2007 (8) TMI 462 - HC - Companies Law

Validity of statutory notice upheld with minor discrepancy; petitioner's claim to be considered in broader context.

The court upheld the validity of the statutory notice despite a minor discrepancy in the room number. However, it determined that the petitioner's claim ... Winding up - Circumstances in which a company may be wound up - Held that:- There is no doubt that the petitioner in this case has been able to establish that supply of the goods was effected, bills were raised and there was no disputes as to quality or quantity or rate. And yet there would be at least three grounds on which this petitioner can be stopped in its tracks. The first is the undeniable impression from the papers relied upon that the petitioner’s supply to the company was but a part of the overall transactions between the two groups of concerns. The second is the Premier group’s claims for incentives and other receivables; in substance, a defence that accounts had not been taken and that the petitioner’s claim could not be isolated without apportionment therefrom on account of incentives and other receivables due to the company. The third is the equitable consideration. It is true that the petitioner did not issue the advertisement in the year 2004, but such advertisement covered all SKF products of which the petitioner’s supplies were a part. The company, or the Premier group, did not enter into the distributorship agreement, albeit on principal-to-principal basis, for their own consumption of the goods. The Premier group was to sell the SKF bearings and other components to end-users. The SKF warnings in newspapers, it can be reasonably argued, drove customers away from the company’s counters where SKF products were on sale. The counterclaim of damages set up by the company is not altogether absurd. The fact that there is no direct action between the dramatis personae here in respect of the company’s claim for damages, is not good ground by itself to discredit the counter-claim. That is not to say that the entirety of petitioner’s claim, or the claims of the other entities in that group, can be wished away by the defence that has been set up. The company’s group appear, to be debtors of the petitioner’s group. But it would be unwise to single out one undisputed bill, or three as in this case, for a claim in summary proceedings to be founded thereon, unmindful of the other matters that need to be resolved in the overall transaction. To yield to the petitioner’s request in this case would be to prompt it to arm-twist the company into submitting to an inequitable demand in the context of the larger picture. The claim of the petitioner, attractive as it is, is relegated to a suit. The petition is permanently stayed Issues Involved1. Preliminary challenge to the creditor's application for winding up.2. Validity of the statutory notice.3. Substance of the petitioner's claim.4. Defense and counterclaims by the company.5. Equitable considerations in winding up proceedings.Issue-Wise Detailed Analysis1. Preliminary Challenge to the Creditor's Application for Winding UpThe company challenges the creditor's application for winding up on the grounds that the statutory notice was not issued to its registered office, thus negating the legal fiction under section 434(1)(a) of the Companies Act, 1956. The company also argues that it has a substantial defense against the claim and that the petition should not be admitted.2. Validity of the Statutory NoticeThe statutory notice dated 15-2-2005 was addressed to the company at its Marshall House address in Calcutta, but the room number was indicated as 407 instead of 471. The company contends that the notice must be delivered to the registered office for the presumption of inability to pay to arise. The court refers to multiple precedents, including Bukhtiarpur Bihar Light Railway Co. Ltd. v. Union of India and N.L. Mehta Cinema Enterprises (P.) Ltd. v. Pravinchandra P. Mehta, which emphasize strict compliance with the statutory requirements for the legal fiction to be invoked. However, the court finds that a minor discrepancy in the room number within the same building does not invalidate the notice.3. Substance of the Petitioner's ClaimThe petitioner claims a sum of Euro 3916.47 based on three invoices from December 2003. The petitioner argues that the company's ineffective denial in its opposition amounts to an admission of the claim. The petitioner suggests that the supply of goods, raising of bills, and absence of disputes on quality or rate indicate no defense to the company's liability.4. Defense and Counterclaims by the CompanyThe company asserts that the arrangement was between two groups and not restricted to the named parties in the agreement of 14-2-2003. The company claims that disputes arose between the two groups, leading to a civil suit (Civil Suit No. 101 of 2004) filed by Premier India Bearings Ltd. against SKF Bearings India Ltd. The company argues that the entirety of the matter should be dealt with as a composite claim and counter-claim, rather than isolated proceedings for individual claims. The company also highlights its counter-claim for incentives and other receivables, arguing that accounts had not been settled.5. Equitable Considerations in Winding Up ProceedingsThe court emphasizes that winding up proceedings should not be used as a debt collection mechanism. The petitioner's claim is part of a larger transaction between two groups, and isolating this claim without considering the overall context would be inequitable. The court acknowledges the petitioner's established supply of goods and the company's failure to dispute the transactions. However, it also considers the company's defense that the petitioner's claim is part of a broader dispute involving incentives and other receivables.ConclusionThe court concludes that the statutory notice, despite the minor discrepancy in the room number, is valid. However, the petitioner's claim cannot be isolated from the overall transactions between the two groups. The court decides that the rival claims should be assessed in more protracted proceedings and relegates the petitioner's claim to a suit. The petition is permanently stayed, and each party is to bear its own costs.