- 1 - appeal225ravikadam rng IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.225 OF 2009 in COMPANY PETITION NO.803 OF 2008 Tilaknagar Industries Ltd .. Appellant vs M/s Anupama Wine Distributors.. Respondent Mr.Ravi Kadam, Sr.Advocate a/w Mr.Chetan Kapadia i.b M/s.L.J.Law for Appellant Mr.J.P.Sen a/w Mr.Rafiq Peermohamadin for Respondent CORAM: D.K.DESHMUKH & ANOOP V.MOHTA, JJ DATE: 25th April, 2011 P.C. (Per D.K.Deshmukh,J) 1. By this Appeal, the Appellant makes a grievance against the order dated 16th March 2009 passed in Company Petition No.803 of 2008 by the learned Single Judge of this court. By that order, the learned company Judge had directed the appellant company to deposit an amount of Rs.4,21,00,000/- in - 2 - appeal225ravikadam this Court within the time stipulated in the order. Failure of the Petitioner to deposit the amount was to result in admission of the Company Petition which was filed by the respondents seeking an order of winding up against the appellant company for its alleged inability to pay its debts. The relevant facts are as under : 2. The respondent-company issued a statutory notice dated 20th September, 2007 claiming that an amount of Rs.7,46,52,625/- was owed by the Appellant to the respondents. The Appellant was called upon to pay that amount within three months from the date of receipt of the notice. The Appellant replied to that notice and denied its liability to pay the amount and claimed that on the contrary, amounts were recoverable by the Appellant from the respondents. The respondents filed a civil - 3 - appeal225ravikadam suit being Suit No. 8311 of 2007 in the City Civil Court at Bangalore. In the suit, a money decree against the Appellant in the amount of Rs.7,31,10,153/- was claimed. The Appellant appeared in that suit and filed its written statement. The Appellant denied its liability to pay the amount claimed by the respondents. It also filed a counter claim in the Civil suit claiming that it is entitled to a decree against the respondents in the amount of Rs.11,93,16,736/-. It appears that thereafter the respondents took out an application for attachment before judgment in the civil suit. That Application was admittedly rejected. Thereafter the respondents again issued a statutory notice under section 434 of the Companies Act to the petitioner. That notice is dated 15.4.2000. This time, the respondents reduced its demand and claimed an amount of Rs.4 crores. The Appellant replied to that - 4 - appeal225ravikadam notice and denied its liability. The appellant referred to the first notice, the civil suit and the written statement filed in that suit. It is thereafter that Company Petition was filed seeking an order for winding up of the respondent company. The appellant filed a reply in that Company Petition and contested that the Company Petition. Order was made by the learned Single Judge dated 16.3.2009 finding that the amount of Rs.4 crores which was claimed by the respondents was due and therefore directed the Appellant to deposit the amount as aforesaid. Present appeal is directed against that order. 3. Learned Counsel appearing for the Appellant submits that the learned Single Judge has not considered the averments in the plaint and the claim in the written statement as also what was said in reply to - 5 - appeal225ravikadam the second notice issued by the respondents. Learned counsel submits that the learned Single Judge finds that the amount of Rs. 4 crores was received by the Appellant as deposit from the respondents and therefore that amount is liable to be refunded. The learned Single Judge however failed to see that in the written statement as also in the reply to the second statutory notice the Appellant had claimed that even assuming that amount of Rs.4 crores is received by the Appellant from the respondents the Appellant is entitled to adjustment of that amount. Learned Counsel submits that it is clear from the plaint that the respondents has admittedly received an amount of Rs. 1,97,00,000/- from the Appellant. The Appellant was claiming adjustment of that amount towards security deposit but that case has not been considered by the learned Single Judge. Learned counsel submits that - 6 - appeal225ravikadam the fact that first statutory notice was given was suppressed by the respondents. In the submission of the learned counsel it was submitted that by itself it is enough to dismiss the Company Petition. Learned counsel relying on the observations recorded in the judgment of the Supreme Court in the case of OSWAL FATS AND OILS LIMITED vs ADDITIONAL COMMISSIONER (Administration) BAREILLY (2010) 4 Supreme Court cases 728 especially the observations made in para 20. 20. It is settled law that person who approached the court for grant of relief, equitable or otherwise is under a solemn obligation to candidly disclose all the material/important facts which have bearing on the adjudication of the issues raised in the case. In other words, he owes a duty to the court to bring out all the facts and refrain from concealing/suppressing any material fact within his knowledge or which he could have known by exercising diligence expected of a person of ordinary prudence. If he is found guilty of concealment of material facts or making an attempt to pollute the pure stream of justice, the court not only has the right but a duty to deny relief to such person. - 7 - appeal225ravikadam 4. Learned counsel submits that the Appellant has stated in its reply to the statutory notice as also in its reply filed in the company petition that it is a profit making company and dividend paying company for a long time and therefore it cannot be said that it is not in a position to pay its debts. Learned Counsel submits that it was also contended that the respondent is misusing the jurisdiction of the company court for winding up of the company for recovery of its amount and therefore learned Counsel submitted that the learned Single judge should have considered this aspect in the matter and relied on the observations of the Supreme Court in IBA HEALTH (INDIA) PRIVATE LIMTIED VS INFO-DRIVE SYSTEMS SDN.BHD (2010) 10 Supreme Court Cases 553. - 8 - appeal225ravikadam 5. Learned counsel appearing for the respondents on the other hand submitted that the learned Single Judge has in detail considered the reply submitted by the Appellant to the first statutory notice. Learned Single Judge after considering the defence put up by the Appellant has recorded a finding that the defences have been raised without any supporting material and without any details and therefore the defence raised by the Appellant has no substance. Learned Counsel submits that all the relevant aspects have been considered by the learned Single judge and therefore the finding recorded by the learned Single judge cannot be interfered with. 6. Learned counsel further submits that institution of the Civil suit is clearly mentioned in the second show cause notice and in the Company Petition and in the Civil - 9 - appeal225ravikadam suit the first statutory notice has been clearly referred to, therefore it cannot be said that respondents has suppressed any material and relevant facts. Learned Counsel then submitted that merely because the company is a dividend paying company does not mean that it is in a position to pay its debts. If the defence put up by the respondent-company have been found to be non-existent then the court is entitled to entertain the Company Petition. 7. Now if the record of the case is perused in the light of the sequence of events it appears that the respondent first issued a statutory notice for recovery of amount in excess of Rs.7 crores, the Appellant replied to that notice denied its liability to pay the amount. The respondent abandoned the idea of filing Company Petition after receiving the reply and instead filed a - 10 - appeal225ravikadam Civil suit. In the Civil suit decree in the amount of Rs.7 crores was claimed. The amount of Rs. 4 crores which according to the respondents was given as security deposit was also claimed. 8. In the Plaint, in para 34 following statement was made: The Plaintiff submits that the 2nd defendant paid a sum of Rs.86,10,836/- and Rs.1,97,75,000/- towards the dues outstanding on account of the excise duty and additional excise duty paid by the Plaintiff to the account of 1st defendant. The said sum was appropriate by the plaintiff towards outstanding dues of thew 1st defendant. 9. While giving the particulars of the claim it was stated thus: Thus, in all 1st defendant is due to the Plaintiff a total sum of Rs. 9,28,85,153/- out of which an amount of Rs. 1,97,75,000/- has been paid by 1st defendant and the 1st defendant is due in a sum of Rs. - 11 - appeal225ravikadam 7,31,10,153/-. 10. The Appellant filed its written statement. In the written statement the defendant denied the averments that it was holding Rs.4 crores as a deposit from the respondents. It claimed that even assuming that the amount is held in deposit it was claimed that it was entitled to adjust the amount. What is said in para 36 of the written statement is relevant it reads as under : Re. para 23. The averment that in the circumstances the first defendant is holding with it a deposit of Rs.4 crores which is repayable to the plaintiff firm 12 months after the completion of payment is false. Till date, the plaintiff has deposited only Rs.4 crores of the mandated Rs.5 crores. The averment that the payment of 4 crores has been completed on 4.8.06 is true. The averment that period of 12 months has expired and payment of Rs 4 crores has become due from the first defendant company to the plaintiff firm is false. In fact the first defendant - 12 - appeal225ravikadam is entitled to adjust the said security deposit of Rs. 4 crores towards the claim of the first defendant against the plaintiff. (Emphasis supplied) 11. So far as Rs.1,97,75,000/- and Rs. 86,10,836/- which the defendants claimed to have received from the plaintiff towards excise duty is concerned what is stated in para 47 of the written statement is relevant. It reads as under : 47.Re para 34. The averment that the second defendant paid a sum of Rs. 86,10,836/- and Rs. 1,97,75,000/- towards the dues outstanding on account of the excise duty and additional excise duty paid by the plaintiff to the account of the first defendant is false. The plaintiff fradulently misused the blank cheques given by the first defendant to the plaintiff and encashed those cheques. 12. Thus, it is clear that the Appellant was denying that it was holding an amount of - 13 - appeal225ravikadam Rs. 4 crores as deposit, it was claiming that assuming that the Appellant holding the amount in deposit the amount is adjustable. The plaintiff was admitting that it has received Rs.1,97,75,000/- and Rs. 86,10,536/- from the defendants towards excise duty. The Appellant was denying that the amount was paid by it towards excise duty and the Appellant was claiming that the amount was wrongfully taken away by the plaintiff and was claiming refund of that amount. 13. In this situation, therefore it was necessary for the learned Single Judge to consider these pleadings of the parties. A perusal of the order of the learned Single Judge shows that the learned single Judge has not considered the averments in the plaint and in the written statement. The learned single Judge has also not considered - 14 - appeal225ravikadam what is said in reply to the second statutory notice because in the reply to the second statutory notice the appellant had clearly referred to the aforesaid two amounts in following terms: It was the duty of AWD to provide from time to time, detailed accounts of the distribution business to our clients. Shockingly not only did AWD avoid to come for reconciliation of accounts whenever requested by our client but also misappropriate the funds of our clients. AWD had fraudulently encashed two cheques in its custody from the joint account of our clients and M/s Ugar Sugar amounting approximately to Rs.86 lakh and Rs.1,92 lakh and without informing our clients about this encashment even after the agreement with M/s Ugar sugar had terminated by efflux of time. AWD have thus siphoned off approximately Rs. 2.81 crores. In this regard, by claiming sales discounts and payments towards excise and raisng false debit notes without proper supporting vouchers. Therefore our clients were left with no other option but to lodge a complaint with Economic Offences Wing of Mumbai police. Currently, the said complaint is under investigation. 14. The learned Single Judge instead considered only the reply to the first - 15 - appeal225ravikadam statutory notice given by the Appellant and found that as in that reply details have not been given, defence put up the Appellant is not bonafide. In the order, We do not find above referred aspect being considered by the learned single judge anywhere. In our opinion, really speaking the learned single judge should have seen the situation in which the second statutory notice was given and the Company Petition was filed. The respondent intended to file a Company Petition for seeking an order to winding up when the first statutory notice was given but after receiving reply from the Appellant that idea was given up and instead a Civil Suit was filed. In the Civil Suit, an attempt was made to secure its claim by getting an order of attachment before judgment but, that order was not granted and the respondents did not challenge that order instead issued the second statutory - 16 - appeal225ravikadam notice. Without there being any proper explanation from the respondent-company as to why after show cause notice company petition was not filed, the learned Single judge should not have admitted the Company Petition. Admitting a company petition is a drastic step. 15. The jurisdiction of the Company Court to entertain the company Petition for winding up of a company should not be allowed by the Company court to be misused. The Supreme Court in the recent judgment in the case of IBA HEALTH (INDIA) PRIVATE LIMITED vs.INFO DRIVE SYSTEMS SDN.BHD. Supra has discussed this aspects of the matter. What is stated by the Supreme court in para 33 of the judgment in our opinion is relevant. 33. We may notice so far as this case is concerned, there has been an attempt by the respondent company to force the payment of a - 17 - appeal225ravikadam debt which the respondent company knows to be in substantial dispute. A party to the dispute should not be allowed to use the threat of winding up petition as a means of enforcing the company to pay bonafide disputed debt. A company court cannot be reduced as a debt collecting agency or as a means of bringing improper pressure on the company to pay a bonafide disputed debt. Of late, we have seen several instances where the jurisdiction of the company court is being abused by filing winding up petitions to pressure the companies to pay the debts which are substantially disputed and the courts are very casual in issuing notices and ordering publication in the newspapers which may attract adverse publicity. Remember an action may lie in appropriate court in respect of the injury to reputation caused by maliciously and unreasonably commencing liquidation proceedings against a company and later dismissed when a proper defence is made out on substantial grounds. A creditor s winding up petition implies insolvency and is likely to damage the company s creditworthiness or its financial standing within its creditors or customers and even among the public. (Emphasis supplied) In the affidavit in reply to the Petition, the Appellant has stated thus about its financial position thus : - 18 - appeal225ravikadam 16. Nothing on record to show that the Respondent company is commercially insolvent or unable to repay its debts and hence the petition is misconceived. 17. Without prejudice to the aforesaid I state that there is nothing on record to show that the respondent company is commercially insolvent and unable to repay its debts. I state that the respondent company is a 75 years old reputed Public Limited company which is in the business of manufacturing, trading and marketing of the Indian Made Foreign Liquor, Industrial Alcohol/Spirit and chemicals etc. Further the Respondent is a well reputed and steadily progressing company in the industry of its choice and it is being managed on sound commercial lines. The respondent company is a dividend paying company and has been paying dividend continuously or the the past 5 years has a net turnover of Rs. 88,62,22,000/- (Rs.Eight eight crores sixty two lakh twenty two thousand only for a period ended 30th September, 2008 employing nearly 537 personnel. The respondent has been a profit making company for several years and the profits before tax for the period ended 30th September 2008 has been up to Rs.11,79,27,000/-(Rs.Eleven crores seventy nine lakhs twenty seven thousand only). The respondent company has its manufacturing bottling plants at various places in India including Bangalore Hyderabad etc and has 129 distilleries situated indifferent parts of India. The respondent company has a strong assets base and is abundantly solvent to discharge its liabilities. A copy of the annual reports - 19 - appeal225ravikadam of the respondent company for the financial years 2006-2007 and 2007-2008 are annexed herewith and marked as Exhibit F and Exhibit F-1 respectively. 16. In the order, the learned Single judge has not considered this aspect of the matter at all. What is further to be seen here is that the Appellant company has furnished a bank guarantee to get an order for stay of the order passed by the learned Single Judge. The fact that it was in a position to give bank guarantee of such a large amount in our opinion is also relevant. 17. Taking an over view of the matter, in our opinion, this was not a case where the learned single Judge should have entertained the Company Petition. 18. In the result, therefore, Appeal - 20 - appeal225ravikadam succeeds and is allowed. The order of the learned Single Judge is set aside. Company Petition No.803 of 2008 is rejected. At the request of learned counsel for the respondents, it is directed that the Prothonotary and Senior Master shall permit the Appellant to discharge the bank guarantee which has been given pursuant to the interim order passed in Appeal only after expiry of eight weeks from today. Anoop V.Mohta, J D.K.Deshmukh, J