JUDGMENT
Sunil Ambwani, J.
1. Both these company petitions have been filed under Sections 433, 434, 439 of the Companies Act, 1956, with a prayer to wind up Khaitan Overseas and Finance Ltd. (hereinafter called as the company) under the directions of the court and to appoint any fit or proper person as liquidator of the company with authority to take charge over the assets of the company in accordance with law, with all powers under the Companies Act, 1956, and for other reliefs.
2. The company petitions were presented on 27.8.1999. On 23.9.1999, notice was directed to be issued to the company to show cause as to why the petition be not admitted and advertised, fixing the matter on 3.11.1999 by which date the company was required to give its reply. A supplementary affidavit of Sri Sushil Kumar Dhandhania, Chairman-cum-director, Dhandhania Brothers (P) Ltd., 4, Middleton Street, Calcutta, was filed, deposing that statutory notice under Section 434 of the Companies Act was sent by registered post to the company at its registered office. It was received by the company ; but no reply was received nor has the debt been paid by the company. In response to the notice, an application was filed on 10.4.2000 by Sri R.P. Agarwal, Advocate, on 11.9.2002, on behalf of Narendra Kumar Jha, Chief Manager (Legal) of the company (sic). The applicant company filed an amendment application dated 2.5.2001 to amend the company petition. These amendments were allowed on 30.7.2001. Preliminary objections were raised in the counter affidavit of Sri Narendra Kumar Jha to the effect that the company petition was not supported by a proper affidavit and has not been filed by a competent person. A third objection was taken to the effect that the loan in respect of which petition is filed is time barred. The first and second preliminary objections were directed and overruled by order dated 13.12.2001. In respect of the third objection, the order dated 13.12.2001 recorded a statement of Sri R.P. Agarwal that after the amendment of the company petition, and the documents filed along with amendment application when the company petition was filed, the loan cannot be said to be time barred, and as such, he does not press the objection in this regard. In the concluding portion of the order dated 13.12.2001, it was observed that the liability has not been denied, and that the objection that the debt is time barred has not been pressed.
3. After the disposal of preliminary objections, company petitions were admitted and were directed to be advertised in accordance with Rule 24 of the Companies (Court) Rules, 1959. The advertisement was carried out, both in Official Gazette of Uttar Pradesh, dated 12.10.2002, and in the newspapers, namely,–Times of India published in English from Lucknow, dated 2 January, 2002, and the daily newspaper Anj published from Allahabad of the same date. An affidavit of Sri Amar Bahadur Singh, Pairokar of Dhandhania Brothers Ltd., was filed, deposing that the advertisement as directed by this court has been carried out. Counter and supplementary rejoinder affidavits have been filed. No other person has filed any objection or reply.
4. The facts of the case are that in Company Petition No. 77 of 1999, the applicant company, advanced a loan of Rs. 25 lakhs to the company. The loan was taken on 28.10.1993 against pledge of shares. The debt was still due with interest and TDS and a total amount of Rs. 43,15,818 is due to be paid by the company to the applicant company. A notice of demand dated 10.3.1999 was sent to the registered office of the company at Somdutt Plaza (22 floor), the Mall Kanpur, but in spite of service of the statutory notice, the debt was not paid. The loan was given to Khaitan Hostombe Spinels Ltd., 234/3-A, AJC, Bose Road, Calcutta, which merged in Khaitan Overseas and Finance Ltd. In the order dated 27.5.1997 of this court in Company Petition No. 44 of 1996 connected with Company Application No. 1996, by which the companies merged, a statement was made by the company that the interest of creditors would remain in tact and was fully safeguarded by the assets of the transferee company. The loan was confirmed in writing on 7.2.1995 vide confirmation letter enclosed as Annexure SA-1 to the petition. Cheques dated 20.4.1996 and 30.4.1996 were issued towards the payment of interest and capital amount and the entries was recorded in 31.3.1997 annexed as Annexure SA 2 to the affidavit. On 2.10.1997 by Challan No. 2 drawn on Punjab National Bank, the company deposited Rs. 91,096 towards TDS in the Income-tax Department. The debt was acknowledged vide letter dated 14.5.1997, 28.9.1997, 13.12.1997 and 14.10.1998.
5. In the supplementary counter affidavit, it is stated in para 4 that the claim of the petitioner has become time barred when the petition was filed. Issuance of cheques dated 14.12.1994 and 15.3.1995 is admitted ; however, the letter dated 4.2.1994 is denied as false and fabricated. The company has also denied the letters dated 22.3.1995 and 18.4.1995 and the confirmation of balance of loan on 31.3.1997. It is stated on behalf of the company that the confirmation of balance has not been signed by any authorised person of company and that these documents were forged and manipulated with a view to get over the limitation. Sri Ajay Khaitan during his tenure as managing director, Sri S.N. Mukherjee, Executive Director (Finance), and Sri S.R. Ramesh, AVP (Finance) were authorised signatories. It is admitted by the respondents that the cheque dated 15.3.1995 for Rs. 1,44,375 was signed by Sri S.N. Mukherjee and S.R. Ramesh, cheque dated 15.3.1995 for Rs. 25 lakh was signed by Sri Ajay Khaitan and the TDS certificate dated 4.10.1997 was signed by Sri D.K. Gupta. No other documents have been signed by any other authorised signatories. Issuance of the cheques dated 30.4.1996, 31.3.1997, however, has not been admitted and has been alleged as forged and manipulated. In para 5.3 in reply to para 11(c) — it is admitted that the respondent company has deposited TDS on 4.10.1997. It was deducted from the interest payments of the petitioner during the period 1.4.1995 to 31.3.1996 which was statutory liability under the Income-tax Act and not on behalf of the petitioner. The letters dated 14.5.1997 and 13.12.1997 with regard to the liability have been replied to as personal letters written by Sri Ajay Khaitan, and not on behalf of the respondent company. It is contended that these letters cannot be treated as acknowledgement letters by the respondents. Sri Ajay Khaitan ceased to be managing director with effect from 2.9.1997, and resigned on 31.7.1998, and thereafter, did not hold any position in the company. In the supplementary rejoinder affidavit, it has been reiterated that the documents are valid. The loan acknowledgment and the cheques were signed by the duly authorised signatory of the respondent company and the acknowledgement letter dated 13.12.1997 and 14.5.1997 were not personal letters. They were letters written by director of the company acknowledging the loan.
6. In Company Petition No. 78 of 1999, it is stated that a loan of Rs. .25 lakhs was advanced to Khaitan Hostombe Spinels Ltd. on 28.10.1993. The company has paid interest and TDS on 4.2.1994, and confirmed payment of Rs. 25 lakhs on 7.2.1995. The confirmation has been annexed as Annexure SA-1. The cheques dated 20.4.1996 and 30.4.1996 were issued towards the payment of interest due on principal amount and that is entered in the confirmation letter dated 31.3.1997. The document is annexed as Annexure SA-2 to the affidavit. On 2.10.1997, by Challan No. 2 drawn on Punjab National Bank, the company deposited Rs. 91,096 towards TDS in the Income-tax Department. The Challan Form. No. 16 dated 2.10.1997 has been filed on record. The debtor company acknowledged debts by letters dated 14.5.1997, 29.9.1997, 13.12.1997, and 14.10.1998. A notice of demand was sent by the applicant company by registered post which was received by the company, but the amount has not been paid.
7. In the counter affidavit of Sri N.K. Jha, it is stated that there is no legally enforceable debt due against petitioner and that the alleged debt is time barred. The notice was received at the registered office. In the supplementary counter affidavit filed to be amended writ petition, the receipt of loan of Rs. 25 lakhs on 28.10.1993 is admitted. The interest payment made on 7.2.1994 and 14.12.1994, issuance of cheque of Rs. 25 lakhs and Rs. 1,44,375 and dishonour of cheque has not been disputed. The letter, dated 18.4.1995, is also admitted. However, the letter, dated 22.3.1995, is incorrect as the signature of Sri S.R. Ramesh has been forged. The company has denied confirmation balance of loan dated 7.2.1995, 31.3.1996 and 31.3.1997. The rest of averments are the same as in the supplementary counter affidavit of Company Petition No. 77 of 1999. The TDS deposit on 4.10.1997 in Punjab National Bank has been admitted. It is, however, stated that it was deposited in the Punjab National Bank and not in Income-tax Department. The TDS was deducted from interest payments made to petitioner during the period 1.4.1995 to 31.3.1996, and was paid as statutory liability under the Income-tax Act. It is denied that the letter, dated 14.10.1998, has been sent on behalf of the company.
8. It is stated in para 4 of the company petition that as on 30.4.1996 as authorised capital of the company was Rs. 100 crores of which Rs. 1 crore is subscribed and paid up, by subscription of 10 lakh equity shares of 10 each fully paid up. The company is engaged in the production, sale and export of magnesia, dairy and merchant business. The company has not cared to file its audited balance sheets and has not given any reply with regard to its financial position. There is no averment either in the counter affidavit or in the supplementary counter affidavit with regard to just and equitable clause under Section 433 of the Companies Act.
9. Sri R.P. Agarwal, learned counsel appearing for the company, has raised preliminary objection with regard to the limitation and the fact that the loan is time barred, as a preliminary objection to the maintainability of the company petition. As stated above, Sri R.P. Agarwal made a statement on 21.10.2001, that after the amendment of the company petition, the documents filed along with the amendment application, the loan could not be said to be time barred, when the company petition was filed, and as such, he is not pressing the objection in this regard. The objection with regard to the fact that the debt is time barred, therefore, was clearly given up by the petitioner and this fact is so recorded in the order, dated 13.12.2001. The company has neither tried to dispute this statement, nor to clarify, nor explain the same.
10. Sri B.D. Madhyan, learned counsel for applicant company has relied upon the decision of Karnataka High Court, in State Bank of India v. Hegde and Golay Ltd. (1987) 62 Comp Cas 239 (Karn), and a decision of Delhi High Court in Rishi Pal Gupta v S.J. Knitting and Finishing Mills (P) Ltd. (1998) 4 Comp LJ 519 (Del). In both these decisions, it was held that if the debt is acknowledged in the balance sheet the company petition cannot be treated as time barred. In the present case, the company petition [was] filed on 27.8.1999. The confirmation of loan, dated 31.3.1997, has been filed on record and the company has admitted the deposit of TDS on 2.10.1997 by challan drawn in the Punjab National Bank. These challans in prescribed forms signed by authorised signatory of the company, are certificates of deduction of tax on interest at source under Section 306 of the Income-tax Act, 1966, for the period 1.4.1995 to 31.3.1996. The deposit of this interest is a proof of the fact that the loan is acknowledged in the records of the company and is admitted to the company. With the admission of these documents, which is within the period of three years of filing the company petition, the recovery of loan can be said to be barred by law of limitation.
11. The remedy of recovery of money through civil suit is distinct from winding up of company for non-payment of debt under Section 434 of the Companies Act. Winding up order is not only beneficial to applicant company, but to all shareholders. The purpose of filing suit for recovery and winding up petition are distinct, and thus even where a civil suit is filed, there is no bar for the creditors to file a petition for winding up of the defaulting company.
12. In Madhusudan Goverdhandas and Co. v. Madhu Woollen Industries (P) Ltd. (1972) 42 Comp Cas 125 (SC), the Supreme Court held that where the debt is undisputed, the court will not enter upon a defence that the company has the ability to pay the debt; but the company has chosen not to pay the debt on that particular dale. Where the amount of debt is either disputed or there is a bona fide defence, the court may refuse to wind up the company. The defence, therefore, should be in good faith and one of substance, and, secondly, such defence should succeed in law by prima facie facts on which such defence depends.
13. The court may refuse to wind up the company if it is just and equitable to do so. For this purposes, the company must disclose its financial position and take the said defence which may disentitle the petitioner company to seek relief to winding up the company. In the present case, no such plea has been taken nor any such defence has been set up. There are absolutely no pleadings and no arguments have been advanced in defence to winding up. The company admittedly, took loan and has not paid the amount. According to pleadings, which have been established on record, the company is liable to pay over Rs. 1 crore taking into account the principal debt and interest in both the petitions.
14. On the aforesaid reasons, I find that the company has admitted the debt and has failed to pay the same to petitioner. The debt was not barred by limitation, when the petitions were filed. No objection or defence has been set up as to why the company has preferred not to pay the debt. The company has also not raised any objection on which the court may find that it is not just and equitable to wind up company.
15. In the result, both company petitions are allowed. The company, namely, Khaitan Overseas and Finance Ltd., having its office at Somdutt Plaza, 11 floor, The Mall, Kanpur, is ordered to be wound up. The Official Liquidator is appointed as Liquidator of the company. He shall proceed to liquidate the company in accordance with law and submit periodical reports to court.