1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION rpa COMPANY PETITION NO. 183 OF 2009. In the matter of sections 433 and 434 of the Companies Act, 1956; And In the matter of M/s. Klassic Studios and Films Private Limited, A Company incorporated under the Provisions of the Companies Act, 1956, having its Registered Office at 109, 3rd Floor, Link Plaza, Link Road Extension, Near Oshiwara Police Station, Andheri (W), Mumbai 400 102. Satyen Chowdhury, ] Age – Adult, ] Indian Inhabitant of Mumbai, ] Having his office at A-404, Kia Park, ] Veera Desai Road, Andheri (W), ] Mumbai 400 053. ] .. Petitioner. v/s. M/s. Klassic Studios and Films ] Pvt. Ltd. ] .. Respondents. .... Mr. Santosh Shetty for the Petitioner. Mr. P. Jaiswal i/b. M/s. Kanga & Co. for the Respondents. .... CORAM : S. J. KATHAWALLA, J. DATE : FEBRUARY 18, 2010. P.C. By this Petition, the Petitioner is seeking winding up of 2 the Respondent Company M/s. Klassic Studios and Films Pvt. Ltd. (Company). 2. According to the Petitioner he is a Cine Art Director by profession and is associated with Art direction in various films, serials, etc. According to the Petitioner, one Mr. Ashwin Varma, Managing Director of the Company had approached the Petitioner requesting him to work as an Art Director in a serial/talk show which was being made by the Company which was tentatively titled as Sahara’s Arrange Marriage [to be telecasted on Rastriya/Sahara Samay T.V.] Pursuant to the negotiations, an Agreement dated 12th September, 2007 was entered into between the Petitioner and the said Company. Under the said agreement, the Petitioner agreed to work as an Art Director. It was agreed between the Company and the Petitioner that a total consideration of Rs.13,00,000/- would be paid to the Petitioner including for the costs of set and it was further agreed that a sum of Rs. 10,000/- per shooting month would be paid in the manner as more particularly set out in the Agreement dated 12th September, 2007. 3 3. According to the Petitioner, in pursuance to the said Agreement in October 2007, the Petitioner put up a set at Klassic Studios and Films Pvt. Ltd., Mira Road. The shooting for the said serial ‘Sahara’s Arrange Marriage’ commenced in October 2007 and continued till November 2007, during which period the Petitioner rendered his services as an Art Director. According to the Petitioner, the set put up by him for the purpose of shooting the serial was finally removed by him in June 2008, as per the instructions of the Managing Director of the Company. The Petitioner incurred a loss of Rs. 60,000/- being the expenses towards the hire of material and other equipments for retaining the set for the period December, 2007 to June 2008. According to the Petitioner, he was paid only a sum of Rs. 9 lacs, though, the agreed consideration was Rs. 13 lacs. According to the Petitioner, despite repeated requests the Company failed and neglected to pay the balance amount of Rs. 4,80,000/- to the Petitioner, because of which a statutory notice dated 31st July, 2008 was issued by the Advocate for the Petitioner to the Company calling upon the Company to pay a sum of Rs. 4,57,800/- inclusive of interest at the rate of 12 % till the date of the notice. According to the Petitioner, upon receipt of the statutory notice, he was assured 4 by the Managing Director of the Company that his outstandings would be cleared alongwith 24 % interest from 13th November, 2007. According to the Petitioner the Managing Director of the Company informed the Petitioner that the Company is facing a liquidity crunch and is not in a position to honour the financial commitments made by the company to its creditors. According to the Petitioner, the Company is, therefore, not in a sound financial position and the company is defrauding its creditors and deserves to be wound up. 4. The Company has filed its affidavit-in-reply dated 14th January, 2010 wherein the Company has denied and disputed the claim made by the Petitioners. It is submitted that the Petitioner was appointed under the instructions of Sahara India T. V. Network and the Petitioner has in fact vide his letter dated 9th August, 2007 submitted his quotation to Sahara Samay India T.V. Network in respect thereof. It is submitted that as per the directions of Sahara India T.V. Network, the agreement dated 12th September, 2007 was entered into between the Petitioner and the Respondent. It is submitted that clause 3 of the said agreement dated 12th September, 2007 (which is in the form of a letter addressed to the 5 Petitioner) reads as under : “ You will have absolutely no RIGHTS or CLAIMS on any part or whole of the set, script work, creative work, concept, dialogues, lyrics, songs, programme or any related elements.” 5. It is pointed out by the Company that by a letter dated 7th September, 2007, the Petitioner has given a break up of the said amount of Rs. 13 lacs which were due and payable to him for the purpose of set design and construction at the Klassic Studios ( Exhibit - 5 to the reply ). The said break up shows that putting up the set would involve wood/patti worth Rs. 2 lacs, Ply wood, and acrylic worth Rs. 1 lac and Rs. 2 lacs respectively. It is submitted that the material used for putting up the set belonged to the Company and the Petitioner had no right or claim on any part or whole of the said set as agreed under clause 3 of the said agreement. According to the Company assuming that the said set depreciated by 50 % of its value, even then the cost of the set when it was removed by the Petitioner would be to the tune of Rs. 6,50,000/- and the Company is entitled to recover the said moneys from the Petitioner. It is submitted that the Petitioner without any authority of the Company and contrary to the 6 agreement dated 12th September, 2007 removed the set and sold the same. It is submitted that after receipt of the statutory notice on 2nd August, 2008, the Managing Director of the Company called a meeting with the Petitioner on 4th August, 2008 when he also took the Petitioner to the Office of Sahara Samay India T. V. Network. It is submitted that the Petitioner was informed that in view of the fact that he had removed the said set and sold the same, he is not entitled to any moneys as called upon by him and therefore he should not take any steps as set out in the notice dated 31st July, 2008. According to the Company, the Petitioner was further informed that if despite the conduct of the Petitioner of removing the said set and selling the same, if Sahara Samay India T.V. Network is agreeable to pay him any amounts, the Company will not come in his way. After the said meeting, the Petitioner assured the Managing Director of the Company that he will not proceed with the notice dated 31st July, 2008 because of which the Company did not reply to the said notice and genuinely believed that the matter is now at rest. The Company in fact forwarded a copy of the notice issued by the Petitioner to the Company, to Sahara Samay India T.V. Network, since the Company was not wanting to come in the way of the Petitioner, if Sahara 7 Samay India T.V. Network was ready to pay any further amounts to the Petitioner. The Petitioner has in his affidavit-in-rejoinder disputed the submissions/contentions of the Company. 6. I have considered the contentions raised by the learned Advocate for the parties. It is an admitted fact that the amount of Rs. 13 lacs was due and payable by the Company to the Petitioner for setting up of a set which admittedly contained wood, plywood, acrylic worth Rs. 5 lacs. The fabrication, lighting, painting and hardware charges aggregated to a further amount of Rs. 4 lacs. The labour charges, transportation extra expenses was to the tune of Rs. 4 lacs. An amount of Rs. 9 lacs was paid by the Company to the Petitioner. Again, the Petitioner had no right/claim over the said set as can be seen from clause 3 of the agreement. However, according to the Petitioner, on instructions of the Company he removed the said set on June 2008 and has claimed the balance amount from the Company. On a query raised by the Court whether the wood, ply wood, acrylic etc. admittedly worth lacs of rupees used in the said set has been retained by the Petitioner to return the same to the Company, the learned Advocate for the Petitioner was unable to give his response. 8 According to the Company no instructions for removal of the said set was given to the Petitioner. There is not a single letter written by the Petitioner to the Company setting out that the set was required to be removed or is removed at the instance of the Company and what is done with the raw material used therein. According to the Company, the Petitioner has sold the said set after dismantling the same, which has approximately fetched an amount of Rs. 6,50,000/-, which is wrongly retained by the Petitioner. Both the Parties have a different story to tell qua the Company not responding to the statutory notice. However, as held by this Court in its decision in the case of Digitial Data Services V/s. Sharp Industries Pvt. Ltd., reported in 1998 (4) L.J. 338 whether a reply is given to the statutory notice or not, is immaterial, because even in the absence of a reply, before admitting any Company Petition for winding up of the Company, the Court has to be satisfied that the debt in relation to which the Petition has been filed is clearly due. For satisfying itself, as to whether the debt is clearly due or not, the Court is entitled to go into the defence put up before the Court in the Affidavit-in-reply to the Petition. The fact that the Company forwarded a copy of the notice issued by the Petitioner to the Company, to Sahara India 9 T.V. Network also cannot be held against the Company since the Company has explained that despite the Petitioner removing the set in violation of the agreement dated 12th September, 2007, the Company was not wanting to come in the way of the Petitioner if Sahara Samay India T.V. Network was agreeable to pay any additional amount to the Petitioner. 7. In these circumstances, in my view, the defence put up by the Respondent company is substantial and bonafide. It cannot be said that the defence is merely a cloak to cover up its inability to pay its debts. Therefore, the Company Petition for winding up of the Respondent Company cannot be entertained and is dismissed. [ S. J. KATHAWALLA, J. ]