G. MATHAI Vs. MANGALAM PUBLICATIONS INDIA (P) LTD.

JUDGEMENT

(1.) The petitioner has approached this court seeking winding up of the respondent company which is indebted to the petitioner. Though the respondent company has an authorised capital of Rs. 5 lakhs issued subscribed share capital is for Rs. 36,000 divided into 600 shares of Rs. 10 as revealed by the memorandum of association produced along with the petition. It is stated that respondent company had failed in submitting the annual returns to the Registrar of Companies as mandated by the provisions in the Companies Act, 1956. The petitioner submits that the respondent company is indebted to the petitioner for a sum of Rs. 31 lakhs as on 26.5.1995 for which the petitioner claims 24% interest from the said date.

(2.) The petitioner and the managing director of the company, Sri M.C. Varghese, have long personal relationship. The latter met the petitioner, who is a non-resident Indian in Germany and sought his assistance for purchasing a 'Komori' brand offset printing machine for the use of the company. The company wanted assistance of the petitioner who is experienced in the field of printing machinery. Acting on behalf of the company, the petitioner undertook enquiries, and he was given to understand that Sankyo Machinery Supply Inc. of Kobe, Japan could supply the machinery. So, both of them decided to visit Japan to negotiate the deal. They planned that the petitioner shall reach Kobe, Japan directly from West Germany and the managing director of the respondent company to join him in Japan from India. Though the petitioner reached Japan in the first week of Oct., 1994, Sri Varghese informed that he could not obtain visa from the Japanese consulate. Sri Varghese over telephone instructed the petitioner to proceed with the deal. The petitioner negotiated with the Japanese dealer who was willing to arrange the sale of machinery on payment of advance. The machinery was a running one and expenses have to be incurred in dismantling, and upto shipment. The petitioner was satisfied with the functioning. The Japanese demanded 8.5 million yen equal to Rs. 1.55 lakhs DM as advance to confirm the deal. Mr. Varghese as also Sajan Varghese, another director of the company, told the petitioner that the machinery was very essential for their business and requested to settle the purchase by payment of advance. They directed the petitioner to arrange payment on their behalf promising to repay the petitioner the amount within few weeks and the petitioner agreed to pay the advance on behalf of the company. They had also promised to meet the entire expenses on this account. It was on this firm understanding the petitioner paid the amount to the Japanese dealer, Sankyo Machinery Supply Inc. 8.5 million yen as advance for and on behalf of the respondent company. The petitioner demanded repayment of the money from Sri Varghese and also his son, Sajan Varghese. They were showing one or the other excuses stating that the company was undergoing a financial crisis and assured that the amount will be paid during the petitioner's next visit to India. As they were thick friends, the petitioner agreed to collect the amount during his next visit. This visit took place in Jan., 1995. Mr. Varghese sought two months' time for payment. The petitioner agreed as he also felt that the company was in financial crisis. Therefore, the petitioner again came to Kerala seeking repayment in April, 1995. The petitioner waited till last week of May and he could find that the company was unable to pay him as it was to meet several liabilities and was not in good financial position, to meet the liabilities. So, the petitioner was compelled to threaten the company (with) legal action for repayment. There was discussion between the petitioner and the managing director of the company in the presence of one Sri K. Susheelan, Chartered Accountant. During that discussion, he was promised that the amount would be paid in instalments taking into account the financial crisis faced by the company. The petitioner agreed to it. A letter, dated 26.5.1995 evidencing the agreement to pay the amount in instalments was issued to the petitioner. Annexure C is that letter which contains the schedule of payment. But, the agreement reached during the discussion and undertaking as contained in Annexure C were not honoured. The petitioner had in the meantime returned to Germany in June, 1995, with instruction to his bank regarding payment undertaken by the company in Annexure C. The first instalment was due on 29.6.1995. The petitioner could get information from the bank manager that no remittance was made by the company inspite of the undertaking contained in Annexure C. The bank manager contacted Sri Varghese who promised the bank manager to remit the money immediately. The second instalment also was defaulted. This persuaded the petitioner to come over to Kerala in Sept., 1995, from Germany to meet Mr. M.C. Varghese. He pleaded for time again on behalf of the company. The petitioner could understand that the respondent was unable to pay the amount. So, he caused a lawyer's notice as contained in Annexure D. This was replied to by Annexure E. Even in the reply notice, the respondent company did not express their preparedness to repay the amount. On enquiry the petitioner understood that the liability of the respondent company is far in excess of its assets and the company is insolvent both commercially and also in fact. The affairs of the company are being totally mismanaged and the affairs of the company are that huge liabilities are again being fastened. Thus, the company is unable to pay its debt and it is, therefore, equitable that the company be wound up, the petitioner submits.

(3.) A counter affidavit has been filed on behalf of the respondent company by Sri Sajan Varghese, a director of the company. Several documents are produced along with the said counter affidavit. It is contended that the company petition is frivolous and only intended to harass the company. It is further submitted that the petitioner ought to have resorted to much more efficacious remedy of a suit. The claim of the petitioner is seriously disputed by the company. It is submitted that the company is solvent to meet its liabilities. It is stated that the respondent company has not incurred any debt in favour of the petitioner. Therefore, there arises no question of refusal of discharge of debt due to the petitioner. So, there arises no question of winding up of the company as prayed for in this petition. When Sri M.C. Varghese was invited to Germany to participate in an Onam Celebration held in Sept., 1994, the petitioner told him that there was a 'Komori' brand offset machine available in Germany. Sri M.C. Varghese showed some interest in it and taking into account the position of the petitioner that he was a broker of the company, directed to make detailed enquiries regarding the availability of the machine. So, the company submits that it is not correct that the petitioner made enquiries with the Japanese firm on behalf of the company at the request of the company. The averment of the petitioner that they had proposed to go to Japan to negotiate the deal, is also disputed by the company. It is submitted that Sri M.C. Varghese intended to visit Nagoya and had to be in Kobe, Japan, to suit the convenience of one Mr. Hayashi of Japanese firm. When they visited in Jan., 1995, Japan was in the threat of earthquake and, therefore, he had no occasion to see the machine. Mr. Varghese had to leave Japan for safety reasons. It is stated that there was no understanding between the petitioner and Shri Varghese to visit Japan in Oct., 1994, as alleged by the petitioner.