Co.Pet. 3/2010 BEFORE HON’BLE MR. JUSTICE HRISHIKESH ROY Heard Ms. M. Hazarika, learned Senior Counsel for the petitioner . The respondent company is represented by Mr. GN Sahewalla, learned Senior Cou nsel. 2) The petitioner seeks winding up of the respondent company under Section 433 and 434 of the Companies Act, 1956 on the ground that the respondent /company is unable to pay its debt or should be considered as deemed unable to p ay its debts, on demand made by the petitioner. 3) The petitioner was engaged as a transporter by the respondent co mpany, to carry construction materials from different places like Kolkata, Durga pur etc. to the factory site of the respondents at Lumshnong of Jaintia Hills in the State of Meghalaya. According to the petitioner, the respondent cleared al l the carriage bills raised by the petitioner up-till 25.04.2009. But since 26 .04.2009, the respondent dishonoured the petitioner’s bills and accordingly an a mount of Rs.44,58,486/- became due from the respondent. Thereafter, on 11.09.2 009 a notice under Section 434 of the Companies Act was served on the respondent company demanding payment of Rs. 44,58,486/- (Rupees Forty Four Lakhs Fifty Eig ht Thousand Four Hundred Eight Six only) within three weeks from the date of rec eipt of the notice or else winding up proceeding under the Companies Act was thr eatened against the noticee. 4) In their response to the statutory notice, the respondent denied its liability to pay any amount to the petitioner and contended that due to mis appropriation of goods during transit by the petitioner, an amount of Rs. 25,73, 541/- was due to them from transporter. A further amount of Rs. 51,55,336/- was claimed to be payable by the petitioner for the damage suffered by the responde nt due to short delivery and misappropriation of the construction materials. 5. 1) Appearing for the petitioner, it is argued by Ms. M. Hazarika, l earned senior counsel that assuming that there has been misappropriation of the construction materials during transit, the said loss cannot be attributed to the petitioner and, accordingly, the counter claim for alleged misappropriation of the transiting goods, cannot be a bonafide defence against the winding up procee ding. 5.2) On the respondent’s counter claim for damage, the petitioner con tends that few of the bill(s) of the labour contractors pertain to the year 2007 and 2008 and since misappropriation is alleged w.e.f June, 2009, there can be n o justification for the respondent to adjust the dues of the petitioner against the expenses allegedly incurred by the respondent, under the head of Idle Labo ur . 5.3) Referring to the two FIRs filed on 2.7.2009 and 22.7.2009, Ms Ha zarika contends that the allegations in the FIR relates to others and not the pe titioner and therefore, the respondent cannot fasten the liability of alleged mi sappropriation of construction materials on the petitioner. She submits that th e construction materials originating from different destinations are brought in large trucks of 40 Ton capacity and since these trucks are unable to carry the g oods to the factory site located in the Meghalaya Hills, the goods were unloaded at Guwahati and transshipped to its hill destination in smaller trucks. The lea rned counsel contends that if due to illegal acts of the truck drivers, loaders and weigh bridge employees, the respondent incurred additional expenses, the res ultant counterclaim cannot be a bonafide defence of the respondent, in a windin g up proceeding. 5.4) The learned counsel finally submits that even assuming that the petitioner is required to compensate the respondent for the misappropriated mate rials amounting to Rs. 25,73,541/-, considering that the petitioner is entitled to receive Rs. 44,58,186/- as transportation charge, even after squaring account s for the balance due, the winding up petition is maintainable. 6.1) Mr. GN Sahewalla, learned senior counsel submits that the respon dent company is a part of a large corporate group of about 8 functioning compani es and the project value of the proposed cement company set up by the group is w orth about Rs. 614 Crores. The learned counsel accordingly submits that the resp ondent is a solvent and going concern and cannot be deemed to be insolvent by ap plication of Section 434 of the Companies Act. He contends that the petitioner’ s claim is a highly disputed claim and considering the respondent’s counter-clai m, the invocation of the Company Court’s jurisdiction is inappropriate in the pr esent case. 6.2) The petitioner as the appointed transporter was responsible for safe transshipment of the construction materials to the factory site at Lumshno ng and accordingly the counsel submits that they cannot pass on the responsibili ty for loss of the transiting materials, to the sub-transporters. The responden t having executed the carriage contract only with the petitioner, without involv ement of any third party, the petitioner according to the respondent is solely r esponsible to compensate the loss in transit. 6.3) Mr. Sahewalla submits further that the respondent’s defence is n ot an afterthought or a counter-blast to the winding up proceeding since at the very first instance, in its response to the statutory notice, the defendant proj ected it counterclaim for the loss of the materials carried by the petitioner as the transporter of the respondent company. 6.4) Referring to the debit note dated 31.7.2009 for Rs. 25,73,541 an d the second debit note dated 3.8.2009 for Rs. 35,55,336/-, the learned senior c ounsel contends that as per the arrangement with the transporter, the transshipm ent loss and the extra expenses on the ’idle labour’ component were debited from the account of the petitioner and only after receiving the two debit notes in J uly/ August, 2009, the petitioner as a counterblast had issued the statutory not ice, demanding payment of its alleged dues from the respondent. 7) On consideration of the confessional statement(s) of the driver of the truck and the employee of the weigh bridge recorded during June, 2009 and the two FIRs lodged at Lumshnong Police Station by the CEO of the respondent, i t can be safely concluded that the construction materials were misappropriated d uring transit by replacing the steel rods, pipes etc. in the trucks, with sand a nd boulders. Whether the petitioner was personally responsible for the theft of the materials, cannot however, be conclusively determined at this stage, since t here is no information on the stage of the police investigation. But, being the transporter, the petitioner definitely had the entire responsibility for safe de livery of the materials at the factory site and they cannot escape responsibilit y as a transporter, if there is pilferage of the transiting goods. 8) From the timing of the two FIRs which were filed on 2.7.2009 and 22.7.2009 by the respondent it can be easily inferred that misappropriation of the carriage goods were going on for quite sometime and the details of the modus operandi is given by the respondent in paragraph 3(xiv), (xv), (xvi), (xvii) a nd (xviii) of the affidavit-in-opposition. The averments show how the goods were pilfered during transit and the steps taken by the respondent to catch the culp rits in the act. The ’idle labour’ expenses forced upon the respondent due to s hort delivery of material is also reflected in the counter affidavit of the resp ondent, the relevant portion of which are extracted hereinbelow for ready refere nce: 3 &..(xiv) But from the last 2 years, the company used to receive complaint from their site office, at Meghalaya, that the petitioner was supplying less materia ls than consigned. Due to shortage in materials delivered by the petitioner th e company had to stop the construction work of the factory occasionally and subs equently same was found to be as a consequence of the wrongful activities of the petitioner, the company suffered may idle days, cost of which has been assessed as Rs.51,55,532/- only and lien has been exercised by the company over said amo unt against the petitioner who is liable to pay the same to the company in the f ollowing manner: Srl. Particulars Bill dates Amount 1 Idle working labour charges charged by M/S Buildwell Constructions due t o shortage of materials 13.9.2007, 8.4.2008, 15.8.2008, 24.6.2009 & 15.7 .2009 11,14,766.00 2 Idle working labour charges charged by M/S Venu Engineers due to shortag e of materials 12.1.2008, 10.5.2008, 12.9.2008, 30.2.2008, 19.9.2008, 7 .3.2009 & 14.9.2009 10,78,918.00 3 Idle working labour charges charged by M/S Anna Engineering Construction s Company due to shortage of materials 7.11.2007, 15.3.2008, 18.6.2008, 19.12.2008 & 12.9.2009 16,54,730.00 4 Idle working labour charges charged by M/S New Asians Engineers & Contra ctor due to shortage of materials 9.11.2007, 24.4.2008, 15.7.2008, 20.12.2 008 & 10.5.2009 13,06,918.00 Total 51,55,332.00 (xv) All the aforesaid contractors have raised their bills upon the company, on account of their idle labour charges, as aforesaid, ad same was accrued only du e to short supply of materials by the petitioner, in the project. Copies of afo resaid demand made by the aforesaid contractors are annexed hereto and marked AN NEXURE-C. (xvi) On the basis of said complaint, the company instructed their Meghalaya of fice, to be vigilant and to utter surprise of the company, in between, 11th June , 2009 to 15th June, 2009, the men of the petitioner were caught red-handed and found misappropriating the carried materials, by following modus operandi: (a) The petitioner used to unload the materials at Guwahati, for transshipment i n the process & used to handover those materials to third parties, for onward tr ansportation of the material from Guwahati to Factory site, situated at Meghalay a. (b) During this transshipment process they used to misappropriate huge mater ials from the trucks by using malpractices, involving other persons small gain. One of the malpractice used is to substitute the construction materials by ston e an bounders. (c) They used to sale such misappropriated materials and distribute the sale pr oceeds, amongst themselves. (d) When the persons of respondent company caught the trucks red handed loaded with stone & boulder to match the weight of truck load. The company immediatel y informed Mr. Ashoke Kumar Agarwal, the Proprietor of Agarwal Carrying Corporat ion over telephone to provide details of the transporter’s investigation period, to the respondent company’s astonishment he replied that he did not know all th ese transporters. (e) During the investigation period, respondent company had asked Mr. Ashoke Kum ar Agarwal, to provide the details of Transport engaged by them for re-transport of the material, which he could not provide for investigation with a fear of tr uth outcome. (f) During our investigation respondent company came to know that this practi ce were used by those persons for long & Mr. Gurucharan owner of VFR Hardware, J owai & Mr. Mahendra, and Manager of 7th Mile Petrol Pump use to purchase these s tolen materials till date. (g) Lion share of the realization was handed over to Mr. Ashoke Kumar Agarwal. All these were as per the statement dated 30th June, 2009 of Mr. Shiv Shai, on e of the accused involved in the racket. (h) With an intention of delaying the process Mr. Ashok Kumar Agarwal called u p many times to settle the matter out of Court and failing to do so respondent c ompany had lodged FIR on 22nd July, 2009 with the Officer -in-charge, A.D. Camp, P.S.- Lumshnong, Jaintia Hills, Meghalaya. (xvii) The men of the petitioners had confessed and admitted by issuing a lett er of admission of their misdeeds and copies of the same are annexed hereto and marked as ANNEXURE-D. (xviii) That the company have came to know the aforesaid facts, from the men o f the complainant, and on 2.7.2009 and another on 22.7.2009, two separate FIRs h ave been filed against the men of the petitioner as well as against the Agarwal Carrying Corporation. Copies of said FIRs lodged by the company against the men of the petitioner as well as against the petitioner dated 2.7.2009 and 22.7.200 9 are annexed hereto and marked as ANNEXURE- E & F respectively. 9) As regards ’idle labour’ charge suffered by the respondent for s hort delivery of the construction materials, the petitioner is correct in saying that some of the bills referred by the respondent pertain to the year 2007 and 2008 and the entire amount claimed against idle labour component, may not be a ttributable to the default of the transporter. But, the precise amount of extra cost that the respondent had to incur for default of the petitioner, is a matter of evidence and the Company Court is obviously not the appropriate forum for qu antifying the entitlement of the respondent. 10) The two debit notes forwarded to the petitioner by the responden t on 31.7.2009 and 3.8.2009 respectively may also have a material bearing in thi s case. Although the petitioner denies delivery, the receipt(s) of the courier company through whom the debit notes were couriered to the petitioner are enclos ed. Therefore, although it would be a matter of evidence as to whether the debit notes were actually delivered, the timing of the debit notes is a matter of som e significance. This is because the statutory notice under Section 434 of the C ompanies Act was issued against the respondent Company on 11.9.2009, perhaps soo n after the debit notes were delivered to the petitioner. 11) Therefore, the question that has to be answered in this proceedi ng is whether a substantial dispute has been raised by the respondent on the cla im made by the petitioner. Here, the two FIRs which were filed in July, 2009 can definitely throw some light. It is noteworthy that the FIRs were filed well be fore any claim was made by the petitioner against the respondent company and in the respondent’s FIR it was clearly alleged that the building materials were bei ng misappropriated during transit. Therefore, the case now projected by the res pondent of pilferage of the transiting goods, cannot be said to be an afterthoug ht or a counter-blast to the winding up proceeding. 12) Although it might be a matter of evidence as to the amount of ad ditional expenditure that respondent incurred on account of ’idle labour for sh ort delivery of goods by the transporter, the contention raised by the responden t on this count cannot, in my view, be considered to be non-bonafide . 13) While considering a winding up petition on an allegation that th e company is unable to pay its debts, the first imperative is to examine whether the debt is beyond dispute. If the company raises a bonafide dispute, the peti tioner can’t be placed in the category of a creditor of the company. If there a re materials and substantive basis for the dispute raised by the company, it wou ldn’t be appropriate for a Company Court to proceed in a winding up proceeding. Undoubtedly the Company Court should look into the causes of refusal by the com pany to pay, before coming to that conclusion that, the company’s refusal is sup ported by a reasonable cause or a bona fide dispute in which the dispute can onl y be adjudicated by a trial in a Civil Court. 14) The Company Court while exercising powers under Section 433 & 43 4 of the Companies Act is not in a position to decide who defaulted in dischargi ng its obligation under the contract, which calls for detailed examination of va rious aspects of the objection and also examination of evidence. It may also inv olve interpretation of the terms and condition of the agreement amongst the part ies. 15) It must also borne in mind that a party to the dispute s hould not be allowed to use the threat of winding up petition as a means of forc ing the company to pay a bonafide disputed debt, especially when the aggrieved p arty has alternate remedy in different forum. The jurisdiction of the Company Co urt can’t be permitted to be abused by entertaining winding up petition to put p ressure on a company to pay disputed debts since entertainment of such petition and its advertisement, certainly damages the companies credit-worthiness and its reputation amongst its customers and public. The Company Court, therefore, shou ld act with circumspection, care and caution and decide at first instances wheth er, a substantial dispute is raised by the company with regard to the debt claim ed against it. 16) On a detail analysis of all aspects of the matter, I am of the c onsidered opinion that there is a bona fide dispute on the claim made against th e respondent company and it would not be just and proper to accept this winding up petition, to pressurize the respondent to pay a disputed debt. 17) The Company Court is not expected to hold a full trial to decide on the veracity of the claim made by the respondent as this is a summary procee ding where the debt should be a matter of prima facie inference. If the debt is bonafide disputed, there cannot be neglect to pay within the meaning of Secti on 433(1)(a) of the Companies Act, 1956. Consequently, when there is no neglect, the deeming provision under Section 434 does not come into operation and the re spondent cannot be ordered to be wound up under Section 433 of the Companies Act , 1956. 18) For the forgoing reasons and having regard to the ratio laid dow n by the Apex Court in Iba Health (India) Private Limited -vs.- Info-Drive Syste ms Sdn. Bhd. reported in (2010) 10 SCC 553, I see no merit in this winding up pe tition and the same is accordingly dismissed.