2008 (8) TMI 572 - HC - Companies Law

Money lending activities under Assam Money Lenders' Act; Tea plantation exempt from compound interest

The court held that the respondent's activities as a money lender fell under the Assam Money Lenders' Act, 1934, due to regular lending practices. Tea ... Winding up petition - Held that:- It is well-settled law that a creditor's application for winding up of a company is ordered only in such cases where the claim of the creditor is undisputedly or indisputably an enforceable claim. In view of our discussions above, the claim of the respondent-company petitioner appears to be at least a partially disputed claim both on questions of fact and law. On January 4, 2008, this court recorded that pursuant to an earlier interim order dated December 10, 2007, passed in Misc. Case No. 4169 of 2007 in the present appeal the appellant deposited an amount of ₹ 30,00, 000 by three cheques drawn on the Federal Bank Ltd., Fancy Bazar Branch, Guwahati with the registry. This court further recorded that the respondent-company petitioner shall be at liberty to withdraw the same. In the circumstances, in view of our conclusion that the claim of the respondent-company petitioner is only a disputed claim in part the respondent shall retain the amount and the same shall be adjusted towards the amount, if any, found due to the respondent in any appropriate proceeding that may be initiated by the respondent, as indicated earlier.For the reasons discussed hereinabove, we are satisfied that the appellant has been able to make out a case for interference. Accordingly, the impugned judgment and order dated September 18, 2007, passed in Company Petition No. 16 of 2005 by the learned single Bench is hereby set aside. However, it is open to the respondent-company the petitioner to move such appropriate forum for the recovery of money claimed by him. Issues Involved:1. Applicability of the Assam Money Lenders' Act, 1934.2. Classification of tea plantation and production as agricultural activities.3. Legitimacy of winding up a company based on disputed claims.Detailed Analysis:Issue 1: Applicability of the Assam Money Lenders' Act, 1934The court examined whether the respondent's activities of advancing money/loan with interest at 22% per annum at quarterly rests fell under the Assam Money Lenders' Act, 1934. The Act defines a 'money lender' as a person who advances loans in the regular course of business with interest. The court noted that the respondent's activities, which included advancing money to the appellant and other tea planters since 1996, were regular and not isolated. The respondent's practice of advancing money to 19 other companies, most of which were tea planters, indicated a regular course of business. Thus, the court concluded that the respondent's activities fell within the definition of 'money lender' under the Act.Issue 2: Classification of Tea Plantation and Production as Agricultural ActivitiesThe court addressed whether tea plantation and production are considered agricultural activities. The appellant argued that tea plantation and production are agricultural activities, and therefore, compound interest on loans for such activities is impermissible. The respondent did not specifically rebut this contention. The court, considering the nature of tea plantation involving large-scale labor and cultivation, held that tea plantation and production are indeed agricultural activities. Consequently, the charging of compound interest on loans for agricultural purposes was deemed impermissible, as per the Supreme Court's ruling in Central Bank of India v. Ravindra.Issue 3: Legitimacy of Winding Up a Company Based on Disputed ClaimsThe court examined whether a winding-up petition based on disputed claims is maintainable. It is established law that a creditor's application for winding up a company is ordered only when the claim is undisputedly or indisputably enforceable. In this case, the court found that the respondent's claim was at least partially disputed, both on factual and legal grounds. The court noted that the amount claimed by the respondent included compound interest, which was disputed by the appellant. Additionally, the authority of the person who acknowledged the debt on behalf of the appellant was also contested. Therefore, the court concluded that the winding-up petition was not maintainable based on the disputed claim.Decision:The court set aside the judgment and order dated September 18, 2007, passed by the learned single Bench in Company Petition No. 16 of 2005. The court allowed the respondent to pursue recovery of the claimed amount through an appropriate forum. The court also noted that the amount of Rs. 30,00,000 deposited by the appellant could be retained by the respondent and adjusted towards any amount found due in subsequent proceedings. No order as to costs was made.