2011 (7) TMI 1009 - HC - Companies Law

Company ordered to pay $82,467.90 with interest, ads for default. Security deposit dispute not for winding up.

The court directed the Company to pay the outstanding sum of US$ 82,467.90 within a specified timeline, along with interest. Advertisements for default ... Forfeiture of security deposit - notice under section 434 of the Companies Act, 1956 - winding up proceeding not a debt-collection forum - applicability of arbitration clause in winding up proceedings - bona fide dispute as bar to determination in winding up - interest on unpaid sumsNotice under section 434 of the Companies Act, 1956 - admission of debt - interest on unpaid sums - Direction to pay US$ 82,467.90 with interest at 12% per annum from the date it became payable until payment. - HELD THAT: - The petitioning creditor and the company entered an agreement for supply of digital channel service with a 40-day credit period and a security deposit. Following termination, a statutory notice under section 434 was issued claiming US$ 2,12,452.78. The Court found that the company had admitted an outstanding balance through contemporaneous communications and account statements (including the confirmed payment schedule and statement showing US$ 82,467.90 payable). The Court held that that portion of the claim (US$ 82,467.90) is due and payable and directed payment within six weeks together with interest at 12% per annum from when the sum became payable until payment on the reducing balance. The direction is founded on the company's admissions and documentary statements demonstrating the outstanding rental component. [Paras 6, 9, 10]Company directed to pay US$ 82,467.90 with 12% p.a. interest within six weeks; default to be advertised.Forfeiture of security deposit - bona fide dispute as bar to determination in winding up - remand for separate proceedings - Forfeiture of the security deposit was not finally decided in the winding up application and remains open for the parties to pursue by appropriate proceedings. - HELD THAT: - Although the petitioning creditor asserted entitlement to forfeit the security deposit under the contract, the affidavit in opposition raised a bona fide dispute as to forfeiture which was not the subject of admission in the statutory reply. The Court observed that the dispute over forfeiture is a live controversy and, being bona fide, cannot be resolved in this winding up application. Accordingly the Court declined to adjudicate the forfeiture question in the present proceeding and left the parties free to take steps in accordance with law to determine that issue. [Paras 2, 8, 12]Forfeiture dispute not decided; parties may pursue appropriate proceedings to determine forfeiture.Applicability of arbitration clause in winding up proceedings - choice of foreign law and arbitration - Arbitration clause and choice of foreign law were not treated as a bar to the winding up application because the clause was not invoked or pleaded in the statutory reply, and the Court proceeded to entertain the winding up relief as regards the admitted debt. - HELD THAT: - The company relied on contractual clauses providing for resolution under the laws of Singapore and arbitration, but the Court noted that the arbitration plea was not taken in the formal reply to the statutory notice under section 434 nor was any reference or arbitration initiated. Relying on precedent cited by the petitioning creditor, the Court held that the arbitration clause could not be invoked to stymie the present proceedings where it had not been relied upon or commenced, and therefore the winding up Court could proceed to adjudicate the admitted portion of the claim. [Paras 2, 5, 8]Arbitration clause and choice of foreign law did not preclude the Court from directing payment of the admitted debt in the winding up application where arbitration was not invoked.Final Conclusion: The petitioning creditor's claim for US$ 82,467.90 (outstanding rental component) is decreed payable with 12% interest from the date it became payable; the company must pay within six weeks and, on default, specified advertisements shall be issued. The contested forfeiture of the security deposit is left open for separate adjudication and the arbitration clause was not allowed to bar relief where it was not invoked. Issues:1. Application filed for winding up under sections 433, 434, and 439 of the Companies Act, 1956.Analysis:1. The petitioning Creditor sought winding up of the Company due to default in payment of rent for Satellite services provided. The termination of the agreement was justified under clause 6.2, allowing forfeiture of the security deposit. The Company's contention of subpar service quality was not raised in response to the notice under section 434, and no counterclaim against the forfeiture was made. The court relied on precedents like Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. to support the petitioning Creditor's claim.2. The Company argued against the winding up application, citing lack of admission in the reply to the statutory notice and the agreement's arbitration clause. The Company contended that disputes should be resolved as per the laws of Singapore and through arbitration, as per clauses 13 and 14 of the agreement, thus challenging the jurisdiction of the winding up Court.3. The petitioning creditor clarified that the dispute was primarily about the security deposit's forfeiture and outstanding rental payments. Despite proposals for payment, the Company failed to remit the dues, triggering the forfeiture clause. Precedents like Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. were cited to support the petitioning creditor's claim.4. The court noted the agreement between the parties, the termination of the agreement by the petitioning creditor, and the subsequent dispute over the security deposit and outstanding payments. The Company was directed to pay the outstanding sum of US$ 82,467.90 within a specified timeline, along with interest. Advertisements for default were also ordered, and the dispute over the security deposit was deemed not suitable for resolution in the winding up application, allowing parties to pursue legal remedies.This comprehensive analysis covers the key issues raised in the legal judgment, highlighting the arguments presented by both parties and the court's decision based on the relevant legal provisions and precedents cited.