Case: Credit Agricole Indisuez Vs. Credential Finance Limited

Suit is filed will not debar the Petitioner from filing the Company Petition claiming an order of winding up of the Company, because the Company is not in a position to pay its debts. 5.Though, one of the grounds mentioned in the impugned order for not entertaining the Company Petition is that the Civil Suit has been filed by the Petitioner for recovery of the amount, the learned Counsel for the Respondent did not urge that merely because the Civil Suit is filed, the Company Petition cannot be entertained. The submission of the learned Counsel for the Respondent is that in terms of the provisions of section 70 of the Contract Act, what the Petitioner is entitled to claim is damages from the Respondent and therefore, unless the Petitioner pleads and proves the amount of damages to which it is entitled, it cannot get the damages. In the submission of the learned Counsel as the claim of the Petitioner can only be for damages, the Company Petition is not maintainable. The learned Counsel in support of this submission relies on two judgments of the Supreme Court, one in the case of M/s. Hansraj Gupta & Co. vs. Union of Indian AIR 1973 SC 2724 and another in the case of Union of India vs. Sita Ram Jaiswal, AIR 1977 SC 329 . 6.After having heard the learned Counsel for both sides and after having gone through the record, we find that following are the admitted positions:(i) that the cheque in the amount of Rs.1,22,44,466/- was deposited in the account of the Respondent with the Petitioner/bank; (ii) that three pay orders on 4th April, 1996 were issued in favour of the Respondent by the Petitioner and payment pursuant to those pay orders have been received by the Respondent; (iii) that the cheque deposited by the Respondent on 29th March, 1996 has been dishonoured; It is clear that the Petitioner issued three pay orders in favour of the Respondent on the assumption that the cheque deposited by the Respondent has been cleared. It was subsequently, discovered that that cheque was dishonoured. Therefore, the consideration for which the Petitioner issued three pay orders in favour of the Respondent/ company did not materialise or was not received by the Petitioner. The three pay orders were issued by the Petitioner for consideration namely against the amount either already received or yet to be received by the Petitioner. Therefore, once it is an admitted position that the Petitioner/ bank did not receive the amount of consideration for issuing pay orders, the Respondent cannot deny its liability to pay the amount of pay orders to the Petitioner. In our opinion, the submission of the learned Counsel appearing for the Respondent that the claim of the Petitioner would be under the provisions of Section 70 of the Contract Act, is not well founded. What the Petitioner is claiming, is the return of money which was paid by it as and by way of pay orders to the Respondent/company. The claim of the Petitioner, therefore, would be governed by the provisions of Section 72 of the Indian Contract Act. Section 72 of the Contract Act reads as under:"72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.- A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it."When the Petitioner/ Bank issued pay orders, what was really done was money was paid by the Bank. Therefore, the Petitioner/ bank is entitled to the return of that amount. It is no doubt true that in the civil suit filed by the Petitioner, the Petitioner is claiming a decree primarily for refund of the amount from the Respondent. In addition, it is also demanding reimbursement of the amount as damages. That is an alternative plea taken in that suit by the Petitioner. In the suit, the Petitioner is no doubt claiming that due to negligence of the State Bank of India in communicating immediately that the cheque has been dishonoured, it issued the pay orders and therefore, the State Bank of India is also liable to pay the damages for its negligence. The claim made by the Petitioner, however, against the State Bank of India would not, in our opinion, disentitled the Petitioner from claiming refund of the amount from the Respondent/company. The Respondent/company is primarily liable to the Petitioner to make good the money, because admittedly, it has encashed the pay orders. It is pertinent to note here that the account with the Petitioner/bank is of the Respondent, on the assumption that the cheque has been cleared, the entire amount of cheque was shown as credited in the account of the Respondent, the Respondent has taken the pay orders in the amount of Rs.1,09,00,000/- in its own name. Why it became necessary for the Respondent to take the pay orders of such a big amounts in its own name from its own account is not explained anywhere. 7.In our opinion, by no stretch of imagination, it can be said that any defence is available to the Respondent, so far as the refund of the amount of pay orders to the Petitioner/ bank is concerned, and therefore, in our opinion, the order passed by the learned Single Judge is liable to be set aside. 8.It is further to be seen here that in the Petition, the Petitioner has prayed as and by way of interim relief an order appointing the provisional liquidator. The manner in which the defence has been raised by the Respondent/company clearly shows its inability to pay its debts. The conduct of the Respondent/company of taking pay orders in its own name of a huge amount of Rs.1,09,00,000/-, prima facie, appears to be malafide. Taking overall view of the matter, in our opinion, in case the Respondent/company is not in a position to deposit the amount in Court, it would be, in the interest of justice to appoint the provisional liquidator.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]6.After having heard the learned Counsel for both sides and after having gone through the record, we find that following are the admitted positions:(i) that the cheque in the amount of Rs.1,22,44,466/was deposited in the account of the Respondent with thethat three pay orders on 4th April, 1996 were issued in favour of the Respondent by the Petitioner and payment pursuant to those pay orders have been received by thethat the cheque deposited by the Respondent on 29th March, 1996 has beenis clear that the Petitioner issued three pay orders in favour of the Respondent on the assumption that the cheque deposited by the Respondent has been cleared. It was subsequently, discovered that that cheque was dishonoured. Therefore, the consideration for which the Petitioner issued three pay orders in favour of the Respondent/ company did not materialise or was not received by the Petitioner. The three pay orders were issued by the Petitioner for consideration namely against the amount either already received or yet to be received by the Petitioner. Therefore, once it is an admitted position that the Petitioner/ bank did not receive the amount of consideration for issuing pay orders, the Respondent cannot deny its liability to pay the amount of pay orders to the Petitioner. In our opinion, the submission of the learned Counsel appearing for the Respondent that the claim of the Petitioner would be under the provisions of Section 70 of the Contract Act, is not well founded. What the Petitioner is claiming, is the return of money which was paid by it as and by way of pay orders to the Respondent/company. The claim of the Petitioner, therefore, would be governed by the provisions of Section 72 of the Indian Contract Act. Section 72 of the Contract Act reads as under:"72. Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it."When the Petitioner/ Bank issued pay orders, what was really done was money was paid by the Bank. Therefore, the Petitioner/ bank is entitled to the return of that amount. It is no doubt true that in the civil suit filed by the Petitioner, the Petitioner is claiming a decree primarily for refund of the amount from the Respondent. In addition, it is also demanding reimbursement of the amount as damages. That is an alternative plea taken in that suit by the Petitioner. In the suit, the Petitioner is no doubt claiming that due to negligence of the State Bank of India in communicating immediately that the cheque has been dishonoured, it issued the pay orders and therefore, the State Bank of India is also liable to pay the damages for its negligence. The claim made by the Petitioner, however, against the State Bank of India would not, in our opinion, disentitled the Petitioner from claiming refund of the amount from the Respondent/company. The Respondent/company is primarily liable to the Petitioner to make good the money, because admittedly, it has encashed the pay orders. It is pertinent to note here that the account with the Petitioner/bank is of the Respondent, on the assumption that the cheque has been cleared, the entire amount of cheque was shown as credited in the account of the Respondent, the Respondent has taken the pay orders in the amount of Rs.1,09,00,000/in its own name. Why it became necessary for the Respondent to take the pay orders of such a big amounts in its own name from its own account is not explainedour opinion, by no stretch of imagination, it can be said that any defence is available to the Respondent, so far as the refund of the amount of pay orders to the Petitioner/ bank is concerned, and therefore, in our opinion, the order passed by the learned Single Judge is liable to be setis further to be seen here that in the Petition, the Petitioner has prayed as and by way of interim relief an order appointing the provisional liquidator. The manner in which the defence has been raised by the Respondent/company clearly shows its inability to pay its debts. The conduct of the Respondent/company of taking pay orders in its own name of a huge amount ofprima facie, appears to be malafide. Taking overall view of the matter, in our opinion, in case the Respondent/company is not in a position to deposit the amount in Court, it would be, in the interest of justice to appoint the provisional liquidator.