TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Court affirms decision on winding-up petition appeal, finding defense unsustainable. Public policy against aiding illegal transactions.</h1> The court dismissed the appeal, affirming the learned Company Judge's decision to admit the winding-up petition. The appellant's defense was found to be ... Winding up petition - flat let out on by Appellant-company on pre defined conditions - respondent in pursuance of the 'mutual discussions' regarding the said flat, vacating the flat with immediate effect and waiving the notice period sought refund of the amounts deposited with the appellant - Held that:- The dispute raised by the appellant about non receipt of the letters dated 12.07.2007 and 12.12.2008 is irrelevant. At least the letter dated 12.07.2007, even if there is nothing to show dispatch/delivery thereof, is in consonance with the contemporaneous events. The appellant in its reply to the winding up petition also admitted that the arrangement between the parties with respect to the flat continued till July, 2007 only. The appellant admits that thereafter no rent as was earlier being paid, was paid by the respondent and no demand therefor was also raised by the appellant on the respondent. This is in consonance with the letter dated 12.07.2007 whereunder the respondent claims to have vacated the flat with immediate effect and demanded refund of security deposit. In this regard, it may also be mentioned that the respondent in its legal notice preceding the winding up petition had expressly referred to the letter dated 12.07.2007 whereunder the flat was vacated and though the appellant had in its reply thereto generally denied the contents of the legal notice but had not expressly denied the receipt of the letter dated 12.07.2007. In fact the appellant in the said reply evaded to even set out as to on what account the amounts aforesaid had been received if not as Security Deposit/Extra Deposit and vaguely stated that they were under some other arrangement known to Mr. Birla only. Such conduct of the appellant also is indicative of the appellant surely building up its defence and the same being not based on true facts. The payment by the respondent to the appellant of Rs. 1,16,340/- per month till July, 2007 was towards rent of Rs. 1,50,000/- per month, less TDS as agreed and not in reimbursement of Rs. 1,50,000/-, admittedly refunded by appellant out of extra deposit of Rs. 54,00,000/-, in terms of letter dated 10.10.2005 supra. Letting was for three years terminable prior thereto by a 12 months notice and which had not been given, that the respondent is thus not entitled to refund of Security Deposit. The appellant has to sail or sink on his pleas and cannot on the one hand contend that the tenancy has not been determined by the respondent and on the other hand also deny enjoyment of the flat as tenant to the respondent. Even otherwise, a Lease for three years could be created by a registered document only and which admittedly does not exist. The Lease in the present case is by delivery of possession on the terms proposed by the appellant itself a couple of months prior to letting and such a Lease would be a month to month Lease and would not require a notice of determination of 12 months notwithstanding a stipulation to the said effect in the letter of offer of the premises. Such a lease is terminable by a 15 days notice and the maximum claim which the appellant can have on the said account can be for 15 days rent only. Thus finally in law, the appellant Company is a distinct entity from its Directors and the payment due to its Director could not have been received by the appellant Company. This is yet another illegality in the defence of the appellant. Seen in this light, it is obvious that the defence of the appellant to the winding up petition indeed was a moonshine and illusory and unsustainable in law and has been rightly rejected by the learned Company Judge. Once the appellant to be having no defence to the refund of the amounts admittedly received by the appellant, the power of winding up has been correctly exercised and no ground in opposition thereto has been urged. Issues Involved:1. Admissibility of the winding-up petition under Sections 433(e), 434, and 439 of the Companies Act, 1956.2. Validity of the appellant's defense against the winding-up petition.3. Determination of the debt owed by the appellant to the respondent.4. Applicability of Sections 91 and 92 of the Evidence Act, 1872.5. Public policy considerations and the principle of ex dolo malo non oritur actio.Issue-wise Detailed Analysis:1. Admissibility of the winding-up petition under Sections 433(e), 434, and 439 of the Companies Act, 1956:The respondent filed a winding-up petition under Sections 433(e), 434, and 439 of the Companies Act, 1956, seeking to wind up the appellant company for non-payment of Rs. 2,26,05,872/- along with interest. The learned Company Judge admitted the petition, finding that the appellant was indebted to the respondent and had failed to pay the due amount despite several notices.2. Validity of the appellant's defense against the winding-up petition:The appellant contended that the transaction was not as represented by the respondent and raised a defense involving disputed questions of fact. The learned Company Judge found this defense to be 'wholly illusory and moonshine' and in conflict with the documentary evidence on record. The defense was also held to be barred by Sections 91 and 92 of the Evidence Act, 1872, which prohibit evidence in contravention of written documents.3. Determination of the debt owed by the appellant to the respondent:The appellant had received Rs. 2,00,00,000/- as a security deposit and Rs. 54,00,000/- as an extra deposit under a rental agreement. The respondent vacated the flat and demanded a refund of the deposits. The appellant denied the refund, claiming the amounts were part of an incentive to its Director, Mr. Swami, from the respondent. However, the court found no evidence supporting this claim and noted that the appellant's books of accounts reflected the amounts as deposits, not as incentive payments.4. Applicability of Sections 91 and 92 of the Evidence Act, 1872:The court held that the appellant's defense was unsustainable under Sections 91 and 92 of the Evidence Act, 1872. These sections prohibit the admission of oral evidence to contradict, vary, add to, or subtract from the terms of a written contract. The appellant's attempt to present a different version of the transaction was thus inadmissible.5. Public policy considerations and the principle of ex dolo malo non oritur actio:The court emphasized the principle of public policy that no court will assist a party whose cause of action is founded on an illegal or immoral act. The appellant's defense involved allegations of tax evasion and illegal transactions, which the court refused to entertain. The court cited several precedents, including Nair Service Society Ltd. v. K.C. Alexander and Sita Ram v. Radhabai, to support this principle.Conclusion:The court dismissed the appeal, affirming the learned Company Judge's decision to admit the winding-up petition. The appellant's defense was found to be illusory, unsustainable, and barred by law. The court also highlighted the public policy principle against aiding illegal transactions and tax evasion. No costs were imposed on the appellant.
TaxTMI 
TaxTMI 
