JUDGMENT
Srinivasan, J.
1. These two appeals arise out of a petition for winding up filed under Section 433(e) of the Companies Act. The appellant in O.S.A. No. 116 of 1987 was the respondent in Company Petition No. 87 of 1985 and the appellant in O.S.A. No. 174 of 1987 was the petitioner in the company petition. The parties will be referred to hereinafter by their rank in the company petition.
2. It is not a matter in dispute that the petitioner supplied skins of sheep and goats to the respondent from January, 1981 to July, 1982, under 17 bills marked as Exs. P 2 to P 18. There was no time limit for payment of the price of the goods nor was there any agreement to pay interest on delayed payments. It is admitted that a sum of Rs. 1,24,752-88 was due to the petitioner and it was making demands on the respondents to pay the same. It issued a notice through a lawyer on 8.12.1982 and the notice is marked as Ex. P45. In that notice, it had not only demanded payment of the principal but also the payment of interest at the rate of 18 per cent per annum. There was no reply to the notice by the respondent. Thereafter, there was correspondence between the parties. On the one hand, the petitioner was demanding payment of money due to it and on the other the respondent was repeatedly assuring the petitioner that it will settle the accounts shortly. Ultimately a telegram was sent by the petitioner on 1.11.1985 demanding payment of principal and interest. Finding that it did not produce the desired result, the petitioner filed the Company Petition as stated above for winding up the respondent company.
3. The respondent while admitting that the principal amount was due, was raising a dispute with regard to its liability to pay the interest thereon. During the pendency of the petition, the respondent was making payments as follows:
1. 7.1.1986 .... Rs. 10,000 2. 6.2.1986 .... Rs. 10,000 3. 19.2.1986 .... Rs. 30,000 4. 19.3.1986 .... Rs. 20,000 5. 2.2.1987 .... Rs. 20,000 6. 17.2.1987 .... Rs. 20,000 Finally it paid the balance due on 29.4.1987.
4. At the time when the petition was heard by the company Court, the respondent contended that the liability to pay interest was in dispute, and, therefore, it fell outside the purview of Section 433 of the Companies Act. The contention on behalf of the petitioner was that the matter of interest was also covered by the provisions of Section 433 of the Companies Act, as the liability to pay the principal amount was not in dispute and as the demand for interest had been made long prior to the filing of the petition.
5. The learned Judge accepted the contention of the petitioner and relying upon the decision of the Punjab and Haryana High Court in Stephen Chemical Ltd. v. Innosearch Ltd. (1986)60 Com. Cas. 702, held that the matter of interest fell within the scope of the company petition. With regard to the rate of interest, the learned Judge directed the respondent to pay interest at the rate of 9 per cent per annum on the principal amount and granted three months time to the respondent to pay the same. The learned Judge directed the petition to be called on 29.7.1987.
6. The petitioner has filed O.S.A. No. 174 of 1987 contending that it will be entitled to interest at the rate of 18 per cent per annum as claimed by it in the notice dt. 8.12.1982. The respondent has filed O.S.A. No. 116 of 1987 contending that it is not liable to pay any interest and, in any event, the question of liability to pay interest cannot be gone into in the proceedings for winding up.
7. Learned Counsel for the petitioner referred to the decision of the Punjab and Haryana High Court in Stephen Chemical Ltd. v. Innosearch Co. Ltd., (1986)60 Com. Cas. 702; and in Delhi Cloth and General Mills Co. v. Stephen Chemicals, (1986)60 Com. Cas. 1046. The proposition laid down in both the cases is that the question of payment of interest is a matter to be considered by the Company Court in the winding up proceedings and the creditor cannot be permitted to file a civil suit with regard to the payment of interest alone. It is useful to refer to the following passage in the judgment in Stephen Chemical Ltd. v. Innosearch Ltd., (1986)60 Com. Cas. 702.
In our opinion, where the company Judge was seized of the matter and when the liability to pay the principal debt had not been disputed by the company sought to be wound up and, in fact, paid up the debt in order to avoid winding up, the forum of the company Judge is the appropriate forum for determining as to whether the creditor was entitled to interest on amount in question or not. The basic policy of law is to avoid multiplicity of litigation. The learned Counsel for the appellant also referred us to the order of Goyal, J. rendered in C.P. No. 77 of 1983 decided on 20th July, 1984, Unisystems (P) Ltd. v. Stephen Chemical Ltd., (1985)58 Com. Cas. 875, wherein Goyal, J. had observed that where no agreement for the payment of interest existed and creditor had claimed interest, no winding up order could be passed.
With respect, if the said observations are intended to cover the cases of the present kind, then we find ourselves unable to concur In that view. The said observations may be correctly applicable to a case where winding up initially is sought by a party on the ground that certain amount by way of interest was due from the other party which the other party had failed to pay up despite demand notice and the other party raises a Bona Fide dispute as to the right of the creditor to claim interest in the absence of any agreement regarding payment of interest or any other possible ground, but the position would be entirely different where the amount alleged to be due from the company sought to be wound up included the principal amount of debt and the liability to the principal amount has been accepted before the company Judgment and the creditor is sought to be relegated to a civil remedy for getting the interest on the principal amount.
We are entirely in agreement with the proposition set out above.
8. Learned Counsel draws our attention to the provisions of Section 2(b) and Section 3(1)(b) of the Interest Act, 1978. Section 2(b) of the Interest Act defines ‘current rate of interest’ as the highest of the maximum
rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949.
9. Section 3(1)(b) provides that if the proceedings in a Court do not relate to any debt discharged by virtue of a written statement, then interest is to be awarded from the date mentioned in this regard in a written notice given by the person entitled to or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings.
10. It is argued by learned Counsel for the petitioner that the rate of interest payable on deposits by the scheduled banks is 15 per cent. We do not find any record in support of the submission made by the learned Counsel for the petitioner. To our knowledge, the maximum rate of interest payable on deposits by scheduled Banks does not exceed 12 per cent per annum. Learned Counsel also relies on Section 34, C.P.C. The relevant portion of Section 34 is found in the proviso to the Section which reads as follows:
Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction the rate of such further interest may exceed six per cent per annum but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalised banks in relation to Commercial transactions.
It is, therefore, submitted by learned Counsel for the petitioner that interest could be awarded at the rate prescribed in the Interest Act, up to the date of the filing of the petition and at the rate prescribed by the Civil Procedure Code after the date of the filing of the petition till date of payment.
11. As against this, learned Counsel for the respondent relies on the decision of the Karnataka High Court in S.L. Polymers v. Amar Formulators and Electronics, (1984) 56 Com. Cas. 77. In that case, the respondent therein had certain transactions with the petitioner company and in respect of those transactions the respondent company was due and payable to the petitioner a sum of Rs. 2,69,308-38 as on 31.3.1981. When the petition for winding up was filed on 10.9.1981, the claim was raised to Rs. 2,96,736-62. After the presentation of the petition there was an agreement between the parties in a meeting held on 10.11.1981, by which it was agreed that a sum of Rs. 3,16,072-37 should be paid by the respondent to the petitioner company by installments as mentioned in the joint memo of agreement. In terms of the joint memo, the petitioner had also agreed to withdraw the company petition. However, the memo of agreement was not acted upon strictly in terms thereof. On 12.4.1982, the respondent paid a sum of Rs. 40,000 in Court and on 2.6.1982, it had paid Rs. 15,390-64 and a further sum of Rs. 17,064-75 was paid on 18.6.1982. With the last payment mentioned, it was submitted that the entire claim against the Company had been satisfied except the interest claimed at 20 per cent though interest had been worked out at 12 per cent and paid. In that situation the Karnataka High Court made the following observation:
But all outstanding claims except the amount arising out of the difference in the rate of interest calculated is outstanding. In my view, the scope of an inquiry under Section 433 cannot extend to an enforcement of the memorandum of an agreement entered into during the pendency of the proceedings. The payment made by the respondent company is clearly indicative that the respondent company is commercially solvent. Therefore, an exercise of the jurisdiction under Section 433 of the Act, admitting the parties merely because the rate of interest agreed to between the parties in regard to the transactions is disputed, would be unjust.
The Karnataka High Court has not laid down any proposition of law that whenever a dispute is raised by the respondent as regards payment of interest, that would fall outside the scope of Section 433. On the facts of that case, the Court found that the petitioner in the company petition was trying to enforce a memorandum of agreement which was entered into after the filing of the petition. That could not be done.
12. The decision in the above case will not help the respondent herein to contend that the claim for interest cannot be made in these proceedings.
13. Learned Counsel for the respondents relied upon a decision of the Supreme Court in Union of India v. Watkins and Co., . In that case, it was held that interest may be awarded for the period prior to the date of the institution of the suit when there is an agreement for the payment of interest at fixed rate or when interest is payable by the usage of trade having the force of law or under the provisions of any substantive law as for instance, under Section 80 of the Negotiable Instruments Act, 1981, when no rate of interest is specified in the promissory note or bill of exchange, and the Court may award interest at the rate of 6 per cent per annum.
14. The above decision was rendered long prior to the amendment of the Civil Procedure Code in 1976. That case does not help the respondents to contend that it has no liability to pay interest. If at all, it could rely on that decision only for the purpose of contending that the rate of interest should be fixed at 6 per cent. In view of the law as it then existed, the Supreme Court held that the rate of interest should be 6 per cent. The law has since changed.
15. Learned Counsel for the respondents has cited another decision of the Supreme Court in Hirachand Kothari (Dead) Through L. Rs. v. State of Rajasthan 98 L.W. 686 : A.I.R. 1985 S.C.998. In that case the Supreme Court had to consider the powers of Court to award interest on equitable grounds on the compensation awarded. The Court held that interest should be awarded on the compensation granted from the date of dispossession till the date of judgment of the trial Court at 6 per cent and thereafter at 9 per cent till realisation. We do not see how this decision will help the respondent.
16. In this case, admittedly the amount due was out of the transactions of sale of goods. Goods were supplied to the respondents and price was due from the respondent. Under Section 62 of the Sale of Goods Act the Court is empowered to award interest at such rate as it thinks fit on the amount of the price to the seller from the date of the tender of the goods or from the date on which the price was payable.
17. Apart from the provisions of the Sale of Goods Act, the Interest Act and the Civil procedure Code provided for payment of interest. In this case, it cannot be said that there is a Bona Fide dispute with regard to payment of interest. The liability to pay the principal was never in dispute. The claim for interest was made for the first time on 8.12.1982 by a lawyer’s notice. Admittedly, the respondent did not send any reply to that notice. Thereafter, the petitioner has been repeatedly making demands for interest as well as the principal by several letters. In all the replies sent by the respondent, it had been assuring the petitioner that it would settle the claim. It had never demurred that it was not liable to pay interest on the amount due. For the first time, the respondent raised the contention in the proceedings before the Company Court that it was not liable to pay interest if a dispute is raised just for the purpose of evading payment and delaying the proceedings, it cannot be considered to be a Bona Fide dispute. Unless there is a Bona Fide dispute with regard to the liability to pay the amount, the company Court was entitled to consider the matter under Section 433. In that view, we hold that the conclusion of the learned Judge that the respondent is liable to pay interest and that is a matter which has to be gone into in these proceedings is correct.
18. With regard to the rate of interest, we think that it is just and equitable in this case to award 12 per cent per annum. The petitioner will be entitled to interest at the uniform rate of 12 per cent per annum from 8.12.1982 till the date of payment.
19. It is contended by learned Counsel for the petitioner that the rate of interest should be fixed at 18 per cent per annum and it should be payable from the date which was mentioned in the notice dated 8.12.1982, issued by its lawyer to the respondent. As we have pointed out already, there is no material on record to show that the prevailing rate of interest payable on bank deposits is 18 per cent per annum. While the Interest Act refers to the interest payable on deposits in Scheduled Banks, the Civil Procedure Code refers to the rate of interest charged by banks on loans advanced. This is not a proceeding for recovery of money as such. This is only a proceeding for winding-up the Company. In the exercise of our equitable jurisdiction, we are directing the respondent company to pay to the petitioner the amount due with interest thereon in order to avoid winding up of the company. Hence we consider that the interests of justice require to fix the rate of interest at 12 per cent per annum as stated above.
20. Learned Counsel for the respondent contended that the Court should not fix more than six per cent. He relied upon the decision of the Supreme Court in Hirachand Kothari (Dead) Through L. Rs. v. State of Rajasthan, 98 L.W. 686 : A.I.R. 1985 S.C. 998. We have already referred to that decision and we find that decision does not lay down any principle of law that interest granted by Court should not exceed six per cent per annum. Hence, we reject this contention advanced on behalf of the respondent.
21. The payments made by the respondent on the various dates will be given credit on the respective dates and for the balance due on those dates the interest will be calculated. The parties are directed to file a calculation memo before the Company Court. The respondent will have four months’ time from this date to pay the amount. It shall pay the entire amount on or before the expiry of four months. The Company petition will be called before the company Court on 13.6.1988.
22. O.S.A. No. 174 of 1987 is allowed to the extent indicated above. O.S.A. No. 116 of 1987 is dismissed. There will be no order as to costs.