TaxTMI 
TaxTMI 
2021 (12) TMI 348
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....12 a supplemental agreement was entered into to change certain terms of the agreement. The amendments included extension of time for payment of monies due under various invoices raised by SR Technics and also a deferred payment scheme. Since there was a general increase in the cost, the supplemental agreement dated 24.08.2012 included adjustment of flight hour rates and provisions for escalation were also made. 2.1. Upon provision of the services under the agreement, SR Technics had raised invoices and the respondent had issued seven bills of exchange for the monies due under the invoices. The respondent also acknowledge the debts from time to time by issuing certificate of acceptance in relation to the bills of exchange which would imply that the respondent had not disputed the correctness of the claim made in the invoices. The details of the seven invoices are as follows: S.No. Date Invoice Amount and reference no. BOE issuance no. and date of payment Certificate of Acceptance 1 30.07.2013 USD 3,075,603.12 out of the invoice value of USD 4,134,733.75 bearing reference No.M90204840 (kindly note that USD 59'130.63 has been credited and USD 1 million t....
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.... SR Technics, the petitioner is entitled to receive payments of the monies due under the seven Invoices from the respondent. 2.3. The petitioner has been making repeated requests to the respondent to make payments under the various invoices. Since the respondent did not honour its commitment under the agreements with the SR Technics and the petitioner reliably learnt that the respondent is not in a position to meet its financial obligations, the petitioner issued a statutory notice. It neither evoked any response nor did the respondent Company pay the monies due under the various invoices. Claiming that the failure on the part of the respondent to pay the monies due, despite issuance of a notice under Sections 433 and 434 of the Companies Act, 1956, would tantamount to inability to pay the debts making the respondent liable for winding up under Section 433 (e) of the Companies Act 1956, the petitioner has come up with this Company Petition. 3. The respondent resisted the Company Petition contending that the alleged debts are not legally enforceable and as such there cannot be a winding up order under Section 433 of the Companies Act, 1956. It was further contended that the pe....
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....r.Rahul Balaji, learned counsel appearing for the petitioner would vehemently contend that Section 433 (e) of the Companies Act 1956, provides for winding up of a Company, if it is found that the Company is unable to pay its debts. Relying upon Section 434, the learned counsel would contend that once a notice under Section 434 (1)(a) of the Companies Act 1956, had been issued and the Company fails to pay the debt demanded under said notice within the three weeks period or to secure or compound for it to the reasonable satisfaction of the creditor, a company is deemed to be unable to pay its debts. In view of the presumption of inability to pay created under Section 434 of the Companies Act, an order for winding up should automatically follow, unless the debtor Company is able to show that the debt itself is unenforceable or that there is a bona fide dispute. 5.1. The absence of a reply to the statutory notice, according to Mr.Rahul Balaji, would strengthen the presumption and the burden is on the debtor to show that the defences are bona fide or that the debt is unenforceable under Indian Law. The learned counsel would also point out that the debtor Company has not disputed the ....
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....ise at this juncture. According to him, the Company Court while deciding the question of winding up need not look into the requirement relating to stamping of the instruments. He would submit that even an unstamped instrument can be relied upon for collateral purposes namely, to establish the existence of the debt. According to the learned counsel, all that is required for admission of a Company petition is the existence of the debt and the inability of the respondent to pay the debt. Inasmuch as the petitioning creditor does not seek to enforce the debt in a petition under Section 433 read with 434 and 439 of the Companies Act, the question of stamping would not arise. 5.5. Mr. Rahul Balaji, learnd counsel appearing for the petitioner would also contend that the bills of exchange being the documents that are payable on demand they do not require stamping. Even otherwise, According to Mr.Rahul Balaji, the certificates of acceptance, the execution of which have been admitted by the respondent, would establish the debt beyond doubt and therefore, the issue relating to stamping may not be very germane to decide whether the Company Petition should be admitted and winding up should b....
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....plication seeking winding up. 6.1. Elaborating on his submissions, Mr.V.Ramakrishnan, would contend that the agreements dated 24.11.2011 and 24.08.2012 are not stamped in accordance with the Indian Stamped Act. Drawing my attention to the bills of exchange which have been relied upon as a proof of debt, the senior counsel would submit that those bills are not bills payable on demand and therefore they require stamping. Relying upon the language of the bills, the learned Senior Counsel would submit that the bills are not ones payable on demand. He would also draw my attention to Section 3 of the Indian Stamp Act, to contend that under Section 3(b) of the Act, a bill of exchange payable otherwise than on demand is chargeable with duty. Relying upon the definition of a bill of exchange payable on demand under Section 2 (3) (b) of the Indian Stamp Act, the learned Senior Counsel would submit that a bill of exchange payable on demand should contain an order for the payment of any sum of money weekly, monthly, or at any other stated period. 6.2. Drawing my attention to the bills of exchange, Mr.V.Ramakrishnan, learned Senior Counsel would submit that all the bills of exchange are m....
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.... of drawee's bank) Drawn on: ......................... (name and address of drawee) .................................. (signature of drawer - SR Technics (Switzerland) AG) Accepted ............................................ (stamp and signature of drawee - Spice Jet Ltd.) The signatures of Mr(s)............... and Mr(s) is/are legally binding4 for Spice Jet Ltd. Amd cprrect .......................................(Stamp and signature of confirming bank) Yes Bank Ltd, 48, Nyana Marg, Chanakyapuri, New Delhi 110 021, India (Endorsement on the back side of the Bill of Exchange) Please pay to the order of Credit Suisse AG ......................................... (Stamp and signature drawer - SR Technics (Switzerland AG)" 6.4. Pointing out that the endorsements made on the reverse of each of the seven bills of exchange that were subject matter of this Company Petition, Mr.V.Ramakrishnan, would submit that none of the endorsements are in the form required or suggested and therefore, the very endorsement of the bills of exchange is invalid. He would also point out that in the agreem....
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....its incorporation, or suspends its business for a whole year ; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts ; (f) if the Tribunal is of opinion that it is just and equitable that the company should be wound up; (g) if the company has made a default in filing with the Registrar its balance sheet and profit and loss account or annual return for any five consecutive financial years ; (h) if the company has acted against the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality ; (i) if the Tribunal is of the opinion that the company should be wound up under the circumstances specified in section 424G : Provided that the Tribunal shall make an order for winding up of a company under clause (h) on application made by the Central Government or a State Government." Class (e) of Section 433 of the Companies Act provides for winding up a Company, if the Company is unable to pay its debts. Sect....
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....d 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 Re. A Company. 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 Re. Tweeds Garages Ltd. The principles 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." 10. A reading of the above principles laid down by the Hon'ble Supreme Court would show that the Court while examining the question, as to whether, a winding up proceeding is to be admitted or not must, upon the existence of a debt being proved, consider whether i. The defence of the Company is in good faith and one of substance; ii. The defence is likely to succeed on point of law; and iii. The company adduces prima facie proof of the facts on wh....
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....up proceedings. The counsel for the parties had addressed arguments on the requirement of stamping of the agreements and the bills of exchange, the nature of the bills of exchange whether they are bills payable on demand or payable otherwise than on demand. 13. As I had already pointed out the scope of examination of the defences is very limited. The three pronged test suggested by the Hon'ble Supreme Court which I have already extracted would show that the Company Court need not render a conclusive finding on the enforceability of the debt, while examining the issuance of notice of winding up or while examining the admission of a winding up petition. The question whether the documents require stamping or the question whether the bills of exchange are payable on demand or otherwise than on demand or questions which, as rightly pointed out by Mr.Rahul Balaji, learned counsel appearing for the petitioner, will have to be examined at the time when the actual enforcement or examination of the claim of the petitioner by the Official Liquidator takes place. 14. I therefore do not propose to go into the requirements as to stamping. I must point out, even ignoring the agreements and ....
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....e Bombay Stamp Act as applicable in Gujarat. 8. In the State of Gujarat where the document of corporate guarantee was executed, it was based an adequate stamp duty payable on the instrument so far as that State. According to the appellant, when this document comes to the State of Maharashtra in the light of sections 18 and 19 of Bombay Stamp Act which are applicable in the State of Maharashtra, there is deficit of stamp duty required to be paid on the documents, in accordance with the laws applicable in the State within the stipulated period. If that stamp duty is not paid, according to the appellant, the document cannot be admitted in evidence, and cannot be acted upon. We fail to understand this stand of the appellant in the present Appeal, since we are not concerned with the insufficiency of stamp duty payable on documents of corporate guarantee, but we are concerned with the issue whether the appellant Company deserves to be wound up or not. The Company Court definitely is not required to act upon any particular document while considering whether or not to wind up a Company. It necessarily considers whether the Company is unable to pay its debts. Section 434 is a deemi....
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....isse AG, even on 24.08.2012 when it entered into the supplemental agreement. The said supplemental agreement also makes it obligatory on the part of the respondent to execute a certificate of acceptance and it is not in dispute that such certificates of acceptance have been executed by the respondent company in support of each and every one of the bills of exchange and the invoices. 18. A reading of the supplemental agreement dated 24.08.2012 would show that the execution of the bills of exchange in support of the invoices and the execution of the certificates of acceptance have been done by the respondent Company in order to avail the benefit of a six months deferred payment scheme. Therefore, it is clear that the respondent Company had obtained an advantage of a deferred payment by execution of these documents and the denial there of, in my considered opinion, cannot be said to be bona fide. Having obtained an advantage under the supplementary agreement and having executed the documents as required, the respondent cannot now seek to evade liability raising technical objections relating to stamping of the instruments. 19. This leaves us with the last contention of Mr.V.Ramak....