TaxTMI 
TaxTMI 
TaxTMI 
2011 (8) TMI 966
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....mmon facilities. The plea of the appellant was that since the charges specified in the decree were not being paid by the respondents, it was apparent that they were unable or had neglected to pay their debts. 2. On the other hand, the respondents had taken the plea that though they had initially made payments of recurring charges in terms of the compromise decree, they had stopped making the payments at the rates demanded by the appellant inasmuch as the maintenance charges were contrary to the provisions of the Delhi Apartment Ownership Act, 1986 as well as against public policy. It was claimed by the respondent companies that the compromise decree was a nullity and could not be enforced and, therefore, the non-payment of any amount thereunder could not be regarded as a debt payable by the respondent companies. 3. The learned Company Judge dismissed the winding up petitions after concluding that the respondent companies had raised a bona fide dispute with regard to the so-called debt, particularly in view of the mandatory provisions of the Delhi Apartment Ownership Act, 1986. The learned Company Judge has also taken the view that even though there was a compromise decree, the co....
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.... also the compromise decree, is binding on the civil court in the suits pending between the parties ?" 5. Before we examine these questions, it would be appropriate to set out the necessary facts. The appellant is in the hotel business and one of its hotels is located at Nehru Place, New Delhi adjacent to which the appellant has also built up an International Trade Tower which houses several commercial establishments. The space has been sold to such establishments by the appellant. The respondent companies also entered into 'lease' agreements dated 16-4-1993 and dated 17-4-1993, whereby the appellants were to eventually sell, transfer and convey the title of Flat Nos. 109, 110, 111 and 112 altogether measuring 4000 sq. ft., situated in Block-F of the First Floor of the said Trade Tower to the respondent (Bhushan Limited). A similar arrangement was made with Bhushan Steel and Strips Limited in respect of Flat Nos. 101, 102, 103, 104, 105, 106, 107 and 108 altogether measuring 8000 sq. ft., including the super built-up area situated in Block-F, First Floor of the said International Trade Tower, Nehru Place, New Delhi. The respondent companies had raised some disputes in 1994 and had....
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.... such as for the consumption of electric and water and other consumables for the running of air-conditioning, plant, as well as for its repairs, maintenance, administrative expenses and management charges of the Company which are included in the Maintenance charges stipulated in Annexure. (c) The Space Buyer would be liable to pay annually the sinking fund for the replacement of capital goods like air-conditioning plant, generators, machinery, electrical equipments, cables ducting, transformers, pumping-sets, fire fighting equipment, water-mains, toilets, ventilation equipments, lifts, escalators, etc., etc., the rates of sinking fund as payable would be worked out separately for air-conditioned areas and non air-conditioned areas. (d) That the raids ( sic) of general Maintenance charges for common services, insurance and sinking fund for replacement of capital goods for the calendar year 1997 have been fixed on the basis of Living Index Points as issued by Delhi Administration in December, 1996. The above charges will be subject to annual increase in proportion to the rate of inflation to cover the increased cost of maintenance/materials expenses etc. The annual inflation/increa....
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....or that purpose. 11. On every 1st July commencing 1st July, 1998 the rate of Rs. 8 per unit shall be revised upwards according to the living index as on that date subject, however, to a minimum increase of 9 per cent each year." 9. On a joint application under Order 23 Rule 3 read with section 151 of the Code of Civil Procedure, 1908, and after the statements of the learned counsel for the parties were recorded, the order recording the compromise on 19-12-1997, was passed by the learned Single Judge in the following manner :- "7. In view of the above statement made by the learned counsel for the parties and the contents of the documents (Ex. C-1, C-11, C-11.1), compromise arrived at between the parties, which is lawful, is hereby accepted. The present suit filed by the plaintiff is decreed in terms of compromise arrived at between the parties and as reflected in documents (Ex.0-t, C-11 and C-111) that form part of the decree sheet. Decree sheet be drawn up accordingly." 10. It is relevant to note that after the said compromise decree, the respondent companies made payments in accordance therewith towards maintenance charges for car parking till 31-12-2002 and the recurring char....
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....intenance during this period while it had charged Rs. 2.25 crores from the respondents. The plea taken by the respondents was that the appellant could clear the maintenance charges on actual basis and could not claim such charges by adding undue profits. 11. The learned Company Judge, after examining the rival contentions of the parties, came to the conclusion that although there was a compromise decree, it was still founded on an agreement between the parties which was evidenced by the compromise deed. He also took the view that section 24 of the said Act gave primacy to the provisions of the same over, inter alia, any contract which may have been entered into between the parties and, therefore, the statutory provisions of the said Act would override the agreement between the parties. Consequently, according to the learned Company Judge, the appellant was only entitled to what was permitted by the said Act and not what they had agreed upon. The learned Company Judge also held that notwithstanding the existence of a court decree (albeit a compromise decree), the Company Court was entitled to examine the question as to whether, in reality, a debt existed and in doing so, the compan....
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....r of FAO (OS) No. 256/2007, which is pending before a Division Bench of this court. "Question (a) : Whether the company court can go behind a compromise decree in order to ascertain as to whether a debt based on the same is legally enforceable or not and whether a bona fide dispute in respect of the debt can be raised notwithstanding the existence of a compromise decree ?" 13. It was submitted on behalf of the appellant that a decree passed by a competent court can only be set aside in competent proceedings and cannot be attacked in collateral proceedings. Reliance was placed on the decision of the Supreme Court in the case of Rafique Bibi v. Sayed Waliuddin [2004] 1 SCC 287. It was contended that the compromise decree dated 19-12-1997, in the present case, had not been challenged by the respondents and had, therefore, attained finality. It was also contended that the decree was binding between the parties and could not be challenged in collateral proceedings, including winding up proceedings before a Company Court. The decision in the case of Balvant N. Viswamitra v. Yadav Sadashiv Mule [2004] 8 SCC 706 was also referred to by the learned counsel for the appellant to contend th....
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.... to court orders and that even a consent decree has the same value as a decree upon adjudication. Reliance was placed on Rama Narang v. Ramesh Narang [2006] 11 SCC 114. It was also contended that the learned Company Judge had misinterpreted the ratio of the decision of the Supreme Court in the case of Dhurandhar Prasad Singh v. Jai Prakash University [2001] 6 SCC 534 while observing that "in the case of Dhurandhar Prasad Singh (supra), the Supreme Court had gone to the extent of holding that if a decree is passed in ignorance of the provisions of law, such a decree would be inexecutable". With reference to paragraph 24 of the Supreme Court decision, the learned counsel for the appellant submitted that the Supreme Court decision specifically talked of "in ignorance of such a provision of law" referring to a provision which made a decree incapable of execution under law. He contended that this observation of the Supreme Court cannot be generalized to mean that any decree passed in ignorance of the provisions of law would be inexecutable. It was contended that the Supreme Court used the expression specifically in connection with the law relating to capability of execution and not as a....
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....iage of justice might, according to the winding-up court, occur, if the decretal debts were permitted to be used as a tool for winding up." It was further held in the Calcutta High Court decision that :- "The position at law well-settled both in England and in India, therefore, is that a winding-up court on its own goes behind the decree in the aforesaid serious circumstances, and if it is itself dissatisfied, then it does not permit a winding-up application to proceed, leaving the parties to work out their rights in execution proceedings in the ordinary civil courts. ..." 17. On the strength of the aforesaid observations, Mr. Kaul submitted that the compromise deed was entered into by the parties in ignorance of the provisions of the said Act which had an overriding effect. The compromise decree was also passed in these circumstances. According to Mr. Kaul, the learned Company Judge has taken a plausible view in coming to a conclusion that the respondents have a bona fide dispute with regard to the debt and, in thereby not proceeding further with the winding up petitions. 18. Reliance was also placed on the decision of the Supreme Court in the case of State of Punjab v. S. Rat....
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.... for the respondents submitted that, while the normal rule is that an executing court or any other court, in collateral proceedings, cannot go behind a court decree, this general rule is not applicable to the special cases of insolvency and winding up proceedings. 21. We agree with the view taken by the learned Company Judge that the company court in the course of the winding up proceedings is not bound by a decree of the court when it has to determine as to whether there exists a real debt or not. We also agree with the submissions made by Mr. Kaul that the general rule does not apply to insolvency proceedings or to winding up proceedings before a company court. The logic of this is quite clear and has been amply brought out by the Calcutta High Court in the case of Bajrangbali Engineering Co. Ltd. (supra). While a decree of a civil court binds the parties to the decree and to that extent neither of them can wriggle out of it unless they are able to show that it was obtained because of fraud or collusion etc., in a winding up proceeding, it is not only an issue between a creditor and the company, but also involves the larger question of survival of the company itself which effect....
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....This takes us to the discussion of the next question. "Question (b) : Whether the recurring maintenance charges agreed to be paid by the respondent companies to the appellant in terms of the compromise decree are contrary to the provisions of the Delhi Apartment Ownership Act, 1986?" 24. We do not have to give a definitive answer to this question because the same cannot be gone into in winding up proceedings. That is a matter of full-fledged trial before an appropriate forum. The question whether the respondents are right in contending that in view of the provisions of the Delhi Apartment Ownership Act, 1986, they are not liable to pay the amount agreed upon by them and recorded in the compromise decree, cannot be decisively gone into by a company court in ascertaining as to whether the respondents were unable to pay their debts. All that the company court is required to do, as observed by the Supreme Court in IBA Health (I) (P.) Ltd.'s case (supra), is that whether the dispute raised by the respondents was substantial and genuine or in other words, whether it was bona fide and not spurious, speculative, illusory or misconceived. We note that the learned Company Judge has examin....