TaxTMI 
TaxTMI 
2013 (8) TMI 429
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....the grammar and literal meaning of each word. Katju, J. speaking for the Apex Court would say[AIR 2011 Supreme Court 1925 [Premananda and Ors Vs. Mohan Koikal and Ors.] , "the literal rule of interpretation simply means that we mean what we say and we say what we mean". His Lordship further observed, "the literal rule of interpretation really means that there should be no interpretation. In other words, Court should read the statute as it is without distorting or twisting its language". His Lordship eloquently explained what literal interpretation would mean. The golden rule of interpretation would however suggest, the law should be given a correct meaning keeping in view the true spirit and the mindset that the legislature had while enacting the law. The law, in our view, should be interpreted to extend the benefit to all who would otherwise be entitled to. It was not for stretching it to an extent beyond its capacity. It was not to supplant something that was not contemplated. It was to give the widest amplitude, it could bear that would come only from the true spirit for which such law was enacted. Our Indian laws are century old. Laws are still prevalent that had been born bef....
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.... Section 439 (1) (b) would permit any creditor to maintain the winding up petition. Sub section (2) would also include a secured creditor as a creditor within the meaning of sub section (1)(b). Section 434 (1) (a) would give right to a creditor by assignment or otherwise having a claim more than Rs.500/- to serve the notice of remand and if the demand is not satisfied he would be entitled to claim deemed insolvency as per sub section (2). From the analysis as above, we would find as follows:- i) A creditor could maintain the winding up petition. ii) A secured creditor is also creditor to maintain winding up petition. iii) A creditor should have the claim for Rs.500 and above. iv) He would serve the notice of demand, that demand, if unattended and /or unsatisfied, would permit the creditor to claim deemed insolvency v) The creditor would maintain the winding up petition on the ground of inability to pay. vi) He would have to prove, it is otherwise just and equitable that the company should be wound up". The counsel appearing for the parties cited several decisions before us on the issue that we would be discussing soon after. FACTS : The appellant appointed the respondent a....
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....g a) that we have been doing business with hp for last 10 years and have been regular in our payments. b) without any notice you had stopped billing 6j i.e. desktop material to partner like us somewhere in June 08, but surprisingly you had billed some 350 monitors before it and never bothered till January how it will get liquidated. c) you also stopped billing of kv products from February 09 to so called rd model. d) we had been exclusively working for erstwhile Compaq and then Hp for an period of more than 7 odd years and had initially developed the entire market in east for you 80% of your existing major partners were actually developed by us from scratch but as overheads were mounting and we took up other brands there was lot of resistance from certain section of management of HP to an extent of us going multi brand that we were deprived of buying pavilion as an brand till the last while all other partners were billed this product. e) the support of the spo team had dwindled to an extent were the business had come to an auto mode, the same could be proved by the fact that the claims of last two years has not been approved on technical ground and spo team has not bothered to....
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....ayment plan which I feel was possible from our side. I would once again request you to please accept our payment plan and confirm so the initial payment could be made before the commit day. The intent is to pay and basis that I had committed dates below. Request your understanding and cooperation and a confirmation. Rgds Pravin Jalan." (viii) From Nitin to Pravin : April 24, 2009 Hi Pravin, As discussed yesterday, below is our Final counter proposal to Jalan:- Month USD INR 25th April 100,000.00 4,900,000.00 15th May 100,000.00 4,900,000.00 15th June 145,137,07 7,111,716.55 15th July 145,137,07 7,111,716.55 15th Aug 145,137,07 7,111,716.55 15th Sep 145,137,07 7,111,716.55 780,548.29 38,246,866.21 On the strength of the above materials the appellant issued a statutory notice of demand that the respondent replied. The respondent would deny having committed any wrong. On the contrary, they charged the appellant for ignoring them in the matter of maintaining business relationship. They would say, because of the wrong policy of the appellant, they suffered loss to the extent of Rs.795.74 lacs. They denied, having withheld the sum of Rs.4,10,03,260.98. They would lastly c....
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....basis of documents contained in the petition which have been relied upon in course of the hearing, it cannot be said that the petitioner has been able to establish the amount which is due and owing from the company". His Lordship lastly observed, "it does not appear that the defence is altogether moonshine or without basis". RIVAL CONTENTIONS : Mr. Siddhartha Mitra, learned senior counsel appearing for the appellant advanced his argument by discussing the law of winding up. According to him, when the claim of the appellant was specific it could never be resisted except through a bona fide dispute. In case such dispute was raised by setting up a counter-claim such counter-claim must be specific and not vague. In the instant case, the appellant had a specific claim that the respondent miserably failed to counter act. The alleged counter-claim was set up for the first time in reply to the statutory notice of demand that was inconsistent with the e-mails, the parties exchanged where the company unequivocally offered to pay off the dues of the appellant in a phased manner. Per contra, Mr. Pratap Chatterjee, learned senior counsel would contend, laws of limitation hopelessly barred the....
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....inding up petition, dealt with the issue and observed, "Under section 433 a creditor can bring an action under sub section (e) provided he has just debt payable by the company and the company failed and neglected to pay and/or secured such claim despite statutory notice of demand. Hence, if an action is brought by a creditor for winding up of a company on account of non payment of debt and defence is taken by the company the Court is only to prima facie examine the defence of the company and if the Court feels that the said defence is bona fide and there is even a possibility of success in case the dispute is relegated to a regular trial winding up is refused. Whether the defence can be sustained or not the winding up Court is only to examine the same prima facie. Neither the winding up Court is competent to finally adjudicate the rights of the parties on account of the claim nor does it have authority in law. If a creditor has claim against the debtor the law has prescribed its remedy. Those remedies are complete code by themselves. Merely because the debtor is a corporate entity the creditor cannot enforce hid debt as a matter of a right in a winding up proceeding. It can only a....
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....hich the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends." "Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. (See A Company, In re [1894] 94 SJ 369; [1894] 2 Ch 349 (Ch D). Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely. (See Tweeds Garages Ltd., In re [1962] Ch 406; [1962] 32 Comp Case 795 (Ch D). The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends." In the later case the Apex Court relying on an English decision[1962] Vol. 1 All E.R. 121....
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....siness relationship. The company acted as a distributor. There was debtor-creditor relationship prevalent for a long time. The last credit invoice was of April 2009. Even if we ignore the credit invoice and take the dates of the purchase orders we cannot say, the claim was barred, being not raised within three years. Jural relationship between the two parties would depend upon the series of transactions and the conduct of the parties, the nature of dealings, and the contemporaneous reaction. The law of limitation is enacted to prevent any stale claim to be raised as and when a litigant would desire that would create a tremendous uncertainty to a right and liability preventing any controversy to reach finality. In a money claim if money becomes due and payable on a particular date and someone sleeps over his right and demands it beyond three years period, the law would not support his conduct. However, the reason for his not approaching the Court within the period of limitation is also taken care of and Section 4 to 26 would take care of it. If we give a combined reading of the law of limitation we would find that such law would not prevent any live claim to be brought in Court, ir....
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....uivocal. If the defence was likely to succeed, the application for judgment upon admission would fail. We are in doubt as to whether the defence was bona fide or not. Even if we accept the contention, the counter claim is genuine, so long it is not specific it would not be in a position to resist a specific claim of the petitioning creditor. With deepest regard we have for His Lordship and with all humility may we say, the present case is not as such that the company would go scot-free having an unconditional order resisting an order of admission. In course of hearing we enquired, what was the wroth of the company. We got a reply, it was a trading company and probably had no tangible asset, at least to secure the debt of the petitioning creditor being the appellant that would prompt us to ask the company to secure the claim of the appellant being the petitioning creditor. RESULT : The appeal succeeds in part and is allowed. The respondent company is directed to secure the claim of the appellant by offering cash security or any other co-lateral security to the satisfaction of the Registrar, Original Side. Such security must be furnished within a period of four weeks from date. In....