N GOPALAKRISHNAN Vs. ASIANET SATELLITE COMMUNICATIONS LIMITED

JUDGEMENT

(1.) Appellant filed a petition Under Sub-section 433 and 439(1)(b) of the Companies Act, 1956 (hereinafter referred to as 'the Act') for winding up of the respondent-company alleging that the respondent company is unable to pay its debts which is one of the grounds for winding up of a company under Section 433 (e) of the Act. The learned Company Judge dismissed the application on the ground that (1) there was no statutory notice and (2) respondent-company bona fide disputed the claim.

(2.) It is the case of the appellant that he is a financial management consultant and sole proprietor of G.K.Financial and Management Consultancy Services. As per Annexure A extracts of the minutes/Board resolution of the Vth meeting of the Board of Directors, the company decided to avail the specialised services of the appellant for obtaining share capital, bank loan, NRI deposits etc. Rate of remuneration was also mentioned in Annexure A. By Annexure B letter dated 5-1-1994, appellant requested the respondent/company regarding settlement of the services. We quote the same:

(3.) By winding up, life of a company is put to an end. Therefore, winding up of a company can be ordered only very cautiously and carefully. A company can be ordered to be wound up if it is unable to pay its debts. For raising a presumption to that effect, firstly, a statutory notice should be served on the company demanding payment and the company has for three weeks neglected to pay or otherwise satisfy him. Failure to pay the amount in spite of several communications including service of statutory notice is an evidence of neglect and inability. Here, Annexure C invoice with covering letter was, admittedly, received by the company. That only shows that an invoice was raised by the appellant. That is based on Annexure B. Annexure B itself shows that rates are not fixed and the basis is not settled. It is true that demand as mentioned under Section 434 need not be in any special form. It is not even necessary to use the word 'demand' in the statutory notice. As stated in Palmer's Company Precedents, Part II, 17th edition, page 26 the use of the polite words, 'request' does not make it the less a demand, if it is stern enough to indicate that payment must be made. This Court in K. Suresh Shenoy v. Cochin Stock Exchange Limited (1988 (2) KLT SN 100 P.67 : (1989) 65 Comp. Cases 240 (Ker.) held that though in the notice sought to be given under Section 434(1)(a) it is not necessary that there should be an indication that it is given under Section 434(1)(a), there should be some indication given to the company that in case of non-compliance with the terms of the notice or demand, the creditor will take steps for winding up of the company. A contrary view was expressed by the Delhi High Court in Devendra Kumar Jain v. Polar Forgings and Tools Ltd. ((1985) 84 Comp. Cases 766). There it was held that it is not necessary that the notice should carry a wording that if the demand is not met, a winding up petition would be filed. A request for payment with interest can be treated as a valid demand and the law does not require that the demand must recite a 433 proceedings for winding up in case of nonpayment. In this case, no such demand notice was issued. Series of decisions were cited by both sides following both view points. Even if we accept the Delhi High Court decision, in this case, there was not even such a demand. Annexure C invoice/bill was forwarded for the first time. The respondent company informed that they are not liable to pay the amount for various reasons. Thereafter, after forwarding the bills, no further demand was made either in the form of a request, demand or notice. Only a bill is forwarded and the claims in the bill were not accepted by the other side. Thereafter, absolutely no notice or demand or request for payment was made. Mere sending of a bill for the first time cannot be treated as a notice or demand for the purpose of satisfying the statutory demand or notice as contemplated under Section 434(1)(a) of the Act. Therefore, we fully agree with the learned Company Judge (Justice P.K.Balasubramanyan as he then was) that mere handing over a bill or invoice with a request to pay the same cannot be construed as a notice within the meaning of Section 434(1)(a) of the Act. It is true that even in the absence of a notice, petitioner can adduce evidence to show that the company is unable to pay its debts and has become bankrupt. No evidence was also adduced by the appellant to show that the company is unable to pay its debts. In Annexure C, no time limit was also fixed for making payment. In this connection, we also refer to the decision of the Calcutta High Court in Pancham Tea Co. Ltd. v. Darjeeling Commercial Co. Ltd. ((1977) 47 Com. Cases 15 (Cal.).