JUMGO COTTON ENTERPRISES Vs. RAYALASEEMA MILLS LTD

JUDGEMENT

(1.) By this petition under Sections 433(e), 434(1)(a) and 439(1)(b) of the Companies Act, 1956 (for brevity 'the Act') the petitioner is seeking an order of winding up of the respondent company on the ground that the respondent company is unable to pay of its debts.

(2.) It is stated that the petitioner is a Partnership Firm in the name and style of 'M/s. Jumgo Cotton Enterprises', incorporated under the provisions of Indian Partnership Act with its office at 416, Navketan Building 62, S.D. Road, Secunderabad. The petitioner was engaged in the business of Ready Cotton Bales, Yarn and other related goods and conversion of cotton to yarn etc. It is stated that M/s. The Rayalaseema Mills Limited, the respondent herein was incorporated under the provisions of the Companies Act, with its registered office and the factory at Rayanagar, Adoni, Kurnool District, Andhra Pradesh. The respondent company had its issued, subscribed and paid up capital of Rs.39,71,200/- divided into 3,97,120 Equity Shares of Rs.10/- each. The respondent company was mainly engaged to carry on the business of purchase, sale and manufacture of cotton, yam etc. It is stated that during the course of its business the respondent company approached the petitioner firm for the supply of cotton and accordingly the petitioner firm supplied cotton bales under various invoices during the period from 11-4-1997 to 14-6-1997 for different considerations. The respondent company made certain payments directly through Demand Drafts and certain payments through third parties. It is stated that after payment of Rs.13,63,065/- till 15-7-1997, Rs.3,00,000/- and Rs.2,00,000/- on 30-11-1997 through Demand Drafts, left an unpaid outstanding balance of Rs.5,89,157/- as on 30-11-1997.

(3.) The respondent company when failed to pay the balance consideration towards the value of the goods received by it and also failed to honour its promise, the petitioner firm addressed a letter dated 2-12-1997 bringing to its notice that the payments are overdue and requested to clear off the outstanding balance. The respondent company after receipt of the above letter, approached the petitioner firm with a scheme to liquidate its outstanding and that of M/s. Navyug Cotton Company, which is a sister-concern of the petitioner firm. Accordingly an understanding/agreement was made between the parties under Ex.A. 12, dated 16-12-1997, wherein the respondent company has admitted and confirmed the payment due to the petitioner firm and M/s. Navyug Cotton Company in a sum of Rs.5,89,157/- and Rs. 11,30,509/- respectively and also agreed to pay interest at 2% per month. It is stated that the respondent company purchased cotton under various contracts between 25-12-1997 to 14-3-1998 and got supplies for a total value of Rs.67,00,269/-. The respondent company authorized its debtors to pay and clear its outstanding of Rs.50,83,592/- as on 31-3-1998 towards the old and new dues and also to clear the liability of M/s. Navyug Cotton Company by transferring it to the petitioner account. A copy of the letter dated 10-2-1998 showing the transfer by M/s. Navyug Cotton Company to the respondent is also filed. It is stated that thereafter also there were transactions of purchase and supply of the goods. It is further stated that there was another agreement entered into between the parties under Ex.A.54 dated 19-1-2000 for conversion, utilizing the machinery of the respondent company by the petitioner. It is only after the said agreement, the mill was reopened which was closed till June, 2000. During the period of June, 2000 to 9-2-2001 no amounts were recovered or adjusted from the old dues though agreements provide for that. Again the mill was closed on 9-2-2001. It is stated that in spite of several demands for payment of the outstanding amount, the respondent company did not pay, but however, again suggested to enter into another agreement and accordingly Ex.A.59, dated 21-3-2001 was entered into between the parties under which it was agreed by the respondent to allow the petitioner to run a part of the mill for conversion of the cotton into yam. It is stated that in the process a sum of Rs.7,00,000/- was paid by the petitioner firm for getting reconnection of electricity in order to run the mill. The said payment was also acknowledged by the respondent. But, however, as promised by the respondent, the dues to the petitioner firm were neither adjusted nor discharged. It is further stated that as per the Books of Account as on 31-5-2002 the respondent company is liable to pay an amount of Rs.95,15,697/- and the said amount is payable with interest at 24% per annum as is prevalent in the business transactions. As the respondent company did not pay the said amount, a statutory notice was issued on 10-7-2002. In response to the said notice the respondent company issued a reply deliberately denying the contents of the notice with false and incorrect facts. It is stated that the petitioner firm came to know that the respondent company has lost its substratum and in view of the above circumstances, it is unable to pay its debts and has become a fit case for winding up. The petitioner also came to know that even the banks have filed suits before the Debts Recovery Tribunal for the recovery of its debt. Hence sought for an order of winding up.