AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2002 (10) TMI 693
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....line NEPC. The petitioner had entered into an aviation fuel supply contract on 23-7-1996 at Chennai with NEPC India Limited and the petitioner had agreed to supply aircraft fuel on terms and conditions contained in the agreement. It is stated that separate agreement was also entered into between Skyline NEPC Limited and the petitioner. It is also stated that in terms of the agreement, NEPC India Limited and Skyline NEPC Limited had received supply of aviation turbine fuel, aviation lubricants, etc., collectively referred to as 'aircraft fuel' from the petitioner on several dates for their airline services. It is stated that on 30-4-1997, a sum of Rs. 6 crores was due and payable by NEPC India Limited and a sum of Rs. 13 crores was due and payable by Skyline NEPC Limited to the petitioner under the aircraft fuel account. It is stated that in order to secure the said sums, NEPC Airlines by letters dated 28-3-1997 and 15-4-1997 undertook to hypothecate its two aircraft having registration Nos. VT-NEJ, Aircraft SL. No. 10684 (model Fokker make F27-500) and VT-NEK, Aircraft SL.No. 10687 (model Fokker make F27-500) in favour of the petitioner. It is stated that NEPC India Limited also ex....
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....tated that the deed of hypothecation empowered the petitioner to bring the said aircraft for sale in case of default in payment as per the schedule mentioned in the tripartite agreement dated 6-5-1997. 3. It is stated that the petitioner issued a legal notice dated 23-5-1997 calling upon NEPC India Limited and Skyline NEPC Limited to pay a sum of Rs. 10 crores which fell due on 7-5-1997 within 15 days from the date of receipt of the notice. It is stated that the counsel for NEPC India Limited and Skyline NEPC Limited sent a letter requesting time to give a detailed reply, but no reply was sent. It is stated that in view of the outstanding liability, the petitioner, by letter dated 20-5-1997 addressed to NEPC Airlines and Skyline NEPC Limited, requested them to issue necessary instructions to the concerned officials to make full payment. It is stated that NEPC Airlines by Fax dated 23-5-1997, reported that daily payment would put them to tremendous difficulty and requested the petitioner to consider and approve payment for monthly supplies in two instalments on 14th and 28th of every month. In that letter, NEPC Airlines further assured to provide immovable property as security for ....
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....EPC India Limited to make satisfactory arrangements to pay all instalments which fell due under the hypothecation deed. It is stated that no reply was sent by NEPC India Limited and Skyline NEPC Limited and the petitioner issued a notice to NEPC India Limited under section 433 of the Act calling upon the respondent-company to pay the debts due to the petitioner within 21 days from the date of receipt of the notice. It is stated that NEPC India Limited, even after the receipt of notice, did not pay the dues. It is stated that as on 11-8-1997 a sum of Rs. 7,03,08,688.83 was payable and due by NEPC Micon Limited, and the petitioner also enclosed a statement to that effect. 6. The petitioner has stated that the financial position of NEPC Airlines has weakened to such an extent that it was not able to lift fuel on cash and carry basis and the cheques issued by NEPC airlines were returned for insufficiency of funds. It is stated that fuel supply was stopped with effect from 3-6-1997 by the petitioner and after protracted negotiations, a further agreement was entered into between NEPC Group of Companies and the petitioner on 20-9-1997. It is stated that under the agreement, the petitione....
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.... is a secured creditor. Yet another objection was that the petitioner has already filed a civil suit in C.S. No. 425 of 1997 and hence, the company petition is not maintainable. The respondent also referred to the arbitration agreement. 8. The case of the respondent is that the payments made by the respondent had been appropriated to the credit of Skyline NEPC Limited without consent and knowledge of the respondent and if true account of two companies are taken, there would be no amount due and payable by the respondent. It is stated that the respondent was kept under pressure of stoppage of fuel and was made to execute several agreements which were prepared and kept ready by the petitioner. The respondent has denied various averments and the main case of the respondent is that no amount is due and payable by the respondent and the agreements entered into were all prepared by the petitioner and the petitioner, taking advantage of its dominant position, included various clauses in the agreements in its favour. The case of the respondent is that the respondent has paid the entire amount due on the dishonoured cheques and the petitioner is secured with respect to the balance amount. ....
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....ed and pending before this Hon'ble Court on the same cause of action? (6)Whether the suit in C.S. No. 11/00 is barred under Order II Rule 2 of CPC in the light of the pendency of the earlier suits in C.S. No. 25/97, C.S. No. 998/97 and O.S. No. 3327/98 between the parties on the same cause of action initiated by the petitioner? (7)Whether IOC was entitled to appropriate and adjust the amount paid by NEPC India Ltd. towards claims against Skyline without any authority therefor ? (8)Whether, IOC had any right to appropriate the amounts paid prior to 6-5-1997 towards Skyline dues? (9)Whether, NEPC India Ltd. having discharged the liability and made payment in excess are liable to be proceeded against? (10)Whether, the petitioner, secured creditor, who has wasted the security can maintain the petition and whether NEPC India Ltd. has the right to set off for counter claim against the petitioner for wastage of security? (11)Whether, the petition can be maintained when the same has not been served on the Registered Office and the wrong description of the petitioner's address in the petitioner? (12)Whether, the petitioner/secured creditor having exercised its right to proceed agains....
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....efore the Hon'ble Judicial Magistrate, Alandur, Madras. (7)15-7-1998 - Complaint in CC. No. 299/99 before the Hon'ble Judicial Magistrate IV, Coimbatore. (8)27-8-1998 - Application for contempt in C.A. No. 318/98 for alleged violation of interim orders in C.S. No. 425/97. (9)20-9-1999 - Plaint in C.S. No. 998/99 for recovery of Rs. 5,28,23,501.90 against NEPC and 5 others before the High Court, Madras. (10)20-9-1999 - Plaint in C.S. No. 11/00 against Skyline NEPC, NEPC and others for recovery of Rs. 13,12,76,421.25 before the Hon'ble High Court, Madras. 12. Mrs. Nalini Chidambaram, learned senior counsel appearing for the petitioner referred to various agreements and submitted that after giving credit to all the payments made, a sum of Rs. 6 crores was due and payable by the respondent to the petitioner. She referred to two aviation fuel supply contracts entered into by the petitioner with NEPC India Limited and Skyline NEPC Limited respectively. She also referred to the deeds of hypothecation dated 1-5-1997 and 14-5-1997. Her submission was that NEPC India Limited undertook to clear all the arrears and also gave cheques to the tune of Rs. 183.50 lakhs. She submitted that the ....
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....d submitted that the conduct of NEPC India limited and Skyline NEPC Limited in not permitting the petitioner from taking possession of the aircrafts shows that NEPC India Limited is not interested in clearing the arrears. She therefore submitted that the causes of action for filing the suits, C.S. No. 425 of 1997, O.S. No. 3327 of 1998, C.S. No. 998 of 1999 and C.S. No. 11 of 2000 are different and the suits are not barred by Order II Rule 2 C.P.C. She also submitted that NEPC India limited is liable to pay in any event a sum of Rs. 6 crores and for the non-payment of the said sum, the company is liable to be wound up. She also denied that the amount paid by NEPC India Limited was adjusted by the petitioner towards the dues payable by Skyline NEPC Limited. She submitted that the statement of account filed by NEPC India Limited is erroneous. As far as the security is concerned, she submitted that the aircrafts do not have the value as the engines of both the aircrafts have already been removed from the aircrafts by NEPC India Limited and the aircrafts have been reduced to scrap metal. She referred to the contradictory stand taken by NEPC India Limited in several letters. As far as i....
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.... paid the amount due by it and the two companies are separate companies and claims are also separate and the respondent cannot be sought to be wound up for the dues of the other company, viz., Skyline NEPC Limited. Learned senior counsel also submitted that there was novation of contract and there are triable issues and the questions whether the respondent has violated the terms of the hypothecation deed and which one of the agreements would prevail are all triable issues. 16. Learned senior counsel referred to the plaints filed in the civil courts and submitted that the amount due has to be ascertained. Learned senior counsel submitted that it is necessary to lead evidence on the interpretation of documents and in such a case, the company petition is not a proper remedy. Learned senior counsel submitted that the respondent has raised a bona fide dispute. Learned senior counsel submitted that the petitioner has not produced the statement of account and the respondent was maintaining running account and it cannot be stated that the respondent is liable to pay the amount. Learned senior counsel referred to the affidavit filed by one Srinivasan on behalf of the petitioner and submitt....
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....de out a prima facie case for admission. The purpose of giving notice in the company petition as to admission is to find out whether the debt is bona fide disputed or the petition has been presented with mala fide motive or there is any abuse of the process of the court and whether there is a substantial defence from the respondent. Therefore the question that has to be considered is whether the respondent has raised a bona fide dispute as regards the existence of the debt and the defence raised is substantial. 19. On 23-7-1996, NEPC Airlines has entered into a memorandum of agreement for aviation fuel supply with the petitioner for a period of five years. On 28-3-1997, NEPC Airlines has issued an irrevocable letter of undertaking to bring down the outstanding amount due to the petitioner to the expected level of Rs. 10 crores as of 31-3-1997. The letter of undertaking also provides for hypothecation of aircraft No. 10684 and the specification of the aircraft No. 10684 is given as annexure to the document. On 15-4-1997, another letter of undertaking was given hypo-thecating the aircraft No. 10687. On 1-5-1997, NEPC Micon Limited executed a deed of hypothecation admitting its liabi....
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....to any statutory authorities or to any other authorities. The deed confirms the deed of hypothecation and the tripartite agreement between the parties. In other words, the tripartite agreement is in addition to the hypothecation agreement executed by NEPC Micon Limited to secure the out-standings of Skyline NEPC Limited to the petitioner apart from securing the out-standings of NEPC Micon Limited to the petitioner. 21. It is stated that NEPC Micon Limited and Skyline NEPC limited are sister concerns and they have agreed that they will be jointly and severally liable to pay all the out-standings of both the companies and this shall not be disputed at any point of time at any forum, either judicial or otherwise. On the same date, a similar undertaking was executed by the respondent- company admitting that both the companies are sister concerns and they are jointly and severally liable to pay all the out-standings of both the companies to the petitioner. Another letter that is enclosed in the typed-set of papers is dated 7-5-1997 issued by the petitioner wherein there is a reference to the hypothecation deed and the joint liability of NEPC Micon Limited and Skyline NEPC Limited for a....
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....e petitioner to give time to send a reply to the notice of the counsel for the petitioner dated 23-5-1997. Another letter was issued by NEPC Airlines on 17-6-1997 making certain proposals. In that letter it was suggested that since the aircraft which was hypothecated to the petitioner is under the detention of the Customs, properties belonging to the respondent may be taken as security for the current outstanding and also for fortnightly upliftments. The respondent also gave the details of the properties. 23. On 17-6-1997, the petitioner issued the statutory notice to both NEPC Micon Limited and Skyline NEPC Limited calling upon them to discharge the liability. The notice was served, but there was no reply by the respondent to the statutory notice. Subsequently, the petitioner filed an application before the civil court for interim injunction in C.S. No. 425 of 1997 restraining the respondent from removing or otherwise dealing with the aircraft having registration No. VT-NEJ F-27 Fokker stationed at the Coimbatore Airport. Subsequently, another agreement was entered into on 20-9-1997. This agreement was entered into after an order of interim injunction was passed and in the agreem....
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....at the respondent has admitted its liability and also undertaken to discharge the liability. I am therefore prima facie of the view that the debt is established. 25. Once it is a joint and several liability, it is open to the petitioner to appropriate the payments made by the respondent against the liability of anyone of the two airlines corporations as it is not the case of the respondent that it was not an open payment, but the payment was made with specific instructions that it should be adjusted against the liability of a particular airlines corporation. I therefore hold that there was a joint and several liability of both the companies. The documents produced by the petitioner clearly show that there was an admission and acknowledgement of liability of both the corporations by the respondent. 26. The next submission was that there was novation of terms in the subsequent agreement. The tripartite agreement is dated 6-5-1997 and another agreement was entered into subsequently on 20-9-1997 which specifically provides that it cancels the agreement dated 19-9-1997. The terms of the agreement dated 20-9-1997 clearly show that there was no novation. The subsequent agreement was ent....
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....from the respondent-company with reference to the liabilities of both the companies is not maintainable. I am unable to accept the submission of the learned senior counsel. I have already held that there is a joint and several liability undertaken by both the companies and I am prima facie of the view that if it is open to the petitioner company to institute a suit separately against the respondent- company for its liability alone as the liability undertaken is joint and several liability, equally, it is open to the petitioner to maintain a suit separately against Skyline NEPC Limited for recovery of the amount due by Skyline NEPC Limited. Further, the scope and ambit of a company petition is different from a civil suit. While a civil suit is filed to vindicate the private rights, the company petition is filed in recognition of the law of insolvency to establish that the company which is sought to be wound up is not in a sound financial status so that the interests of the general body of creditors are protected. To maintain a company petition what has to be seen is whether there is a debt on the date of filing of the petition. Therefore, I am quite satisfied on the basis of the doc....
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....ffered by the respondent and also on the question whether the securities offered are valuable securities. The documents produced by the petitioner prima facie establish that the securities offered would not be sufficient to cover the liability. Therefore I hold that the petition is maintainable. Accordingly the issue Nos. 10 and 12 are answered against the respondent. 33. The other point raised was that the notice was not served at the Registered Office of the respondent and therefore the petition is not maintainable. As far as the service of notice at the Registered Office of the respondent is concerned, the case of the petitioner is that the Registered Office of the respondent was situate at No. 36, Wallajah Road, Chennai and the notice was sent to the said address and the notice was served on the respondent. Though the respondent has produced the certified copies of Form 23 and Form 18 stating that the Registered Office has been shifted from No. 36, Wallajah Road, Chennai to 'NEPC House, 1678, Trichy Road, Ramanathapuram, Coimbatore - 641 045' and the name of the respondent has been changed from NEPC Micon Limited to NEPC India Limited, the petitioner has produced several lette....
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....when subsequent to the notice the respondent admitted the liability and agreed to pay the amount, the wrong reference as to the address of the Registered Office of the respondent in the statutory notice would not vitiate the notice. Further, this Court in Rajearajeswari Packaging Products v. Dev Fasteners Ltd. [2002] 37 SCL 248 has taken the view that in the case of petition filed under section 433(e) read with section 434 of the Companies Act, notice served on the administrative office is a valid notice. Here also, it is a case filed under section 433(e) read with section 434 of the Companies Act and the decision of this Court in Rajearajeswari Packaging Products' case (supra) would squarely apply to the facts of the case. 34. As far as the issue No. 12 is concerned, it is stated that the suit, C.S. No. 425 of 1997 has already been filed by the petitioner for a money decree. As already observed, the respondent has not established that the security offered by the respondent would be sufficient to cover the liability, but, on the other hand, the case of the petitioner is that the security offered is insufficient. Though the petitioner has not given particulars as to the value of th....
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....the petition has been filed on the basis of the admission of liability by the respondent. I hold that the respondent has acknowledged the liability to the petitioner and therefore, the question of filing of statement of account does not arise. 39. The question of liability as guarantor does also not arise as the liability undertaken is a joint and several liability. It is stated that the amount due from the respondent is Rs. 6 crores and the amount due from Skyline NEPC Limited is Rs. 13 crores. The petitioner has proved that there was admission of liability by the respondent and hence, the question of liability as guarantor does not arise. Further, the petition has been filed on the basis that there are dues by the respondent in its individual account, and there is absolutely no material from the respondent that the respondent has discharged its independent liability or the Skyline NEPC Limited has discharged its liability. Nor is there any material to show that the payments made by the respondent were adjusted against the dues of Skyline NEPC Limited. 40. As far as the decisions relied upon by the learned senior counsel for the respondent, viz., (1) G. Loganayaki v. Moolangudi ....