2019 (1) TMI 520 - HC - Companies Law

Court Upholds Provisional Liquidator Appointment for Non-Repayment of Deposit

ICRI Research Pvt. Ltd. Versus Bon Lon Securities Ltd.

The High Court dismissed the appeal, upholding the Company Judge's order appointing a Provisional Liquidator for the appellant company due to ... Appointment of Provisional Liquidator - time limitation - Appellant argued that the learned Company Judge has erred in admitting the petition and appointing a provisional liquidator, without taking note of the fact that the claim of the Respondent was barred by limitation - Held that:- In the present case, it is significant to note that the Appellant has not denied the receipt of the legal notice issued by the Respondent prior to filing of the winding up petition. The legal notice annexed along with the Company petition is duly supported with the copies of the postal receipts, courier receipts and tracking report of the courier company evidencing the service of the said notice on the Appellant. Concededly, the Appellant did not give any reply to the said legal notice. In case the Appellant indeed had a justifiable defence, the same ought to be taken immediately on the receipt of the legal notice. The Appellant did not do so and therefore adverse influence has to be drawn against the Appellant. However, failure on the part of the Appellant to reply to the legal notice is not the only reason for this Court to decline to admit the instant appeal - There being no cogent defence of the Appellant to deny the claim, the only question that merits consideration is as to whether the letter dated 4th March, 2013 enclosing the outstanding balance confirmation is a forged communication that would render the claim to be time barred. The communication dated 4th March, 2013 is on the Appellant’s Company letter head and also bears the rubber stamp along with the signatures of Ms. Shruti Gaur affixed on it. Learned Single Judge has also noted that in the reply there is only a bare denial of the aforesaid documents. There is no attempt on the part of the Appellant to justify the denial by producing the original ledger accounts or the copies thereof that would contradict the entries reflected in the said ledger account - The Appellant Company had the opportunity to contest the claim by producing the ledger accounts maintained by them to traverse and disclaim the entries reflected with the letter dated 4th March, 2013. Since this was not done, the learned Single Judge was justified in drawing an adverse inference against the Appellant Company on the doctrine of onus of proof. It is well settled in law that party who is having the possession of the original documents ought to take steps to produce the same. Appeal dismissed - decided against appellant. Issues Involved:1. Exemption Application2. Delay in Filing the Appeal3. Appointment of Provisional Liquidator4. Limitation Period for Debt Recovery5. Admissibility of Evidence and Documents6. Adverse Inference Due to Non-Reply to Legal Notice7. Merits of the Appellant's DefenseDetailed Analysis:1. Exemption Application:Issue: The appellant sought an exemption for certain procedural requirements.Judgment: The court allowed the exemption application, subject to all just exceptions.2. Delay in Filing the Appeal:Issue: The appellant filed an application to condone the delay in filing the appeal.Judgment: The court condoned the delay based on the reasons stated in the application and disposed of the application.3. Appointment of Provisional Liquidator:Issue: The appellant challenged the order of the Company Judge appointing a Provisional Liquidator.Factual Background: The appellant company had taken an Inter-Corporate Deposit (ICD) of Rs. 50 lacs from the respondent, which was not repaid on time despite several extensions and partial payments. The respondent filed a petition under Section 433(e) read with Section 434(f) of the Companies Act, 1956, seeking winding up of the appellant company.Judgment: The Company Judge admitted the petition and appointed a Provisional Liquidator, directing the Official Liquidator to take over the assets, books of accounts, and records of the appellant company. The court also ordered the publication of citations and the preparation of an inventory of the assets.4. Limitation Period for Debt Recovery:Issue: The appellant argued that the respondent's claim was barred by limitation.Judgment: The court noted that the respondent's claim was based on a communication dated 4th March 2013, which acknowledged the debt. The winding-up petition was filed within three years from this date, making it within the limitation period.5. Admissibility of Evidence and Documents:Issue: The appellant contended that the communication dated 4th March 2013 was forged and fabricated.Judgment: The court found that the appellant had not provided any evidence to contradict the statement of accounts or the acknowledgment of debt. The documents submitted by the respondent were on the appellant's letterhead, duly stamped, and signed. The appellant failed to produce their own ledger accounts to dispute the entries, leading the court to draw an adverse inference against the appellant.6. Adverse Inference Due to Non-Reply to Legal Notice:Issue: The appellant did not respond to the legal notice issued by the respondent.Judgment: The court held that the appellant's failure to reply to the legal notice warranted an adverse inference. The court cited previous judgments to support this position, emphasizing that a lack of response indicates an absence of a justifiable defense.7. Merits of the Appellant's Defense:Issue: The appellant claimed that the debt had been settled and that the documents were manipulated.Judgment: The court found the appellant's defense to be vague and unsupported by evidence. The appellant admitted to issuing cheques for repayment and did not provide any substantial proof to refute the respondent's claims. The court concluded that the appellant had no cogent or plausible defense and upheld the Company Judge's decision.Conclusion:The High Court dismissed the appeal, finding no grounds to interfere with the Company Judge's order. The appellant's arguments regarding the limitation period and the authenticity of the documents were rejected due to a lack of evidence and the appellant's failure to provide a credible defense. The court's decision emphasized the importance of timely responses to legal notices and the necessity of substantiating claims with concrete evidence.