TaxTMI 
TaxTMI 
2017 (12) TMI 636
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....F MOTION LODGING NO.23 OF 2017, NOTICE OF MOTION LODGING NO. 27 OF 2017, NOTICE OF MOTION LODGING NO.24 OF 2017, NOTICE OF MOTION LODGING NO. 30 OF 2017 AND NOTICE OF MOTION LODGING NO. 33 OF 2017 For The Appellant : Mr.Yusuf Iqbal Yusuf a/w Mr.Neville Majra, Ms. Shaista Pathan, Mrs.Anvee Mehta, Mr.Feroj Qureshi i/by Mr. Akhileshwar Sharma For The Respondents : Mr.Yusuf Iqbal Yusuf a/w Mr.Neville Majra, Ms. Shaista Pathan, Mrs.Anvee Mehta, Mr.Feroj Qureshi i/by Mr. Akhileshwar Sharma for the Appellant. Mr. Sharan Jagtiani a/w Mr. Sunny Shah i/by Mr. Hemant Sethi JUDGMENT : [PER R M SAVANT, J] 1 All the above Appeals are admitted and with the consent of the learned counsel for the parties are heard forthwith. 2 The above Appeals challenge the order dated 17/18th October 2016 passed by a learned Single Judge of this Court (A.K.Menon, J.) by which order the Company Petitions filed by the Respondents herein came to be disposed of in terms of the directions issued in the said order which directions interalia contained the direction to deposit the amounts claimed in the statutory notices issued by each of the Respondents in the above Appeals. The said directions are rep....
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....Notes, Contracts, quantity of the product, delivery schedule and the rates. The parties would be referred to as per their nomenclature in the Trial Court i.e. before the learned Single Judge, the Appellant would be referred to as the Respondent whereas the Respondent would be referred to as the Petitioner. The case of the Petitioner as appearing in the Company Petition is that the Petitioner under the five contracts for purchase of Soyabean Meal had paid a sum of Rs. 51,00,00,000/to the Respondent as advance against the total purchase price of Rs. 101,34,00,000/. The said amount of Rs. 51,00,00,000/was transferred to the account of the Respondent by RTGS on various dates as mentioned in paragraph 9 of the Company Petition. The Petitioner in respect of the said payment has placed reliance on the bankers certificate annexed at Exhibit D to the Petition confirming that six remittances totalling to Rs. 51,00,00,000/have been made to the Respondents. The receipt of the advance in the instant Company Petition of Rs. 51,00,00,000/as also the advances from the other Petitioners in the other companion Company Petitions is not in dispute. The details of the Soyabean Meal contracts e....
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....t to the Petitioner of 5500 Metric Tonnes (MT) of Guar Seeds against an advance of 90% of the value to be calculated with reference to the price of Guar Seeds prevailing as on 27/04/2012 being the agreed "settlement date". It was further mentioned in the said letter that the Petitioner had made certain advance payments in installments but this fell short of the requisite amount for supply of the 5500 MT of Guar Seeds. It was the case of the Respondent that at the request of the Petitioner, the Respondent reduced the advance by 30% of such price and the Petitioner agreed to pay further amounts against which the Respondent would supply Guar Seeds. It was the case of the Respondent that the amounts already paid were to be adjusted in the last lot of Guar Seeds to be supplied. It was the case of the Respondent that though the Petitioner did not make further payments, the Respondent continued to purchase the Guar Seeds on behalf of the Petitioner and contended that it was in a position to supply the seeds provided the Petitioner made payments of the amount due. It was the case of the Respondent that it notified the Petitioner that if the balance amounts were not paid within a period of ....
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....rs. In the said Company Petition the Appellant herein i.e. the original Respondent filed the affidavit of one Mr.Manish Bothra - Director of the Respondent opposing the above Company Petition interalia on various grounds. In the said reply affidavit the defence taken is that there was never any contract for purchase of Soyabean Meal and that the contracts entered into were in respect of purchase of Guar Seeds. It was alleged that the emails produced by the Petitioners were false and fabricated. It was contended that since the Respondent went on purchasing Guar Seeds and since the Petitioner did not make the balance payment on account of which the Respondent had suffered financial loss, it was therefore, denied there was any debt due to the Petitioner. A reference was also made in the said affidavit to the investigation conducted by the Director General, Competition Commission of India (for short "the DG CCI") in Case No.76 of 2012 pertaining to the sharp rise in the price of Guar Seeds during the period October 2011 and March 2012. In the said reply affidavit it is stated that various observations were made by the DG CCI during the course of investigation into the operation of Ruch....
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....wspapers i.e. Free Press Journal (in English) and Navshakti (in Marathi) and in the Maharashtra Government Gazette. The gist of the reasoning of the learned Single Judge as can be culled out from the impugned order is that though there is merit in the contention raised on behalf of the Respondent that the circumstances mentioned by the Respondent in its affidavit in reply indicating that the transaction is not a genuine transaction, according to the learned Single Judge what has been lost sight of is the fact that the said contracts have originated from the Respondent. The learned Single Judge further held that the contention that these are all fabricated and designed to reflect data matching the credit balances is farfetched. The learned Single Judge has further observed that the denial of the contracts' authenticity appears to be a feeble attempt to avoid liability and the consequences that follow. The learned Single Judge has observed that the signatures of Mr. Bothra - the deponent of the affidavit in reply which are on the contracts have not been denied. Having regard to the dispute raised by the Respondent as regards the authenticity of the emails the learned Single Ju....
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.... been caused on account of they being allegedly induced to purchase large quantities of Guar Seeds at the instance of the Petitioners. The learned Single Judge having regard to all the aforesaid facts prima facie found that the defence set up by the Respondent does not appear to be bonafide. The learned Single Judge has observed that having regard to the fact that the Respondent has received the amount paid over by the Petitioners coupled with the fact that the Respondent has not relied upon any evidence of having purchased any quantities of Guar Seeds pursuant to the alleged repeated orders to purchase the Guar Seeds, the defence of the Respondent was not a plausible one. The learned Single Judge therefore as indicated above deemed it appropriate to direct the Respondent to deposit in this Court the amount claimed by way of the statutory notices by the Petitioners in the above Company Petition as also the Petitioners in other companion Company Petitions. As indicated above it is the said order dated 17th/18th October 2016 which is taken exception to by way of the above Appeals. 9 Heard the learned counsel for the parties. 10 SUBMISSIONS ON BEHALF OF THE APPELLANT/ORIGINAL RE....
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....tered into the correspondence almost for a period of one year though it was the case of the Petitioner that it had not been supplied the Soyabean Meal under the said 5 contracts; I] That the learned Single Judge failed to appreciate that the Petitioners could not have continued to enter into new contracts for purchase of Soyabean Meal and paid advance despite consistent default in earlier contracts for purchase of Soyabean Meal. J] That the learned Single Judge failed to appreciate that since the Petitioners have not signed the contracts for purchase of Soyabean Meal, it could not be said that the said contracts were completed and therefore the reliance placed on the said contracts was misfounded. K] That even though the Respondent may have neglected to pay the debt, it being commercially solvent, a Petition for winding up is not maintainable. 11 SUBMISSIONS ON BEHALF OF THE RESPONDENT/ORIGINAL PETITIONERS BY THE LEARNED COUNSEL MR. SHARAN JAGTIANI : i] That the Petitioners produced the Soyabean Meal contracts as signed by the Respondent with the rubber stamp of the Respondent appearing on the same. The Petitioners have also produced evidence ....
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.... CCI is misplaced. xi] That having regard to the nature of the inquiry by the DG CCI, the same is a preliminary fact finding inquiry and not in itself a quasijudicial order. At that stage there is no opportunity given to the concerned parties to make submission, but only statements are recorded and materials considered. Hence the said preliminary fact finding statements in that report have no evidentiary value and is not determinative of the issues that arise inter se parties before a Court. xii] That as regards evidentiary value of the said report, reliance is placed on the judgment of the Apex Court reported in (2008) 12 SCC 73 in the matter of Raymond Woollen Mills Ltd. v/s. Director General (Investigation and Registration) & Anr. to contend that the said report does not have any evidentiary value. xiii] That the report of DG CCI is solely based on the bank statement of the parties. The DG CCI did not have the benefit of material facts necessary to determine the inter se disputes between the parties as also the admissions made by the Director Mr. D Narsimhan and the representative of the Chartered Accountants Mr. P Bhargava before this Court that the a....
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....in being 27/07/2012, the Respondent also did not address any correspondence for almost a year before addressing the said letter dated 15/06/2013. xx] That it is well settled that the commercial solvency does not constitute a stand alone ground to avoid winding up. In the event the company refused to pay on no genuine and substantial grounds, there is a presumption that the company is unable to pay its debts and thus the company ought to be wound up. Reliance is placed on the judgment of the Apex Court reported in (1971) 3 SCC 632 in the matter of M/s. Madhusudan Gordhandas & Co. v/s. Madhu Woollen Industries Pvt. Ltd. and, (2010) 10 SCC 553 in the matter of IBA Health (I) Pvt. Ltd. v/s. InforDrive Systems SDN, BHD, xxi] The view taken by the learned Single Judge is a possible view in the facts and circumstances of the case and therefore the impugned order need not be interefered with by this Court in its Appellate jurisdiction. Reliance is sought to be placed on the judgment of the Apex Court reported in 1990 (Supp) SCC 727 in the matter of Wander Ltd. and another v/s. Antox India P. Ltd. xxii] Having regard to all the aforesaid facts, the order passed by....
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....tatements evidencing the payment of advances of Rs. 51,00,00,000/to the Respondent by RTGS. Hence the Petitioner has discharged the burden which was initially lying on it. However, on the burden shifting to the Respondent, the Respondent has not discharged the said burden by producing material which was the fulcrum of its defence. 13 The Appellant herein i.e. the original Respondent has filed an Application to produce additional evidence being Notice of Motion (L) No.1548 of 2017. The additional evidence which is sought to be produced interalia contain the alleged Guar Seeds contracts. Hence it is for the first time at the Appellate stage that the Guar Seeds contracts are sought to be produced. By an order passed today the said Notice of Motion (L) No.1548 of 2017 has been dismissed for the reasons stated in the said order. 14 In so far as the 5 Soyabean Meal contracts which have been received by email by the Petitioner is concerned, each contract bears the signature and rubber stamp of the Respondent. Each contract identifies the quantity, rate, payment terms, delivery date. The Petitioner has given inspection of the emails to the Respondent. In so far as the said contracts ....
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....hereas the alleged Guar Seeds contracts are also dated prior in point of time. A reading of the said email indicates that the said email is in the nature of the proposal to the Respondent that the advances can be adjusted against the Gaur Seeds. The alleged Guar Seeds contracts are all prior in point of time to the email. Hence there would be no question of Mr. Rajkumar Goyal making a proposal for purchase of Guar Seeds to be adjusted with the advances provided by the Petitioner. The said email therefore does not in any manner support the case of the Respondent that the amount advanced by the Petitioner was towards the purchase of Guar Seeds. The factum of supply of Guar Seeds to 5 entities which are sister concerns of the Petitioner also does not further case of the Respondent in so far as contracts being for purchase Guar Seeds and not for purchase of Soyabean Meal is concerned. The contracts relating to Guar Seeds, according to the Respondent are dated 14/01/2012 whilst the Guar Seeds are alleged to have been supplied even prior to the contract date i.e. 28/11/2011. It is only in respect of the alleged Guar Seeds contract between the Respondent and M/s. Nova Trading Pvt. Ltd. (o....
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....on the judgment of Raymond Woollen Mills Ltd.'s case (supra) seems to be apposite. In the said case the Apex Court was concerned with the investigation report under the provisions of Section 11 of the Monopolies Restrictive Trade Practices Act, 1969 which provisions can be said to be almost paramateria to Section 26 of the present Competition Act, 2002. The Apex Court held that any reference to the contents of the said report which have not been put in evidence and subjected to cross examination cannot be looked into. Paragraph 36 of the said report is material and is reproduced herein under : 36. The learned senior counsel for the respondents referred to the "preliminary investigation report" submitted by the Director General (I&R). The preliminary investigation report cannot be taken into consideration as it is not produced in evidence. It is only a report submitted in terms of Section 11 of the MRTP Act for initiating the enquiry. Only those facts contained therein, which are proved on record by evidence, can be looked into. The preliminary investigation report, as such, is not evidence on record. As such, any reference to the contents thereof, which have not been p....
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....d fact impinges upon whether there were any contracts for purchase of Soyabean Meal. In our view, the said contention misses the point that the said contract was acted upon inasmuch as the Petitioner had made payment of the advance which constituted 50% of the contracted amount i.e. the sum of Rs. 51,00,00,000/and hence in terms of Section 8 of the Contract Act the same constitutes an acceptance. 22 In so far as the order passed by the Madhya Pradesh High Court is concerned, it seems that the parties and the contracts in issue before the Madhya Pradesh High Court were different. In the said case it appears that the Respondent therein Betul Oils Ltd had produced the contract for purchase of Guar Seeds bearing the signature of M/s. Nova Trading Pvt. Ltd.; whereas in the instant case the Respondent has failed to produce any such Guar Seeds contracts. Further before the Madhya Pradesh High Court there was no admissions as are in the present case by the Director Mr. D Narsimhan and the representative of the Chartered Accountants Mr. P Bhargava. In so far as the said order passed by the Madhya Pradesh High Court is concerned, it is required to be noted that the Review Petition being N....
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....such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the company's insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company's liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation a....