w w w . L a w y e r S e r v i c e s . i n


Coromandel International Limited, rep. by B. Gopala Krishna v/s Chemcel Biotech Limited Auto Nagar, Vijayawada

    Company Petition No.160 of 2009
    Decided On, 18 July 2011
    At, High Court of Andhra Pradesh
    By, THE HONOURABLE MR. JUSTICE B. SESHASAYANA REDDY
    For the Petitioner: B. Nalin Kumar, Advocate. For the Respondent: Ch. Ramesh Babu, Advocate.


Judgment Text
1. This Company Petition has been taken out by Coromandel International Limited under Section 433(e) read with Section 434(a) and 439(1)(b) of the Companies Act, 1956 seeking an order of winding up of the respondent company-Chemcel Biotech Limited.

2. The petition averments, in brief, are:-

2(a) The petitioner is a company incorporated under the Companies Act, 1956 ('the Act', for brevity) represented by its authorised signatory B.Gopala Krishna. It is engaged in the business of manufacture, marketing and dealing in various types of farm inputs like Fertilisers, pesticides etc., having its registered office at Coromandel House, 1-2-10, Sardar Patel Road, Secunderabad.

2(b) Chemcel Biotech Limited-respondent company was incorporated on 29.9.1995 as a public limited company. The registered office of the respondent company is situated at D.No.16-130/12, JRD Tata Industrial Estate, Autonagar,3rd Cross Road Extension, Vijayawada.

2(c) Ficom Organics Limited was a company incorporated under the Act in the State of Maharashtra. The said company was engaged in the business of manufacture, production and distribution in fertilizers, pesticides, insecticides etc. The said Ficom Organics Limited came to be amalgamated with the petitioner company as per the orders of this Court dated 10.4.2007 in Company Petition No.21 of 2007, connected with C.A.No.1748 of 2006 and orders of Bombay High Court in Company Petition No.94 of 2007 connected with C.A.No.1211 of 2006 and Company Petition No.96 of 2007 connected with C.A.No.1207 of 2006, dated 24.7.2007. As per the scheme of amalgamation, Ficom Organics Limited came to be amalgamated with the petitioner company and thereby, the petitioner company acquired assets and liabilities of Ficom Organics Limited.

3. The respondent company placed a purchase order dated 06.12.2006 with Ficom Organics Limited for supply of 100 kg of Henaconazole-tech valued at Rs.9,59,640/- . Ficom Organics Limited supplied the same under Invoice-cum-Delivery Challan No.1 dated 11.12.2006 despatched by Common Carrier Transport Corporation of India under lorry receipt No.108019973, dated 11.12.2006. The respondent having received the material failed to pay the value of the same in spite of several demands made by the petitioner company. After prolonged demands made by Ficom Organics Limited and the petitioner company, the respondent company issued a cheque bearing No.48662 dated 30.11.2007 for Rs.5,00,000/- and cheque bearing No.60882 dated 21.01.2008 for Rs.4,59,640/- drawn on Union Bank of India, Vijayawada towards discharge of the above-referred debt. On presentation, both the cheques came to be dishonoured due to insufficient funds. Thereafter, the petitioner company issued a statutory notice as provided under Section 138 of the Negotiable Instruments Act and filed C.C.No.229 of 2009 and C.C.No.323 of 2009 on the file of XI Additional Chief Metropolitan Magistrate, Secunderabad against the respondent company and the Managing Director for the offence under Section 138 of the Negotiable Instruments Act. The complaints filed under the Negotiable Instruments Act are pending disposal. The Managing Director of the respondent company made an endorsement on 30.3.2009 confirming the balance outstanding to the petitioner company. The petitioner company issued a notice dated 11.5.2009 by registered post acknowledgment due and also through fax bearing No.08662545437 dated 11.5.2009 calling upon the respondent company to liquidate its liability within four weeks. The respondent company acknowledged the receipt of notice dated 11.5.2009 in its letters dated 13.6.2009 and 13.7.2009. The respondent company assured the petitioner company with regard to payment of amount under letter dated 13.6.2009. Subsequently, the respondent company sought time under letter dated 13.7.2009. In spite of such assurances, the respondent company failed to liquidate the liability. The respondent company is also heavily indebted and is not in a position to pay its dues and it is not able to carry on business on proper lines and thereby, it has become commercially insolvent.

4. Notice before admission came to be ordered on 15.10.2009. The respondent entered appearance and filed counter as well as additional counter.

5. The sum and substance of the counter/additional counter, in brief, is:

The notice issued under Section 434 of the Act is defective and therefore, the petition is liable to be dismissed in limini. The amount claimed by the petitioner company is not correct as Ficom Organics Limited did not deduct the amount towards discount and commission that was promised to be paid to the respondent company as per the existing trade and practice and adjust the same out of the claimed amount. When the same was brought to the notice of the petitioner company, it also promised to look into it and carry out necessary adjustment. The petitioner has not placed any material to show that the respondent company was unable to pay several debts due to the named creditors. The petitioner filed cheque bouncing cases against the respondent company in respect of debt of Rs.9,59,640/- covered under two cheques. As he availed an alternative remedy to recover the whole debt, it is impermissible for the petitioner to seek recourse under the provisions of the Companies Act seeking an order of winding up of the respondent company. The debt claimed by the petitioner in the company petition is based on notice-cum-delivery challan dated 11.12.2006 and as per the terms and conditions indicated in the challan, disputes, if any are subject to Mumbai jurisdiction. Therefore, the company petition filed by the petitioner company in this Court is not maintainable. Ficom Organics Limited which was merged with the petitioner company has relinquished its rights under the Act to invoke the jurisdiction of the Courts situate at Andhra Pradesh based on the provisions of the Act for the purpose of winding up of the respondent company. The petition presented by B.Gopala Krishna cannot be maintained since he has not obtained any leave as provided under Rule 32 of the Civil Rules of Practice. Even the General Power of Attorney does not indicate of authorising him to institute company petition against the respondent company for its winding up. The respondent company is carrying on business since one and half decade and its paid up capital is Rs.25,91,84,060/- and its turn over is Rs.35,18,77,770/-.It provided employment to hundreds of persons either direct or indirect. The equity shares of the respondent company are listed in Bombay Stock Exchange (BSE). The respondent company acquired 60% of equity in M/s. Jetro Petro Biotech (P) Ltd., and as such it became the subsidiary of the respondent company. The petitioner company has effective alternative remedy for recovery of the amounts due from the respondent company by approaching civil Court. The statement of facts and figures projected by the respondent company in its 14th Annual Report for the year 2009 disprove the contention of the petitioner that the respondent company has become commercially insolvent.

6. The petitioner filed reply affidavit. It is stated in the reply affidavit that there is no contract of whatsoever nature between Ficom Organics Limited and the respondent company to deduct the amount towards discount or commission. The invoices do not indicate of any such discount or commission allowable to the respondent company.

7. Heard learned counsel appearing for the petitioner and learned counsel appearing for the respondent.

8. Learned counsel appearing for the petitioner submits that the respondent company placed purchase order dated 06.12.2006. Pursuant to the purchase order, Ficom Organics Limited supplied pesticides under invoice-cum-delivery challan dated 11.12.2006. The respondent company admitted the liability and issued two cheques and on presentation of the same, they came to be dishonoured and thereupon, the petitioner company initiated proceedings under Section 138 of the Negotiable Instruments Act by filing complaints before the XI Additional Chief Metropolitan Magistrate, Secunderabad and the said complaints are pending adjudication. He would also submit that the respondent company confirmed the balance due to the petitioner company on 30.3.2009 and also in subsequent letters dated 13.6.2009 and 13.7.2009. Learned counsel refers the letter emanating from the Managing Director of the respondent company acknowledging the debt of Rs.9,59,640/-. For better appreciation, I may refer the relevant portion of the letter dated 13.7.2009, which reads as hereunder:-

'To

General Manager-Legal

M/s.Coromandel Fertilisers Limited

1-2-10,Sardar Patel Road,

Secunderabad 500 003.

Sir,

Kind attention Mr.P.Varadarajan

Sub: Payment of our dues of Rs.9,59,640/- regarding

Ref: Your letter dated May 11, 2009 and our letter dated 13.6.09

With reference to our above letter, we inform that due to set back in recoveries arising out of delay in monsoon and its impact on realizations, we could not send you the remittance of dues amount of Rs.9,59,640/-lacs as promised to you.

The situation is expected to improve by end of this month. We hereby assure firm commitment that we will be clearing the dues of Rs.9,59,640/- lacks in piecemeal payments between 27th and 31st of this month without fail.

In view of the above we request you to kindly permit us time till end of this month to clear the dues. We request you to kindly bear with us for this delay and oblige.

Thanking you,

Yours faithfully,

FOR CHEMCEL BIOTECH LIMITED

KT VIJAYA KUMAR

Managing Director'

The said reply seems to be in response to the statutory notice issued to the respondent company under Section 434 of the Act. He would also contend that that the registered office of the respondent company is at Secunderabad, which is within the jurisdiction of this Company Court and therefore, this petition seeking for winding up of the respondent company is maintainable in this Court.

9. In support of his submissions, reliance has been placed on the judgment of the Supreme Court in M.Gordhandas & Company v. Madhu Woollen Industries Pvt. Ltd. (1972 24 Company Cases page 125), wherein the Supreme Court held that 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. Much emphasis has been laid by the learned counsel on the following observation of the Supreme Court;-

'Two rules are well settled. First, it the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The Court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. ( See In re London and Paris Banking Corporation [1874 L.R 19 Eq.444] . Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed (See In re Brighton Club and Norfolk hotel Co. Ltd. [ (1865)35 Beav. 204].

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 in re A Company [ (1894) 94 S.J 369]. Where, however, there is no debt 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 In 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'.

10. Learned counsel appearing for the respondent submits that the petitioner company allegedly supplied the pesticides for agriculture under Invoice-cum-delivery challan dated 11.12.2006 and as per the terms and conditions indicated in the invoice, the dispute, if any, is subject to Mumbai jurisdiction and therefore, this Court has no jurisdiction to entertain the petition seeking an order of winding up of the respondent company. He would also submit that B.Gopala Krishna who has filed the company petition on behalf of the petitioner company has not been authorized to file the company petition under Section 433(e) read with Section 434(a) and 439(1)(b) of the Act, and therefore, power of attorney which is placed on record does not authorise B.Gopala Krishna to institute proceedings against the respondent company under the provisions of the Act. Learned counsel laid much emphasis on clauses 3, 11 and 12 of the General Power of Attorney issued in favour of B.Gopala Krishna, Senior Accounts Officer of the petitioner company. By referring these clauses, he would contend that B.Gopala Krishna who is a signatory to the affidavit filed in support of the petition has not been specifically authorised to institute proceedings under the provisions of the Companies Act against the respondent company, in which case, the petition filed by B.Gopala Krishna on behalf of the petitioner company is liable to be dismissed in limini.

11. In support of his submissions, reliance has been placed on the decisions of the Supreme Court in M/s. Hanil Ear Textiles Ltd. V. M/s. Puromatic Filters (P) Ltd. (AIR 2004 SUPREME COURT 2432), Hind Overseas Private Ltd. V. Raghunath Prasad Jhunjhunwalla (AIR 1976 SUPREME COURT 565), Pradeshiya Industrial & Investment Corporation of U.P v. North India Petrochemicals Ltd. ((1994) 3 Supreme Court Cases 348) and the decisions of this Court in Ahmedabad Electricity Company Limited, Ahmedabad v. Sanghi Spinners (India) Ltd. (2006-ALD-4-749), Kitti Steels Ltd., Hyderabad v. Sanghi Industries Ltd., Hyderabad (2010(4) ALD 116) and the decisions of Gujarath High Court in Re Atul Drug House Ltd. (1971 Vo.41 Company Cases 352), Rishi Enterprises, In re. (1992 Vol. 73 Company Cases 271) and the decision of Karnataka High Court in Kanchanganga Chemical Industries v. Mysore Chipboards Ltd. (1998 Company Cases (vol.91) page 646)nd the decision of the Bombay High Court in Shantilal Khushaldas and Bros. Pvt. Ltd. vs.Chandanbala Sughir Shah (1992-TLMHH-0-156).

12. In reply, learned counsel appearing for the petitioner submits that under sub-section (3) of Section 10 of the Act, for the purpose of jurisdiction to wind up companies, the expression ‘registered office' means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.

13. According to the learned counsel, the registered office of the respondent company is at Secunderabad which is within the jurisdiction of this Court and therefore, this Court has jurisdiction to entertain this company petition. It is further contended by the learned counsel that the Managing Director of the petitioner company is empowered to delegate any of his powers except the powers mentioned in Clauses 4, 7 and 8 of the Power of Attorney and the special power of Attorney executed by the Managing Director in favour of B.Gopala Krishna, who instituted the company petition does not come within the exception clauses and therefore, the said Gopala Krishna has valid power to institute winding up proceedings against the respondent company under the provisions of the Act.

14. Before entering into the merits of the petition, two preliminary points are required to be considered. Firstly; Whether this Court has territorial jurisdiction to entertain the petition and secondly; whether Mr.B.Gopala Krishna is competent to file company petition on behalf of the petitioner company seeking an order of winding up of the respondent company.

15. POINT NO.1: Section 10 of the Companies Act, 1956 deals with the jurisdiction of Courts and it reads as hereunder:-

'10:Jurisdiction of Courts.

(1) The Court having jurisdiction under this Act shall be-

(a) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any District Court or District Courts subordinate to that High Court in pursuance of sub-section (2); and

(b) where jurisdiction has been so conferred, the District Court in regard to matters falling within the scope of the jurisdiction conferred, in respect of companies having their registered offices in the district.

(2) The Central Government may, by notification in the Official Gazette and subject to such restrictions, limitations and conditions as it thinks fit, empower any District Court to exercise all or any of the jurisdiction conferred by this Act upon the Court, not being the jurisdiction conferred-

(a) in respect of companies generally, by (section 237, 391, 394, 395 and 397 to 407, both inclusive;

(b) in respect of companies with a paid-up share capital of not less than one lakh of rupees, by Part VII ( (section 425) to (section 560) and the other provisions of this Act relating to the winding up of companies.

(3) For the purposes of jurisdiction to wind up companies, the expression "registered office" means the place which has longest been the registered office of the company during the six months immediately preceding the presentation of the petition for winding up.'

A plain reading of the above-referred section indicates that it is only the High Court, where the registered office of the company is situated, which can hear the petition for winding up of the company.

16. Indisputably, the registered office of the respondent company is situated at Secunderabad, which is within the territorial jurisdiction of this High Court. Therefore, this Court has territorial jurisdiction to entertain the petition seeking an order of winding up. The point is answered accordingly.

17. POINT NO.2: The petition has been filed by Sri B.Gopala Krishna, authorised signatory of the petitioner company. A copy of the power of attorney executed by the Managing Director of the petitioner company has been filed along with the petition. This power of attorney is dated 02.7.2007. The Board of Directors of the Company in the meeting held on 18.1.2006 granted specific powers to Mr.V.Ravichandran, detailed in the draft Deed of Power of Attorney. The resolution finds place at Page No.12 of the material papers filed along with the petition and it reads as hereunder:-

'RESOLVED

XXX

XXX

THAT the Company do grant to Mr. V.Ravichandran the specific powers detailed in the draft Deed of Power of Attorney tabled at the meeting and initialled by the Chairman for the purpose of identification.

THAT Mr.A Vellayan, Chairman, be and is hereby authorised execute and deliver the said Deed of Power of Attorney on behalf of the Company and that the Common seal of the Company be affixed to the said Deed of Power of Attorney in the presence of any one Director and the Company Secretary in accordance with the Articles of Association of the Company.

THAT Company Secretary be and is hereby authorised to take and do all such actions/things as necessary, to give effect to the aforesaid appointment including steps required to obtain approvals, if any, required in this regard'.

18. The Ficom Organics Limited came to be dissolved and its assets and liabilities came to be vested with the petitioner company under a scheme of amalgamation. The scheme of amalgamation between Ficom Organics Limited and the petitioner company came to be approved by this Court as per the order dated 10.4.2007 passed in Company petition No.21 of 2007. Copy of the order passed by this Court finds place at Page No.13 of the material papers filed along with the petition.

19. The resolution passed by the Board of Directors of the petitioner company giving specific powers to Mr. V.Ravichandran was much earlier to the approval of the scheme by this Court as to amalgamation of Ficom Organics Ltd with the petitioner company. A copy of the Power of attorney executed in favour of B.Gopala Krishna dated 02.7.2007 is placed on record. The powers are enumerated under clauses 1 to 13, which read thus:-

1) To file civil suits, such as money suits, specific relief etc., in any Court of India under the Code of Civil Procedure for recovery of sums due to the Company from dealers of Fertilisers or Pesticides or both.

2) Filing of Criminal complaints in any Court in India under Section 138 of the Negotiable Instruments Act, 1881 as amended by the Banking, Public Financial Institutions & Negotiable Instruments Laws (Amendment) Act, 1988 against the defaulted dealers of Fertilisers or Pesticides or both.

3) To sign and verify plaints, written statements, petitions, vakalats, claims and objections, and memorandum of all kinds and to present them in any Court in India and offices.

4) To accept service of all summons notices and other judicial process and to issue summons, notices and other judicial process on behalf of the company in this regard.

5) To appoint advocates, or other practitioners, agents or attorneys to appear and act for the Company in any Court in India and offices or other forums and to depose evidence on behalf of the Company in relation to the said civil cases.

6) To file and receive back documents to deposit and withdraw money, and to obtain refund of stamp duty and court-fees in and from any Court of India and offices.

7) To file an application for execution of a decree or order passed in the said appeal and to sign and verify such application.

8) To take delivery on behalf of the Company or take possession on behalf of the Company of property or goods purchased or of money realised in execution of decrees or orders of any Courts and authorities.

9) To obtain copies of documents and papers from any Court of India and offices of the Court

10) To file appeals, revisions and/or reviews for and on behalf of the Company before any Court in India and to appoint advocates and sign vakalats and to accept service on behalf of the Company in connecton with such proceedings as above mentioned.

11) Subject to the approval of the Chairman or any Director of the Company, to compromise or settle the cases by receiving dues either by way of cheques/demand drafts or other means on behalf o f the company and issue proper receipts so as to bind the Company in regard to the above proceedings.

12) Generally to do all other lawful acts, deeds things and matters as the Attorney may deem fit and necessary for the exercise of the aforesaid powers vested in him.

13) In this Deed, the term 'Court' shall mean and include any Court, Tribunal or othe

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r judicial or Quasi-judicial authority' 20. Mr.Ch.Ramesh Babu is correct in pointing out that the power to file suits and/or proceedings for the recovery of the amounts due or becoming due cannot be held to embrace the power to institute proceedings for winding up under the Companies Act. Proceedings for winding up under Section 433 of the Companies Act can by no stretch of imagination be equated to suits or for that matter suits for recovery of money. In the winding up proceedings, the lis is not merely between the petitioning party and the company sought to be wound up. Once the petition is admitted, creditors, contributories, shareholders, etc., seek redress in the proceedings and even oppose the winding up. The company is directed to be wound up depending upon a case made out whereupon the assets are taken over and distributed in accordance with the provisions of the Companies Act and the Rules. A suit for recovery of money is essentially a suit between the parties where no third party can seek any indulgence or impleadment. The proceedings under the Companies Act for winding up are entirely different, a special remedy provided for and the idea is not to restrict the proceedings to the parties alone and its range is widened and all steps taken in winding up proceedings are in public interest. Sometimes the relief for winding up is denied when it is against public interest. The settled principle is that powers of attorney must be strictly construed, the rationale behind that principle being that the powers given are not abused by the agents and the actions are restricted within and only to the extent the power is indicated or given. Even when one reads the power as a whole what it boils down to is this: that the constituted attorney, B.Gopala Krishna is authorised to sign and verify plaints, written statements, petitions, vakalats, claims and objections and memorandum of all kinds and to present them in any Court in India and offices and to file appeals, revisions and/or reviews for and on behalf of the Company before any Court in India and to appoint advocates and sign vakalatsand to accept service on behalf of the Company in connection with such proceedings as above mentioned. It will be difficult to read that the powers conferred on the constituted authority will include winding up proceedings. 21. Since B.Gopala Krishna, who verified the contents of the petition has no authority to initiate winding up proceedings against the respondent company, the Company Petition is liable to be dismissed and accordingly, the same is hereby dismissed. No order as to costs.
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