1 IN THE HIGH COURT OF BOMBAY AT GOA COMPANY PETITION NO. 19­F OF 2003 Fomento Resorts And Hotels Ltd., a Public Ltd. Company registered under Companies Act 1956, with its registered office at Cidade de Goa, Vaiguinim beach, Goa. Represented by its Company Secretary Mr. I. B. Muchandi, aged 55 years, married, Resident of L­104, Housing Board Colony, Alto­Betim, Porvorim, Goa­403 521. ... Petitioner Mr. M. S. Usgaonkar, Senior Advocate with Mr. Sudesh Usgaonkar, Advocate for the Petitioner. Mr. S. G. Dessai, Senior Advocate with Mr. M. S. Sonak, Advocate for the Respondents. CORAM : N. A. BRITTO, J. DATE : 7TH JUNE, 2006. 2 J U D G M E N T This petition is filed under Section 433(e) of the Companies Act, 1956 for the winding up of the Respondent­ Company­M/s. Goa Golf Club Pvt. Ltd. on the ground that the Respondent is indebted to the petitioner­Company in the sum of Rs.19,73,535/­ which the respondent has failed to pay to the petitioner inspite of the statutory notice dated 21­4­2003. The petition is resisted on the ground that the petition has been filed to exert pressure on the respondent to give in to the unreasonable and inconceivable demands made by the petitioner from time to time and it is the petitioner which is due and payable to the respondent a sum of Rs.5,14,406/­. 2. Some facts are required to be stated to dispose of the petition. 3. The petitioner owns a Five Star Resort known as Cidade de Goa. In terms of Section 13A of the Goa, Daman and Diu Public Gambling Act, 1976 a Casino i.e. games of electronic 3 amusement/slot machines can be run only in a Five Star Hotel. The respondent had specialized knowledge and expertise in running a Casino i.e. games of electronic amusement/slot machines, and the respondent's Director obtained a licence from the Government of Goa dated 15­2­1994. One Dr. William Britto is the Manging Director of the respondent­Company as well as of its sister concern namely Britto Amusement Pvt. Ltd. 4. By agreement dated 15­4­1995 the petitioner and the respondent agreed to set up a Casino in a place referred to as a "Hall" in Cidade de Goa Hotel in terms and conditions mentioned therein. This agreement was to commence from 1­9­1995 and to end on 31­8­2002 and could be renewed for a further period of 10 years and thereafter the respondent had a first right to extend the agreement on mutually acceptable terms and conditions. On or about 26­9­1997 the respondent renewed the Casino licence with additional machines valid from 26­9­1997 to 25­9­2002. The petitioner and the respondent modified the said agreement by another agreement dated 1­1­1999 and thereby modified the terms of the earlier agreement dated 15­4­1995. In terms of Clause 36 of the agreement dated 4 1­1­1999, the parties agreed that the respondent would shift the said Casino (games of electronic amusement/slot machines) to the premises owned or arranged by the respondent but leased to the petitioner and in any case not later than 31­3­2002 and further agreed that all the amounts mentioned in Clause 30 of the said agreement would not be required to be paid by the respondent from the date the respondent shifted the said Casino. The said sister concern of the respondent i.e. M/s Britto Amusements Pvt. Ltd. by registered Sale Deed dated 18­2­1999 purchased plot nos.184, 186 and 187 for a sum of Rs.32,64,750/­ and a building has been constructed thereon named as "Chances" and the respondent on or about 14­9­2000 shifted the said Casino from the premises of the petitioner's hotel Cidade de Goa to the first floor of the said building known as "Chances". This shifting, as per the petitioner was in violation of the said Clause 36. On or about 8­3­2001 the respondent's Casino at the "Chances" came to be raided by the Police upon a complaint filed by the petitioner on the ground that the said Casino was being run in an unauthorised premises and on 28­3­2001 the Sub­Divisional Magistrate made a report that the 5 Casino was run in unauthorised premises i.e. outside the Five Star Hotel premises. 5. On or about 15­4­2001 the parties entered into another agreement under which the respondent was to pay to the petitioner a sum of Rs.2,50,000/­ to run the said Casino. The said agreement was for a period of 11 months only and ended on 25­9­2002. Simultaneously, another agreement was executed between the petitioner and the respondent's sister concern namely Britto Amusements Pvt. Ltd. by which the said M/s. Britto Amusements Pvt. Ltd. licenced the first floor of the building known as "Chances" to the petitioner for a period of 11 months from 15­4­2001 to 14­3­2002 on payment of monthly compensation of Rs.50,000/­ renewable for a further period from 15­3­2002 to 25­9­2002 on the same terms and conditions. The agreement dated 15­4­2001 between the parties which expired on 15­11­2002 was by virtue of another agreement dated 24­9­2002 extended till 15­11­2002 by stipulating that the existing arrangement with reference to the said Casino would continue till the ongoing negotiations were continued but however the fact remains that there has been no agreement 6 entered into between the parties in writing after 15­11­2002 though the petitioner contends that he put an end to the agreement dated 15­4­2001 between the parties on 31­3­2002. 6. The case of the petitioner is that under the second agreement(should be third) dated 15­4­2001 the respondent instead of conducting the operations in the Casino at Cidade de Goa as earlier agreed had to conduct the same in another premises, forming the extension of Cidade de Goa being premises taken by the petitioner on licence from Britto Amusement Pvt. Ltd. As per the petitioner, though the said agreement dated 15­4­2001 came to an end on the agreed date namely 25­9­2002 the same was renewed till 15­11­2002 but thereafter it was continued with the permission of the petitioner till 31­3­2003 and that the negotiations which were going on between the petitioner and the respondent did not materialise and as such on 31­3­2003 the contract between the petitioner and the respondent­Company came to an end. The petitioner states that the respondent and the petitioner exchanged correspondence during the said period which discloses that the respondent admitted its liability and agreed to settle the outstanding dues 7 and which is evidenced by Minutes of the Meeting dated 5­9­2001, letters dated 17­1­2003, 7­2­2003 and 17­2­2003 from the petitioner to the respondent and the letter dated 22­2­2003 from the respondent to the petitioner. Indeed, the letter dated 5­9­2001 shows that the petitioner was to start the construction of a bridge between Cidade de Goa and the Chances in three days and that the dues between the petitioner and the respondent had been reconciled and that over and above the agreed amount the respondent would pay interest at the rate of 18%, etc. The letter dated 17­1­2003 written to the respondent on behalf of the petitioner shows that a demand of Rs.19,41,496/­ was made and it was further stated that no agreement would be signed unless the said payment was made. The same demand was reiterated in letter dated 7­2­2003. By letter dated 17­2­2003 the same demand was again reiterated. The letter dated 22­2­2003 written to the petitioner by the respondent shows that whatever was due to the petitioner would be paid simultaneously with the agreement to be signed. At the same time it was stated that the figures claimed by the petitioner were erroneous but that could be finalised after they got together. 8 7. The case of the petitioner further is that at the time of execution of the agreement dated 15­4­2001 the petitioner and the respondent had mutually worked out the dues payable by the respondent to the petitioner and the same were set out in Schedule II to the said agreement dated 15­4­2001 and the methodology of payment was mentioned in Clause V.1 thereof and thereafter the liability to pay interest amounting to Rs.7,23,890/­ on account of delayed payment of monthly consideration for the period prior to 15­4­2001 was confirmed and acknowledged by the respondent vide his letter dated 8­7­2002. The petitioner has stated that the monthly compensation of Rs.2,50,000/­ payable under the agreement dated 15­4­2001 was paid by the respondent upto June, 2002 and in terms of the said agreement dated 15­4­2001 the respondent had to pay interest at the rate of 18% for delay of payment of monthly consideration for a period upto 90 days and 21% for delay beyond 90 days. The petitioner stated that though in letter dated 8­7­2002 the outstanding due on account of interest was reduced to Rs.5,49,622/­ on the ground that Ls.2000 were adjusted against the figure of Rs.7,23,890/­, such 9 adjustment was unwarranted and incorrect as is clear from subsequent letter dated 16­3­2003 from the respondent. The letter dated 8­7­2002 written as "without prejudice" by the respondent to Mr. Ambar Timblo shows that the interest calculated works out to Rs.7,23,890/­. It also makes a mention that the said Managing Director Dr. Britto had confirmed with him(Mr. Ambar Timblo) that Mr. Timblo owed Ls.2000 but since the matter was not settled the respondent had deducted that balance from interest due along with interest at the same rate thereby leaving a net payable amount to the petitioner of Rs.5,49,622/­. The petitioner, therefore, stated that the respondent­Company was due and payable to the petitioner a sum of Rs.7,23,890/­ towards interest on delayed payment prior to 15­4­2001 and Rs.22,50,000/­ towards monthly consideration for the months of July, 2002 to March, 2003, Rs.1,51,673/­ towards interest payable on the said monthly compensation till 31­3­2003 and Rs.2,062/­ towards liability on account of City Ledger. The petitioner seeks the winding up of the respondent for non payment of the said sum of Rs.19,73,535/­ which, as per Annexure 1 to the petition is as follows:­ 10 ANNEXURE 1 ­ AMOUNT PAYABLE TO FRHL AS ON 31/03/2003 ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­ A PAYABLE BY GGCPL TO FRHL 1 Interest due to FRHL under 1999 Agreement 723,890 Admitted in letter 8.7.2002 2 Licence Fees payable under 15.4.2001 Agreement at the rate of Rs.250,000/­ per month 2,250,000 Licence fees from Jul­02 to 31­Mar­03 TDS @ 21% 3 Interest on delayed payment as per Clause IV.1.1 of the 15.4.2001 Agreement 151,673 See Annexure - 2 4 City Ledger 2,062 ------------------------------------------------------------------------------------------------------------- TOTAL PAYABLE BY GGCPL TO FRHL 3,127,625 ====================================== B PAYABLE BY FRHL TO GGCPL 1 Discount Coupons from 12/10/02 to 27/3/03 139,090 2 Conference Hall hire charges 15,000 ------------------------------------------------------------------------------------------------------------- TOTAL PAYABLE BY FRHL TO GGCPL 154,090 ========================================== C NET PAYABLE BY GGCPL TO FRHL 2,973,535 D DEPOSIT UNDER 15.4.2001 AGREEMENT ADJUSTED 1,000,000 ------------------------------------------------------------------------------------------------------------- E BALANCE PAYABLE BY GGCPL TO FRHL 1,973,535 ------------------------------------------------------------------------------------------------------------- 11 8. On the other hand, it is the case of the respondent that the filing of this petition is an abuse of the process of the Court as the petitioner has been indulging in various pressure tactics to secure the eviction of the respondent from its present premises so that the license granted to the respondent for the operation of the Casino is withdrawn or revoked by the Government and the present petition is a step in that direction. The respondent has stated that the petitioner is well aware that the petitioner is liable to pay to the respondent a sum of Rs.5,14,806/­(now it is contended that it works out to Rs.574763/­ which contention cannot be accepted) which amount has been arrived at after adjustment of certain amounts payable by the respondent to the petitioner and this position was made clear in response to the statutory notice, and that at any rate there exists a bona fide dispute with regard to the claims raised and filing of a winding up petition for the purpose of recovery of bona fide amounts is abuse of the process of the Court. The respondent has also stated that the petitioner has indulged in suppression of material particulars. 9. The respondent has stated that in utter breach of the agreement dated 15­4­1995, the petitioner proposed that the Casino be shifted to another portion of Hotel Cidade de Goa as the premises initially 12 allotted were required by the petitioner to be used for some other purpose. The respondent has stated that the petitioner being aware that the Casino can be installed only in a Five Star Hotel has chosen to exploit this position to the hilt, often by extracting from the respondent exorbitant amounts from time to time including by way of payments to be effected in foreign currency at London, where Dr. William Britto, the Managing Director of the respondent is primarily based and that the petitioner is also very much aware that the respondent has invested an amount of Rs.3,17,81,611/­ as on 31­3­2003 towards the acquisition of the slot machines, etc. and in terms of the import license the respondent is precluded from exporting the same to overseas buyers and in view of the restrictions of gaming activities in most of the States in India there is remote possibility of securing any buyers for the purchase of the said machines and the petitioner is also aware that in the event, it creates a situation where the licence issued by the Government of Goa to the respondent is revoked, the respondent will have virtually no option but to offer the machines priced at approximately Rs.10,00,000/­ to the petitioner at a throw away price or at least at a price that would be dictated by the petitioner in order to mitigate the losses which such an eventuality would obviously invite. The respondent has stated that the petitioner is bent upon creating such a situation which is evident from the false and contradictory complaints which the petitioner 13 has made to the Government of Goa from time to time, for the sole purpose of exerting undue pressure on the respondent and the complaints have been withdrawn no sooner the respondent on some occasions gave to the exorbitant and inconceivable financial demands made by the petitioner and the filing of the petition is yet another ploy to coerce the respondent to give in to the said exorbitant financial demands. 10. The respondent has stated that after complaints were filed by the petitioner a raid was conducted by the Government and a Show Cause Notice dated 9­5­2001 was issued to the respondent and after the Government was satisfied that there was functional integrality between the location of the Casino(at Chances) and the Five Star Hotel Cidade de Goa, the Show Cause Notice dated 9­5­2001 was discharged vide Order dated 16­1­2003 and that between the interregnum from 9­5­2001 and 16­1­2003, the respondent was constrained to approach the petitioner to clarify the position to the Government of Goa as it was the petitioner who had insisted upon the shifting of the Casino on the ground that the shifted premises would also be a part and parcel of the Five Star Hotel Cidade de Goa and initially the petitioner avoided to furnish any clarification or statement and thereafter the petitioner renewed exorbitant and inconceivable demands and the Managing Director of the petitioner and his 14 family began making visits out of the country insisting that Dr. William Britto settles their expenses abroad as he was a British National and this mode was probably adopted by the Managing Director of the petitioner in order to defraud the other share holders of the petitioner and the respondent was virtually forced to give in to the unreasonable and inconceivable demands and it is only thereafter that the petitioner furnished a written statement to the Government confirming that the Casino(at Chances) was operated in the premises licensed by the Five Star Hotel Cidade de Goa and that the petitioner had authorized the respondent to install the said Casino in terms of the license issued and there was complete functional integrality both in physical characteristic and legal documentation and it is only thereafter that the Order dated 16­1­2003 discharging the show cause notice dated 9­5­2001 came to be passed. 11. The respondent has stated that the petitioner made a false complaint on 8­4­2003 stating that the arrangements with the respondent ended on 31­3­2003 and this was again to coerce the respondent into giving in to unreasonable demands and at this time it was the demand that the sister concern M/s Britto Amusements Pvt. Ltd. sells the three said plots along with the buildings to the petitioner or in the alternative the said three plots along with the buildings situated thereon are given on a long term 15 lease to the petitioner and inspite of both the offers the petitioner was prepared to pay only a paltry amount and the Managing Director of the petitioner made it clear that in the event the respondent does not give in to the demands, every possible means would be employed to ensure that the licenses issued to the respondent under the Goa Public Gambling Act, 1976 would be revoked and as it was impossible to give in any further and that position having been made clear to both Mr. and Mrs. Anju Timblo, the complaint dated 8­4­2003 came to be lodged and further in order to create panic amongst the members of the public an advertisement on newspapers also came to be published stating that the petitioner would not be responsible to any person who might be gambling in the Casino (at Chances) and such persons would be doing so at their own risk and although the said complaint dated 8­4­2003 is suppressed by the petitioner copies of the advertisement have been annexed with the petition. 12. The respondent has stated that based on the said complaint dated 8­4­2003 the Government issued yet another notice dated 29­4­2003 to which the respondent filed its replies and the petitioner, as on previous occasions, recommenced pursuing its demands of exorbitant sums holding out that on this occasion also it would submit a written statement to the Government of Goa confirming the position that the Casino(at Chances) 16 was indeed located in the premises which formed part and parcel of Cidade de Goa Hotel and during the course of various meetings held, this position was made clear by the representatives of the petitioner including in particular Mr. and Mrs. Anju Timblo and in the course of the said meetings it was openly stated by the representative of the petitioner that no stone would be left unturned to ensure that the license would be cancelled and further that they would proceed to even file petition for the winding up of the Company and that Mr. and Mrs. Anju Timblo addressed communications to the Government urging for expeditious disposal of the show cause notice dated 29­4­2003 and that they be heard in the matter and in fact they were heard at the personal hearing in the chamber of the Hon'ble Chief Minister and thereafter by Order dated 28­10­2003 the said Show Cause Notice was dropped and the respondent was granted a license for a period of six months in order to enable the respondent to obtain a declaration to the effect that the licensed premises are part of the Five Star Hotel Cidade de Goa pursuant to the agreement entered into by the respondent with the petitioner. The respondent stated that although the statutory notice was addressed on 21­4­2003 for a period of almost seven months no petition for winding up of the Respondent­Company came to be filed and this is so because the petitioner was hopeful that pursuant to the show cause notice dated 29­4­2003 the Government would revoke the 17 license granted to the respondent for operating the Casino and only after the Order dated 28­10­2003 of the Government that the petition came to be filed on 27­11­2003 and, therefore, it is evident that this petition has been filed to exert pressure on the respondent to give in to the unreasonable and inconceivable demands from time to time and the filing of the petition is undoubtedly gross abuse of the process of the Court. The respondent has denied that the respondent is liable to pay to the petitioner a sum of Rs.19,73,535/­ and that there is no existing liability on the part of the respondent towards the petitioner but on the contrary it is the petitioner who owes to the respondent a sum of Rs.5,14,800/­ as on 25­9­2002. The respondent has stated that it was agreed that the calculations would be done upto 15­11­2002 pending the execution of a formal renewal agreement and, therefore, that could not be done upto 31­3­2003 and as such on 13­9­2002 representatives of the petitioner and the respondent had met at the Office of the petitioner and had agreed to execute a formal agreement and the terms were discussed and agreed upon and it was agreed in particular that lease would be granted to the petitioner only in respect of the area where the gaming was being carried out and the deposit would be in the form of a Bank Guarantee but the petitioner with a view to black mail the respondent deferred the execution of a formal agreement by offering flimsy excuses. The respondent has stated that the respondent is by 18 no means commercially insolvent and that the assets of the respondent as on 31­3­2003 is to the tune of Rs.3,10,96,310/­ of plant and machinery, Rs.2,75,16,274/­ of investment in the sister concern and Rs.76,05,548/­ by way of loans and advances and other current assets and that the respondent has employed 35 employees all of whom along with their families are dependent upon the Company for the purpose of their livelihood and that its sister concern the said M/s Britto Amusements Pvt. Ltd. for the benefit of the respondent has recently undertaken an expansion programme by investing Rs.11,00,00,000/­ and the petitioner has been bent upon in creating hurdles in the said extension plan. The respondent has stated that the petitioner has falsely stated that in the communication dated 18­10­2003 there was no annexure to the reply dated 13­5­2003 submitted in response to the notice for winding up petition dated 21­4­2003 and it is merely because the contents of the said annexure are inconvenient to the petitioner that ignorance is being feigned. The respondent has stated that the credits which were initially given were sought to be reversed on the ground that the same were erroneous and that such a volte face apart from being mala fide was for the purpose of avoiding adjustment on the basis of which it would be apparent that it is the petitioner who is due and payable at least Rs.5,14,806/­ to the respondent and that the petitioner has deliberately suppressed the agreement between the petitioner and the said 19 M/s. Britto Amusements Pvt. Ltd. and as per the said agreement it is the petitioner who is due and payable to the respondent amounts by way of compensation/license fees and all throughout, such amounts were duly adjusted and the net amounts payable by or to the petitioner were worked out and the departure from this accounting system consistently followed, apart from being mala fide, establishes that the respondent is not due and payable to the petitioner any amount but it is rather the petitioner which is to pay to the respondent Rs.5,14,806/­. The respondent has stated that in terms of the agreement dated 15­4­2001 with M/s. Britto Amusements Pvt. Ltd., which agreement the petitioner has suppressed, it is the petitioner who is liable to pay compensation of Rs.50,000/­ monthly and the said suppression is deliberate. As regards the communication dated 8­7­2002 upon which reliance is placed by the petitioner, the respondent has stated that it is deliberately misinterpreted and that in the first place there arises no question of placing reliance upon "without prejudice" communication dated 8­7­2002 and that at any rate upon adjustment of the said license fees it is apparent that no amount is due and payable by the Company to the petitioner. It is rather the petitioner who is liable to pay Rs.5,14,806/­ to the respondent. The respondent has