Case: Vision Millennium Exports Private Limited Vs. M/S. Stride Multitrade Private Limited &amp; Others

Petition for winding up. Paragraph 21 of the said report is material and is reproduced herein under:21. Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt (See Re. A Company 94 S.J. 369). Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantity the debt precisely (See Re. Tweeds Garages Ltd. 1962 Ch.406. (3) The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. In IBA Health (I) Pvt. Ltds case (supra) the Apex Court has held that solvency of a company might not constitute a stand alone ground for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. Paragraph 24 of the said report is material and reproduced herein under:24. Appellant company raised a contention that it is commercially solvent and, in such a situation, the question may arise that the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the companys insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the companys liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation application to rebut that presumption. Apart from the aforesaid legal position, it is sought to be pointed out on behalf of the Petitioners that the net worth of the Respondent as per its last balance sheet is much lesser than outstanding debts of the Petitioners. It is further sought to be pointed out that the amount lying in the bank account of the Respondent is also not sufficient to pay off the outstanding debts.24. Now lastly coming to the issue as to whether this Court should interfere with the impugned order passed by the learned Single Judge. In the said context it is necessary to make a reference to the judgment of the Apex Court in Wonder Ltds case. (supra). Paragraph 14 of the said report is material and is reproduced herein under:14. The appeals before the Division Bench were against the exercise of discretion by the Single Judge. In such appeals, the Appellate Court will not interfere with the exercise of discretion of the court of first instance and substitute its own discretion except where the discretion has been shown to have been exercised arbitrarily, or capriciously or perversely or where the court had ignored the settled principles of law regulating grant or refusal of interlocutory injunctions. An appeal against exercise of discretion is said to be an appeal on principle. Appellate Court will not reassess the material and seek to reach a conclusion different from the one reached by the court below if the one reached by the court was reasonably possible on the material. The appellate court would normally not be justified in interfering with the exercise of discretion under appeal solely on the ground that if it had considered the matter at the trial stage it would have come to a contrary conclusion. If the discretion has been exercised by the Trial Court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial courts exercise of discretion. After referring to these principles Gajendragadkar, J. in Printers (Mysore) Private Ltd. v. Pothan Joseph (1960) 3 SCR 713 : AIR 1960 SC 1156 : (SCR 721) ...... These principles are well established, but as has been observed by Viscount Simon in Charles Osention & Co. v. Johnston [1942 AC 130] . the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case. The appellate judgment does not seem to defer to this principle. Hence going by the test laid down by the Apex Court in Wander Ltd.s case (supra), the view taken by the learned Single Judge being a possible view taken in the facts and circumstances of the instant case, the same does not merit any interference in the Appellate Jurisdiction.25. In our view, the Respondent i.e. the Appellant herein has not raised any substantial or genuine grounds to avoid the payment and the defences raised on behalf of the Respondent are therefore not bonafide. In our view, the learned Single Judge has in the facts and circumstances rightly issued the directions which are contained in the operative part of the impugned order.

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

Explanation:
0[ds]The cause for issuing the said direction as can be seen from the impugned order is that the defence raised by the Respondent was not found to be genuine, bonafide and plausible one by the learned Single Judge and therefore the learned Single Judge deemed it appropriate to put the Respondent to terms. It is required to be noted that the only defence taken by the Respondent in the reply to the statutory notice and in the affidavit in reply to the above Company Petitions is the defence that there were never any contracts for purchase of Soyabean Meal but the contracts were for purchase of Guar Seeds. Though the said defence was taken by the Respondent, significantly the Respondent has not produced the alleged Guar Seeds contracts before the learned Single Judge or in the Review Petition filed against the order passed in the Company Petition being No.586 of 2014 filed by the Petitioner M/s. Nova Trading Pvt. Ltd. or even in the instant Appeal and an attempt has now been made to bring on record the said Guar Seeds contracts by way of an application filed under Order XLI Rule 27 of the Code of Civil Procedure being Notice of Motion (L) No.1548 of 2017 which is filed in the instant Appeal. Hence the defence which was sought to be taken by the Respondent admittedly has not been buttressed by producing any cogent material in that regard. In so far as the Petitioners i.e. the Respondents herein are concerned, they have produced emails which according to them have been received from the Respondent comprising 5 contracts for purchase of Soyabean Meal. The Petitioner has also produced the bank statements evidencing the payment of advances of Rs.51,00,00,000/to the Respondent by RTGS. Hence the Petitioner has discharged the burden which was initially lying on it. However, on the burden shifting to the Respondent, the Respondent has not discharged the said burden by producing material which was the fulcrum of its defence.13. The Appellant herein i.e. the original Respondent has filed an Application to produce additional evidence being Notice of Motion (L) No.1548 of 2017. The additional evidence which is sought to be produced interalia contain the alleged Guar Seeds contracts. Hence it is for the first time at the Appellate stage that the Guar Seeds contracts are sought to be produced. By an order passed today the said Notice of Motion (L) No.1548 of 2017 has been dismissed for the reasons stated in the said order.14. In so far as the 5 Soyabean Meal contracts which have been received by email by the Petitioner is concerned, each contract bears the signature and rubber stamp of the Respondent. Each contract identifies the quantity, rate, payment terms, delivery date. The Petitioner has given inspection of the emails to the Respondent. In so far as the said contracts are concerned, in the affidavit in reply though the authenticity of the email is sought to be disputed the denial is bare and bereft of particulars. The same can be seen by the averments made in paragraph 20 which are reproduced herein under:The Respondent states that the alleged contracts annexed by the Petitioners are also fabricated. The date are created to match the existing position of credit balance with the Respondent Company. The Respondent denies having sent any mail as annexed by the Petitioner. The following error is patent in the contracts.Hence a reading of the said paragraph indicates that though the Respondent has alleged that the contracts are fabricated and the dates are created to mach the existing position of credit balance, on the other hand the Respondent has denied of having sent any email as annexed by the Petitioner to the Company Petition. Significantly the Respondent has not disputed the signatures on the contracts nor has disputed the authenticity of the rubber stamp affixed over the signature in the Sales Confirmation Note.15. In so far as the alleged Guar Seeds contracts are concerned, the Respondent has not mentioned in any pleadings as to how the said Guar Seeds contracts were sent to the Petitioners. There is no reference to any email/ letter/correspondence by which the said Guar Seeds contracts were sent to the Petitioners.16. Another aspect which dents the case of the Respondent in so far as the said defence is concerned is that its Director Mr. D Narsimhan and the representative of the Chartered Accountants of the Respondent Mr. P Bhargava have admitted before this Court that the amounts paid by the Petitioners are shown as advance received in the account of the Respondent which fact has been recorded in the order dated 23/02/2015 and 27/02/2015 passed in one of the connected Company Petition being No.16 of 2014. The case of the Respondent that the Petitioners failed to make payment on account of sharp fall in price of Guar Seeds between the settlement date and the delivery date also appears to be unacceptable in view of the fact that the Petitioners made payment of Rs.6,00,00,000/on 26/07/2011 a day prior to the delivery date.17. In so far as email dated 15/02/2012 addressed by Mr. Rajkumar Goyal to the Respondent is concerned, it is required to be noted that the said email is dated 14/02/2012 whereas the alleged Guar Seeds contracts are also dated prior in point of time. A reading of the said email indicates that the said email is in the nature of the proposal to the Respondent that the advances can be adjusted against the Gaur Seeds. The alleged Guar Seeds contracts are all prior in point of time to the email. Hence there would be no question of Mr. Rajkumar Goyal making a proposal for purchase of Guar Seeds to be adjusted with the advances provided by the Petitioner. The said email therefore does not in any manner support the case of the Respondent that the amount advanced by the Petitioner was towards the purchase of Guar Seeds. The factum of supply of Guar Seeds to 5 entities which are sister concerns of the Petitioner also does not further case of the Respondent in so far as contracts being for purchase Guar Seeds and not for purchase of Soyabean Meal is concerned. The contracts relating to Guar Seeds, according to the Respondent are dated 14/01/2012 whilst the Guar Seeds are alleged to have been supplied even prior to the contract date i.e. 28/11/2011. It is only in respect of the alleged Guar Seeds contract between the Respondent and M/s. Nova Trading Pvt. Ltd. (one of the Respondents in the companion Appeals) that the contract date is prior to the delivery date. Hence the aforesaid fact also does not support the case of the Respondent that the contracts were in respect of purchase of Guar Seeds and not for purchase of Soyabean Meal.18. Now coming to the report of the DG CCI on which much reliance was sought to be placed on behalf of the Respondent in support of its case that the contracts were in respect of supply of Guar Seeds and not for Soyabean Meal. The said report has been submitted by the DG CCI after undertaking an inquiry under Section 26 of the Competition Act 2002. The statutory scheme comprising the said Act indicates that the investigation carried out by the DG CCI is a preliminary fact finding inquiry and is not by way ofproceeding. In the said fact finding inquiry there is no opportunity given to the concerned parties to make submissions but only statements are recorded and material considered. In so far as the instant report of the DG CCI is concerned, reading of paragraphs 5.12.10, 5.12.11 and 5.12.14 indicate that the DG CCIs finding is solely based on the bank statements of the parties. The DG CCI did not have the benefit of the material facts which are necessary to determine the inter se disputes between the parties. In so far as the instant case is concerned, the DG CCI did not have access to the Soyabean Meal contracts bearing the signature and rubber stamp of the Respondent i.e. the Appellant herein, the email through which the Respondent forwarded the Soyabean Meal contracts to the Petitioners, admissions of Mr. D Narsimhan the Director of the Respondent and, Mr. P Bhargava the representative of the Chartered Accountants of the Respondent wherein they have stated that the amount paid by the Petitioner was shown as advance in the account of the Respondent. The DG CCI cannot be said to be conducting any inquiry as regards the inter se disputes between the Petitioner and the Respondent but was only conducting the inquiry into whether there was any monopolistic activities being carried out in the sale of Guar Seeds.19. In our view, though the learned Single Judge has not expressed any opinion one way or the other as regards the efficacy of any of the findings recorded by the DG CCI, no evidentiary value could be attached to the said report of the DG CCI. Reliance placed on the judgment of Raymond Woollen Mills Ltd.s case (supra) seems to be apposite. In the said case the Apex Court was concerned with the investigation report under the provisions of Section 11 of the Monopolies Restrictive Trade Practices Act, 1969 which provisions can be said to be almostto Section 26 of the present Competition Act, 2002. The Apex Court held that any reference to the contents of the said report which have not been put in evidence and subjected to cross examination cannot be looked into. Paragraph 36 of the said report is material and is reproduced herein under:36. The learned senior counsel for the respondents referred to the "preliminary investigation report" submitted by the Director GeneralThe preliminary investigation report cannot be taken into consideration as it is not produced in evidence. It is only a report submitted in terms of Section 11 of the MRTP Act for initiating the enquiry. Only those facts contained therein, which are proved on record by evidence, can be looked into. The preliminary investigation report, as such, is not evidence on record. As such, any reference to the contents thereof, which have not been put in evidence and subjected to cross examination, cannot be looked into. This is without prejudice to the contention that there is nothing stated in the preliminary investigation report, which in any way establishes that any competition was affected within the meaning of Section 2(o) of the Act and that competition was affected to any "material degree" in the relevant trade or industry, as contemplated under Clause (h) of Section 38(1) of the Act. In our view, therefore the findings of the DG CCI as contained in its report do not further the case of the Respondent i.e. the Appellant herein.20. In so far as the discrepancies in the Soyabean Meal contracts alleged by the Respondent are concerned, it is required to be noted that the Soyabean Meal contracts bear the signature and rubber stamp of the Respondent. As indicated above the Respondent has not denied the authenticity of the signature and its rubber stamp on the Soyabean Meal contracts. Since the Soyabean Meal contracts have originated from the Respondent, the discrepancies if any cannot lie at the door of the Petitioner and it is for the Respondent therefore to explain such discrepancies. Hence the case of the Respondent that the Soyabean Meal contracts are fabricated and that the Respondent did not send any email does not seem to be bonafide and is devoid of merits as rightly held by the learned Single Judge. In our view, merely because the Petitioner did not enter into correspondence though breach was committed by the Respondent would not dent the case of the Petitioner in so far as their claim based on Soyabean Meal contracts is concerned. Since the parties had a running business relationship, it may be possible that the parties were trying to work out and in the said process time might have elapsed. In the said context it is required to be noted that even in respect of the Guar Seed contracts the delivery date as per the said contracts was 27/07/2012. The Respondent did not address any correspondence for almost a year before addressing the letter dated 15/06/2013. Hence the aforesaid fact suggests that the parties being in continuous business relationship did not desire to precipitate the matter and were trying to resolve the same.21. The contention as urged on behalf of the Respondent that the emails do not contain the signature made on behalf of the Petitioner and therefore the said fact impinges upon whether there were any contracts for purchase of Soyabean Meal. In our view, the said contention misses the point that the said contract was acted upon inasmuch as the Petitioner had made payment of the advance which constituted 50% of the contracted amount i.e. the sum of Rs.51,00,00,000/and hence in terms of Section 8 of the Contract Act the same constitutes an acceptance.22. In so far as the order passed by the Madhya Pradesh High Court is concerned, it seems that the parties and the contracts in issue before the Madhya Pradesh High Court were different. In the said case it appears that the Respondent therein Betul Oils Ltd had produced the contract for purchase of Guar Seeds bearing the signature of M/s. Nova Trading Pvt. Ltd.; whereas in the instant case the Respondent has failed to produce any such Guar Seeds contracts. Further before the Madhya Pradesh High Court there was no admissions as are in the present case by the Director Mr. D Narsimhan and the representative of the Chartered Accountants Mr. P Bhargava. In so far as the said order passed by the Madhya Pradesh High Court is concerned, it is required to be noted that the Review Petition being No.1 of 2017 filed in Company Petition No.586 of 2014 came to be filed by the Respondent on the said very ground i.e. placing reliance on the order passed by the Madhya Pradesh High Court dismissing the Company Petition. The said Review Petition came to be dismissed by the learned Single Judge by the order dated 24/02/2017. In our view, therefore, the order passed by the Madhya Pradesh High Court does not in any manner aid the Respondent to deny that it owes any debt to the Petitioner in the Company Petition.23. In so far as the contention that urged on behalf of the Respondent that the Respondent is commercial solvent and therefore the order of the nature passed by the learned Single Judge was not required to be passed. In the said context, reference could be made to the judgment of the Apex Court in M/s. Madhusudan GordhandasCo.s case (supra) and IBA Health (I) Pvt. Ltd.s case (supra) . In Madhusudan GordhandasCo.s case (supra), the Apex Court held that mere ability to pay but choosing not to pay cannot be a defence in a Petition for winding up. Paragraph 21 of the said report is material and is reproduced herein under:21. Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt (See Re. A Company 94 S.J. 369). Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantity the debt precisely (See Re. Tweeds Garages Ltd. 1962 Ch.406. (3) The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. In IBA Health (I) Pvt. Ltds case (supra) the Apex Court has held that solvency of a company might not constitute a stand alone ground for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. Paragraph 24 of the said report is material and reproduced hereinIn our view, the Respondent i.e. the Appellant herein has not raised any substantial or genuine grounds to avoid the payment and the defences raised on behalf of the Respondent are therefore not bonafide. In our view, the learned Single Judge has in the facts and circumstances rightly issued the directions which are contained in the operative part of the impugned order.