1 cp-266-03 Jmi IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO. 266 OF 2003. Shri Krishna S/o. Shankar Gaikwad, since deceased, through Legal Representatives & Anr. ..Petitioners. Versus M/s. Peerless Construction Pvt. Ltd. ..Respondents. Mr. V.T. Lulia, for Petitioners. Mr. D. Madon, Senior Counsel, a/w. Mr. Jose George, for Respondents. CORAM : S.J. KATHAWALLA, J. DATE : 14TH SEPTEMBER 2010. P.C. 1. By this Petition, the Petitioners have sought winding up of the Respondent Company- M/s. Peerless Construction Private Limited (the Company). 2. The above Petition was earlier admitted on 18 th June 2004. At the time of admission, the Advocate for the Company had failed to remain present. The Company preferred an Appeal therefrom which was admitted and the order of the learned Single Judge was stayed, subject to the Appellant depositing an amount of Rs.10,00,000/-. The said amount was deposited on 25 th November 2004. The Appeal was finally heard and allowed and the Company Petition remanded back for admission before this Court. In view thereof, the Company Petition is now taken up for admission. 3. The Petitioners who are the heirs and legal representatives of one Shri Shankar Chiku Gaikwad, who expired on 17 th September 1987, have become 2 cp-266-03 owners of the land bearing C.T.Survey Nos. 359 and 370 O.P. 228, 228/A-2, FP No.369, TPS III, Village Eksar, Borivli (West), Mumbai-400 091, admeasuring 4361 square meters with the additional FSI of road admeasuring 1744.40 square meters (the said property). 4. The Petitioners initially entered into an Agreement dated 28 th September 1992 with the Company, whereunder the Company agreed to pay to the Petitioners an amount of Rs.1,05,00,000/- as and by way of consideration for the development of the said land. An Application under section 37(I) was made under the Income Tax Act, 1961. The Income Tax Authorities were of the view that the consideration was not adequate. In view thereof, another Agreement dated 28 th December 1992 was entered into by and between the Petitioners and the Company for development of the said property. The consideration under the said Agreement, was shown as Rs.1,10,00,000/-, which was payable as follows :- i. A sum of Rs.1,25,000/- was paid upon execution of the Agreement; ii. A sum of Rs.35,00,000/- was to be adjusted against the flats which were agreed to be provided by the Company to the Petitioners (Vendors); iii. The balance of Rs.73,75,000/- was to be paid in equal bi-monthly installments of Rs.7,50,000/-. The first installment was agreed to commence within 30 days from the date of obtaining the clearance under section 37(I) of the Income Tax Act, 1961. An amount of Rs. 3 cp-266-03 6,25,000/- being the last installment was to be paid by the Company to the Petitioners at the time of execution of conveyance. 5. Under clause 7 of the said Agreement, it was provided that if the purchasers commit default in payment of any of the bimonthly installments to the Petitioners/Vendors, the Company/purchaser shall pay 18% interest upto two months delay in payment of the installment and after expiry of two months, if the Company is not able to pay the amount on the due date, the Agreement shall stand cancelled and monies paid by the Company shall stand forfeited. 6. According to the Petitioners, the Company delayed the payment of installments because of which the Petitioners are entitled to claim interest as provided under the Agreement. According to the Petitioners, the Company has also not paid an amount of Rs.1,50,000/- towards the consideration and has also not paid the amount of Rs.5,75,000/- which they are required to pay under the Agreement upon the execution of the conveyance of the said property. It is, therefore, submitted that an amount of Rs.23,67,857.51 is due and payable by the Company to the Petitioners, as set out in the statement of interest calculation annexed as Exhibit-B to the Petition. According to the Petitioners, though the Company was time and again reminded to make the payment of conveyance amount and interest on the delayed payment of installments under the said Agreement, the Company failed and neglected to make the payment. The Petitioners issued a statutory notice dated 9 th May 2002 to the Company. However, the Registered A.D. packet was returned by the Postal Authorities with an endorsement “left”. The Petitioners sent a copy of the notice to the Company under Certificate of Posting along with a letter dated 30 th May 2002 which was 4 cp-266-03 returned back to the Petitioners’ Advocate. The Petitioners state that from the facts mentioned in the Petition, it is clear that the Company is not in a position to liquidate the liabilities of its creditors and deserves to be wound up. 7. Mr. D.D. Madon, the learned Senior Advocate appearing for the Company has submitted that the claim of the Petitioners qua the interest on payment of delayed bimonthly installments is hopelessly time barred. He has submitted that the amount of Rs.5,75,000/- is payable only when the Petitioners’ execute a conveyance in respect of the said property. It is submitted that the Petitioners for one reason or the other are not executing the conveyance and the Company is ready and willing to pay the said amount of Rs.5,75,000/- immediately upon the Petitioners executing the conveyance. As regards the claim of the Petitioners for payment of Rs.1,50,000/-, Mr. Madon submits that it is mentioned in paragraph 6 of the statutory notice dated 9 th May 2002 by the Petitioners themselves that there is a mistake in the amount calculated by them to the extent of Rs.1,50,000/-, which was wrongly claimed from the Company. Mr. Madon has also submitted that the contents of the said notice itself shows that long standing disputes are pending between the parties qua the payments under the Agreement. 8. The learned Advocate for the Petitioners has in rejoinder submitted that the claim of the Petitioners is not barred under the Law of Limitation in view of clause 18 of the Agreement dated 28 th December 1992 which reads thus :- “18. As soon as the construction of the building and structures hereinbefore agreed to be built-up the said property shall be erected and completed and upon payment of the consideration 5 cp-266-03 as hereinafter provided the Vendors shall execute or cause to be executed a conveyance or conveyances of the said property or any part thereof in favour of the purchasers or their nominee or nominees including a Co-operative Society or Limited Company or condominium or Apartments as hereinafter provided.” It is submitted on behalf of the Petitioners that under the provisions of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 and the rules thereunder the Company has to execute the conveyance within four months from the date of registration of the society. The society itself was registered on 12 th June 2000. The Company contrary to its statutory duty failed and neglected to execute the conveyance within four months from the date of registration of the society. The liability for payment of consideration for executing conveyance starts after four months of registration of the society and as the making of the payment under the provisions of the said Act is a statutory duty of the Company the provisions of Limitation Act are not applicable and the liability of executing conveyance and making payment is a continuing liability. To support this contention, the Petitioners have relied upon the decision of the Hon’ble Supreme Court in Lohia Properties (P)Limited V/s. Atmaram Kumar, reported in 1994 MH.RCJ 14 and the Judgments of this Court reported in Padma Nair Vs. The Deputy Collector and another B. P. 1994(1)BCR 298, Madhuvihar Cooperative Housing Society Vs. Jayantilal Investment & others 2006(3) Bom. C.R.36 and Arun Shriram Bawaskar Vs. Ramdas Vishnupant Kakane- 2007 (4) All MR 81. 6 cp-266-03 9. I have considered the submissions advanced on behalf of the Petitioners and also on behalf of the Company. According to the Petitioners, an amount of Rs.12,05,432.85 is due and payable by the Company to the Petitioners under the Development Agreement dated 28 th December 1992 for delay in payment of bi-monthly installments as follows :- Payment due on Date of Payment Period of Interest Amount of Interest Due 29.11.1992 18.02.1993 81 15,978.08 18.02.1993 81 9,986.30 25.02.1993 88 2,169.86 29.01.1993 25.02.1993 27 2,663.01 3.11.1993 41 5,054.79 6.02.1993 124 15,287.67 29.03.1993 6.02.1993 65 16,027.40 20.09.1993 175 17,260.27 29.05.1993 20.09.1993 114 2,810.96 18.10.1993 142 35,013.70 11.09.1993 164 12,131.51 29.07.1993 11.09.1993 103 17,778.08 23.05.1994 298 51,435.62 29.09.1993 23.05.1994 236 17,457.53 16.06.1994 260 32,054.79 20.06.1994 264 39,057.53 29.11.1993 20.06.1994 203 20,021.92 11.07.1996 1073 2,64,575.34 29.01.1994 11.11.1996 1023 2,52,246.58 23.12.1996 1058 1,04,350.68 29.03.1994 23.12.1996 999 1,47,797.26 01.01.1997 1008 1,24,273.97 Total 1,205,432.85 7 cp-266-03 The Petitioners have not explained how any installment would fall due on 29 th November 1992 when the Agreement forming the basis of the Petitioners' claim is itself dated 28 th December 1992. Again, the above table shows that the installments were payable between 29th November 1992 and 29th March 1994, but were paid between 18th February 1993 and 1st January 1997. The Petitioners would therefore be entitled to claim interest within three years from the date of the delayed payments. Admittedly, the last installment was paid on 1 st January 1997. Interest on the said last delayed installment was therefore, payable on or before 31st December 2000. The Company Petition is filed on 15th November 2002. The entire claim of interest on delayed payments therefore prima facie appears to be barred under the Law of Limitation. 10. The Petitioners in support of their contention that their claim pertaining to interest on delayed installments is not time barred have relied on clause 18 of the Agreement and have submitted that they as vendors are required to execute the conveyance or cause the same to be executed inter alia upon payment of the consideration. It is submitted that the liability of executing conveyance and making payment is a continuing liability and, therefore, the provision of the Limitation Act are not applicable. The Petitioners have not appreciated that it is not the contention of the Respondent Company that the amount payable upon execution of the conveyance is barred under the law of limitation. In fact as submitted by Mr. Madon, the Respondent Company is willing to pay the amount agreed to be paid at the time of the execution of conveyance. In my view, the Petitioners are well aware that in this Petition this Court cannot decide the issue as to which party is guilty of not executing the conveyance. For that purpose, the Petitioners are required to file a suit seeking necessary reliefs. In this 8 cp-266-03 Petition, the Petitioners have made a specific and independent claim for interest on delayed payment of bi-monthly installments as set out in the above table which appears to be barred by the law of limitation. Under the circumstances, the contention of the Petitioners that their claim pertaining to interest on delayed installments is not barred by the Law of Limitation and the limitation has not stopped running, in view of aforestated reasons prima facie appears to be untenable. The case law cited by the Petitioners would also be of no assistance to them. 11. In any event, the Petitioners are not entitled to interest on the delayed bi-monthly installments as claimed by them and further by no stretch of imagination their claim can be termed as a statutory claim since on the Petitioners own showing under clause 7 of the Agreement, it is agreed between the parties that if the Company defaults in making payment of any of the bi- monthly installments to the Petitioners, the Company is required to pay 18% interest upto two months, after which, the Agreement would stand cancelled and monies paid by the Company to the Vendors shall stand forfeited. However, as can be seen from the above table, the Petitioners except in the case of two bi- monthly installments, in respect of delay in payment of all other bi-monthly installments have claimed interest much beyond the period of two months, which the Petitioners as per the terms of the Agreement cannot do. 12. As regards the Petitioners’ claim of Rs.1,50,000/-, the learned Advocate appearing for the Petitioners has not responded to Mr. Madon’s submission that the Petitioners have in their statutory notice itself admitted that the Petitioners had by mistake demanded an amount of Rs.1,50,000/- from the 9 cp-266-03 Company by its earlier notice dated 6th November 2000. Even otherwise, the Petitioners have not explained when the sum of Rs.1,50,000/- has fallen due. As regards the payment of Rs.5,75,000/-, as stated above both the parties have blamed one another for not executing the conveyance. Mr. Madon has submitted that the Company is willing to forthwith pay an amount of Rs.5,75,000/- to the Petitioners upon the Petitioners executing the conveyance. As recorded above, the issue as to who is responsible for not executing the conveyance cannot be decided in the present proceedings and the parties will have to take out appropriate proceedings by way of a Suit in that regard. 13. It is a well settled principle of law that the Company Court does not conclusively adjudicate the claims of parties but investigates summarily whether dispute as regards indebtedness is bonafide or not. In the instant case, in view of the aforestated facts, in my view, the Company has raised a genuine and bonafide dispute and have at least prima facie offered a proper/ substantial explanation for its plea of no liability. The dispute, therefore, requires adjudication on further evidence in a properly constituted suit. The Hon’ble Apex Court has also in its decision in Amalgamated Commercial Traders (P) Ltd.Vs. A.C.K. Krishnaswami and another reported in 1965 Company Cases page 456 inter alia held that “it is well settled that a winding up petition is not a legitimate means of seeking to enforce payment of a 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...... . ” 10 cp-266-03 14. For the aforestated reasons the Company petition is dismissed. However, there will be no order as to costs. 15. Needless to add that in the event of the Petitioners filing a civil suit against the Company in the matter in issue, the same will be disposed of on its own merits without taking into consideration any of the observations made in this order, which are prima facie and not upon a detailed adjudication of the disputes between the parties. [ S.J. KATHAWALLA, J. ]