1 IN THE HIGH COURT OF JUDICATURE OF BOMBAY IN THE HIGH COURT OF JUDICATURE OF BOMBAY IN THE HIGH COURT OF JUDICATURE OF BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO.611 OF 2007 Praveen Gupta ..Petitioner. V/s. Star Share & Stock Brokers Ltd. ..Respondent. Mr.Birendra Saraf a/w. Ashish Kamath i/b. Y.N.Adhia for petitioner. Mr.P.M.Shah for respondent . CORAM: A.M.KHANWILKAR,J CORAM: A.M.KHANWILKAR,J CORAM: A.M.KHANWILKAR,J DATE : FEBRUARY 21, 2008. DATE : FEBRUARY 21, 2008. DATE : FEBRUARY 21, 2008. P.C. : P.C. : P.C. : 1. Heard Counsel for the parties. Perused the documents and pleadings on record. Having considered the rival submissions and analysing the materials on record, in my opinion, the Petitioner has made out formidable case to establish the position that the Respondent company took over the liability in relation to the margin Security Deposit, which was payable by M/s.Gupta Associates to the Petitioner as is stated in the communication dated 1st April, 2004, Exh.B. The said communication is addressed to the Petitioner on the letterhead of Respondent company signed by the Director Mr.K.C.Gupta. There is yet another communication, which restates the liability of the Respondent company to pay the amount of 2 Rs.20,00,000/-(Rs.twenty Lakhs only) to the Petitioner alongwith the interest accrued thereon, dated 31st March, 2006 at Exh. ‘C’. Even this communicaiton is sent to the Petitioner on the letterhead of the Respondent company duly signed by the Director of the Company Mr.K.C.Gupta. Notably, the said Mr.K.C.Gupta has sworn on affidavits dated 20th February, 2007 and 11th April, 2007, which affidavits were used in the arbitration proceedings, clearly conceding the position that the sum of Rs.20 Lakhs was payable by the Respondent Company to the Petitioner in terms of the arrangement recorded in the letter dated 1st April, 2004 Exh.‘B’. In other words, there is ample material to indicate that the Petitioner is entitled to receive the sum of Rs.20 Lakhs alongwith interest thereon from the Respondent company. The Petitioner’s case is that inspite of statutory notice served on the registered address of the Respondent company and the known Delhi address, the Respondent has failed and neglected to pay the outstanding dues. As a result, the Petitioner has approached this Court paying for winding up of the Respondent company. 2. The Respondent has opposed this action. According to the Respondent, the Petition is not 3 maintainable as the statutory notice appended to the Petition has not been served on the Respondent. This argument, in my opinion, is obviously an argument of desperation. Inasmuch as, the Petitioners have produced the statutory notice at Exh.‘F’ and the postal acknowledgement of RPAD at Exh.‘G’. The postal acknowledgment clearly indicates that the envelop containing the statutory notice was sent on the registered address of the Respondent company which was received with stamp of the Respondent company as well as signature of some emissary of the Respondent company, as is noted on the acknowledgement. To get over this position, the Respondent in the reply affidavit have disputed the fact that they have received such statutory notice. According to the Respondent, the rubber stamp appearing on the acknowledgement is forged and fabricated. Significantly, the Respondents are not disputing that some signature is noticed on the acknowledgment. It is not the case of the Respondent that the said person who has signed, is not in the employment of the Respondent at all or was not authorised to receive any communication. There is yet another aspect which persuades me to answer the issue against the Respondent. It is seen that the statutory notice was forwarded not only on the 4 registered address of the Respondent company but also on the corporate office address at New Delhi. In so far as notice sent on the corporate office at New Delhi, the same has been returned back with postal endorsement "refused". Indeed, the service on the corporate office may not be of so relevance for answering the issue but this only indicates that the desperate stand taken by the Respondent so as to extricate itself from the liability to pay the outstanding debt and to take frivolous defence in this Petition. In my opinion, the argument regarding non-service of statutory notice is bogus and fraudulent. 3. It was next contended on behalf of the Respondent that no communication was ever received by the Respondent company from 1st April, 2004 till 4th November, 2006 till the statutory notice was sent to the Respondent, on any of the addresses of the Respondent company either at the registered address or at the corporate office address. The fact that no such communication has been received during this period would not absolve the Respondent company from its conceded liability to discharge its obligations, as noted by its director who was authorised to issue such communication at the relevant time on 1st April, 5 2004 and which position is restated in the communication dated 31st March, 2006. To get over this position, the Respondent would contend that the said K.C.Gupta was no longer the director of the Respondent company and had no authority to issue communication on or after 30th March, 2006. 4. Once again, this submission clearly overlooks the documents produced by the Respondent on record. The Respondent has produced Form-32 to indicate that Mr.K.C.Gupta had resigned on 30th March, "2007". What is relevant to notice is that in column below Part-II of this form, which requires the date with effect from which the person snapped association with the Company, that date is disclosed as 29th March, 2007. Besides, it is the case of the Petitioner that the said K.C.Gupta is still associated with the Respondent company and working as its Chief Executive officer. Be that as it may, from the documents submitted by the Respondent to the Registrar of Companies, there is clear admission of the Respondent that K.C.Gupta was associated with the Respondent company till 29th March, 2007. If it is so, I have no hesitation in accepting the Petitioner’s case that the said K.C.Gupta was fully authorised to make commitment on behalf of the Respondent company, which 6 he did in his letters dated 1st April, 2004 and 31st March, 2006 and more particularly in the two affidavits filed in the arbitration proceedings between the parties. As a result whereof, the Respondent company is liable to pay the outstanding dues to the Petitioner. 5. The next argument canvassed on behalf of the Respondent is that in absence of any decision of the Company to take over the liability of Gupta Associates, such liability cannot be fastened on the Respondent company. In support of this submission, reliance is placed on Section 299 in particular Section (1) of the Companies Act. The said provision stipulates that every director of a Company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of Director. I fail to understand how this provision will come to the aid of the Respondent company. The fact that no meeting was held by the Board of Director or that the said K.C.Gupta who was director at the relevant time did not disclose his interest can be no basis to absolve 7 the Respondent company of its liability in terms of the arrangement recorded and assurance given in the communication dated 1st April, 2004 and 31st March, 2006 and restated in the two affidavits of K.C.Gupta filed in the arbitration proceedings for and on behalf of the Company. To my mind, this argument is clearly an argument of desperation. 6. Counsel for the Respondent would then contend that the stand taken by the Petitioner in relation to the documents at Exh. 9, Exh.10 and Exh.11 to the reply affidavit is untenable. It cannot be overlooked that it is well established that in an action for winding up, at the stage of admission of the Petition praying for winding up of the Company on available grounds, the Court is expected to broadly examine the defence of the Company regarding its outstanding dues. In my opinion, the documents already pressed into service on behalf of the Petitioners Exh.B and Exh. C as well as Exh.E collectively to the Petition, genuineness whereof cannot be and has not been questioned, even if the stand taken in paragraph-17 and 18 of the reply affidavit were to be read liberally. All that is emphasised on behalf of the Respondent is that the Company has not entered into any arrangment/agreement 8 to take over any liability of M/s. Gupta and Associates. It was a proprietary concern of K.C.Gupta. To my mind, the stand taken by the Respondent in the reply affidavit seems to be fraudulent one. For, the respondent proceeds on the assumption that Mr.K.C.Gupta has executed documents at Exh.B and Exh. C to the Petition. Whereas, it is faintly suggested in paragraph-18 that the signature of K.C.Gupta appearing on the said letters is not genuine. In so far as the later stand is concerned, that may have to be straightway rejected in view of the two affidavits filed by the K.C.Gupta, which has been used in the arbitration proceedings. That would belie the stand of the Respondent that the two letters have not been signed by Mr.K.C.Gupta himself. 7. It was next contended by the Respondent that the income tax returns filed by Gupta Associates would indicate that the liability to pay the stated amount was that of Gupta Associates even for the relevant period. This submission is of no avail to the Respondent. The fact that some entries were found in the returns filed by Gupta Associates cannot be the basis to reject the contents of the documents Exh‘B’ and Exh.‘C’ to the Petition, which unambiguously concedes that the Respondent company 9 has taken over the liability of the Respondent company and would repay the said amount alongwith the accrued interest thereon. 8. It is lastly contended on behalf of the Respondent company that the financial status of the Respondent is very sound. It is argued that it is not a case where the Respondent company is unable to pay its debt. This argument will have to be stated to be rejected. It is well established position that inspite of statutory notice, if the Respondent company fails and neglects to pay its debt and the Court were to form an opinion that the defence raised on behalf of the Respondent company is not genuine and fraudulent; the fact that the Respondent company has enough funds cannot be the basis to reject the claim of winding up which is founded on the grounds available under section 433 of the Act read with statutory presumption of inability of the Respondent company to pay its debt. In my opinion, therefore, the fact that the Respondent company is financially sound cannot be the basis to reject this Petition. 9. Accordingly, having considered all aspects of the matter, I proceed to pass the following order: 10 (i) The Respondent shall deposit sum of Rs.20 Lakhs in this Court within eight weeks from today, failing which the Company Petition to stand admitted, without further reference to the Court. (ii) In that case, the Petitioner shall advertise the admission of the Petition in two local news papers, namely, "Free Press Journal", "Navshakti" and in the Maharashtra Government Gazette. The Petitioner shall deposit an amount of Rs.10,000/- with the Prothonotary & Senior Master towards the publication charges, within three weeks with intimation to the Company Registrar failing which the Petition shall stand dismissed for non-prosecution. (iii) In the event, amount is deposited within time by the Respondent, the Petition shall stand disposed off without further reference to the Court upon the Petitioner withdrawing the said amount. 10. At this stage, Counsel for the Respondent seeks stay of operation of the order. I see no 11 propriety in acceding to this request as the Respondent has been granted eight weeks’ time to deposit the amount, till which date no precipitative steps are likely to take place. (A.M.KHANWILKAR,J) (A.M.KHANWILKAR,J) (A.M.KHANWILKAR,J)