TaxTMI 
TaxTMI 
2015 (8) TMI 1589
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....ting third party rights for selling or disposing off its property. 2. Heard learned advocate Mr. Navin Pahwa for the petitioner with learned advocate Mrs. Sangeeta Pahwa and learned advocate Mr. B. T. Rao for the respondent. 2.1 Learned advocate Mr. Pahwa for the petitioner submitted that the respondent awarded a contract to a consortium headed by Samsung SDS Company Limited which is having its registered office at Seoul, Korea (hereinafter referred as as 'Samsung') on certain terms and conditions. Samsung in turn entered into a contract with the petitioner. Learned advocate submitted that the petitioner executed the contract both to the satisfaction of Samsung and the respondent. The parties mutually agreed that a part of the outstanding dues payable by the respondent to Samsung shall be assigned to the petitioner. Therefore, after certain deliberations and correspondence, the respondent issued a certificate dated 12.12.2005 regarding the mutual understanding in this regard. It is contended by learned advocate that the respondent, however, did not join into execution of tri-partite agreement though earlier agreed. Therefore, the Deed of Assignment of debt was entered into be....
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.... a letter dated 4.4.2007 to the petitioner informing that the claims of the petitioner shall be brought to the knowledge of the Board of Directors. 2.4 Learned advocate Mr. Pahwa would submit that thereafter the respondent sent a letter dated 11.4.2007 stating that the respondent acknowledges a debt of amount of USD 1,65,493. However, it was clarified in the said communication that if no interest whatsoever is applied on the dues which has been reflected in the Deed of Assignment, then outstanding dues are acknowledged. From the contents of the aforesaid letter, it is clear that respondents had acknowledged the principal amount of USD 1,65,493. The petitioner has, therefore, informed the respondent that if the respondent agrees to pay the principal amount within a period of 90 days from 20.4.2007, the petitioner is agreeable to accept the said amount failing which the petitioner will insist for the interest amount. 2.5 Learned advocate for the petitioner thereafter submitted that another letter was received from the respondent that the respondent is agreeable to the payment of amount of USD 1,65,493 provided the petitioner does not insist upon the interest on the said amount.....
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....etitioner. Thus, the respondent has not entered into any agreement or assigned any contract for carrying out the work at Wadinar Port of the respondent-company. The petitioner has failed to produce any document on record that the respondent has entered into any contract with the petitioner for undertaking any work and, therefore, in absence of any agreement, the present petition filed by the third party is not maintainable. 3.1 Learned advocate referred to the various correspondence entered into between the respondent and Samsung from November, 2003 to June, 2005 annexed at pages 62 to 73 of the compilation and submitted that the transaction was between the respondent and Samsung for execution of a particular work. Learned advocate Mr. Rao appearing for the respondent would contend that the claim of the petitioner is based on the Assignment Deed executed between Samsung and the petitioner on 30.12.2005. However, the said document is not signed by the respondent nor the respondent has ratified the same and, therefore, when the respondent has not accepted the Deed of Assignment executed by Samsung in favour of the petitioner, the petitioner cannot file the present petition and, th....
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....e present case and pointed out that the respondent is Joint Venture Company promoted by IOC, Reliance Industries Limited, Essar Limited and Petronet India Limited. The respondent-company has been incorporated for setting up under water pipe line for transporting liquid crude, oil, petrol, diesel from the vessel which is anchored in the mid sea to the storage tanks. For the said purpose, the respondent had given a contract to Samsung for the work of Wadiner-Kandla pipe line project. The said contract was given in February, 1999. It was to be completed with a period of two years. Said period was extended for the completion of the work and it was completed on 18.4.2003. Final bill has been submitted by Samsung to the respondent on 23.5.2003. Respondent pointed out various discrepancies in the final bill and called upon the Samsung to rectify the same. Meeting was held in July, 2003. The assurance was given by Samsung to rectify the defects. However, it was not rectified. It was pointed out that there were serious disputes about the finalisation of the work with Samsung. It is also pointed out by learned advocate that there were disputes with regard to payment between Samsung and the p....
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....aim made by the petitioner and, therefore, when there is a dispute with regard to the claim of the petitioner, the present petition is liable to be dismissed. 4. Learned advocate Mr. Pahwa appearing for the petitioner-company has submitted in the rejoinder that the present petition is filed within the prescribed time limit. Learned advocate has placed reliance upon the provisions contained in Sections 18 and 20 of the Limitation Act, 1963 and submitted that the respondent has acknowledged its debt in the communication dated 11.4.2007 and 4.10.2007. Lastly, in the communication dated 20.3.2008 also, the respondent has accepted liability to make payment of USD 1,65,493 and, therefore, when there is an acknowledgment of debt on the part of the respondent, the present petition is filed thereafter within stipulated time limit. Learned advocate Mr. Pahwa further contended that the respondent is disputing the letter dated 4.10.2007 written by its Manager. However, there is no dispute with regard to letter dated 11.4.2007 written by the said officer. In any case, the internal authorisation is a matter governed by the doctrine of indoor management of the company. An outsider is not expec....
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.... However, there were certain discrepancies in the said bill. Therefore, the respondent informed the Samsung to rectify the same. The respondent has raised serious disputes about the finalization of the work. e) Notice was issued by Samsung to the respondent and called upon it to pay Rs. 30,90,136/- as well as USD 3,06,725. f) The respondent has made the payment of Rs. 30,90,136/- by way of full and final settlement. g) There were certain communications between Managing Director of the respondent, petitioner and Samsung. From the said correspondence, it is clear that the petitioner addressed various communications to Managing Director of respondent-company. From the record, it is also revealed that suggestion was made to execute Deed of Assignment between the petitioner and Samsung. However, the Managing Director of the respondent informed Samsung on 20.5.2005 that they are not directly concerned with any assignment which Samsung may have with the petitioner and Deed of Assignment is not feasible. h) After the said communication dated 20.5.2005 from Managing Director of respondent to Samsung, Samsung issued notice on 2.6.2005 as observed hereinabo....
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....rking as Manager of the respondent-company was not authorized as stated in the affidavit-in-reply by the respondent to write letters which are produced by the petitioner. From the documents produced on record, it is clear that initially there were correspondence between the Managing Director of the respondent and Samsung as well as the petitioner-company. The Managing Director has specifically stated that Deed of Assignment is not feasible in May, 2005. Therefore, it is surprising that Manager of the respondent-company has informed the petitioner that they are agreeable for the principal amount of USD 1,65,493 if interest is waived. However, when the authority to write such letter by the Manager is disputed by the respondent, the petitioner cannot rely upon the said communication and more particularly when the other communications are from Managing Director of the respondent. Thus, it cannot be said that the respondent has acknowledged its debt and was agreeable for the payment of USD 1,65,493 to the petitioner. The last communication is in March, 2008 and the petition is filed even after approximately a period of three years i.e. on 18.3.2011. Thus, it is also clear that the petit....
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.... India Petrochemicals Ltd. and another] where the Supreme Court held as under:- "29. It is beyond dispute that the machinery for winding up will not be allowed to be utilised merely as a means for realising its debts due from a company. In Amalgamated Commercial Traders (P) Ltd. v. A.C.K.Krishnaswani, this Court quoted with approval the following passage from Buckley on the Companies Act: "It is well settled that 'a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bonafide disputed by the Company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the Court."' 27. While examining the entire case laws on the issue with reference to the word "debt" under Sec.433(e) of Companies Ac t , in 2000(III)CTC 107 [Neg Micon A/s.Alsvoj 21 DK 8900 Rangers Denmark v.NEPC India Limited 1678 Trichy Road, Ramanathapuram Coimbatore 641 045], the Division Bench of this Court held as under:- "16. If the debt is bona fide disputed and the defence is a substantial one, the Cour....
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....rson, however anxious that person may be, to have the company wound up. It is the duty of the Court to dismiss claims made beyond the prescribed period of limitation, as provided in Section 3 of the Limitation Act. If on the basis of the case set up, and the documents relied upon by the petitioner, the claim is barred, either in whole or in part, to the extent such claim is barred by time the Court is not required to adjudicate on merits.(Vijayalakshmi Art Productions v. Vijaya Productions Pvt.Ltd. (1997) Vol.88 CC 353 (Madras). 10. Period of limitation "has been defined under Section 2(j) of the Limitation Act, 1963 to mean the period of limitation prescribed, for any suit, appeal or application by the Schedule, and "prescribed period" has been defined to mean the period of limitation computed in accordance with the provisions of the Limitation Act. Under Section 3(1), subject to the provisions contained in Sections 4 to 24, every suit instituted, appeal preferred and application made after the prescribed period shall be dismissed, although limitation has not been set up as a defence. Under Section 3(2)(a)(iii), for purposes of the Limitation Act a suit is instituted, in ....
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....the petition for winding up can be admitted to proof even if it may have become time barred on the date of the order of winding up. 24. Reference may be made to Palmer's Company Law, Volume I, page 1166. paragraph 85.53 reads: A statute-barred debt does not constitute a 'liability' of the company for the purposes of winding-up. The liquidator in a compulsory winding-up or an insolvent voluntary winding-up is under a duty to reject the proof of a statute-barred debt; in a solvent voluntary winding-up, he must do so likewise unless the contributories consent. A winding-up order stops the period of limitation from running in the company's favour so that a debt which is not statute-barred at the date of the order can be proved for." 13. In the case of Madhusudan Gordhandas & Co., (supra), the Hon'ble Surpeme Court has observed and held as under: "The High Court on appeal upheld the judgment and order and found that the alleged claims of the appellants were very strongly and substantially denied and disputed. The first claim for erection of plant and machinery was totally denied by the company. The defences were first that the books of the company showe....
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....of the petitioner is not feasible. Therefore, from the said communication, it is clear that the Managing Director of the respondent was not agreeable for such arrangement between Samsung and petitioner. In view of the aforesaid facts and circumstances of the present case, the decisions relied upon by learned advocate Mr. Pahwa appearing for the petitioner are not applicable mainly because of the fact that there was no privity of contract between the petitioner and the respondent and though the Deed of Assignment is entered into on 30.12.2005 between the petitioner and Samsung, the petition is filed in the year March, 2011. The communication by the Manager of the respondent-company cannot be termed as acknowledgment of debt by the respondent-company as he was not authorized to write such letters and, therefore, when the Manager was not authorized to send the communication to the petitioner, it is not covered within the meaning of acknowledgment of debt. Further, as observed hereinabove, the last communication is in March, 2008 and the present petition is filed on 18.3.2011 i.e. almost after period of three years. Thus, in the facts of the present case, the decisions relied upon by l....
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....he expression 'debt' would refer the liability to pay and it rests on certain contingencies, conditions and casualties. Even if the debt is proved and even if the inability to pay the debt is also shown, it is not a launching pad, in all cases, for successful winding-up order. Inability may arise for variety of reasons and the Court is obliged to consider whether inability is the outcome of any deliberate or designed action or mere temporary shock and effect of economy and market. In a given case, it may happen that a party may become unable to pay its debts for a while, but that by itself is not a criterion for exercise the power to wind up, ipso facto. (4) It is necessary for the Company Court to consider the financial status, strength and substratum of the Company, in overall context. It is possible, at times, there may be a cash crunch. It may be also, possible, at times, the temporary cash crisis despite high sale and heavy turnover and, therefore, in such a situation, mere disability or only on the ground of inability to pay would not constitute a ground empowering the Court to wind-up the Company. (5) If the Company is an ongoing concern having regu....
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.... in the interest of justice to wind-up the company. It is a well known rule of prudence that even in case where indebtedness to the petitioning person is undisputed, the Court does not pass order for winding-up where it is satisfied that it would not be in the larger interest of justice to wind-up the Company. (13) It is, also well settled that a winding-up order shall not be made on a creditor's petition, if it would not benefit him or the company's creditors in general. (14) The Court is also obliged to consider that it would be in the interest of justice to give the Company some time to come out of the momentary financial crisis or any other temporary difficulty as winding-up is a measure of last resort. (15) Winding-up course cannot be adopted as a recourse to recovery of the debt. (16) The Court must bear in mind one more celebrated principle and consider whether the Company has reached a stage where it is obviously and plainly and commercially insolvent, that is to say, that its assets are such and its existing liabilities are such as to make the Court feel clearly satisfied that currents assets would be insufficient to meet the cur....
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....the money. Such an attempt would be nothing but would tantamount to blackmailing or stigmatizing the concerned company by abusing the process of the Court. (22) Winding-up petition is not an appropriate mode enforcing bona fide disputed debts as it is nothing but misuse and abuse of the process of the Court. (23) Winding-up petition is not an alternative form for resolving the debt dispute. In certain cases disputes are such that they are fit for resolving through Civil Court rather than through Company Court. (24) What is bona fide and what is not is a question of fact. The expression "bona fide" would mean genuine, in good faith and when dispute is based on substantial grounds or when defence is probable and with some substance, it is a bona fide dispute. It must be strictly noted that winding-up petition is not an alternate to civil suit." 16. Thus, the Hon'ble Division Bench has laid down various guidelines which are required to be considered by the Company Court while deciding the winding up petition. It is clear from the said guidelines that remedy under Section 433(e) is not a matter of right and it is the discretion of the Company Court. It....