THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition No.236 of 2010 (Dated : 10-08-2011) Between: M/s. Balaji Traders Ghatkesar, Ranga Reddy District. …Petitioner A n d M/s. Navayuga Engineering company Limited Nellore District …Respondent THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition No.236 of 2010 ORDER: This company petition has been taken out by M/s. Balaji Traders under Section 433(e) (f) read with Section 434 of the Companies Act, 1956 seeking an order of winding up of the respondent-M/s.Navayuga Engineering Company Limited, Krishnapatnam Port Project site, Nellore, Nellore District. 2. The petitioner is a proprietary concern and it is a dealer and supplier of all types of Hardware, electrical, paints, sanitary, welding, electric and safety equipments, industrial & Project materials, PVC, MS Pipes, Aluminium fittings etcetera. 3. The respondent-M/s. Navayuga Engineering Company Limited is a limited company incorporated under the Companies Act having its office at Krishnapatnam Port Project Site, Nellore, Nellore District. The petitioner supplied hardware and sanitary material to the respondent during the period from 12.2.2009 to 01.10.2009 at Krishnapatnam Port Project site, Nellore. The respondent acknowledged the delivery challan. The petitioner raised invoices against the supplies made to the respondent. The respondent undertook to pay the amount covered under the invoices within thirty days of supply. The petitioner supplied the material to the respondent company worth of Rs.1,10,62,188/-. The respondent paid Rs.72,93,527/- through demand drafts and cheques. The balance amount due from the respondent is Rs.37,68,661/-. The petitioner made repeated demands to the respondent for payment of the balance amount. The demands did not yield any fruitful result. Therefore, the petitioner issued notice dated 31.07.2010 under Section 434 of the Companies Act and calling upon the respondent to pay the outstanding amount of Rs.37,68,661/- within a period of three weeks. Despite service of notice, the respondent has not liquidated the liability. Hence, the instant petition seeking an order of winding up of the respondent company. 4. Notice before admission came to be ordered on 24.12.2010. The respondent entered appearance through a counsel and filed counter. The respondent deposited the admitted liability of Rs.10,03,308/- with interest thereon totalling to Rs.12,79,397/- by way of demand draft bearing No.007915 dated 11.7.2011 drawn on ICICI Bank, Jubilee Hills Branch, Hyderabad. 5. The counter of the respondent, in brief, is:- The amount claimed by the petitioner has been disputed. The petitioner inflated the invoices to a tune of nearly Rs.50 lakhs in collusion with one of its stores staff. On coming to know of the fraud in the form of inflated invoices by the petitioner, the respondent lodged a complaint with Krishnapatnam police, Nellore District. Thereupon, the petitioner’s brothers, including Mr.Devaram Choudhary requested them not to proceed with the criminal proceedings and agreed to accept Debit Note for a sum of about Rs.47,00,000/-, which includes Debit Note of the petitioner firm for a sum of Rs.26,87,000/-. After giving effect to the said debit note for Rs.26,87,000/-, the outstanding amount payable to the petitioner is Rs.10,03,308/-, which amount the respondent is always ready and willing to pay. The statutory notice is not served at the registered office of the company, which is at Visakhapatnam, and therefore, there is no valid service of statutory notice. The winding up proceedings based on the said invalid notice cannot be maintained. 6. The petitioner field reply affidavit. It is stated in the reply affidavit that the petitioner is no way concerned with the fraud that took place in the respondent company and the petitioner never influenced the staff of the respondent company. The petitioner never received Debit Note from the respondent. The petitioner sent complete bill amount statement on 27-01-2010 through registered post acknowledgment due to the respondent. The petitioner company has no sister concerns, namely, M/s. Jagadamba Trading Corporation & M/s. Vishwakarma Sales Corporation. 7. Heard learned counsel appearing for the petitioner and learned counsel appearing for the respondent. 8. Learned counsel appearing for the petitioner submits that the respondent received various types of hardware, electrical, paints, sanitary items etcetera and acknowledged the receipt of the said items and the same is evidenced by the ledger extract maintained by the petitioner. A further submission has been made that the respondent has admitted of the correctness of the liability shown in the ledger extract of the petitioner, but pleaded that the petitioner inflated invoices in collusion with one of the staff of the respondent and that on the complaint being presented by the respondent, the petitioner received a debit note to a tune of Rs.26,87,000/- He would also contend that raising of debit note is not substantiated by any material in which case, it is to be inferred that the respondent was to pay Rs.37,68,661/- as on the date of issuance of statutory notice. Learned counsel refers Photostat copy of the debit note filed along with the counter and contends that they do not contain the signature of the petitioner and the signature appearing on the debit note does not belong to the staff of the petitioner company nor the debit note contain the stamp of the petitioner. In the absence of any material with regard to acceptance of debit note by the petitioner, it is to be construed that the respondent neglected to pay the admitted amount and therefore, the petition seeking winding up of the respondent company warrants admission. 9. Learned counsel appearing for the respondent submits that the petitioner inflated the invoices in collusion with one of the staff of the respondent company and inflation of the invoices came to be admitted by the petitioner by way of acceptance of debit note in which case, the amount due to the petitioner is Rs.10,03,308/- with interest, which amount has been paid pending the petition and therefore, no cause of action survives for continuance of the petition seeking an order of winding up of the respondent company. Learned counsel took me to the debit note filed along with the counter and also drew my attention to the signature appearing on the debit note. By referring the signatures in the debit note, learned counsel contends that the signatures belong to the representative of the petitioner. It is also contended by the learned counsel appearing for the respondent that the very notice issued under Section 434 is not a valid notice, since the same has not been addressed to the registered office of the respondent company. He would also contend that even the notice sent to the respondent to it’s office at Krishnpatnam Port Project site, Nellore has not been received by the petitioner. In support of his contention, learned counsel placed reliance on the judgment of this Court in M/s. Andhra Cements Limited v. M/s. Bhatia International Ltd.[1], wherein a Division Bench of this Court held as hereunder:- “ From the statutory concepts, the object under the aforesaid provisions is more an enabling and guiding once to avoid any attempts to defeat by taking any other recourse. A company which is registered under the provisions of the Companies Act is a legal entity. Therefore, the law contemplates for its due recognition for the solemn purpose of dealing with to a place, both for correspondence and notices. Though in the regular course of business, the third parties while dealing with the company in the process correspond with any other places or addresses, however that itself would not constitute a valid address for issuing notice under Section 434 of the Act. It is now well established that where the law prescribes a procedure, it should be adhered in its letter. Any attempt to deviate therefrom, is nothing but to defeat the mandate. Consequently, both the aforesaid provisions become otiose and a dead letter. Hence, while interpreting any such statutory prerequisite, courts should made an approach in reiterating the solemn object instead of allowing any in- roads or by-lanes. The notice to the registered office is therefore mandatory and failure of which, vitiates whole proceedings and result the necessary consequences of very rejection of the application”. 10. In response, learned counsel appearing for the petitioner submits that the notice sent to the respondent to it’s project address has been served, as per letter dated 31.8.2008 of the Postal Department, in which case, it is impermissible for the respondent to contend that the statutory notice has not been served. Learned counsel refers the text of the letter dated 31.8.2010 of the Sr.Supdt of Post Offices, Secunderabad, Department of Posts, India. The text of the letter reads as hereunder:- “ In continuation of our letter regarding the complaint No.500200-45726, it is to inform you that the complaint on Non Delivery of Article of Registered Letters with Acknowledgment with Transaction No.1683 on 31/07/2010 of Zamistanpur PO 500020 is settled on 31/08/2010 with the following information “RL WAS DELIVERED TO THE ADDRESEE ON 03.8.2010”. 11. The preliminary issue that calls for adjudication in this petition is: Whether the notice under section 434 of the Companies Act, 1956 is a valid notice? 12. POINT: Indisputably, the registered office of the respondent company is situated at premises 48-9-17, Dwaraka Nagar, Visakhapatnam-500016. It is an admitted fact that the notice under Section 433 (e) and 434 of the Act was not sent to the respondent to its registered office. Section 434 of the Companies Act reads as hereunder:- “434:Company when deemed unable to pay its debts (1) A company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding "five hundred rupees" then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; (b) if execution or other process issued on a decree or order of any Court in favour of a creditor of the company is returned unsatisfied in whole or in part; or (c) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company. (2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm”. 13. A bare reading of the aforesaid provision, as it spells out, the notice provided is to be issued to the registered office, before filing any company petition. There is no provision, contemplating issuance of notice, to any of the officers with which normally the party/petitioner is corresponding. The registered office of the company is defined under Section 146 of the Act, which reads as hereunder:- “146: Registered office of company (1) A company shall, as from the day on which it begins to carry on business, or as from the [thirtieth] day after the date of its incorporation, whichever is earlier, have a registered office to which all communications and notices may be addressed” 14. The provision mandates to correspond only with the registered office. On a reading of the aforesaid two provisions together, the object of the statute providing for registered office of a company is for the purpose of not only correspondence for any action but also to make aware as to the places with which the company can be reached, for all purposes, be it through process of Court or by the third parties for various purposes. A company necessarily has to have a registered office since inception. However, the company in the normal course of business can have any number of branches, offices etcetera for convenient transaction of business. But, none of the provisions of the Act or Rules contemplated under the Act makes such places as equal to as that of the registered office or can be treated as registered office for any purposes by any stretch. These provisions specifically reiterate that registered office shall be the address for all purposes of correspondence including issuance of notices. Therefore, it will not lie in the mouth of the parties dealing with a company, to have a say that it is only with this particular address though not a registered one, they can deal for all purposes. Whether the statutory notice is required to be sent to the registered office of the company or does it sufficient compliance if it is sent to one of the offices of the company is no more res integra, in view of the decision of the Division Bench judgment of this court in M/s.Andhra Cements Limited ( 1 supra). 15. Indisputably, the statutory notice under section 434 of the Companies Act has not been addressed to the respondent to it’s registered office. Therefore, the notice on the basis of which winding up proceedings have been initiated cannot be said to be a valid notice. Therefore, the company Petition basing on the invalid notice cannot be maintained. 16. Accordingly, the Company Petition is dismissed. No order as to costs. _____________________ B.SESHASAYANA REDDY, J Dt.10-08-2011 RAR 55 THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition No.236 of 2010 Trd. to CMSO (Dated : 10-08-2011) [1] O.S.A.No.7 of 2007 decided on 18.7.2008