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

Mannesmann Rexroth (India) Limited v/s National Engineering Industries Limited

Company & Directors' Information:- NATIONAL ENGINEERING INDUSTRIES LIMITED [Active] CIN = U29130WB1946PLC013643

Company & Directors' Information:- D P ENGINEERING INDUSTRIES LIMITED [Active] CIN = U27310DL2008PLC176856

Company & Directors' Information:- A K ENGINEERING INDUSTRIES (INDIA) PRIVATE LIMITED [Active] CIN = U25206DL1997PTC085204

Company & Directors' Information:- G L ENGINEERING INDUSTRIES PRIVATE LIMITED [Active] CIN = U28920MH1981PTC023662

Company & Directors' Information:- THE INDIA COMPANY PRIVATE LIMITED [Active] CIN = U74999TN1919PTC000911

Company & Directors' Information:- B V M ENGINEERING INDUSTRIES LIMITED [Active] CIN = U28111DL1972PLC005983

Company & Directors' Information:- R R R ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1993PTC055069

Company & Directors' Information:- INDIA CORPORATION PRIVATE LIMITED [Active] CIN = U65990MH1941PTC003461

Company & Directors' Information:- A. V. ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1974PTC007360

Company & Directors' Information:- G D R ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U27109UP1971PTC003388

Company & Directors' Information:- L S ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U74899DL1977PTC008484

Company & Directors' Information:- I B I ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U45202PB1974PTC003422

Company & Directors' Information:- A H B ENGINEERING INDUSTRIES PVT LTD [Strike Off] CIN = U35999WB1988PTC044786

Company & Directors' Information:- O K ENGINEERING INDUSTRIES PRIVATE LTD [Active] CIN = U74899DL1987PTC027660

Company & Directors' Information:- R P ENGINEERING INDUSTRIES PRIVATE LIMITED [Strike Off] CIN = U99999DL1973PTC006781

Company & Directors' Information:- NATIONAL INDIA ENGINEERING PVT LTD [Strike Off] CIN = U27100MH1946PTC004895

Company & Directors' Information:- S V ENGINEERING INDUSTRIES PVT LTD [Under Liquidation] CIN = U74210TG1981PTC003174

Company & Directors' Information:- THE NATIONAL ENGINEERING COMPANY (INDIA) LIMITED [Dissolved] CIN = U99999MH1935PTC002259

    A.C.O 207 of 2002, A.P.O.T 831 of 2002, C.P 114 of 2000, A.P.O 65 of 2003

    Decided On, 28 July 2006

    At, High Court of Judicature at Calcutta


    For the Appearing Parties: Hirak Mitra, S. Mukherjee, Soumen Sen, Utpal Bose, S.N. Mukherjee, D. Nath, Niloy Sen Gupta, Indranil Karga, Advocates.

Judgment Text


(1.) This appeal is at the instance of an applicant under sections 433, 434 and 439 of the Companies Act, 1956, and is directed against the order dated 4th September, 2002 passed by a learned Single Judge of this Court thereby dismissing the application for winding up.

(2.) The appellant before us filed an application before the Company Court under sections 433, 434 and 439 of the Companies Act, 1956 thereby praying for an order of winding up of the National Engineering Industries Limited, the respondent herein, on the allegation that by virtue of various agreements between the petitioning-creditor and the company, the former supplied goods on behalf of the latter for the modernisation of the Rourkela Steel Plant, the value of those aggregating to Rs. 10,35,30,147.07 but out of those amount, only a sum of Rs. 6,71,87,352/- was paid by the company thereby keeping a sum of Rs. 3,63,42,795.07 as due and payable. According to the petitioning-creditor, in spite of repeated requests of the creditor, the company had failed to pay the balance amount of Rs. 3,53,42,795.07 which included the accrued interest of Rs. 1,96,32,992.00 to the petitioning-creditor. It was further alleged that there was specific admission on the part of the company to pay-off the dues of the petitioning-creditor but the company had failed to honour the same. It is alleged that in a meeting held between the parties, the company committed to pay Rs. 95 lakh and that too, excluding the preliminary acceptance certificate, commissioning and final acceptance certificate but ultimately, paid Rs. 40 lakh out of the said amount of Rs. 95 lakh. Accordingly, a notice in terms of section 434 of the Act was given by the Advocate of the petitioning-creditor and after receiving the said letter, the company raised frivolous disputes which would be apparently proved to be baseless as would appear from the minutes of the meeting between the parties dated 23rd March, 1999 where specific commitment was made; hence the application.

(3.) The aforesaid application was contested by the respondent by filing affidavit-in-opposition and in the affidavit, it was specifically asserted that no amount whatsoever was due and payable by the company to the petitioning-creditor and on the other hand, the company was entitled to a sum of Rs. 53,88,316/- from the petitioning-creditor being the liquidated damages for both the delay and the non-fulfilment of performance-guarantee as was agreed upon subject to a maximum of 10 per cent of the contract price. It was further contended that the company was entitled to claim various amounts on account of defective circulation of pumps and other related components supplied by the petitioner which were not according to the prescribed specification. The further defence of the respondent was that the PAC equipments supplied by the petitioner was rejected by the Rourkela Steel Plant for a value of Rs. 68,50,000/- as the same, not being of the required quality, did not serve any useful purpose.

(4.) It was further stated that the Rourkela Steel Plant further deducted an amount of Rs. 13,00,000/- from the sum payable to the company on account of the defect in the accumulator used in the Coil Conveyor. The further claim of the respondent was that it was entitled to a sum of Rs. 89,464/-, Rs. 8,81,710/- and Rs. 4,98,763/- respectively, on account of tax deducted at source, deduction due to Excise and the Central Sales Tax respectively.

(5.) In affidavit-in-reply, the petitioning-creditor denied those allegations.

(6.) As mentioned earlier, the learned Company Court by the order impugned herein has prime facie arrived at a conclusion that in view of the allegations and the counter-allegations, the Court was unable to come to any conclusion that the disputes raised by the company were not bona fide ones and therefore, it was a fit case where the application should not be entertained.

(7.) Being dissatisfied, the petitioning-creditor has come up with the present appeal.

(8.) Mr. Mitra, the learned senior Advocate appearing on behalf of the appellant strenuously contended before Us that the findings of the learned Company Court were based on no material and as such, the same cannot be approved. Mr Mitra contends that in view of the minutes of the parties recorded in the month of March, 1999, it was clear that the subsequent defence taken in reply to the notice of winding up and in the affidavit-in- opposition were apparently a cooked-up defence only for the purpose of avoiding the winding up. Mr. Mitra contends that there is no material to indicate that his client was the sole supplier for the modernization of the Rourkela Steel Plant and as such, there is no scope of arriving at the conclusion that the amount claimed by Rourkela Steel Authority was actually payable for the fault committed by his client. Moreover, Mr. Mitra contends that if goods supplied were defective, in terms of section 42 of the Sales of Goods Act, such rejection must be communicated within a reasonable period and the company could not show that any such notice was ever served upon the petitioning-creditor disclosing rejection of the materials supplied. He, therefore, prays for setting aside the order impugned.

(9.) Mr. Bose, the learned Advocate appearing on behalf of the respondent- company, has, on the other hand, opposed the aforesaid contentions of Mr. Mitra and has contended that there being no admitted amount due and payable and the disputed questions of fact having been raised, the Company Court was not capable of adjudicating such disputes particularly when his client has claimed further amount from the petitioning-creditor by way of counter-claim. Mr. Bose 'submits that in the facts of the present case, the learned Trial Judge having exercised discretion in favour of his client, this Court sitting in appeal should not interfere with such discretion. He, therefore, prays for dismissal of the appeal.

(10.) After hearing the learned Counsel for the parties and after going through the materials on recorded we find that in this case undisputedly there were various agreements between the parties for the supply of a variety of items of machinery for the modernisation of Rourkela Steel Plants and for a long time, the appellant had been supplying those goods on behalf of the respondent. As indicated earlier, the appellant claimed that out of total claim of Rs. 10 crore and more, only Rs. 6 crore and odd were paid and as such, more than Rs. 3 crore were still payable. The defence of the company, on the other hand, is that due to defective supply of goods and for not supplying the goods within the time, the company has not only suffered liquidated damages but the appellant is also liable to pay to the respondent-company huge amount for the breach of the terms of the agreement. Apart from that claim, various other sums were also claimed.

(11.) It is now settled law that in a petition for winding up in terms of the provision of the Companies Act, unless the Court comes to the conclusion that company is admittedly a debtor and is unable to pay the admitted amount, such application should not be entertained. In the case before us, we find that the company has also made counter-claim against the creditor. It is now settled law that when this type of claim and counter-claim are made, the Company Court should ask the parties to resolve their dispute in ordinary forum unless the defence taken by the company is found to be apparently frivolous. Winding up petitions are all disposed of on the basis of affidavits and it is beyond the competence of the Company Court to resolve the disputes of this type where there is no admission on the part of the company as regards the claim or any part of the claim of the creditor. In the case before us, it is true that in the month of March, 1999, the Company agreed to pay Rs. 95 lakh within a specified period, but that was not unconditional and some duty was also cast upon the petitioning-creditor. There is also no dispute that the agreement between the parties subsisted for years and payments were made on account. Whether the claim of the respondent-company is justified or not can be ascertained only if evidence is taken in detail. From the materials that have been placed before us, we are not in a position to arrive at the conclusion that the defence of the company is a mala fide one or that there is no scope of adjudication of the dispute.

(12.) In our view, the learned Company Court followed the correct principles of law and thus, did not entertain the application. Even if, ultimately, some amount may be found to be due and payable to the appellant, for that reason the jurisdiction of the Company Court should not be invoked for winding up of the company and the said procedure should not be adopted as a tool of oppressing the company.

(13.) We, therefore, find that this is not a fit case where we should interfere with the order passed by the Company Court.

(14.) We now propose to deal with the following decisions citied by Mr. Mitra : (i) John Herbert and Co. Pvt. Ltd. vs. Pranay Kumar Dutta, reported in 70 CWN 516. (ii) Madhusudan Gordhandas and Co. vs. Madhu Woolen Industries Private Ltd. and Ore., reported in AIR 1971 SC 2600. (iii) SRC Steel (P) Ltd. vs. Bharat Industrial Corporation Ltd., reported in 2005(4) CHN 343.

(15.) In the case of John Herbert and Co. Pvt. Ltd. vs. Pranay Kumar Dutta (supra), the question before the Appellate Court was whether the order passed by the Company Court refusing to stay further winding up proceeding after the same was entertained should be interfered in appeal. While considering such case, the Division Bench was of the view that the Court should entertain an application for stay of winding up at the initial stage only with a view to find out whether the petition for winding up amounted to an abuse of the process of the Court and as such, ought to be restrained. According to the Division Bench, in rejecting such application the Court merely decided that there was a prima facie case for enquiry and it could not then and did not in fact adjudicate upon the rights of the parties and, therefore, the same was not a judgment under Clause 15 of the Letters Patent.

(16.) We fail to appreciate how the said decision can have any application to the facts of the present case where the learned Company Court has rejected the application for winding up after a finding that there is genuine scope of detailed enquiry as to the claim of the petitioning creditor in view of the defence taken by him. Therefore, the said decision cannot have any application to the facts of the present case.

(17.) In the case of Madhusudan Gordhandas and Co. vs. Madhu Woolen Industries Private Ltd. and Ors. (supra), the Supreme Court while considering the scope of section 433 of the Act held that the principles on which the Court acts are, first, that the defence of the company is taken 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. In the case before us, the learned Company Court after considering the materials on record came to the conclusion that there was bona fide claim of the defendant, which should not be adjudicated in a summary manner. The finding recorded by the learned Company Court cannot be said to be perverse. It is now settled law that in the matter of exercise of discretion by a Trial Court, the Appellate Court should be slow to disturb the same and merely because from the self-same facts another view is possible, that is no ground for interference unless it is established that the Trial Court proceeded on a wrong approach by not following the well-established principles which are required to be followed while exercising discretion in one way or the other. We find that the learned Single Judge, in the case before us, followed the well-settled principles which are required to be considered while entertaining an application for winding up and did not ignore any important material on record, which if considered, would affect the ultimate conclusion. At this stage, it will be profitable to refer to the observation of the Supreme Court in the case of Gujarat Steel Tube Limited vs. Its Mazdur Sabha, reported in AIR 1980 SC 1896, where the Apex Court while considering the scope of an appeal against the discretionary orders reiterated the well-settled proposition of law that the Appellate Court interferes not when the order appealed is not right but only when it is clearly wrong. The difference, the Apex Court observed, is real though fine. We, therefore, find that the said decision does not help Mr. Mitra's client in any way.

(18.) In the case of SRC Steel (P) Ltd. vs. Bharat Industrial Corporation Ltd. (supra), a Division Bench of this Court was considering an appeal preferred against an order passed by the Company Court whereby a petition for winding up of the appellant company was admitted and direction for advertisement was given. In such a context, the Division Bench held that the most important question was whether the debt, which is the subject- matter of winding up noti

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ce, was a "bona fide disputed one" or not. According to the Division Bench, if the company raises a defence in good faith and has a defence in law which is likely to succeed or adduces sufficient prima facie proof of the defence it seeks to raise, then and in that event, the winding up petition should not be admitted and the advertisement would not be directed. According to the Division Bench, the discretion of the Company Court in admitting a winding up petition is exercised after bona fide nature of the defence is decided upon. According to the said Division Bench, if the proof of debts was indisputable, the Court will be compelled to admit the winding-up petition and the Company Court could admit such petition only upon a finding that the debt is indisputable and the defence of the company is bogus, mala fide or moonshine. The Appellate Court, in that case, ultimately, allowed the appeal by setting aside the order of the Company Court. (19.) The aforesaid decision in our opinion rather supports the respondents. In this case, the Company Court, in our view, rightly arrived at the conclusion that the claim of the petitioning-creditor was not indisputable and that there was bona fide defence of the Company. (20.) We, thus, find that the decisions cited by Mr. Mitra are of no avail to his client. (21.) We, accordingly, dismiss this appeal. In the facts and circumstances, there will be, however, no order as to costs. Appeal dismissed.