ORDER
Ram Mohan Reddy, J.
1. The petitioner claims to be a creditor of the respondent, a company incorporated under the Companies Act, 1956 (for short the ‘Act’) having its registered office at Bangalore.
2. The respondent is said to have placed a work order dated 11-11-1998 Annexure ‘C’ on the petitioner for fabrication of 440 Metric Tons of steel structures for Boiler house roof trusses, for its thermal power plant at Bellary, totally valued at Rs. 23,32,000. The respondent having supplied the required raw material, the petitioner completed the job of fabrication which was jointly inspected by the officials of the respondent-company together with their consultants M/s. M.N. Dastur and Company. The petitioner submitted its first bill dated 26-11-1998 for Rs. 12,55,540.32. Annexure ‘D’ the second bill dated 24-12-1998 for Rs. 1,39,504.48 Annexure ‘G’; and the third bill dated 24-7-2000 for Rs. 9,681.99, Annexure T, which the respondent failed to pay but deducted T.D.S. of Rs. 25,111, Annexure ‘E’, Rs. 3,069 Annexure ‘H’ and Rs. 213, against the bills, respectively. The petitioner asserts, that the bills were certified by the consultants of the respondents and payment was required to be made within 30 days of submission of the Bills, in accordance with condition No. 5.4 of the work order dated 11-11-1998 Annexure C. The respondent having failed to pay the amounts as agreed, impelled the petitioner to issue a statutory notice dated 29-8-2001, which though acknowledged on 31-8-2001, the respondent neither caused a reply nor made the payments. Hence, this winding up petition.
3. This petition was clubbed along with C.O.P. 164/01 and batch in which M/s. Bellary Steels and Alloys Ltd., is the respondent, and by a common order dated 31-7-2003, passed in CO.P. 91 /2000, admitted this petition and other petitions. This petition was advertised in one edition of The Indian Express’ on 19-9-2003 fixing the date of hearing as 17-10-2003. After the advertisement, no creditor, member or other interested persons have appeared in court to oppose or support this petition.
4. The petition is not opposed by filing statement of objections.
5. M/s. Bellary Steels and Alloys Ltd., filed C.A. 78/05 contending that the respondent company is a sister company of M/s. Bellary Steel and Alloys Ltd., subject matter of reference before the Board for Industrial and Financial Reconstruction (BIFR), and in view of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985, the further proceedings in this petition be suspended. The application was rejected, by order dated 8-2-2005 holding that the respondent company is altogether a different, independent entity, incorporated under the Act, having nothing to do with M/s. Bellary Steels and Alloys Limited. The order is final and binding on the parties.
6. Sri M.V. Ramanna, learned Counsel for the petitioner reiterates the averments set out in the petition to contend that the respondent is due and payable to the petitioner Rs. 13,76,333 a determined, definite and undisputed debt and that the presumption under Section 434(1) of the Act, aptly applies to the facts of this case, in the absence of a reply to the statutory notice or payment by the respondent. According to the learned Counsel, the respondent is commercially insolvent and incapable of discharging its liabilities.
7. Per contra, learned Counsel for the respondent contends that the petitioner is guilty of suppression of a material fact Le., the petitioner invoked the jurisdiction of the Andhra Pradesh Industry Facilitation Council, Hyderabad, constituted under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (for short, the ‘Industrial Undertakings Act), the council passed a decree dated 29-9-2003 in favour of the petitioner and against the respondent. Learned Counsel points out to Section 10 of ‘Industrial Undertakings Act’ to contend that the said Act override the provisions of the Companies Act, 1956, and hence the company petition is not maintainable. It is next contended that the petitioner having obtained a decree dated 29-9-2003, principles of res judicata apply and hence precluded from invoking the discretionary jurisdiction of this Court to wind up the respondent company. Lastly it is contended that the petitioner having invoked an alternative and efficacious remedy and secured a decree, cannot maintain this petition.
8. Having heard the learned Counsel for the parties and perused pleadings, the questions that arise for decision making in this petition are :
(i) Whether the petitioner has made out a case of a debt which is determined, ascertained, definite and undisputed that the respondent company has failed to pay in order to invoke the extraordinary jurisdiction of this Court for winding up the respondent company ?
(ii) Whether the petition is incompetent and barred by Section 10 of the Industrial Undertakings Act?
(iii) Whether the petitioner having invoked the jurisdiction under the Industrial Undertakings Act’ culminating in a decree dated 29-9-2003, this petition is maintainable ?
9. There is no dispute that by the work order dated 11-11-1998, Annexure-C the petitioner was entrusted the work of fabrication, valued at Rs. 23,32,000, subject to the respondents supplying material to the petitioner. There is also no dispute that the bills, Annexures D, G and J, submitted by the petitioner were duly certified for payment by M/s. M.N. Dastur and Company. It is also not in dispute that the respondent effected deductions of Rs. 25,111 Annexure ‘E’; Rs. 3,069 – Annexure ‘H’ and Rs. 213, by way of Tax Deduction at source (TDS) on the said claims. That the respondent did not make the payment within the time stipulated and in accordance with clause 5.4 under the nomenclature ‘Payment terms’ in the work order, Annexure C is undisputable. That the respondent acknowledged the statutory notice dated 29-8-2001, Annexure K, and did not cause a reply nor make payment is borne out from records, which is not opposed. The petition is not opposed by the respondent company by filing its statement of objections. After advertisement was caused in Indian Express’ on 19-9-2003, fixing the date of hearing as 17-10-2003, till date, none of the creditors, members or other interested persons have appeared before court to oppose or support the petition. The material placed before Court, is substantial legal evidence of the debt of Rs. 13,76,333 due by the respondent to the petitioner.
10. That Rs. 13,76,333 is a determined, ascertained, definite and undisputed sum which the respondent company is due and payable to the petitioner company, is further fortified by the submission of the learned Counsel for the respondent that the petitioner obtained a decree dated 29-9-2003 from the Andhra Pradesh Industry Facilitation Council constituted under the Industrial Undertakings Act, 1993′. The failure of the petitioner to plead the factum of having invoked the jurisdiction of the council constituted under the Industrial Undertakings Act, 1993, and having secured a decree, cannot by itself and nothing more, to establish that it is detrimental to the interest of the respondent company, constitute suppression of material facts, an impediment in the exercise of discretionary jurisdiction. In fact the decree is further proof of the fact that the respondent company is due to the petitioner the decretal sum, which remains unpaid. It is trite that the proceedings under the Act is for winding up of the respondent company, for not paying its debts, and not for recovery of monies due to the petitioner.
11. The contention of the respondent that Section 10 of the Industrial Undertakings Act, is an express bar to proceedings for winding up of the company, is but a specious plea. This contention is noticed only to be rejected. Section 10 of the Industrial Undertakings Act reads thus:
Overriding effect- The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
12. A plain reading of the provisions of the Industrial Undertakings Act, 1993, discloses that the Act is a beneficial piece of legislation with a laudable objective of securing immediate succor to small scale and ancillary units, on account of delay in payments by industrial undertakings, leading to serious and endemic problems affecting the health of small scale industries. The respondent is unable to show how the provisions of the Companies Act, 1956, are inconsistent with the provisions of the Industrial Undertakings Act. The scope of the said Act is not with regard to the jurisdiction to wind up companies incorporated under the Companies Act, 1956. Having regard to the scope and ambit of the Industrial Undertakings Act, I am of the considered opinion that the provisions of the Companies Act are not inconsistent with the Industrial Undertakings Act, so as to have a overriding effect as set out in Section 10.
13. The contention that the proceedings are hit by application of principles of resjudicata is also a specious plea. The decree obtained by the petitioner, is for recovery of monies due, while the company petition is for winding up of the company on account of its inability to pay its liabilities.
14. By no stretch of imagination, it could be said that the issues in the two proceedings, i.e., in the present petition and that of the proceedings before the Andhra Pradesh Industrial Facilitation Council could be the same though the parties are the same. The principles of res judicata are not applicable to the present case. This contention of the respondent is rejected.
15. The last of the contentions that under Section 443(2) of the Companies Act, 1956, the petition is not maintainable as the petitioner exercised an alternative remedy and secured a decree under the Industrial Undertakings Act, 1993, is without any merit. It is no doubt true that under Sub-section (2), this Court may refuse to make an order for winding up if it is of the opinion that some other remedy is available to the petitioner and that it is unreasonable to wind up the respondent company. The observations of the Supreme Court in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd. at paragraph 21, in the circumstances is apposite, which reads thus :
21. 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 particular debt (see Re. A Company 9494 SJ 369). 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 (see Re. Tweeds Garages Ltd., 1962 Ch 406). The principles on which the Court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends.
The dispute brought before this Court is not for recovery of money, but for winding up of the respondent company under the Act on account of its inability to discharge its liabilities. The fact that the respondent has failed to pay the amounts due even after a lapse of six years and the decree of Andhra Pradesh Facilitation Council, remains unsatisfied, coupled with the fact that the respondent company has no defence to offer, or that it has not abandoned its objects and is not commercially insolvent, it cannot but be said that it is reasonable to wind up the respondent. The exercise of discretion to refuse to make a winding up order, in the circumstances of the case would amount to travesty of justice.
16. In these circumstances, the presumption under Section 434(1) of the Act that the respondent is incapable of discharging its liabilities applied on all its fours. To quote the words of Lord Asquith in East End Dwellings Co. Ltd. v. Finsbury Borough Council [1951] 2 All ER 587 (HL), in the circumstances, is apposite.
If one is bidden to treat an imaginary state of affairs as real, one must surely, unless prohibited from doing so, also imagine as real the consequences and indicents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it.
The statute says that one must imagine a certain state of affairs. It does not say that having done so, one must cause or permit one’s imagination to boggle when it comes to the inevitable corollaries of that state of affairs.
This quotations was approved by the Supreme Court in the case of State of Bombay v. Pandurang Vinayak Chaphalkar
The questions raised in this petition are answered accordingly.
In the result, the petition is allowed. The respondent Bellary Power (India) Private Limited, having its registered office at 4000, 100 feet Road, HAL, 2nd Stage, Indiranagar, Bangalore, is directed to wound up under the Companies Act, 1956. The Official Liquidator is directed to take over the assets of the respondent company. The petitioner is directed to :
(i) cause advertisement of this order in one edition of The Indian Express’ within 14 days; from the date of receipt of this order.
(ii) to serve a copy of this order on the Registrar of Companies within 30 days; from the date of receipt of a copy of this order.
(iii) to deposit Rs. 25,000 with the Official Liquidator towards initial liquidation expenses within four weeks, from the date of receipt of a certified copy of this order.
The oral request of the learned Counsel for the respondent to keep in abeyance the order of winding up, is without merit and is rejected.