed to the petitioner for the supply of goods. The court ... Company when deemed unable to pay its debts Issues Involved:1. Liability to pay interest on the principal amount.2. Applicability of Section 433 of the Companies Act to the issue of interest.3. Rate of interest to be awarded.Detailed Analysis:1. Liability to Pay Interest on the Principal Amount:It is admitted that the respondent owed the petitioner a sum of Rs. 1,24,752.88 for the supply of sheep and goat skins from January 1981 to July 1982. The petitioner demanded both the principal and interest at 18% per annum through a lawyer's notice dated December 8, 1982 (Exhibit P-45). The respondent did not reply to this notice but made several assurances to settle the account. During the pendency of the petition, the respondent made partial payments and finally paid the balance due on April 29, 1987. The respondent contended that its liability to pay interest was in dispute and thus fell outside the purview of Section 433 of the Companies Act. The petitioner argued that the interest issue was covered under Section 433 since the principal amount was undisputed and the interest demand was made long before filing the petition.2. Applicability of Section 433 of the Companies Act to the Issue of Interest:The court accepted the petitioner's contention, relying on the Punjab and Haryana High Court's decision in Stephen Chemical Ltd. v. Innosearch Ltd. [1986] 60 Comp. Cas. 702, which held that the company court is the appropriate forum for determining interest entitlement when the principal debt is undisputed and paid to avoid winding up. The court disagreed with the contrary view in Unisystems (P.) Ltd. v. Stepan Chemical Ltd. [1985] 58 Comp. Cas. 875, emphasizing that the creditor should not be relegated to a civil suit solely for interest claims. The court concluded that the respondent's liability to pay interest could be addressed within the winding-up proceedings under Section 433.3. Rate of Interest to be Awarded:The petitioner sought interest at 18% per annum, citing the Interest Act, 1978, and Section 34 of the Civil Procedure Code (CPC). The court noted the lack of evidence supporting a 15% interest rate on bank deposits and acknowledged that the maximum rate did not exceed 12% per annum. The court also referenced the Karnataka High Court's decision in Southern Industrial Polymers (P.) Ltd. v. Amar Formulators and Electronics (P.) Ltd. [1984] 56 Comp. Cas. 77, which found that disputes over interest rates did not fall outside Section 433's scope. The Supreme Court's decision in Union of India v. Watkins Mayor and Co., AIR 1966 SC 275, was deemed outdated due to subsequent amendments to the CPC. The court emphasized that under Section 61 of the Sale of Goods Act, 1930, interest could be awarded on the price of goods from the date of tender or when the price was payable.The court determined that the respondent's dispute over interest was not bona fide, as it was raised only during the company court proceedings. The court concluded that the respondent was liable to pay interest and that this matter could be addressed under Section 433. The court found it just and equitable to award interest at 12% per annum from December 8, 1982, until the date of payment, rejecting the petitioner's claim for 18% and the respondent's contention for a 6% rate.Conclusion:The court directed the respondent to pay interest at 12% per annum, giving credit for payments made on various dates and calculating interest on the remaining balance. The respondent was given four months to pay the amount, and the company petition was scheduled to be called before the company court on June 13, 1988. OSA No. 174 of 1987 was allowed to the extent indicated, and OSA No. 116 of 1987 was dismissed, with no order as to costs.