JUDGMENT
A.G. Qureshi, J.
1. This order shall also govern the disposal of Company Petitions Nos. 6 of 1989 (Sardarmal Bordia v. Jayant Vitamins Ltd.), 9 of 1989 (Smt. Sadhana Devi v. Jayant Vitamins Ltd.), 12 of 1989 (Smt. Manjulabai v. Jayant Vitamins Ltd.), 15 of 1989 (Ramesh Chordia v. Jayant Vitamins Ltd.) and 7 of 1989 (Ram Mohan Bhagvandas Jain v. Jayant Vitamins Ltd.). All these petitions have been filed for winding up of the company situated at Ratlam known as Jayant Vitamins Ltd. filed under Section 433 read with Section 439 of the Companies Act.
2. Jayant Vitamins Ltd. (hereinafter called “the company”) is a company duly registered under the Companies Act and has its registered office at Ratlam. Its authorised share capital consists of 85,00,000 shares of Rs. 10 each, 50,000, 9.5 % redeemable cumulative preference shares of Rs. 100 each, and 10,00,000 unclassified shares of Rs. 10 each. The issued and subscribed capital consists of 38,74,500 equity shares of Rs. 10 each, and 20,000 9.5 per cent. redeemable cumulative preference shares of Rs. 100 each. The petitioners in Company Petitions Nos. 4, 6, 9, 12 and 15 are partnership firms dealing in supply of goods, and the petitioner in Company Petition No. 7 is carrying on a business in transport of goods.
3. In Company Petition No. 4 of 1989, the petitioner, Smt. Manjulabai, claims to carry on business in the name and style of R. Samrathmal at 74, Chandni Chowk, Ratlam. In Company Petition No. 6 of 1989, the petitioner is Sardarmal Bordia, karta of Sardarmal Sagarmal Bordia (HUF) carrying on the business in the name and style of Shree Catalyst at 68, Industrial Area, Ratlam. In Company Petition No. 9 of 1989, Smt. Sadhana Devi, resident of Chandni Chowk, Ratlam, is the petitioner who is carrying on a business in the name and style of Nanalal Samarthmal at 74, Chandni Chowk, Ratlam. In Company Petition No. 12 of 1989, Smt. Manjulabai is the petitioner who carries on a business in the name and style of I. S. Paints (India) at 50, Chandni Chowk, Ratlam. In Company Petition No. 7 of 1989, the petitioner is Rammohan Jain, proprietor of B. R. Road Lines, residing at Mazgaon, Bombay. In Company Petition No. 15 of 1989, the petitioner is Ramesh Chordia who carries on a business in the name and style of Ramesh Chordia and Company at 100, New Road, Ratlam.
4. According to the petitioner, in Company Petition No. 4 of 1989, the petitioner has a right to recover all amounts due to the firm. Her firm carries on the business of supplying pipe fittings, pipes and other sanitary goods. The company has been purchasing goods on credit from the petitioner for the last three years. Full payment has been received from the company in respect of the goods supplied up to March, 1987. Goods were supplied on purchase orders duly signed by one of its senior officers and, on delivery of the goods, a delivery challan accompanied the goods and the acknowledgments for receipt of the goods were given by the officers of the company on a copy of the challan itself. The goods were supplied on credit in view of the reputation of the company in the hope that the payments would be made regularly. The last supply to the company was made by the petitioner-firm on May 23, 1968, and since then no goods have been supplied to the company. The last payment has been received from the company on March 3, 1988. Since then, no payment has been received from the company. According to the statement, annexure 2 filed with the petition, the petitioner has to recover a sum of Rs. 1,70,279.19 from the company on account of the balance of the price of goods ordered by the company and supplied by the petitioner-firm on rates and quantities agreed between the parties. The order forms and the delivery challans have been filed with the petition as annexures. The petitioner has also claimed interest at the rate of 18 per cent. per annum on the unpaid amount as per the prevailing market rate.
5. It has also been averred that, as a part payment due from the company, the company had issued cheque No. 222330, dated May 19, 1988, for Rs. 30,000 only, but the payment of the cheque was stopped by the company. When the cheque was returned dishonoured, the petitioner came to know that there were some disputes amongst the officers of the company at the higher level and the market at Ratlam was full of various rumours. Thereafter, on May 28, 1988, the company addressed a letter to the petitioner informing them that the vice president, Shri Sinha, has been sent on leave by the company (annexure 286). On this letter, the petitioner did not suspect anything, but the petitioner was shocked to receive a letter dated June 13, 1988, from the company making a false allegation that the rates charged by the petitioner were higher and that the goods had not been delivered or diverted. The letter is marked as annexure 287. According to the petitioner, the contents of the aforesaid letter were totally false and unfounded. As the company was unable to meet its financial obligations, it took a dishonest stand as above. The company has issued similar letters to other suppliers also. The goods were supplied at the stipulated rates on the order of the company and the delivery challans were duly acknowledged showing the receipt of the goods. Therefore, the orders and the delivery acknowledgments clearly show that the stand of the company was dishonest.
6. Thereafter, the company, instead of making payments, asked the petitioner to send a copy of the deed of the petitioner’s partnership firm and extracts of registration on the pretext that they were required for audit formalities. The letter, annexure 289, was replied by the petitioner, vide letter dated annexure 290. Thereafter also, instead of making the payments, the company issued a letter to the petitioner on July 1, 1988 (annexure 291), with enclosures making false allegations that the petitioner had made illegal gains from the company and has obtained much higher prices for the goods supplied in collusion with the company’s officers and the company claimed an amount of Rs. 1,85,967.68 from the petitioner. Actually, this counter-claim is baseless, false and mala fide and has been raised with the intention to harass the creditors.
7. The petitioner, therefore, got a notice prepared by their counsel in August, 1988, but having come to know that the company is making payments to its creditors, the notice was not sent on the assurance given by one P.K. Srivastava, manager of the company, that he was trying to get the payments released. However, after waiting for a long time, finally, the petitioner served the company with a statutory notice on December 5, 1988. The notice is annexure 292 and its A. D. receipt is annexure 293. The company, thereafter, instead of complying with the notice and effecting payment, sent a false answer on December 28, 1988, reiterating its pleas taken earlier.
8. From the aforesaid, it is clear that the company is not in a position to pay its debts despite a statutory notice. The business of the company is, therefore, liable to be wound up. It has also been stated that the company is not making payments to several creditors and is raising false pleas. It has also been pleaded that, in view of the annual reports of the company for the years 1985-86, 1986-87 and 1987-88, it is manifest that the financial condition of the company is not good and it has not made arrangements for meeting the liabilities which clearly show that the liquidity of the company is finished and it is not in a position to pay its creditors like the petitioner. It is also clear that the annual accounts of the company do not reflect a true picture of its financial condition and the company is managing to show a paper profit by not taking care of its actual liabilities. Therefore, it has been prayed that the company be wound up.
9. The petitioner in Company Petition No. 6 of 1989 is one Sardar-mal Bordia who carries on a business in the name and style of Shree Catalyst at Ratlam. This petition has also been filed on identical grounds as those in Company Petition No. 4 of 1989, except that the petitioner carries on a business in manufacture and sale of nickel alluminium alloy, nickel sulphate, etc. The last supply by this firm to the company was made on May 10, 1988, and the last payment to this firm was made by the company on the same day. Since then, no payment was received from the company although the goods were supplied to the company on credit. As per the annexed statement, enclosure 1, the petitioner has to recover a sum of Rs. 33,26,657.71 from the company on account of balance of the price of goods ordered by the company and supplied by the petitioner to the company. The orders made by the company to the firm and the delivery challans with acknowledgments have been filed by the petitioner as annexures. The petitioner has also claimed interest at the rate of Rs. 18 per cent. per annum on the amount which remains unpaid. The company, in part payment of the amount due from the company to the petitioner, issued two cheques on May 15, 1988, for Rs. 50,000 each bearing Nos. 892309 and 892310. On May 20, 1988, two cheques were again issued bearing Nos. 892311 and 892312 for Rs. 50,000 each, but the payment of these cheques was stopped by the company. Thereafter, the petitioner also came to know that there was some dispute between the high officers of the company, but he was shocked to receive a letter on June 13, 1988, from the company making false allegations that the rates charged by the petitioner were high and the goods had not been either delivered or were not as per specifications. It appears that the company, in order to avoid meeting its financial obligations, decided to take a dishonest stand alleging charging of high rates. As such the stand taken by the company is totally false.
10. The petitioner, accordingly, replied to the letter on June 21, 1988, again reiterating its demand for payment. On June 21, 1988, the company asked the petitioner to send a copy of the partnership deed and extract of registration on the pretext that they were required for audit purposes. Thereafter, the company issued a letter to the petitioners on June 30, 1988, wherein again the false allegations pertaining to illegal gains from the company in collusion with the company’s officers were made and the company claimed an amount of Rs. 20,16,635 from the petitioner, and this was followed by a letter dated July 21, 1988, claiming Rs. 1,00,575 on account of quality difference. The stand taken by the company was dishonest and mala fide. Thereafter, the company again addressed a letter to the petitioner on July 24, 1988, falsely claiming Rs. 56,03,333 from the petitioner and other three firms. Therefore, the petitioner got a notice addressed to the company by their counsel on August 8, 1988, which was received by the company on August 9, 1988. Thereafter instead of complying with the notice and effecting payments, the company gave a false answer on August 36, 1988, stating therein that the company had to recover money from the petitioner. According to the petitioner, from the aforesaid itself, it is clear that the company is not in a position to meet its liabilities and, therefore, a dishonest and mala fide stand has been taken. The other grounds on which the winding up is sought are the same as have been pleaded by the petitioner in Company Petition No. 4 of 1989.
11. In Company Petition No. 9 of 1989, the averments are identical to the averments made in Company Petition No. 4 of 1989, except the fact that the petitioner-firm carries on a business in supply of pipe-fittings, pipes, lime, RCC pipes, hardware materials, ropes and other goods which were supplied to the company. The last supply of the goods by this firm to the company was on May 23, 1988, and the last payment received from the company by the firm was on May 31, 1988. According to the statement, this firm has to recover a sum of Rs. 4,57,398.31 from the company on account of the balance of the price of goods ordered by the company and supplied by the petitioner to the company. In this petition also, the petitioner has claimed interest at the rate of 18 per cent. per annum on the unpaid amount. The company had also issued a cheque No. 888635, dated June 5, 1988, for Rs. 30,000 to this firm but the payment of this cheque was withheld by the company and thereafter a letter was issued by the company dated June 13, 1988, to this firm of the same text as has been issued to the petitioner in Company Petition No. 4 of 1989, which is annexure 595. The letter was replied to by the petitioner on June 9, 1988, mentioning therein that the contents of the letter sent by the company were false and baseless. This firm was also asked by the company on June 21, 1988, to send a copy of the petitioner’s partnership deed and extract of registration. This letter was replied to by the firm on June 29, 1988, the text of the letter being the same as in Company Petition No. 4 of 1989.
12. The company thereafter on July 21, 1988, issued a letter to the petitioner-firm making the same allegations as in Petition No. 4 of 1989 and claimed an amount of Rs. 1,34,868.87 from the petitioner. This firm also got a statutory notice prepared in August, 1988, for sending it to the company, but it was not sent on assurance by the general manager of the company. However, finally, on December 2, 1988, the statutory notice was sent, but the company, vide its reply dated December 28, 1988, took the same plea that it has to recover Rs. 1,34,868.87 from the petitioner.
13. Smt. Manjulabai has filed Company Petition No. 12 of 1989 on behalf of M/s. I. S. Paints (India). This petition is also based on similar allegations as in Company Petitions Nos. 4 of 1989 and 9 of 1989. This company supplies paints, water-proofing, cement colour, lime and other goods. The firm supplied goods to the company for the last three years. The procedure for order and delivery of goods was the same as mentioned by the other petitioners. The last supply to the company by this firm was made on May 9, 1988, and the last payment to this firm by the company was on February 15, 1988. This firm has also claimed recovery of a sum of Rs. 1,82,453.14 from the company on account of balance of the price of goods ordered by the company and supplied by the petitioner. The firm has also claimed interest on the unpaid amount at the rate of 18 per cent. per annum. The company had issued cheque No. 888631, dated June 1, 1988, for Rs. 14,760.82 to this firm also but the payment was stopped by the company. Thereafter, the company sent a letter dated June 13, 1988, to this firm making similar allegations as in respect of the two firms that the rates charged by the petitioner were higher and the goods were not delivered or diverted in collusion with the officers of the company. According to the firm, the letter is baseless, false and mala fide and on the same grounds as has been stated in the aforementioned petitions. The petitioner replied to the aforesaid letter on June 19, 1988. Thereafter, the company sent a letter to this firm also asking it to send the partnership deed and extract of registration on the pretext that they were required for audit formalities. Thereafter, the company, instead of making payment, issued letter dated July 21, 1988, with enclosures to the firm claiming an amount of Rs. 1,34,849.07 from the petitioner. According to the petitioner, this counter-claim of the company is totally false and baseless. Thereafter, the petitioner also wanted to send a statutory notice in the month of August, 1988, to the company but, on the assurance of the general manager of the company, she did not send it and instead the notice was served on the company on December 5, 1988. The company sent a false reply on December 28, 1988. The reply is false and baseless. Therefore, on similar grounds as has been averred in the other petitions, this petitioner has also made a prayer for winding up of the company.
14. In Company Petition No. 15 of 1989, the petitioner is Ramesh Chordia, who carries on the business in the name and style of Ramesh Chordia and Co., Ratlam. He has filed the petition for winding up of the company on the same grounds as the petitioners in the other aforementioned company petitions. The only difference, in fact, in the present petition is that the petitioner firm carries on a business in supplying pipes, fittings, girders, GI sheets, etc. This firm also supplies goods to the company for the last three years on credit and the procedure for placing of the order and delivery of goods was the same as of the aforementioned other firms. The last supply to the company by the petitioner firm was made on November 25, 1987 and the last payment was received from the company on February 20, 1988. The petitioner claims that it has to recover a sum of Rs. 3,82,701.87 from: the company on account of balance of the price of goods ordered by the company and supplied by the petitioner to the company on rates and quantities agreed between the parties. The petitioner also claims interest at the rate of 18 per cent. per annum for the delayed payment. The petitioner was shocked to receive a letter dated June 6, 1988, from the company which was replied to on June 8, 1988. Thereafter, the company sent a letter dated June 14, 1988, which was replied to by the petitioner on June 21, 1988. Actually, the claim for recovery made by the company is mala fide and baseless. This firm was also asked by the company to send a copy of the partnership deed and extract of registration, etc. This letter was also replied by the firm.
15. Thereafter, on July 21, 1988, the company sent a letter to the petitioner that the petitioner had made illegal gains from the company and the petitioner had obtained a much higher price in collusion with the company’s officers and the company claimed an amount of Rs. 3,50,777.65 from the petitioner. The claim of the company is totally false and baseless. Therefore, the petitioner got a notice prepared in August, 1988, but, on the assurance of the general manager of the company, it was not sent. However, when the payment was not made, the notice was sent in the month of December, 1988, to the company which was received by the company on December 5, 1988. The company on receipt of the notice gave a false answer on December 28, 1988, reiterating its earlier stand of a counter-claim. The other grounds pleaded in the petition are the same which have been taken by the other petitioners in Petitions Nos. 4 of 1989, 9 of 1989 and 12 of 1989.
16. The petitioner in Company Petition No. 7 of 1989 is a transporter, According to the petitioner-firm, the company is indebted to the petitioner in a sum of Rs. 11,63,234.80 together with interest thereon at the rate of 18 per cent. per annum, as stipulated in the company’s transport contracts. The interest amount is quantified at Rs. 1,30,588.20 for the period from June 1, 1988 to January 31, 1989. According to the petitioner, the petitioner is associated with the company as the company’s accredited transporter since December, 1984, under transport rate contracts entered into and executed between the company and the petitioner as per the schedule given in para 7 of the petition. The copies of the contracts have also been annexed to the petition as exhibits A to M. In accordance with the aforesaid transport contract, the petitioner rendered transportation services in carrying and delivering the company’s materials from one place to another to the entire satisfaction of the company. Earlier, the bills which were submitted to the company were being paid by the company regularly. However, according to the statement of accounts, exhibit-N, the company owes a sum of Rs. 11,63,234.80 to the petitioner as on May 31, 1988. The company had already checked the accounts up to March 31, 1988, and the accounts department of the company has confirmed the aforesaid accounts which are annexure-O. According to the petitioner, one Shri Sinha, vice-president of the company was removed from the company with effect from May 28, 1988, and some allegations of fraud, collusion and conspiracy with various parties were alleged against Shri Sinha. It also appears that the company has started some criminal proceedings against Shri Sinha. Therefore, the company has taken a stand that Shri Sinha has granted to the petitioner an unfair revision in freight rates with retrospective effect despite the contract which makes the accounts suspicious and the company, vide its letter dated August 3, 1988, asked the petitioner to be truthful and let the company know the factual aspects with a view to enable dealing with the petitioner’s accounts in a justifiable manner. The reply was sent by the petitioner on August 6, 1988. The company’s officers checked the accounts and, on June 30, 1988, an amount of Rs. 10,32,552,08 was credited to the account of and payable to the petitioner against the petitioner’s freight bills and the remaining bills were to be checked. Thereafter, the petitioner wrote letters to the company whereupon, the company, by its letter dated September 9, 1988, insisted that the petitioner should have personal discussion with Shri P.K. Shrivastava, Controller, Personnel Administration of the company. Thereupon, the petitioner acceded to the deduction and adjustment of Rs. 43,785.50 being the increased rates paid retrospectively in order to get the release of his pending bills to the tune of over Rs. 11 lakhs. Thereafter, the petitioner sent a notice of demand on October 27, 1988, through his advocate calling upon the company to make payment to the petitioner of his dues amounting to Rs. 11,63,234.87 after allowing a credit for Rs. 43,785.50. As this letter was not properly replied to the petitioner sent the statutory notice on November 7, 1988, through his advocates to the company (annexure-W). The company sent a reply to the notice on December 3, 1988, through its advocate falsely and baselessly making allegations against the petitioner of collusion and conspiracy with its past vice-president, Shri Sinha, with an ulterior motive to defeat the petitioner’s legitimate and genuine freight dues for the services rendered to the company for transporting its goods.
17. On receipt of the reply, the petitioner again sent a rejoinder on December 12, 1988, to the company, wherein the names and designations of the officers with whom the petitioner dealt during the course of his business were given. They also specified that the contracts were given by the senior executives and, therefore, the stand taken by the company is baseless. The company, thereafter, sent another letter through their advocate which was received by the petitioner’s advocate on December 30, 1988, wherein general denials without any substance or merits had been made. In the letter, the company took a stand that the names of the officers shown in the rejoinder were only formal signatories.
18. According to the petitioner, the company is liable to pay the amount claimed by the petitioner and the company is unable to pay its debts within the meaning of Section 433(a) read with Section 434(1)(a) of the Companies Act, 1956. The financial position of the company is not good and the share value of the company has gone down by 35 per cent. by December 3, 1988. According to the petitioner, the company is commercially insolvent and, therefore, it is just and convenient that the company be wound up and an official liquidator be appointed.
19. After hearing learned counsel for the petitioners in the aforesaid petitions, show cause notices were issued to the company as to why the company be not wound up.
20. The company, through its secretary, one Hitendra Himmatlal Mehta, has filed the reply to the show-cause notice, opposing the admission of the petitions. According to the company, the petitions have been filed by way of abuse of the process of this court. One Shri R.P. Sinha was working in the capacity as vice president from July, 1986, till June 9, 1988, whereafter his services were terminated. Shri R.P. Sinha was in full, complete and overall charge and management of the company at its factory at Ratlam. Shri R.P. Sinha grossly misused his position and the confidence reposed by the management in him and has made huge illegal profits through malpractices, including joining hands with” his friends, relatives and business associates. Therefore, various criminal cases and complaints are pending against Shri Sinha before the police authorities and in the Ratlam court. In the case of land purchase also, it was found that he has made illegal money. Some instances of Sinha’s acts against the interest of the company and Shri Sinha himself making huge profits have been cited in the reply. Therefore, for many acts committed by Shri Sinha, criminal complaints have been filed and investigation in different cases are pending with various authorities. When the company came to know ,of the malpractices of Shri Sinha, his services were terminated on June 9, 1988. Company Petitions Nos. 4 of 1989, 6 of 1989, 9 of 1989, 12 of 1989 and 15 of 1989 have been filed by Ramesh Chordia and Sardarmal Bordia and their relatives who are all nominees of Ramesh Chordia. In Petition No. 4 of 1989, the petitioner is Smt. Manjulabai, in Petition No. 6 of 1989, the petitioner is Sardarmal Bordia, in Petition No. 9 of 1989, the petitioner is Smt, Sadhanadevi w/o Ramesh Chordia, in Petition No. 12 of 1989, the petitioner is Smt. Manjulabai W/o Ashok Kumar Chordia and, in Petition No. 15 of 1989, the petitioner is Ramesh Chordia. All the partners in the aforesaid firms are family members and/or relatives in the group of Ramesh Chordia and Sardarmal Bordia who are close business associates of Shri R.P. Sinha.
21. After the termination of the services of Shri R.P. Sinha, the affairs of his friends and relatives with whom he entered into contracts were also investigated and, in particular, the aforesaid firm of Rameshchandra Chordia and S. Bordia. On a thorough investigation, it was found that the aforesaid firms have made huge profits and have perpetrated a fraud upon the company to the tune of Rs. 56,03,333. Therefore in July, 1988, the company forwarded details in a tabular form containing all particulars of overcharges and illegal gains by all the said firms and called upon them to refund to the company the illegal profits made by them. The company also, by its letter dated July 24, 1988, jointly addressed to a few of the said firms, put the said facts on record and informed the said various firms which raised false claims against the company that, as a matter of fact, it is the company which has to recover a huge amount of over Rs. 56 lakhs from the said firms. It has also been stated that the statutory notices by the aforesaid petitioners were given at the same time through a common advocate and the petitions have also been collectively filed by the same common advocate. As such, it is manifest that the petitions are filed as an abuse of the process of court and collusively with the sole object, namely, to hurt the company and somehow or other to see that the company closes down while, as a matter of fact, not a single rupee is due by the company to any of the petitioners. The petitions are filed as pressurising tactics in order to pressurise the company to pay the money which is really not due to them.
22. It has further been averred that the transactions between the company and the petitioners are purely of a commercial nature and are also of a disputed nature whereas the company has a genuine and bona fide claim against the petitioners and the entire accounts right from the inception of all the aforesaid firms and associates of Shri R.P. Sinha are necessary to be reopened and that can be done only by a competent civil court and not in these company petitions. In any case, the company has a bona fide defence against the claim of the petitioners. Actually, the petitioners as creditors of the company are not entitled to give statutory notices or file winding up petitions. Therefore, all the petitions deserve to be dismissed. Actually, it is only at the instigation of Shri. R.P. Sinha that the petitions have been filed with a view to see that the company is put to hardship and is closed and wound up.
23. It has also been averred that the company is not in an insolvent state of circumstances. The company has 500 workers working at its factory at Ratlam and about two hundred numbers of staff and executives working at the factory as well as its head office at Bombay, The company’s working up to June 30, 1989, has shown very encouraging results. The company’s turnover is Rs. 36.50 crores (approximately) for the year ending on June 30, 1989. The profit of the company before interest, depreciation and taxes is Rs. 7.17 crores and net profit is Rs. 2.68 crores. The company has net fixed assets along with net current assets of Rs. 38 crores, as against the company’s obligations to banks, financial institutions, deposit holders, etc., of Rs. 26 crores. These are provisional figures to show that the company is not in such a financial state where an order of winding up should be passed and that too on petitions of alleged creditors under Section 434 of the Companies Act. On the basis of audited balance-sheets and accounts as on June 30, 1988, the turnover of the company was Rs. 31 crores and the profit before depreciation and tax was Rs. 3.52 crores and net profit was Rs. 1.86 crores. The net fixed assets along with current assets were Rs. 36 crores against the obligations of the company to the tune of Rs. 23 crores.
24. The company is also implementing a scheme of automation, modernisation, technology upgradation and even the various public sectors, financial institutions and banks have come forward and have agreed to finance the said schemes of the company by subscribing to the convertible debenture issue for which the company has already received sanction from the Controller of Capital Issues, Government of India. The decision by the Government of India to sanction and the financial institutions to contribute to the implementation of the scheme have been taken after thoroughly checking the affairs and accounts and economics of the company. If the company would have been in an insolvent state of circumstances, the financial institutions would not have extended their help to the schemes of the company by investing such huge funds in convertible debentures and sanction would not have been granted by the Government of India as mentioned above. As such, in the face of the aforesaid facts and circumstances, there is no case for winding up.
25. It has also been stated that the share price of the company has also gone up from Rs. 22 to Rs. 50 in a matter of one year. Other facts have also been pleaded to show the financial stability of the company. The details of the taxes paid by the company to the M. P. Government and the Central Government has also been enumerated in para 19 of the reply. It has also been mentioned that the products of the company, like Sorbitol, Mannitol, Vitamin-C, etc., are manufactured by the company, out of which Mannitol is an import substitute and produced only by the company and it has saved considerable amount of foreign exchange by the production. It is also the largest company among companies producing vitamin-C and 75 % of the needs of vita-min-C in the country is being supplied by the company. The factory is established in a backward area of the country, thereby creating job opportunities, improving the economic and cultural life of the local population of the area. In the end, in a parawise reply, the averments made by the petitioners in all the petitions have been denied. The reply is supported with documents in respect of the criminal charges and alleged misappropriations, illegal gains, etc., made by Shri R.P. Sinha.
26. Shri Chandresh Trilochan Oza, the liaison and public relations officer of the company, has filed an affidavit wherein he has stated the circumstances under which the winding-up petitions before the court by the various petitioners and a suit in the Delhi High Court and civil court, Ratlam, were filed by a group who wanted to cause harm to the company.
27. The Jayant Vitamins Shemik Karmachari Sangh, Ratlam, has filed an application for intervention, wherein allegations have been made against Shri R.P. Sinha and it has further been prayed that the company is in a very good financial state and the fate of the employees and workers is tagged with the company. As about 500 workers are working in the company, they should be heard and the petition be dismissed because the winding up prayed for is against the interest of the employees and is based on false averments. The reply of the company is also supported by the affidavit of Shri Hitendra Mehta. Another application for intervention has been filed on behalf of the employees of the company through one Shri S.N. Bakshi, which has also supported the stand taken by the company opposing the winding up petitions.
28. In the counter-affidavits sworn by the petitioners, the averments made by the company have been denied. Thereafter, the company filed another affidavit of Shri Shrivastava wherein some details have been mentioned showing that the petitioners are in league with Shri R.P. Sinha and, in collusion with Shri R.P. Sinha, have earned huge illegal profits from the company.
29. The company has also filed a detailed affidavit of Shri K.K. Ravindranath, son of Shri M.V. Menon, an officer of Jayant Vitamins Ltd. (company), who has explained the various dealings of the petitioners with the company with the connivance of Shri R.P. Sinha and has also shown some facts to show that the petitioners were in league with Shri R.P. Sinha and, as a result of the aforesaid unholy alliance, they had perpetrated fraud on the company and had made illegal profits for which a claim has already been made against the petitioners. Actually, the petitioners have filed these petitions to wriggle out of their liabilities and to save Shri R.P. Sinha. Along with the affidavit, various documents have been filed to support the averments made in the affidavit.
30. In reply to Company Petition No. 7 of 1989 filed by a transporter, the company has filed its reply through an affidavit by Shri Chand-resh Trilochan Oza, secretary of the company. In this reply also, the same allegations against Shri R.P. Sinha as made in reply to the earlier petitions have been made. It is stated that, on investigation and scrutiny of the transactions entered into by Shri Sinha with B. R. Road Lines, it was found that there was unfair revision of rates and the contracts were against the existing policies of the company. Even in some cases, the rates were increased with retrospective effect. According to the company, the present petitioner was an employee of one firm known as Shanti Roadways and Shri R.P. Sinha made him resign the job and, at the behest of Mr. Sinha, the petitioner started his own firm known as B. R. Road Lines. According to the company, Shri Sinha has a share 30 per cent. in the firm, and, therefore, the company earned huge illegal profits with the connivance of Shri Sinha who has a monetary interest in the company. Actually, the company has a claim of Rs. 15,70,108.60 against the petitioner for over-charging the company by all the malpractices adopted, by the petitioner in collusion with Shri R.P. Sinha. The statement of claim has been annexed along with the reply and it has further been pleaded that in all, the petitioner has to pay Rs. 28,47,421.88 to the company by way of loss and/or damages. This shows that actually the company has to recover money from the petitioner and it is not the petitioner who has to get money from the company.
31. The interveners in the present petition are the employees and workmen of the company who have supported the plea of the company that the petitions be dismissed.
32. By way of rejoinder, the petitioner has stated that the company has come with a false, baseless, frivolous and vexatious claim. They are all imaginary and fictitious claims. The factual details given by the company have been denied by the petitioner in the affidavit. Thereafter, a Sub-rejoinder has been filed by Shri Mehta, wherein again, the averments made by the petitioner have been denied and facts in support of the stand taken by the company have been reiterated. One Shri Ravindranath, an officer of the company, has also sworn an affidavit to the same effect as in the other petitions and has also filed documents in support of the affidavit and the stand taken by the company.
33. In view of the aforesaid averments of the petitioners and the company, the first question which falls for consideration is whether the counter claim set up by the company is bona fide or whether it has been set up to defeat the undisputed claims of the petitioners.
34. Learned counsel for the petitioner in Company Petition No. 7 of 1989, Shri G.M. Chaphekar, has strenuously argued that the petitioner had transported the goods of the company in compliance of the orders given by the Senior Executives of the company and the officers were all through in the know of the contracts which the petitioner had entered into with the company pertaining to transport of goods. The accounts were also practically settled. Shri Chaphekar has drawn my attention to the various documents filed by the petitioner in support of his argument that the plea raised by the company is untenable, lacking in bona fides and has been raised only to avoid the consequences because of the neglect in payment of the debt even after the statutory notice.
35. On the other hand, learned counsel for the company, Shri Parikh, assisted by Shri Joshi, has strenuously argued that the counter-claim of the company is bona fide as it is prepared from the documents filed by the company. The company, with the connivance of Shri R.P. Sinha and some other officers of the company, have made huge profits illegally and the billing has been done against the terms of the contract.
36. The counsel for the parties in Company Petitions Nos. 4 of 1989, 6 of 1989, 9 of 1989, 12 of 1989 and 15 of 1989, Shri Bagadia, has also drawn my attention to the documents filed by the petitioners in support of his contention that the goods were supplied to the company on the basis of the orders issued by the company and the company has duly acknowledged the receipts for the goods supplied. The rates were also settled and there was no uncertainty in the contracts. Even if an order is placed by any officer of the company, the company is bound by the action of that officer and it does not lie in the mouth of the company to say that the goods were short supplied or were not of the specified quality or that higher prices were charged. Replying to these arguments advanced by Shri Bagadia, Shri Parikh has argued that the company is not a defaulter in respect of payment to its creditors. He has drawn my attention to the fact that the company has paid lakhs of rupees towards the outstanding bills of the other companies. But, in the instant case, as the petitioners and the company were in league with Shri R.P. Sinha and have made huge illegal profits as a result of the investigation and checking of the accounts, it was found that actually it is the company which has to recover huge amounts from the petitioners and it has to pay nothing to the petitioners, and that is why the payments were not made. It is not a case wherein the company has neglected to pay the debts. Actually, before the service
of the statutory notices itself, the company had made a demand on
the petitioners for the amount which the company has to recover from
the petitioners.
37. I have carefully examined the documents filed by both the parties and have also gone through the various decisions of courts wherein it has been laid down in what circumstances the winding up of a company can be ordered. The petitioners in all these petitions have claimed that the company has failed to pay its debts even after the statutory notices were served on the company and the counterclaims set up by the company are mala fide and without any basis. The claims are undisputed- and if the company fails to pay the undisputed claims of the petitioners, then a presumption under the law should be drawn against the company that it is not in a position to pay its debts. From the clear wording of the law and the principle enunciated by the different High Courts in this respect, it is practically a settled decision of law that when a creditor comes forward with a prayer for winding up of the company on the ground of the nonpayment of dues, then the creditor has to establish that the debt owed by the company is clear, valid in law, unimpeachable and cannot be disputed. However, if there is a dispute about the debt, the court has to consider all the facts placed before it and arrive at a decision on whether the dispute is genuine and has been raised bona fide. If the court arrives at a conclusion that disputes have been raised only for avoiding payment or raising a controversy on flimsy grounds, then the company court can reject the contention of the company holding that the dispute has been raised only with a purpose to create a defence on flimsy grounds against the prayer of winding up.
38. The Supreme Court of India, in the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. [1972] 42 Comp Cas 125, has held that where the petition for winding up of a company is based on the ground of the inability of the company to pay its debts, it is well settled that if the debt is bona fide disputed and the defence is a substantial one, the court will not order winding up. The principles on which the court acts are : (1) that the defence of the company is in good faith and one of substance ; (2) that the defence is likely to succeed in point of law, and (3) that the company adduces prima facie proof of the facts on which the defence depends. Where the debt is undisputed, the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that debt. Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding-up order but the exact amount of the debt is disputed, the court will make a winding up order without requiring the creditor to quantify the debt precisely. It has further been held that, if there is opposition to the making of a winding up order by the creditors of the company and in that event considering their wishes, the court may decline to make the winding up order. But the case of the creditors has to be tested on the grounds of reasonableness and on the fact whether the matters require an enquiry and investigation. In the same judgment, the Supreme Court has further held that the allegation that the substratum of the company is gone has to be alleged and proved as a fact. The mere fact that the company has suffered trading losses will not destroy its substratum unless there is no reasonable prospect of its ever making a profit in the future. On the facts of that case, it was held that the High Court was right in refusing to wind up the company.
39. In the light of the aforesaid Supreme Court dictum, if we look to the pleadings of the parties and the documents filed along with the affidavits, we find that, before the statutory notices are served on the company, the company had already raised a claim against the petitioners alleging that the petitioners had joined hands with the vice president of the company and other employees and have earned huge profits illegally by over-billing, claiming higher rates, deficient supplies, etc. The notices of the company served on the petitioners were also supported by the statement of accounts. Shri Bagadia has pointed out that the accounts which have been filed by the company after the investigation do not present a correct picture inasmuch as there are many mistakes in the accounts submitted by the company. In this regard, it is sufficient to say that only because of certain discrepancies in the counter-claim submitted by the company supported by the details of the counter-claims, the counter-claims of the company cannot be thrown out as mala fide or baseless. The company, before the statutory notice was given to it, had informed the petitioners that they had obtained much higher prices in collusion with the company’s officers and the company claimed amounts mentioned in those notices and as detailed in the statement of accounts sent along with the notices. Learned counsel for the parties have placed reliance on their respective documents to show that their respective cases are strong. However, this court cannot go into the accuracy of accounts or the details given in the accounts. The only point which has to be seen in these petitions by this court is whether the counterclaims which have been raised by the company are bona fide and can be held to be substantial or are such on which the company is likely to succeed or is able to put up a defence in the court of law. Prom the documents, it appears that, at the relevant time, Shri Sinha was in overall charge of the affairs of the company and, after the termination of the services of Shri Sinha, the company got the financial affairs of the company investigated and came to the conclusion that it is the company which has to recover the amounts specified in the statement of the company from the petitioners. It is not disputed that the company has started different criminal proceedings against Shri Sinha and the company has also placed circumstances before the court for showing that the said Shri Sinha had an interest in helping the petitioners. In a company petition, this court has to see only to the prima facie case as put by the parties and if it finds that the intricate issues pertaining to liability have to be examined by evidence and documents, then it would not exercise this discretion of ordering the winding up of the company. In the instant case, on the basis of the documents filed by the parties, it is difficult to hold that the defence put up by the company is mala fide or untenable or has been raised on flimsy grounds.
40. This takes us to the other aspect of the petitions wherein it has been alleged that the financial position of the company is not good and that it has no capacity to pay its debts. The petitioners have placed before me the balance-sheets for three years to show that the balance-sheets do not give a correct picture of the affairs of the financial stability of the company whereas, on the other hand, it has been shown that the company has 500 workers working at its factory at Ratlam and 200 staff and executives. Up to June 30, 1989, the company’s turnover is Rs. 36.50 crores and the profit of the company before interest, depreciation and taxes is Rs. 7.17 crores and net profit is Rs. 2.68 crores. Therefore, the latest position of the company as on June 30, 1989, shows that the company is making profits and its turnover is also of Rs. 36.50 crores. As regards the assets, the fact that different financial institutions are actively co-operating in the expansion programme of the company and that the Controller of Capital Issues, Government of India, has accorded sanction for expansion programme, prima facie is sufficient to show that the company is in a good financial state. The fact that the share price of the company has also gone up from Rs. 22 to Rs. 50 within a period of one year also goes to show that the company is financially stable. It is also manufacturing some drugs which are import substitutes. The company has also given details of its dealings with other big companies and has averred that the company is paying regularly to all other creditors, including the said big companies. Therefore, it cannot be held that the company is financially unstable and is not in a position to make payments to its creditors. As such, prima facie, it appears that the company is in such a financial state wherein it cannot be held that the substratum of the company has been destroyed and it has no reasonable prospect of making a profit in the future.
41. The petitions have also been opposed by the workers’ union of the company and the employees’ association of the company on the ground that the company has given employment to 700 persons and it is in a good financial state. The workers have also supported the plea of the company that one Shri R.P. Sinha was responsible for causing huge losses to the company and through Shri Sinha and some other officers, the petitioners have made illegal gains from the company. The plea of the interveners workmen is that, keeping in view the interests of the workmen and the financially stable position of the company, the winding up order should not be passed.
42. A Division Bench of this court, in the case of Kilpest Pvt. Ltd. v. Shekhar Mehra [1985] MPLJ 160 ; [1987] 62 Comp Cas 717, has held that, in a winding up petition, the workers of the company have the same locus standi as the shareholder has and, therefore, they have an equal right to appear and oppose the winding up of the compariy. This court, in the case of Narendra Glass Works (P.) Ltd. v. M. P. Beer Products Pvt. Ltd. [1989] 65 Comp Cas 396, has also taken the view that, in addition to the other factors, the fact that the company has engaged a large number of employees and is running in profit would itself be a ground for not admitting a petition filed for winding up of the company. Relying on National Textile Workers’ Union v. P.R. Ramakrishnan, AIR 1983 SC 75 ; [1983] 53 Comp Cas 184, the court was of the view that the interest of the workers has also to be taken into consideration. Therefore, in the light of the aforesaid authorities of our court, I am of the view that when the company prima facie is running at a profit and about 700 persons working in that company oppose the winding up petition, it will not be just and equitable to order the winding up of the company.
43. In the result, in view of the fact that the counter-claims set up by the company against the petitioners being not on flimsy grounds or baseless, coupled with the fact that the company is financially stable and earning profits and considering the plea of the workers against the winding up, I am of the opinion that it is not a fit case wherein the aforesaid petitions for winding up should be admitted. In view of the nature of the disputes raised before me, the proper course for the parties would be to approach the competent civil court for the recovery of their claims or counter-claims, as the case may be. Accordingly, the petitions filed by the petitioners are dismissed with no order as to costs.