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Sarabhai Machinery Vs. Haryana Detergents Ltd. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtPunjab and Haryana High Court
Decided On
Case NumberCompany Petition No. 68 of 1982
Judge
Reported in[1986]60CompCas169(P& H)
ActsCompanies Act, 1956 - Sections 433, 434, 434(1) and 439; Companies (Court) Rules, 1959 - Rules 9, 101 and 102
AppellantSarabhai Machinery
RespondentHaryana Detergents Ltd.
Appellant Advocate R.L. Batta, Adv.
Respondent Advocate R.K. Talwar, Adv.
Cases ReferredSeethai Mills Ltd. v. N. Perumalsamy
Excerpt:
.....is necessary to be satisfied under section 434(1)(a) is that there must be a creditor and to that creditor the company must be indebted in a sum exceeding rs. hence we are of the opinion that even a decree-holder in respect of a money decree can institute proceedings under section 434(1)(a) if the other requirements of that provision are satisfied. it is well-settled that if a decree is passed against a person, it is binding on him till it is set aside. it is also well-settled that laws of procedure are the handmaid of justice and meant to advance it. i do not find any merit in this submission as well. the court passed an order to convene a meeting of the unsecured creditors in order to obtain their approval, but for reasons best known to itself, the respondent did not deposit the..........by the respondent on the grounds that as the petitioner did not execute the judgment of the delhi high court, the petition is not maintainable; that the petitioner did not amendthe earlier petition but filed absolutely a new petition; that the respondent intends to file an appeal against the judgment of the high court; that the petitioner was liable to pay stamp fee of rs. 260, but it did not do so and that the petition was required to be filed within a period of three weeks but it was not filed within the said period.6. the first question for determination is whether without executing the judgment of the delhi high court, the present petition is maintainable. there is no dispute about the salient facts of the case. the petitioner served a notice dated september 11, 1980, on the.....
Judgment:

Rajendra Nath Mittal, J.

1. Briefly the. facts are that M/s. Delhi Cloth Mills filed the present petition under Sections 433, 434 and 439 of the Companies Act, 1956 (hereinafter referred to as 'the Act'), for ordering winding up of the respondent. After hearing the parties, the petition was ordered to be advertised, vide order of this court dated October 20, 1983, under Rule 96 of the Rules. It was accordingly advertised by the then petitioner.

2. M/s. Sarabhai Machinery, the present petitioner, filed C. A. No. 74 of 1984 under Rules 101, 102 and 9 of the Companies (Court) Rules, 1959, in the main petition for substituting it as petitioner, in case M/s Delhi Cloth Mills abandoned the same. Subsequently, the respondent in view of the compromise arrived at between the parties, paid the amount to Delhi Cloth Mills and the latter agreed to get its petition dismissed. Consequently, M/s Sarabhai Machinery was allowed to be substituted as the petitioner, vide order dated May 24, 1984. Later, it was allowed to file the amended petition, vide order dated December 13, 1984, within a period of three weeks. In pursuance of that order, the petitioner filed the amended petition on January 10, 1985.

3. It is averred in the petition that the petitioner installed a synthetic detergent plant for the respondent-company in pursuance of a contract dated March 19, 1975, and that an amount of Rs. 21,67,208-15 is due from the respondent. In addition, the petitioner is entitled to charge interest on the said amount at the rate of 18% per annum with effect from December I, 1979, till the date of realisation. In view of the arbitration clause in the agreement, the matter was referred to the arbitration of Mr. Ajit H. Mehta, Advocate, who gave the award dated June 27, 1983 (annexure P. 1), and held that the abovesaid amount was due to the petitioner from the respondent. The award was made a Rule of the court at the instance of the petitioner by the High Court of Delhi, vide judgment dated May 18, 1984 (annexure P. 1). The petitioner, it is further stated, incurred an expense of Rs. 19,000 in the arbitration proceedings and is entitled to recover it from the respondent.

4. The case of the petitioner further is that it served a notice under Sections 433 and 434 of the Act dated September 11, 1980 (annexure P. 3), to pay the amount of Rs. 21,67,208-15 but in spite of that the amount was not paid. Consequently, it was prayed that the respondent-company be ordered to be wound up.

5. The petition has been contested by the respondent on the grounds that as the petitioner did not execute the judgment of the Delhi High Court, the petition is not maintainable; that the petitioner did not amendthe earlier petition but filed absolutely a new petition; that the respondent intends to file an appeal against the judgment of the High Court; that the petitioner was liable to pay stamp fee of Rs. 260, but it did not do so and that the petition was required to be filed within a period of three weeks but it was not filed within the said period.

6. The first question for determination is whether without executing the judgment of the Delhi High Court, the present petition is maintainable. There is no dispute about the salient facts of the case. The petitioner served a notice dated September 11, 1980, on the respondent to pay the amount. After the service of the notice, the matter was referred to the arbitrator who passed an award in favour of the petitioner which was made a Rule of the court by the Delhi High Court on May 18, 1984. However, no proceedings for execution have been taken by the petitioner so far.

7. With this background, it will be appropriate to notice the relevant provisions of the Act. Section 433 provides that a company may be wound up by the court if it is unable to pay its debts. The expression ' when the company is unable to pay its debts ' has been dealt with in Section 434 which reads as follows :

' 434. (1) A company shall be deemed to be unable to pay its debts,--(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor ; or

(6) if execution or other process issued on a decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company....'

8. It is evident from the section that a company is deemed to be unable to pay its debts if any of the conditions in Clauses (a) to (c) is satisfied. The case of the petitioner squarely falls in Clause (a) of Sub-section (1) of Section 434 as it has served a demand notice on the company. A contention has been raised by Mr. Talwar that the petitioner has obtained a decree of the amount after service of the notice and, therefore, the present case is not covered by Clause (a) but is covered by Clause (b). He argues, the petitioner cannot take the benefit of Clause (b) as it did not execute the judgment of the Delhi High Court. I am not impressed with this submission. It is well-settled that Clause (a) is a general clause and applies to all sorts of debts including a judgment debt. It is true that in the case of a judgment debt, the creditor can take the benefit of Clause (b). But that does not mean that he cannot take the benefit of Clause (a) as both the clauses are not exclusive of each other. Similarly, if a creditor after serving notice on the company, obtains a decree against it, he can still take the benefit of Clause (a) as, after the decree, neither the character of the creditor nor that of the debt is changed. In the above view, I am fortified by the following observations of a Division Bench of the Madras High Court in Seethai Mills Ltd. v. N. Perumalsamy [1980] 50 Comp Cas 422, 424 :

' A creditor, who has instituted a suit and obtained a decree against the company, will still be a creditor of the company to whom money is due by the company. It may be that the original debt had merged in the decree and the person who was originally a creditor had become a decree-holder afterwards, but that does not in any way destroy his character as a creditor or the character of the money due to him from the company as a debt. As a matter of fact, Section 434(1)(a) does not even use the word 'debt' and it merely states to whom the company is indebted in a sum exceeding five hundred rupees then due. Consequently, all that is necessary to be satisfied under Section 434(1)(a) is that there must be a creditor and to that creditor the company must be indebted in a sum exceeding Rs. 500 then due and that creditor must have served a notice on the company and the company had not complied with the demand within three weeks from the date of the service of the notice. Even a judgment debtor in respect of a money decree can be said to be indebted to the decree-holder, who would be a creditor. Consequently, in our opinion, there is no mutual exclusion between Section 434(1)(a) and 434(1)(b) of the Act and there is a region common to both, which may be said to overlap. Hence we are of the opinion that even a decree-holder in respect of a money decree can institute proceedings under Section 434(1)(a) if the other requirements of that provision are satisfied.'

9. Consequenty, the petitioner, without executing the judgment of the Delhi High Court, can claim the benefit of Clause (a) as he had served the requisite notice under the said clause.

10. The second question for determination is, whether the petitioner while amending the petition has changed it in toto and if so, with what effect. Admittedly, the petitioner was entitled to amend the petition in view of the order of this court dated December 13, 1984. After the amendment, the petitioner had to plead the facts of his case and omit the facts relatingto the original petitioner. In the circumstances, it is natural that the petition appears to be a new petition. But it could not be helped. It has not been brought to my notice which of the facts included now are unnecessary and how the respondent has been prejudiced by pleading those facts. The objection appears to be too technical. Consequently, I do not find any merit in it.

11. The third question that requires determination is that if the respondent intends to file an appeal against the judgment of the Delhi High Court, whether the petitioner is not entitled to file an application for winding up. It is well-settled that if a decree is passed against a person, it is binding on him till it is set aside. Therefore, it cannot be held that because the respondent wants to file an appeal against the judgment of the Delhi High Court, no amount is due from it and, therefore, the petitioner is not entitled to file an application for winding-up.

12. The fourth question that arises for decision is, whether the petitioner is liable to pay fresh court-fee on the amended petition. The learned counsel for the respondent has not drawn my attention to any provision of law under which a substituted party in a petition under Sections 433, 434 and 439 is liable to pay fresh court-fee on the amended petition. Moreover, Rule 102 of the Rules provides that the amended petition shall be treated as the petition for the winding-up of the company and shall be deemed to have been presented on the date on which the original petition was presented. After taking into consideration all the circumstances, I am of the view that the petitioner is not liable to pay fresh court-fee on the amended petition.

13. The fifth question that requires determination is that if the amended petition was not filed within a period of three weeks as ordered but six days thereafter, whether it is liable to be dismissed on this ground. Section 148 of the Code of Civil Procedure empowers a court to enlarge the period, if the period fixed by the court for doing an act has expired. It is also well-settled that laws of procedure are the handmaid of justice and meant to advance it. Therefore, I am not inclined to dismiss the petition on this technical ground and enlarge the period for filing the petition under the said section by six days.

14. Before parting with the judgment I may notice another contention of Mr. Talwar. He has urged that the respondent is a solvent company but has faced a setback due to the collapse of the joint sector projects under which it was set up. It is taking steps to revive and commence production and for that purpose it is leasing out the factory premises to M/s. Hindustan Lever Ltd. so that adequate funds be generated and debts of the company be liquidated. He submits that in this situation it will not be advisable to order winding-up of the company. I do not find any merit in this submission as well. The petition was filed as far back as 1982. During this period the respondent had been delaying the proceedings on one ground or the other. The machinery was installed by the petitioner as far back as 1975. A period of more than 10 years has elapsed but the payment has not been made by the respondent. During the pendency of the petition, the respondent had also filed a scheme. The court passed an order to convene a meeting of the unsecured creditors in order to obtain their approval, but for reasons best known to itself, the respondent did not deposit the requisite expenses and, therefore, the meeting for the said purpose could not be convened. Thus, it is evident that this contention has been raised by Mr. Talwar for the purpose of delaying the payment to the petitioner. Consequently, I reject the same.

15. For the aforesaid reasons, I order that the company be wound up. The order be advertised within a period of 30 days by the petitioner in the English and Hindi Tribunes and Haryana Government Gazette. The official liquidator is directed to take charge of the company.


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