TaxTMI 
TaxTMI 
2009 (4) TMI 437
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....greement has been reached on 16-12-1997, wherein the respondent- company has confirmed the outstanding dues payable to the petitioner-firm as well as its sister concern, another firm, which similarly supplied cotton to the respondent-company. Again cotton was supplied by the petitioner-firm on various dates between 25-12-1997 to 14-3-1998. Since more than Rs. 50 lakhs have become due and payable by the respondent-company, the respondent-company has addressed several of its debtors authorising them to pay their dues to the petitioner-firm so that the respondent's liability can be reduced towards the petitioner-firm. It is further asserted that as of 31-7-1998, a sum of Rs. 23.81 lakhs has fallen due and payable by the respondent. In the meantime, the respondent-company had declared a lockout on the pretext of labour problem. At this stage, pursuant to a set of negotiations, the respondent requested its creditors for taking measures which will help in reviving the respondent-company. An agreement dated 19-1-2000, has been entered into by and between the petitioner and the respondent-company. It was asserted that pursuant to this agreement, the respondent-mill was reopened on 30-6-200....
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....mpany on 19-1-2000, pursuant to which the petitioner-firm was required to supply certain assured quantity and quality of cotton and also engage a fixed number of spindles on job work, for the purpose of producing yarn and in that process, the respondent-company would be acting as a converter and it would be entitled to be paid as per the agreed rates towards the conversion charges. This package of conversion scheme has been brought in so as to enable optimum utilisation of the infrastructural facilities available at the respondent-company. That would enable the respondent-company to earn an assured amount towards conversion charges to help it discharge its dues over a period of time. Contrary to the expectations and assertions, the petitioner-firm has committed default both by way of supplying not so good quality of cotton but also by not supplying the cotton to the optimum extent agreed to be supplied by it. Consequently, it is the respondent-company, which has suffered on account of unproductive exercise carried out by it pursuant to the agreement, dated 19-1-2000 and hence it is the petitioner-firm, which is liable to make good the loss sustained by the respondent-company. It is....
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....ituted on 6-9-2002 and if the respondent-company has entered into an agreement with the petitioner-firm on 21-3-2002, then the period of limitation of three years could not be said to have expired. In those set of circumstances, the Division Bench allowed the O.S.A. No. 29 of 2005 - Jumgo Cotton Enterprises' case (supra) and admitted the company petition and directed the company petition to be decided on its merits. That is how the present exercise is taken up. 5. The questions that are required to be answered are : (1) whether the claim of the petitioner-firm is barred by limitation? (2) whether the respondent-company is unable to pay up its debts requiring it to be wound up? 6. As was noticed supra , the managing partner who has been examined as PW-1 has reiterated the various averments and contentions canvassed in the company petition. However, it would only be appropriate and necessary to look at that part of the material evidence, which can be characterised or described as undisputed. Exhibit A-9 is the letter dated 13-10-1997, addressed by the respondent-company to the petitioner firm, which discloses that the respondent has instructed one of its debtors, viz., M/s. Nag....
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.... the 20,000 spindles allotted on it and shall compensate the party of the first part for the loss incurred on account of non-supply of cotton and the quantum of loss shall be determined mutually by both the parties in finality. Similarly, the party of the first part shall guarantee production in normal parlance as is in vogue with the mill and shall agree to compensate the party of the second part for loss of profit on account of abnormal deviation of the same." [Emphasis supplied] 8. Thus, this agreement dated 19-1-2000, has essentially proposed a scheme which would enable the petitioner-firm to recover the outstanding amount from the respondent. Therefore, the onus is on the respondent to demonstrate that it paid for or otherwise liquidated its liability any time after 19-1-2000. 9. The petitioner-firm is required to keep the 20,000 spindles of the respondent-company to be engaged fully in the conversion activity. Therefore, the agreement dated 19-1-2000, is not merely an acknowledge-ment of debt, but is a scheme to recycle and liquidate the debt due by the respondent-company. This scheme was required to be kept in force for a period of one year and in case either of the pa....
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....rofitable, at this stage to notice, as to how the Supreme Court deduced the principal relating to acknowledgement of debt in Food Corporation of India v. Assam State Co-operative Marketing & Consumer Federation Ltd. [2004] 12 SCC 360; the relevant portion of which reads as follows : "(14) According to section 18 of the Limitation Act, an acknowledgement of liability made in writing in respect of any right claimed by the opposite party and signed by the party against whom such right is claimed made before the expiration of the prescribed period for a suit in respect of such right has the effect of commencing a fresh period of limitation from the date on which the acknowledgement was so signed. It is well-settled that to amount to an acknowledgement of liability within the meaning of section 18 of the Limitation Act, it need not be accompanied by a promise to pay either expressly or even by implication. (15) The statement providing foundation for a plea of acknowledgement must relate to a present subsisting liability, though the exact nature or the specific character of the said liability may not be indicated in words. The words used in the acknowledgement must indicate the exi....
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....s to the electricity supply company, by obtaining a demand draft in favour of the Senior Accounts Officer of APCPDCL, Kurnool. Advisedly, the petitioner-firm did not leave that money in the hands of the respondent and instead the petitioner-firm directly paid to the APCPDCL, Kurnool, obviously, for securing reconnection of electricity to the mill of the respondent-company. Conscious of it, the respondent tried to shift the blame on the petitioner-firm for its failure to avail the conversion facility. If the respondent-company fell in arrears to the APCPDCL for the electric power consumed by it, and if the petitioner-firm pays up the said arrears on its behalf, to that extent the respondent-company owes money to the petitioner-firm. Exhibit A-60 is dated 23-3-2001. This Rs. 7 lakhs is what the respondent refers to in paragraph 14 of its counter as "remained unadjusted". Therefore, this is a debt outstanding and the respondent-company is unable to liquidate this debt of the petitioner-firm. 14. It will be relevant to point out that PW-1 has been cross-examined quite extensively. He has specifically denied the suggestion that after December 1997, the transactions between the petiti....
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....advance notice through exhibit A-55. 15. Learned counsel for the respondent has tried to place reliance upon the following judgment for the purpose of showing that mere entries from the books of account are not sufficient to charge a person with liability. In Chandradhar Goswami v. Gauhati Bank Ltd. [1967] 37 Comp. Cas. 108, the Supreme Court held as under : "(6) The main question urged before us is that there is no evidence besides the certified copy of the account to prove that a sum of Rs. 10,000 was advanced to the appellants and therefore in view of section 34 of the Evidence Act the appellants cannot be saddled with the liability for that amount. Section 34 is in these terms : 'Entries in books of account, regularly kept in the course of business, are relevant whenever they refer to a matter into which the court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability'. It is clear from a bare perusal of the section that no person can be charged with liability merely on the basis of entries in books of account, even where such books of account are kept in the regular course of business. There has to be further ....
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....ersion charges, which the petitioner-firm failed to pay earlier. Whereas subsequently, it was asserted that this payment was made for securing reconnection of power supply and that this amount will be adjusted in the works that have to be executed and carried out in the forthcoming months. Since the petitioner failed to avail the conversion facility and adhere to the terms of understanding the amount remained unadjusted which is the petitioner's own making. Thus, it is an admission that the sum of Rs. 7 lakhs paid by the petitioner for securing reconnection of electric supply is not because of the failure to pay the fresh charges for the previous period but is intended to be adjusted against future conversion charges. Whatever be the reason, this amount of Rs. 7 lakhs remained unadjusted. In other words, the respondent-company has not repaid this amount of Rs. 7 lakhs to the petitioner-firm. Whether the petitioner is at fault or not cannot be an issue which can be addressed or decided when no material was brought on record. For the failure to bring home this aspect of the matter by leading any evidence on the subject, it has to be held that the respondent has only taken such a defe....