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Mgn
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.73 OF 2010
IN
COMPANY APPLICATION NO.723 OF 2009
WITH
COMPANY APPLICATION (L) NO.1280 OF 2009
IN
CONTEMPT PETITION NO.1 OF 2007
IN
COMPANY PETITION NO.298 OF 1997
M/s.Corporate Couriers Ltd. & Ors..)..APPELLANTS
Versus
M/s.Wall Street Finance Ltd. )...RESPONDENT
Mr. Vinayak Puranik, for the Appellant.
Mr.P.K. Samdani, Senior Counsel i/b. Mr. S.R. Saudagar, for the respondent
CORAM : F.I. REBELLO & R.V.MORE, JJ.
DATE : 8TH JUNE, 2010
ORAL JUDGMENT (PER FERDINO I. REBELLO J.)
The Appellants were the Respondents, in a Company Petition filed by the
Respondent herein, who were the original Petitioners. It was the case of the
Petitioners that the Company owed to them a sum of Rs.77,50,800/-. Inspite of the
statutory notice the amount was not paid and, therefore, the company stood justly
indebted, being unable to pay its debts. The Company Petition No.298 of 1997 came
to be filed. The Company Petition was admitted on 12th April, 1999, but not
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advertised.
2. Before the petition could be advertised, consent terms came to be filed
between the Company and the Applicant on 8th November, 1999. The Company
admitted and acknowledged its liability to pay to the applicant a sum of Rs.
77,50,800/-. Clause 4 of the consent terms reads as under:-
“In the event of the Respondents committing default in payment of any two
consecutive installments on the date as agreed, the Official Liquidator stands
appointed and will take forthwith possession of the companies properties
registered office, books of account, book debts and bank accounts as the
Petition is already admitted by the order dated 12/4/99 passed by His
Lordship Mr. Justice S.S. Nijjar in the above matter. The Petitioner shall be
entitled to the entire amount of Rs.77,50,800/- as mentioned in Clause(2)
herein above after deducting the amount paid if any by the Respondents with
further interest on the balance amount @ 24% p.a., and/or realization. The
petitioners shall thereupon advertise the notice of winding up of the
company in the news paper (i) Bombay Samachar, Bombay (ii) Free Press
Journal, Bombay and (iii) Maharashtra Government Gazette.”
Thus Clause 4 itself provided that in the event the company committed
default in payment of any two consecutive installments on the date as agreed, the
Official Liquidator stands appointed and will take forthwith possession of the
company’s properties, etc., and the petitioner would advertise the notice of winding
up as set out in the clause.
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3. It is the case of the appellants herein that there was breach on the part of the
company in complying with the consent terms and an amount of Rs.33,93,501/- was
still due and payable. A Memorandum of Understanding (MoU) was entered into on
21st August, 2005 under which it was recorded that the amount of Rs.33,93,501/- was
still due and payable. The Appellants, however, agreed to settle the matter for a sum
of Rs.15.00 lacs. The company gave a cheque in the sum of Rs.15.00 lacs in terms of
the MoU. The cheque when deposited was dishonoured and the respondents were
constrained to file Criminal Complaint against the Appellants.
4. The learned Company Judge after considering all these aspects and
considering Clause 4 of the consent terms held that Company Application (Lodging)
No.1280 of 2009 has been taken out for restoration of the Company Petition and that
it was evident on the construction of Clause 4 of the consent terms, that if there were
two consecutive defaults the Official Liquidator shall stand appointed and the
Company Petition was to be advertised. Moreover, under Clause 7 the Company had
agreed not to dispose of its properties until the entire payment was made under the
consent terms. The Court noted that the order of 8 th July, 1999 records that the
petition was disposed of in terms of the consent terms. Considering all these
provisions the Court made the Company Application absolute in terms of prayer
clause (a) and accordingly restored the Company Petition. The Court also considered
the Company Application No.723 of 2009 which was for appointment of the
provisional Liquidator and considering Clause 4 made the Company Application No.
723 of 2009 absolute in terms of prayer (a). It is this order in Company Application
(Lodging) No.1280 of 2009 which is the subject matter of the present Appeal.
5. On behalf of the Appellants it is submitted that once the Company Petition
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was disposed of by consent terms the question of the Company being indebted would
not arise and consequently no application for restoration of the Company Petition
would lie. A Company Petition is not a means to recover money and such an
application would not be maintainable. It is further submitted that after the consent
terms there was a MoU between the Appellants and Respondents whereby the
Respondents inter alia agreed to accept from the Appellant a sum of Rs.15.00 lacs as
full and final settlement. It is, therefore, submitted that the cause of action no longer
survives and in these circumstances the Company Court could not have allowed the
application for restoration of the Company Petition and consequently for
appointment of Liquidator.
In support of his contention learned Counsel for the Appellants has firstly
relied on the Judgment of a single Judge of the Karnataka High Court in the case of
Indo Swiss Jewels Ltd. vs. HMT Watches Ltd. I.L.R. 2010 Kar.215. In that case
what the learned single Judge of the Karnatka High Court amongst others was
considering was the effect of a suit filed and which was pending and independently
maintenance of the Company Petition. The learned Judge held that pendency of a
suit is not a bar to the maintainability of a winding up petition. However, the
decision in the suit is a matter to be taken into consideration before an order of
winding can be made in the Company Petition since filing of the suit for recovery of
money due from the company in which adjudication takes place after recording of
evidence would also be the very basis of filing of the Petition seeking winding upon
on account of inability to pay debt of a just and reason. In our opinion, this judgment
would not be applicable as in the instant case by the consent terms the company itself
admitted the liability to the petitioner, the appellant herein.
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The learned Judge also noted that the petition for winding up with a view to
enforcing payment of disputed debt is an abuse of the process of the Court and it
cannot be gainsaid that an order admitting a winding up petition and resultant order
for inviting claims from the respective parties by public notice, is in many cases from
commercial point of view, the business point of view, from the marketability point of
view and also taking into consideration the interest of the work force not less
injurious than an order of winding up. In the instant case, however, we are clearly of
the opinion that the principle would not apply as the company petition had already
been admitted.
9.
Strong reliance was placed on the judgment of a learned single Judge of the
Gujarat High Court in the case of Gujarat State Financial Services Ltd. vs.
Amar Polyester Ltd., 1998 (1) G.L.R. 734. In that case also consent terms were
filed and there was a breach. Amongst others the question before the Court, was
whether in a case where consent terms were filed and there was a breach of payment
of instalment and considering the clause for revival, whether the Company Petition
could be restored. In that case the company was also before the B.I.F.R.
The learned Judge held that when a creditor enters into an agreement with the
debtor and accepts to receive its debt in installments, then that conduct of creditor
itself shows that the claim of the creditor that the debtor is not in a position to satisfy
its debts is not correct and that the conduct of the debtor may amount to fresh cause
of action. The learned Judge further observed that the foundation for the
proceedings under the Companies Act is the inability of debtor to pay its debt.
Therefore, when the creditor by his own conduct accepts the position that the debtor
will be in a position to satisfy its debt by entering into consent terms by his own
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conduct, shows that no cause of action survives. The moment the creditor enters
into consent terms there is nothing to proceed within the Company Petition. In the
circumstances the Court held that merely because there is a term in the consent terms
giving liberty to revive the proceedings it will not change the law and will not give
right to the creditor to ask the Court to revive the proceeding.
It will not be possible for us to accept the proposition of law as set out by the
learned Judge of the Gujarat High Court. No doubt the consent terms are an
agreement between the parties on which is superimposed the seal of the Court and to
that extent it is not a judgment of the Court. The Agreement, however, is not one
sided. Both parties mutually agreed that the petition will not be proceeded with as
the company is given an opportunity to pay its debts. The Creditor accepts the offer
of the company on the condition that if the installments are not paid within time the
proceedings would continue. In other words both parties are aware that the
proceedings are not closed and that the company petition would revive in the event
there is a default in terms of the consent terms. In our opinion, the company cannot
take advantage of its own wrong, more so as in this case where the creditor went out
of its way even to reduce its claim. A cheque which was issued by the company was
dishonoured, thus clearly indicating the company’s inability to pay. In our opinion,
in such a case, there is no change of cause of action. The cause of action is the cause
based upon which the Company Petition was filed and the company petition
admitted. Only further proceedings were not taken in view of the consent terms.
Once a company petition is admitted and consent terms were filed, on failure to
comply with the consent terms the company petition has to be proceeded with.
1o. Reliance is also placed on the judgment of the Full Bench of the Allahabad
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High Court in the case of Mohiuddin vs. Mt. Kashmiro Bibi, AIR 1933 Allahabad
252. The learned Full Bench was considering an issue arising in a proceeding in
execution and the effect of an agreement which contains a penal clause and whether
that can be gone into by the Executing Court. The learned Counsel sought to contend
that the clause of default is penal clause and in these circumstances that clause shall
not be given effect to. In our opinion, it is not possible to apply that proposition to
the Company Petition. The clause for revival of the petition cannot be said to be
penal clause. In that context the judgment in Mohiuddin (supra) is clearly
distinguishable.
11.
On the facts and circumstances of the case, we are clearly of the opinion that
the learned Judge was within jurisdiction in restoring the company petition and
appointing Official Liquidator.
12. In the light of that we find no merit in this Appeal which is accordingly
dismissed but with no order as to costs.
( R.V.MORE, J.) (F. I. REBELLO, J.)
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