JUDGMENT
Vikramajit Sen, J.
1. This winding-up Petition under Section 433(1)(e) and (f) of the Companies Act has been filed with the complaint that the Petitioner had made supply of steel to the Respondent on various dates details of which are contained in para 6 of the Petition for the supplies ending on 22.6.2001. A sum of Rs. 40,89,948 is stated to be outstanding in favor of the Petitioner and against the Respondent (Company). It is not in dispute that for the supplies made from 12.10.2000 to 27.3.2001 “C” Forms have been duly supplied by the Company to the Petitioner. It will be relevant to note that these “C” Forms were issued after 27.6.2001, the bulk of them being on 11.7.2001. The “C” Forms that had not been issued are for the last five consignments covered by Invoices dated 5.4.2001, 21.5.2001, 31.5.2001, 8.6.2001 and 22.6.2001. It has been stated on behalf of the Petitioner that the “C” Forms do not correspond exactly with the value of the Invoices, since the Company has carried out deductions against some Invoices on account of short weighments.
2. Learned Counsel for the Petitioner has drawn attention to the fact that the Petitioner’s repeated written demands for clearance of dues have been totally ignored, and not even been responded to. By Letter dated June 16, 2001 a request had been made to clear the total outstanding of Rs. 40,24,148/-. Thereafter, by the Petitioner’s Letter dated 3rd July, 2001, a Statement of Accounts was forwarded showing an outstanding balance of Rs. 59,51,404.25 as on 30.9.2000, which Statement has been signed by two signatories on behalf of the Company. By its Letter dated 10.9.2001 the Petitioner requested for liquidating the dues of Rs. 45,56,617.13 after accounting for supplies made and payments received from October 2000 to June 2001. When all these communications failed to evoke any response, the Petitioner caused a Statutory Notice under Section 434 of the Companies Act dated 19th November, 2001 to issue to the Company claiming a sum of Rs. 40,89,948/- together with interest thereon at the rate of 24% per annum. Since the Company remained silent even after the issuance of the Statutory Notice, yet another request for payment of outstanding dues of Rs. 40,89,948/- was made in terms of the Petitioner’s Letter dated 31.12.2001, which also failed to cause any reaction.
3. The Petition was filed on 26.2.2002 and notice was issued pursuant to Orders dated 27.2.2002. It has not been disputed by the Company that the Court notice was served on the Company on 1.3.2002 and also that the Company’s Letter dated 22.2.2002 reached the Petitioner on 5.3.2002. Learned Counsel for the Respondent had orally submitted that its letter dated 22.2.2002 was dispatched on 23.2.2002. In view off the specific averments contained in the Rejoinder to the Petition, this submission on behalf of the Company ought to have been substantiated by the filing of the Postal Receipts. The copy of the Rejoinder was served on Counsel for the Company on 15.7.2002.
4. The contention of Mr. Malhotra, Learned Counsel appearing for the Company is that there is no doubt as to its solvency. It has been strenuously contended that there has been a material concealment inasmuch as Annexure R-1 to the Company’s Reply, being Minutes of a Meeting held between the parties on 7.5.2001 has neither been filed nor been adverted to in the Petition. These Minutes read as follows:
“Minutes of Meeting between M/s. ITW Signode India Ltd. and M/s. Bhushan Steel & Strips Ltd. at the Corporate Office, New Delhi on 7.5.2001.
ITW SIGNODE BHUSHAN STEEL MR. N.L.N. RAJU Mr. Sanjay singal G.M. Steel Packaging Vice Chairman Group. Mr. Raju Gogulwal Mr. Kishi Saxena Key Account Manager Dy General Manager The following points were discussed and agreed during the meeting:- 1) BSSL has conveyed to ITW that their price are higher by Rs. 5,500. per tonne and also that if prices are not matched BSSL will not give further business. ITW has agreed to give further discount to BSSL as under:-- A. On Apex Grade Strapping - 8% B. On Magnus Grade Strapping - 12% 2) ITW has agreed to supply two sets of sealless strapping tools on free of cost basis to BSSL. It has been promised that the use of this tool will reduce the packing cost. 3) BSSL has conveyed that since most of the tools are not working property/at all. ITW has agreed to rectify and put in to use/operation all tools supplied by ITW on free of cost basis i.e. no cost of spares will be charged by ITW.
4) It has again been pointed out by BSSL that the strapping received are all having the tolerance on the + & – side whereas the order gives tolerance on Both + & – side. This + tolerance reduces the length of the strapping coils. ITW has agreed to look in the matter & take care of the same in future supplies.
For & on behalf of For & on behalf of
ITW Signode India Bhushan Steel &
Ltd. Strips Ltd.
Sd/- N.L.N. Raju Sd/- Kishi Saxena
General manager Dy. General Manager"
5. Mr. Malhotra’s argument is twofold, (a) that if the discounts are given, no amount would be due and payable and on the contrary some amount may be claimable by the Company from the Petitioner; (b) that even if the discounts are not given, only the sum of Rs. 12,68,270.66 would be payable as per Annexure R-2 to the Reply. No explanation is forthcoming as to why such a Statement was not fowarded to the Petitioner by the Company in response to the several written communications received from it by the Company. This observation also holds for the contents of the Letter dated 22.2.2002, which according to the Petitioner has been pre-dated in order to give the impression that the defense preceded the filing of the winding up petition. It has been conceded by Learned Counsel for the Respondent that the sum of Rs. 12,668,270.66 only has been shown as a contingent liability in the Balance- Sheet of the Company. It cannot be appreciated why a copy of the Balance-Sheet has not been filed along with the Reply. It certainly renders it possible to draw an adverse inference, i.e. that a larger sum if not the claimed sum of Rs. 40,89,948/- has been shown in the Company’s Balance-Sheet. Mr. Malhotra has vehemently argued that since the Company is solvent, and since a dispute as to the accounts has been raised, these proceedings are not appropriate, and the Petitioner should be relegated to the filing of a Civil Suit. It has also been contended that the Petitioner has not taken into account Debit Notes issued by the Respondent from time to time, which according to the Company were in implementation of the Agreement arrived at on 7.5.2001. Significantly there is no mention of these Debit. Notes prior to the Reply to the Petition.
6. The scope of the inquiry to be conducted in winding up petitions has been encapsulated by the Hon’ble Supreme Court in Pradeshiya Industrial and Investment Corporation of Uttar Pradesh v. North India Petro-Chemical Ltd. and Anr., (1994) 2 Comp LJ 50 (SC). In winding-up proceedings it is necessary to keep the following conditions in perspective —
(i) If there is a bona fide dispute and the defense is a substantial one, the Court will not wind-up the company.
(ii) Where the debt is undisputed the Court will not act upon a defense that the company has the ability to pay the debt but the company chooses not to pay it.
(iii) Where the defense of the company is in good faith and one of substance, and the defense is likely to succeed in point of law, and the company adduces prima facie proof of the facts on which the defense depends, the petition should be rejected.
(iv) The Court may consider the wishes of creditors so long as these appear to be justified.
(v) The machinery of winding-up should not be allowed to be utilised merely as a means of Realizing its debts.
[For the above propositions see Pradeshiya Industrial and Investment Corporation of Uttar Pradesh v. North India Petro-Chemical Ltd. and Anr. (1994) 2 Comp LJ 50 (SC) in which the observation in Amalgamated Commercial Traders (P) Ltd. v. Krishnaswami, [1965] 35 Comp. Case 456 (SC) and Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P) Ltd., [1972] 42 Comp. Cas. 125 (SC) have been paraphrased].
(vi) If the stance of the adversaries hangs in balance it is always open to the Company Court to order the Respondent Company to deposit the disputed amount. This amount may be retained by the Court and be held to the credit of the suit, if any. [see Civil Appeal No. 720 of 1999 arising out of SLP (C) No. 14096 of 1998 – M/s. Nishal Enterprises v. Apte Amalgamations Ltd., decided on February 5, 1999].
It appears to me that the following point may be added to the foregoing considerations.
(vii) Generally speaking, an admission of debt should be available and/or the defense that has been adopted should appear to the Court not to be dishonest and/or a moonshine, for proceedings to continue. If there is insufficient material in favor of the petitioners, such disputes can be properly adjudicated in a regular civil suit. It is extremely helpful to draw upon the analogy of a summary suit under Order xxxvII of the Code of Civil Procedure. If the Company Court reaches the conclusion that, had it been exercising ordinary original civil jurisdiction it would have granted unconditional leave to defend, it must dismiss the winding-up petition.
7. The focal points of the defense appears to be predicated on the afore-mentioned Minutes dated 7.5.2001. On its reading I find that there is no ambiguity in the language and it only indicates that the Company would not give any further business to the Petitioner unless there was a reduction in price. This is the only conclusion that can be drawn because of the use of the words “further business” and “further discounts”. There is also some controversy on the non-supply of the tools mentioned in the Minutes. But, in my opinion these are of little significance to the claim in the Petition, since it is not a demand contemporaneous with supplies. The construction sought to be given to these Minutes cannot be appreciated since the parties had arrived at a consensus on the amount due on the re-conciliation statement dated 27th November, 2000. It is my considered opinion that the scope of the Minutes was prospective only. This is fortified from the fact that “C” Forms for all the prior transactions had been furnished after these Minutes. In Mittal Iron Foundry (P) Ltd. v. Elektro Flame Limited , (2000) 1 Comp LJ 192 AP, the Court accepted the contention of the petitioning creditor that since the Respondent Company had delivered “C” Forms, and had not cleared the outstanding amount despite Statutory Notice it had become commercially insolvent. I am in respectful agreement with this approach.
8. What is extremely important is that no written response was made by the Company in spite of repeated letters received by it from the Petitioner in which large sums of money had been demanded. It taints the defense as dishonest and an after thought. I am also inclined to accept the contention of Learned Counsel for the Petitioner that the Respondent’s letter dated 22.2.2002 has been a pre-dated. Apart from a statement in the Rejoinder, the Petitioner had immediately respondent to this letter in terms of its letter dated 8.3.2002 in which it had not only mentioned that the letter had been wrongly dated but also that it had been received through Registered A.D. on 5th and 6th March, 2002. It had also categorically stated that – “it is clear from the dates on the envelope that the letter has been written after having received the court notice on 01.03.2002.” The sequence of events indicates that the defense has been formulated after the Petition was filed, and therefore does not attract credence.
9. Keeping all the circumstances and submissions in view, I find that no legal objection had been raised which would defeat the present petition. It has already been seen that the solvency of the Company would not be relevant in the face of a resolute refusal to pay its outstanding dues. In the present case there is a clear admission of debt in the light of the settled re-conciliation Statement dated 27th November, 2000. When subsequent transactions are taken into consideration, the amount claimed in the Petition is beyond controversy. The fact that no replies were sent to the letters of the Petitioner, and that apparently pre-dated letter had been sent to set up a defense to the petition, after its receipt on 1.3.2002, is indicative of mala fides.
10. The petition is admitted.
11. The Respondent Company is, accordingly, directed to deposit with the Register of this Court the sum of Rs. 40,24,148/- which is the principal sum due. The question of interest is left open at the present stage. This deposit should be made within four weeks from today. If this order is not complied with, citation be published in Hindustan Times, Vir Arjun and Delhi Gazette returnable on 8th of November, 2002.
12. Renotify the petition for further proceedings on 8th of November, 2002.