Case: Hitechi Jewellery Industries Limited Vs. Choksi Arvind Jewellers

R.M. Lodha, J.Heard the learned Counsel for the parties.2. This appeal is directed against the order dated 28th November, 2002, whereby the Company Judge admitted the Company Petition filed by the present Respondent and ordered advertisement of petition.3. Mr. Kadam, learned Counsel for the Appellant, made two-fold submission: (1) that the impugned order is not a speaking order. According to the learned Counsel, the order admitting winding up petition affects the rights of the parties and is in the nature of decision and therefore such order must be supported by reasons. He relied upon the Division Bench judgment of this Court in Western India Theatres Limited v/s Iswarbhai Somabhai Patel. AIR 1959 Bombay 386, and in the case of Vasudeo Vishwanath Saraf v/s New Education Institute and others. (1986) 4 SCC 31 , and (2) the mere fact that the Company Petition No. 540 of 2000 has been admitted by itself does not furnish a ground for admission of the company petition. The learned Counsel for the Appellant submitted that the Appellant has raised Bonafide dispute to the claim and therefore no case for admission of company petition was made out.4. We shall refer to the Respondent herein as the Petitioner and the Appellant herein as the Company. According to the Petitioner, it sold, supplied and delivered to the Company gold bars for the period from 14th August, 1999 to 30th August, 2000 under different invoices aggregating to Rs.31,36,200/-. The said goods were received by the Company without any demur as regards the price, quality and/or quantity thereof. The Company issued seven cheques dated 7th April, 2001 for aggregating Rs.31,36,200/-. When the said cheques were deposited for realization all the cheques were dishonoured. The Petitioner made many requests for payment of the due amount but the Company negated to discharge its liability. The Petitioner then gave a statutory notice dated 15th January, 2002 calling upon the Company to pay to the Petitioner the amount of Rs.31,36,200/- within 21 days from the date of receipt of the notice, failing which the Company was noticed that winding up petition may be filed by the Petitioner. The Company, did not respond to the statutory notice necessitating the filing of winding up petition by the Petitioner.5. In response to the Company petition, reply affidavit was filed by the Company and claim of the Petitioner was denied by setting up a defence that Petitioner s claim was false and/or frivolous, concocted and untenable and that on the contrary the Company had a counter claim against the Petitioner arising out of the supply of impure gold. The Company set out a case that the goods supplied by the petitioner during the period from 29th June, 1999 and 21st August, 1999 under various invoices contained between 30% to 35% impurities. Thereafter also in the month of September, 1999 the Petitioner supplied impure gold. The company called upon the Petitioner to settle the accounts but the Petitioner failed to comply with the same. Explaining issuance of cheques, the Company set up a defence that considering the cordial relationship between the parties and at the request of the Petitioner, the Company from time to time and lastly on 2nd March, 2001 replaced postdated cheques which were not to be deposited by the Petitioner in view of the agreement between the parties. The said cheques were issued by the Company and accepted by the Petitioner on express condition that the said cheques shall not be deposited without written intimation from the Company. The Petitioner failed to settle the accounts and threatened to deposit the said cheques given by the Company and therefore the Company issued instructions to the bankers to stop payment of cheques.6. The Company Judge vide impugned order admitted the Company Petition apparently for two reasons: (1) that Company Petition No. 540 of 2000 was already admitted against the Company and (2) that in the opinion of the Company Judge the Petition deserved to be admitted.7. The order of admission of winding up petition is statutory appealable under sec. 483 of the Companies Act. There is no denial to the fact that an order advertising petition may have serious consequences for the Company which is sought to be wound up. To the extent the Company Judge admitted petition for winding up, he can be said to have decided something that the petition should not be dismissed but it is too much to say that such order of the admission of winding up petition and advertisement must be supported by adequate reasons since such an order is appealable. The admission of the company petition by the Company Judge only discloses that the Petitioner has been able to make out, prima facie, case and the case needed to be tried. The company Judge in that situation only takes the prima facie view of the petition and the materials placed before him and feels that the materials place before him would not justify summarily dismissal of the Petition and that more materials, more inquiry and more investigation shall be necessary before the decision is taken whether the petition should be allowed or should be dismissed. The order of admission of Company Petition and advertisement thereof must only be read to that effect. Looked from that angle we find that the Company petition, namely (1) that the Company Petition No. 540 of 2000 has already been admitted against the company and (2) in his opinion this company petition also deserved to be admitted. In our considered view the order passed by the Company Judge cannot be faulted on the ground that the order is a non-speaking order. Strong reliance was placed by the learned Counsel for the Company on the judgment of the Apex Court Vasudeo Vishwanath Saraf (Supra). In Paragraph 14 of the report, the Apex Court says thus:14. It is a cardinal Principle of rule of law which governs our policy that the court including writ Court is required to record reasons while disposing of a writ petition in order to enable the litigations more particularly the aggrieved party to know the reasons which weighed with the mind of the court in determining the questions of facts and law raised in the writ petition or in the action brought. This is imperative for the fair and equitable administration of justice. More so when there is a statutory provision for appeal to the higher court in the hierarchy of courts in order to enable the superior court or the appellate court to know or to be apprised of the reasons which impelled the court to pass the order in question. The recording of reasons in deciding cases or applications affecting rights of parties is also a mandatory requirement to be fulfilled in consonance with the principles of natural justice. It is no answer at all to this legal position that for the purpose of expeditious disposal of cases a laconio order like dismissed or rejected will be made without passing a reasoned order or a speaking order. It is not, however, necessary that the order disposing of a writ petition or of a cause must be a lengthy one recording in detail all the reasons that played in the mind of the court in coming to the decision. What is imperative is that the order must in a nutshell record the relevant reasons which were taken into consideration by the court in coming to its final conclusions and in disposing of the petition or the cause by making the order, thereby enabling both the party seeking justice as well as the superior court where an appeal lies to know the mind of the court as well as the reasons for its finding on questions of law and facts in deciding the said petition or cause. In other words fair play and justice demands that justice must not only be done but must seem to have been done.8. The question before the Apex Court was whether the Court while hearing the writ petition is under an obligation to pass a speaking order-an order recording in brief at least the reasons which weighed with the court in determining the salient questions raised by the parties to the action while dismissing or rejecting the petition. The observation made by the Apex Court in paragraph 14 of the report with reference to the question afore noted, we are afraid, cannot be made applicable as it is to a case such as this where a Company Judge admits the Company Petition. Needless to say a writ Court or for that matter any other Court while disposing of the writ petition or proceeding, at the final stage or threshold, needs to state reasons, briefly or elaborately, in support of the order, so that aggrieved party knows the basis on which the Court determined the matter. The determination of any question of facts or law has to be supported by reasons. The order admitting the company petition does not determine the facts and/or law. In the widest connotation of the term decision , an order admitting the company petition may be deemed to be decision to the extent that on prima facie consideration of the matter, the Company Judge forms the opinion that the matter requires consideration and is not liable to be summarily dismissed but that does not mean that by admission of Company Petition, the rights of the parties on facts or law are determined. An order admitting the company petition for winding up is not an order determining the rights of the parties, Prima facie, or finally.9. In Western India Theaters Ltd. (supra) the Division Bench of this court in paragraphs 4, 5 and 6 has observed thus:4. It is said that all that Mr. Justice Shelat has done is to direct advertisements. He has made no order by which any party can be aggrieved. All that he has decided is that there is a prima facie case made out by the petitioner, and the learned Judge without deciding anything directs advertisements to be given so that at a future date creditors and shareholders can appear before him, the matter can be fully argued, and the learned Judge could ultimately decide whether the order of winding up should be passed or not. In our opinion, that is really over-simplifying the situation. There can be no doubt that an order advertising a petition may have very serious consequences for the company which is sought to be wound up. The advertisement may seriously impair its credit and affect its reputation. Therefore there can be no doubt that the order is one which affects the company and it is an order with regard to which company can be legitimately aggrieved. But it is said that even so there must be a decision and it is urged that in merely giving directions for advertisement, all that has been done is to set in motion a certain procedure established by the Court. Now, it must be borne in mind that it was competent to Mr. Justice Shelat at this stage to have dismissed the petition and not to have acted under Rule 751. In the Hirjee Mills case, 57 Bom.L.R. 378: ((S) AIR 1955 Bom 355 ) the petitioner was entitled to have an order of winding up. In this case the company was entitled to have an order of dismissal. In that case the petitioner was aggrieved because he did not get the order of winding up. In this case the company is aggrieved because the learned Judge did not dismiss the petition but proceeded to give directions under Rule 751.5. Mr. Gupte contends that there is a distinction between an order of dismissal and an order directing advertisements under Rule 751. He concedes, as indeed he must, that if the petition had been dismissed, that order undoubtedly would have been subject to appeal. But there, according to him, the learned Judge would have decided something. But as the matter stands today, the learned Judge has not decided anything. Mr. Gupte would have been right if all that the learned Judge could do at this stage was to order advertisements. If he could neither dismiss the petition nor pass any other effective order, then undoubtedly it could be said that the learned Judge has not decided anything. But surely in this case the learned Judge has decided something and his decision is that the petition should not be dismissed, that the petition discloses a prima facie case, and that the case should be tried. Let us take an extreme case. If the petition was on the face of it not maintainable, if it was a creditor s petition and the petitioner was clearly not a creditor, and yet the learned Judge and given directions under Rule 751 and not dismissed the petition, is it suggested that the company could not come in appeal and draw the attention of the Court of appeal to the fact that the petition was not clearly maintainable and should be dismissed. The position to-day is not to extreme as the illustration we have just given, but even so the case of the appellant is that on the face of the petition no case for winding up has been made out and the learned Judge should have dismissed the petition and not passed an order which is fraught with serious consequences to the company. In our opinion, looking to the wide language used in Sec.202 and looking to the interpretation we have placed upon that section in 57 Bom LR 378: ((S) AIR 1955 Bom 355 ), the order made by the learned Judge is appealable.6. Now, we wish to make this position clear. It is one thing to say that an order is appealable; it is another thing to say that the Court of appeal would ordinarily interfere with the discretionary order passed by the learned Judge under R. 751. It would seem to us that except in a very gross case where the petition was not clearly maintainable, the Court of appeal would be loath to interfere with the discretion exercised by the learned Judge, because all that the learned Judge says at this stage is that he has considered the matter and it appears to him that there is a prima facie case and it requires further inquiry and investigation. In that sense it may be said that the learned Judge has not made up his mind. He has taken a prima facie view of the petition and the materials before him and he has felt that the materials before him would not justify him summarily dismissing the petition but that more materials, more inquiry and more investigations was necessary before he ultimately made up his mind whether the petition should be allowed or should be dismissed. Therefore as we were just saying it would require a very strong case indeed to induce the Court of appeal to interfere with the discretion exercised by the Company Judge in ordering advertisements under R.751.10. The issue before the Division Bench in the Western India Theatres was whether an order directing advertisement of company petition is appealable. The arguments was that even though the order of advertisement of company petition could affect the company and to which the company can be legitimately aggrieved, but for making such order appealable, the order must be a decision and the order advertising the company petition is not a decision. Not accepting this contention, the Division Bench, through Chagla, C.J., held that when the Company Judge order advertisement, it has decided that the petition should not be dismissed, and that the petition discloses prima facie case and that the case should be tried. When the Division Bench of this Court observed that while admitting the company petition the Company Judge has decided something that the petition should not be dismissed, the expression decision has been used in its widest sense but that does not mean in our view that such decision determines the rights of the parties. As already noted by us above, the company petition if admitted may be a decision in the widest sense but surely it is not determination of the rights of the parties. By admitting winding up petition what follows is that the matter is worth consideration on further material and that it is not liable to be dismissed summarily, We accordingly, over-rule the first contention of the learned Counsel for the Appellant.11. Having considered the available material, we are satisfied that, prima facie, it cannot be said that the company has been able to raise bonafide dispute. It is not in dispute that the seven cheques aggregating sum of Rs.31,36,200/- were issued by the Company. It is also not in dispute that the said cheques were dishonoured. It is also a matter of record that Company Petition No. 540 of 2000 has been admitted against the Company. We are informed that few other winding up petitions against the company have also been admitted.

Decision reasoning: 0[ds]8. The question before the Apex Court was whether the Court while hearing the writ petition is under an obligation to pass a speakingorder recording in brief at least the reasons which weighed with the court in determining the salient questions raised by the parties to the action while dismissing or rejecting the petition. The observation made by the Apex Court in paragraph 14 of the report with reference to the question afore noted, we are afraid, cannot be made applicable as it is to a case such as this where a Company Judge admits the Company Petition. Needless to say a writ Court or for that matter any other Court while disposing of the writ petition or proceeding, at the final stage or threshold, needs to state reasons, briefly or elaborately, in support of the order, so that aggrieved party knows the basis on which the Court determined the matter. The determination of any question of facts or law has to be supported by reasons. The order admitting the company petition does not determine the facts and/or law. In the widest connotation of the term decision , an order admitting the company petition may be deemed to be decision to the extent that on prima facie consideration of the matter, the Company Judge forms the opinion that the matter requires consideration and is not liable to be summarily dismissed but that does not mean that by admission of Company Petition, the rights of the parties on facts or law are determined. An order admitting the company petition for winding up is not an order determining the rights of the parties, Prima facie, or finally.The issue before the Division Bench in the Western India Theatres was whether an order directing advertisement of company petition is appealable. The arguments was that even though the order of advertisement of company petition could affect the company and to which the company can be legitimately aggrieved, but for making such order appealable, the order must be a decision and the order advertising the company petition is not a decision. Not accepting this contention, the Division Bench, through Chagla, C.J., held that when the Company Judge order advertisement, it has decided that the petition should not be dismissed, and that the petition discloses prima facie case and that the case should be tried. When the Division Bench of this Court observed that while admitting the company petition the Company Judge has decided something that the petition should not be dismissed, the expression decision has been used in its widest sense but that does not mean in our view that such decision determines the rights of the parties. As already noted by us above, the company petition if admitted may be a decision in the widest sense but surely it is not determination of the rights of the parties. By admitting winding up petition what follows is that the matter is worth consideration on further material and that it is not liable to be dismissed summarily, We accordingly,the first contention of the learned Counsel for the Appellant.11. Having considered the available material, we are satisfied that, prima facie, it cannot be said that the company has been able to raise bonafide dispute. It is not in dispute that the seven cheques aggregating sum of Rs.31,36,200/were issued by the Company. It is also not in dispute that the said cheques were dishonoured. It is also a matter of record that Company Petition No. 540 of 2000 has been admitted against the Company. We are informed that few other winding up petitions against the company have also been admitted. In the backdrop of these facts, prima facie, it may be inferred that the Company is unable to pay its debts.