ORDER
Swatanter Kumar, J.
1. Bharti Telecom Limited has filed this petition under section 433, 434 and 439 of the Companies Act (hereinafter referred to as “the Act”), praying that Altos India Limited (hereinafter referred to as “the respondent-company”), be ordered to be wound up.
2. In this petition it is averred that the respondent-company was incorporated on September 25, 1982, under the name of Altos India Pvt. Limited. Its name was subsequently changed to Altos India Limited and a fresh certificate of incorporation was issued to this company on June 16, 1983. The respondent-company is stated to have approached the petitioner-company to advance a sum of Rs. 1 crore as intercorporate deposit for a period of 90 days and agreed to pay interest at the rate of 27 per cent. per annum for which different documents including demand promissory note, stamped receipt and security by way of deposit share of the company were executed by and on behalf of the respondent-company. The terms and conditions as stated in the letter dated August 12, 1996, were accepted between the parties and thereupon the petitioner company released a sum of Rs. 1 crore, vide cheque No. 441977, which was duly encashed. The sum of Rs. 1 crore was released to the respondent-company by the aforestated cheque by Bharti Tele Ventures Limited, a subsidiary company of the petitioner-company. The respondent-company is stated to have further approached the petitioner-company with a request that the said company having decided to issue 20 per cent. redeemable non-convertible preferential shares carrying a dividend of 20 per cent. per annum and maturity date being March 31, 1997, had requested for conversion of inter-corporate deposit of Rs. 1 crore advanced on August 14, 1996, as subscription amount towards the issue of 10 lakhs, 20 per cent. redeemable non-convertible preferential shares. Based on this request the petitioner-company further issued a cheque of Rs. 1 crore bearing No. 441979, dated August 20, 1996, as subscription amount on the aforestated basis. In this manner, the respondent-company had accepted the financial benefits to the extent of Rs. 2 crores from the petitioner-company.
3. In furtherance of the agreement between the parties the respondent company had issued post-dated cheques for repayment of the amounts and it also issued cheques bearing No. 500 992, dated August 20, 1996, for a sum of Rs. 61,177, towards interest for seven days on intercorporate deposit. The total liability was accepted by the respondent-company vide its letter dated August 20, 1996, the copy of which has been placed on record as annexure P-9. Further, vide letter dated March 31, 1997, the respondent-company wrote a letter to the petitioner-company calling upon them not to present the two cheques given earlier, i.e., one for Rs. 2 crores and the other for Rs. 18,70,578 and requested that they be not presented till April 30, 1997, as the respondent-company was in serious financial problem. A copy of this letter has been placed on record as annexure P-12. These very cheques were dishonoured on presentation and the petitioner-company filed proceedings under section 138 of the Negotiable Instruments Act, 1881, which are stated to be pending before the court of competent jurisdiction. As the cheques were dishonoured and no payment was forthcoming from the respondent-company, the petitioner-company issued a notice under section 433 of the Companies Act on May 31, 1997, claiming a sum of Rs. 2,18,17,578, copy whereof is placed on record as annexure P-15. This notice was received by the respondent-company but no reply was sent compelling the petitioner company to file Company Petition No. 103 of 1997. C.P. No. 103 of 1997 was disposed of by this court, vide order dated October 24, 1997, which reads as :
“C.A. No. 427 of 1997 in C.P. No. 103 of 1997.
Present : Mr. P. S. Patwalia, advocate.
Mr. Arvind Kashyap, advocate.
This is an application filed by the petitioner seeking permission to withdraw the company petition with liberty to file one on the same cause of action. Learned counsel for the respondent has no objection if the petition is allowed to withdraw.
In view of the stand taken by the counsel for the respondent as well as the fact that the errors stated to have been occurred in filing of the company petition are mere technical in nature C.M. is allowed.
24-10-1997
(Sd.)
Swatanter Kumar
Judge.
Present : Mr. P. S. Patwalia, advocate.
Mr. Arvind Kashyap, advocate.
In view of the order passed in C.A. No. 427 of 1997, this petition is dismissed as withdrawn.
24-10-1997
(Sd.)
Swatanter Kumar
Judge.”
4. Consequently, the present winding up petition was filed. Notice of this petition was issued to the respondents, vide order dated November 21, 1997. The respondents were served and they put in appearance on January 29, 1998. The respondents were granted time to file reply within one week which was not filed. The matter was adjourned to February 13, 1998. Vide order dated February 20, 1998, it was mentioned that there is a likelihood of the parties settling the matter amicably and as such the matter was adjourned to March 6, 1998. Thus, there was no question of filing any reply nor request for filing of a reply was ever made after January 29, 1998, as liability was clearly admitted thereafter. Learned counsel appearing for the respondent-company submitted that the matter practically has been settled and it is only the question of instalments and the period in which such instalments has to be made that remains to be settled. As such the matter was adjourned to March 20, 1998. Adjournment was again sought and the matter was fixed on April 3, 1998. The parties intended to discuss the matter and consider the possibility of payment to the petitioner-company and as such the matter was adjourned to April 24, 1998, vide order dated April 3, 1998.
5. A note was filed on behalf of the respondent-company in court on that date. The proposed schedule of payment of the amount due to the petitioner-company was put forward by the respondent-company and it reads as under :
“Proposed schedule of payment in the matter of Bharti Telecom Limited v. Altos India Limited, pending in High Court, Chandigarh.
1. Principal amount – 2,18,70,578. The payment of the principal amount is proposed to be made in 16 quarterly instalments commencing from the quarter of July-September, 1998, and ending on the quarter of April-June, 2002, with a minimum payment of 25 per cent. of the principal amount every year (i.e., on or before June, 1999, June, 2000, June, 2001, and June, 2002).
2. Simple interest at 12 per cent. accrued on the diminishing Value of principal amount till the payment of principal amount in full shall be paid within one year from the date of last payment on account of the principal amount.”
6. Though it was not acceptable to learned counsel appearing for the petitioner-company but still the matter was adjourned as aforestated. On April 24, 1998, the respondent-company while admitting the liability towards the petitioner-company attempted to paint a very fascinating picture in regard to the mode of clearing his liability, as such at this juncture it may be relevant to reproduce the entire order passed on April 24, 1998, which reads as
“Learned counsel appearing for the respondent-company submits that there is no dispute to the liability raised in this winding up petition. He further submits that because of financial crunch which is faced by the company, the company bona fide and genuinely seeks further time to discharge its liability. May be the respondents have not disputed the liability but the necessary result thereof is not why a company should be wound up forthwith.
Keeping in view the peculiar facts and circumstances of this case the court would like to grant time to the respondents to pay their liability, if they so wish. There is no dispute that it is a growing unit and has three factories and a lot of people are dependent for their livelihood on this company. But, equally true is that this cannot be raised as a universal defence to a petition for winding up.
In the interest of justice this matter is directed to be listed on May 8, 1998, on which date the authorised signatory of the respondent-company shall be present in court with a bank draft for Rs. ten lakhs at least, may be more and they shall file an affidavit in court as to the mode of repayment of the liability without varying the terms of contract between the parties. Order Dasti.”
7. In order to establish its bona fides and to press upon the court to avoid the winding up order on these dates, the respondent-company took further time to produce in court a sum of Rs. 10 lakhs, as noticed in the order of April 24, 1998. This time as the adjournment prayed was granted, the matter was listed on May 28, 1998.
8. On this date the respondent company took a somersault. The bona fides of the respondent-company were found not only lacking in all respects but to the court it appears that all this time was being gained to achieve such ends which would frustrate the proceedings before this court. On May 28, 1998, there was a complete silence in regard to the steps taken by the respondent-company in furtherance to the order dated April 24, 1998. Complete silence was observed in regard to the cause for not tendering in court even the sum of Rs. 10 lakhs for which the time was sought from the court by a definite request on behalf of the respondent-company. All that was stated on behalf of the respondent-company is that the court should suspend the proceedings in view of the letter produced by learned counsel for the respondent in court. On May 28, 1998, arguments were heard and order was reserved.
9. At the entire controversy now revolves as to whether this court is bound to suspend the proceedings in face of the letter dated May 26, 1998, stated to have been written to the Secretary Board for Industrial and Financial Reconstruction, Tolstoy Marg, New Delhi, it will be more appropriate to reproduce the entire letter, which reads as :
“Altos India Limited,
H 312, Okhla Industrial Area,
Phase I, New Delhi-11O 020.
New Delhi,
May 26, 1998.
To
The Secretary,
Board for Industrial and Financial Reconstruction,
Jawahar Vyapar Bhawan,
No. 1, Tolstoy Marg,
New Delhi-110 001.
Dear Sir,
Sub : Filing of Form A – Altos India Limited.
We are enclosing herewith six sets of Form A along with all the annexures as required under section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985.
Kindly acknowledge receipt of the said Form.
Thanking you.
Yours faithfully,
for ALTOS INDIA LIMITED,
(Sd.) Dadan Bhai,
Managing Director.
Encl. : Form A (six sets)
Power of attorney.
Seal : (Sd.)
27-5-1998.
B.I.F.R.
Received subject to verification that the reference is complete in ail respects.”
10. In order to appreciate this contention it needs to be reiterated that the present case is not one where the respondent-company is disputing its liability. The debt is admitted. It was never contested either in the previous company petition or in reply to the notice served upon the respondent-company under section 433 of the Companies Act and even in the present company petition. During the course of hearing on various dates it was only the repayment schedule and the dues of the petitioner-company and the manner in which the respondent-company was proposing to generate funds to repay the debts which was subject matter of discussion. Keeping in view the larger interest of the company, the court had been granting time to the respondent-company to pay amounts and to show its bona fides in that regard but the above attitude of the company clearly shows that the time sought for all this period was primarily to frustrate the proceedings before this court. On April 3, 1998, learned counsel appearing for the petitioner had expressed his serious doubts about the intention of the respondent-company to repay the amount and the bone fides of the proposals which were being put forward before the court. However, in the interest of justice still another opportunity was granted to discuss the matters, the result of which is apparent from the afore-narrated facts.
11. In view of the recent pronouncement by the Hon’ble apex court in the case of Real Value Appliances Ltd. v. Canara Bank [1998] 93 Comp Cas 26; [1998] 3 JT SC 715, such controversies stand fully settled and do not leave much of scope for interpretation on diverse submissions. In this case, the Supreme Court held that the stage of enquiry as contemplated under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, begins or is reached when it is registered. Further, the registration of the reference is after scrutiny as it is mandatory for the BIFR to conduct an enquiry. Though in this case, the court took the view that on registration other proceedings must be suspended, the court noticed the date on which the company made a reference, i.e., July 17, 1997, and the date of the registration of such reference which was on July 24, 1997, as Case No. 97 of 1997. The court held that on or after July 24, 1997, the proceedings before the court ought to be suspended and also deprecated the attitude of the company making incorrect statements, to avoid orders adverse to the company in proceedings. It will be appropriate to refer to the following observations of the Hon’ble Supreme Court of India, which would have a direct bearing on the matter in this petition (page 37) :
“Therefore, in our view, the High Court of Allahabad in Industrial Finance Corporation of India v. Maharashtra Steels Ltd. [1990] 67 Comp Cas 412, the High Court of Andhra Pradesh in Sponge Iron India Ltd. v. Neelima Steels Ltd. [1990] 68 Comp Cas 201, the High Court of Himachal Pradesh in Orissa Sponge Iron Ltd. v. Rishab Ispat Ltd. [1993] 78 Comp Cas 264 are right in rejecting such a contention and holding that the inquiry must be treated as having commenced as soon as the registration of the reference is completed after scrutiny and that from that time, action against the company’s assets must remain stayed as stated in section 22 till final decisions are taken by the BIFR.”
12. Thus, the clear mandate which flows from the judgment of the Hon’ble apex court is that mere writing a letter and its acknowledgment by the BIFR on behalf of the company is neither the commencement nor a registration of reference with the BIFR, which would operate as an automatic suspension or stay of other proceedings. In the present case on May 26, 1998, the letter was written by the company to the BIFR making a reference of its own under section 15(1) of the Act which was acknowledged by the BIFR on May 27, 1998, with the endorsement received subject to verification. It is not disputed that no action had been taken by the BIFR on the reference made by the company as on the date of hearing before this court. The receipt of such a request by the BIFR, ipso facto cannot operate as a statutory directive for suspension of other legal proceedings, The respondent-company, therefore, cannot derive any benefit by producing this document on record to suspend the proceedings before this court. In any case, the request of the respondent-company lacks bona fides and is a clear attempt to undermine the administration of justice under this special Act, i.e., the Companies Act. The Sick Industrial Companies (Special Provisions) Act, 1985, was enacted keeping the larger public interest in mind and these special provisions were enacted with a view to secure the timely detection of sick and potentially sick companies owning industrial undertakings. The speedy determination by a board of experts and to remedy and revive financial stability in the company were the prime functions vested in the Board under the provisions of the Act. The purpose of this special legislation was, thus, to embark upon reconstruction of industries which were sick or likely to get sick. The legislation never intended that the provisions of this Act should be used to defraud the creditors and apply as an instrument to abuse the process of law established under any other general or special enactment. The application of mind by the Board, therefore, has been determined as a condition precedent to the stay or suspension of other legal proceedings by the Hon’ble apex court in Real Value Appliances Ltd. v. Canara Bank [1998] 93 Comp Cas 26. Every statutory provision is founded on a basic principle of legislation intendment that there should be correct application of such provision to redress the grievances for which such remedy is provided and there could be no presumption of safeguard to the abuse of such provision. The conduct of the respondent-company herein is certainly not worthy of any appreciation and in fact clearly indicates lack of bona fides in their requests even for adjournment before this court. A person abusing the process of law, may be under a special or a general law, cannot claim relief in equity from the court of competent jurisdiction or authority in equity.
13. During the course of hearing it was pointed out that the respondent company is trying to avoid the inevitable results of this winding up petition and thus, the statement recorded on behalf of the respondent-company in the order dated April 24, 1998, was a mere camouflage to gain time and that is why no relevant documents were placed on record to show that the company was arranging funds nor any payment was tendered as promised.
14. In view of the above discussion, I am of the considered view that the respondent-company is unable to pay its debt. The liability is admitted. The company had never approached the BIFR for all this period though admittedly the company has been in delicate financial crisis for quite some time as is clear from the various letters which have been placed on record. In order to afford an opportunity to the company to show its bona fides and consider the possibility of amicably settling the matter, the court had shown more than needed indulgence to the respondent company.
15. At this stage, it may also be relevant to mention that there are two other company petitions, filed by other creditors being C.P. No. 128 of 1997 and C.P. No. 216 of 1997, where the petitioner in those cases have claimed U.S. dollars 9,50,000 and its equivalent in Indian currency is Rs. 37,07,877, respectively. These petitions were also listed for hearing on the same dates and as such possibility of the respondent-company to clear its debt in future seems to be very uncertain. However, I am not proceeding to discuss the merits of these two petitions in view of the order being passed in the present petition. Inability to pay debt coupled with a defence which lacks bona fides would have to result in admission of the petition for winding up. Consequently, while rejecting the contention raised on behalf of the respondent-company that proceedings in this company petition are liable to be suspended in view of the letter dated May 26, 1998, I direct the admission of C.P. No. 196 of 1997. Let notice of admission of this petition be published in the Tribune, Indian Express, Jansatta and Haryana Gazette in accordance with rules. Clear 14 days’ notice prior to the next date of hearing shall be given in the publication.
16. List this matter for further proceedings and directions on July 24, 1998.