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Shri Laxmi Cotton Traders Ltd., v/s Sree Sanku Chakara Mills Ltd.,

    O.S.A.No.18 of 2002
    Decided On, 01 July 2008
    At, High Court of Judicature at Madras
    For the Petitioner : V. Narayanaswami, Advocate. For the Respondent:----

Judgment Text
Original side appeal preferred under Sec.483 of the Companies Act read with Clause 15 of Letters Patent against the order passed in C.P.No.425 of 2000 dated 15.2.2001.

M. Chockalingam, J.

This appeal is brought forth by the appellant namely the petitioner in C.P.No.425 of 2000, whereby the appellant/petitioner sought the winding up of the respondent company under Sec.433 (e) of the Companies Act for the reasons stated therein.

2. The learned Counsel for the appellant is heard. Despite the paper publication effected, the respondent has not appeared.

3. The appellant sought the winding up with the short allegations that there were supply of cotton made by the petitioner's factory to the respondent company; that the outstanding amount on that account as on 31.3.1998, was to the tune of Rs.10,24,252.80; that despite number of letters making the demand, and requests made, and in particular, a letter dated 17.11.1997, though served upon the respondent, they have not made the payment as per the demand; that further, the appellant came to know that amounts exceeding Rs.25 lakhs were to be realized from others; that there was a promise by the respondent to make the payment, but not done so; that the respondent company came forward to execute a mortgage which it did not; that the appellant came to know that the respondent is under financial crisis and outstanding balance is also there; that under the circumstances, a statutory notice as one contemplated under the law, was also issued which was returned unserved on 13.5.1999; that the respondent company was not able to pay its debts exceeding the limit, and hence, it has got to be wound up.

4. The petition was countered by the respondent stating that the allegations found therein, are false; that it is not correct to state that there was a balance of Rs.10,24,252.80; that it is true that there was a supply of cotton; but, the cotton supplied was of substandard quality; that it is also a disputed fact; that apart from that, there was no demand made; that there was no service of notice at all; that further, there was no financial crisis at all as put forth; that issues have got to be framed and decision has got to be taken on that; that what is the actual liability has got to be decided; that it was a device invented by the appellant in order to pressurize the respondent company to make the payment to which the appellant is not entitled to, and hence, the petition was to be dismissed.

5. The said petition was taken up for enquiry by the learned Single Judge. On enquiry, the petition was dismissed. Now, the instant appeal has arisen therefrom.

6. The learned Counsel for the appellant with vigor and vehemence would submit that in the instant case, the reasons adduced by the learned Single Judge for rejecting the request of the petitioner for winding up the respondent company, were erroneous. According to him, the appellant has clearly proved the authenticity of the letter dated 3.12.1997, sent by the Joint Managing Director of the respondent company, and apart from that, a demand has also been made by a letter, and it was actually served upon them, and number of reminders were also sent. Learned Counsel would further submit that the respondent was switching over its office from place to place, and hence, it could not be served all along; that there was a telegraphic message issued; that in the instant case, there was no triable issue at all; that as far as the liability is concerned, by a letter dated 3.12.1997, the same has been admitted by the Joint Managing Director of the respondent company, and under the circumstances, it cannot be disputed.

7. Added further the learned Counsel that there was a definite liability as per the demand; that apart from that, the question as to the disputed liability on the basis that the cottons supplied were of substandard quality, cannot be countenanced, since it was never raised in any of the communications made by the respondent; that under the circumstances, there was a definite liability; that the respondent was unable to pay, and hence, the order of the learned Single Judge has got to be set aside and winding up be ordered.

8. The Court paid its anxious consideration on the submissions made and also looked into the materials available. After doing so, this Court is of the considered opinion that the order of the learned Single Judge has got to be sustained for more reasons than one.

9. The company petition was filed under Sec.433(e) of the Companies Act, which would require that there must be a liability, and it must be definite, and also there should be a statutory notice to make a demand. Apart from that, there should not be any questions triable by the Court. In the case on hand, it is an admitted position that there was a supply of cotton by the appellant's factory to the respondent company. Firstly, it is pertinent to point out that according to the petitioner, there was an outstanding amount to the tune of Rs.10,24,252.80, and that was the liability. Now, according to the respondent, the cotton which was supplied, was of substandard quality, and they were not liable to pay to that extent. Hence, there was an issue to be tried and decided in that regard.

10. Secondly, there was a demand made, according to the appellant, by way of a letter dated 17.11.1997, as required by law. It remains to be stated that as rightly pointed out by the learned Single Judge, there was no proper material available to indicate the service of the said notice, in the absence of which, it cannot be stated that there was a demand.

11. Thirdly, the learned Counsel for the appellant made much reliance on the letter dated 3.12.1997, as if it was an admission of liability made by the Joint Managing Director of the respondent company. Though the said letter was found in the letter head of the respondent company, the same was categorically denied, and hence, it has got to be proved for which it requires evidence.

12. Apart from all the above, it could be seen in the instant case, that the balance sheet as to the assets and liabilities was placed before the Court, at the time when the matter was taken up for enquiry, and the balance sheet as on 31.3.1999, would show that the respondent had fixed the assets to the tune of Rs.268.64 lakhs and also the current assets at Rs.198.90, and the liabilities were shown as Rs.220.60 lakhs. Further, it

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is true that the respondent company, as per the balance sheet, incurred certain loss; but, the same did not mean that it was not able to discharge its liability to the appellant. It is well settled proposition of law that the winding up petition at the instance of the creditor cannot be a device to pressurize the debtor to make the payment. In the instant case, it can be well stated that though it ostensibly looks like a winding up proceeding, it is nothing but a device invented by the appellant in order to pressurize the respondent to make the payment. Under the circumstances, the learned Single Judge was perfectly correct in rejecting the petition both factually and legally. Hence, this appeal stands dismissed. No costs.