G SUBBA RAO Vs. RASMI DIE CASTINGS LIMITED

JUDGEMENT

(1.) This company petition is filed by Sri G. Subba Rao, chartered accountant, under section 433(e) and (f), read with sections 434(1)(a) and 439(1)(b) of the Companies Act, 1956, and under rule 95 of the Companies (Court) Rules, 1959, praying that the respondent-company by name Rasmi Die-Casting Limited be wound up in accordance with the provisions of the Companies Act, 1956, and to pass such orders as this court deems proper in the circumstances of the case. In the petition it is stated that the petitioner as chartered accountant was associated with the respondent-company and a sum of Rs. 4 lakhs is due to the petitioner by the respondent-company on account of the professional services rendered by the petitioner and also in respect of the unsecured advances made by the petitioner through his wife as well in his capacity as the karta of the Hindu undivided family, etc. It is further stated that in view of various claims which the petitioner had against the respondent-company a memorandum of settlement was drawn up on 25/09/1993, between the petitioner and Mr. K. S. S. Niranjan Rao representing the respondent-company and in terms of the said memorandum of understanding (hereinafter referred to as "the MOU") the respondent-company and Mr. K. S. S. Niranjan Rao had jointly and severally agreed to pay Rs. 4 lakhs in terms of para. 3(2) of the said MOU. It is further stated that the said Rs. 4 lakhs was payable in four (4) equal instalments of Rs. 1,00,000 each, on 29/09/1993, December 31, 199 3/06/1994, and 31/12/1994, and accordingly the respondent-company paid the first instalment of Rs. 1,00,000 to the petitioner. It is further stated in the petition that Sri K. S. S. Niranjan Rao addressed a letter dated 19/01/1994, to the petitioner and in that he stated with the mala fide intention that certain alleged permissions were required under the Companies Act for the purpose of making the said payment and the said payments could not be made by the respondent. To that letter, the petitioner responded by his letter dated 9/02/1994, stating that if the respondent fails to implement the agreement the petitioner would take appropriate action in terms of clause 3.3 of the MOU, and by his further letter dated 3/06/1996, the petitioner stated that without prejudice to the earlier claims made by the petitioner the petitioner was invoking clause 8 of the MOU and the respondent may consider the appointment of an arbitrator for settling the dispute. The respondent did not reply to the said letter. Thereafter the petitioner got issued a legal notice dated 2/09/1996, under the provisions of section 434 of the Companies Act, 1956, demanding the payment of the balance of Rs. 3 lakhs with interest at 24 per cent. per annum. It is also stated in the petition that the petitioner reserved his right to proceed against Mr. K. S. S. Niranjan Rao also. The petition further alleges that the respondent has not cleared the outstanding amount and accordingly the respondent is unable to pay its debt and consequently it ought to be wound up in the interest of justice.

(2.) This court issued notice before admission to the respondent on 23/12/1996. The proceeding sheet of the case shows that on 6/02/1997, there was a direction to print the name of the respondent and to post on 10/02/1997. The proceedings sheet dated 10/02/1997, shows that the respondent though served was not present on that day and accordingly the company petition was admitted and accordingly this court directed for advertisement in News Time and Andhra Prabha. Thereafter, the matter was directed to be posted for proof of publication on 10/03/1997. Meanwhile two applications were filed by the respondent-company. C.A. No. 103 of 1997, to set aside the order dated 10/02/1997, passed in C.P. No. 125 of 1996. The said application is supported by two affidavits (1) by D. Narayana Rao, clerk of the respondent-counsel and the affidavit of the respondent-counsel himself. In his own affidavit, learned counsel for the respondent-company stated that the case was posted on 6/02/1997, after service of the notice on the respondent. The respondent engaged him in the case by executing a vakalat in his favour on 5/02/1997, evening and he accepted the same. He further stated that the matter was to be listed on 6/02/1997, and he checked up the cause list, but missed to note the posting since the name of the petitioner was not printed and in the evening on 6/02/1997, he gave the vakalat to his clerk for filing the same in the court. But his clerk had to leave Hyderabad without informing him, he could not file the vakalat on 7/02/1997. On Feb 10/02/1997, the petition was posted for printing the name of the respondent and his name was not printed. His clerk returned to Hyderabad on 12/02/1997, night and on 13/02/1997, he filed the vakalat for the respondent. But on enquiry it was learnt that the case was posted on 10/02/1997, and accordingly, it was admitted as there was no representation on the part of the respondent. He further submitted that his non-appearance on 10/02/1997, was neither wilful nor wanton but purely accidental. Therefore, this court may be pleased to set aside the order dated 10/02/1997. He also filed C.A. No. 221 of 1997, for staying the order of this court dated 10/02/1997, pending the disposal of the application in C.A. No. 103 of 1997. By filing the counter-affidavit, Sri G. Subba Rao has denied the allegations made in C.A. No. 103 of 1997. He further stated that as per the order dated 10/02/1997, there has already been advertisement in the papers. Therefore, the application is infructuous and not maintainable. When C.A. No. 103 of 1997, and C.A. No. 221 of 1997, had come up before the court for consideration, learned counsel on both the sides submitted that the main company petition itself could be taken up for final hearing since the respondent had already filed its objections and the pleadings are complete. It is in these circumstances, I heard learned counsel on both the sides on C.P. itself.

(3.) Opposing the C.P. the respondent filed a counter denying the allegations made in the C.P. It is stated that the petitioner is trying deliberately to mislead this court by describing himself in the cause title as a chartered accountant and also describing himself as a chartered accountant of the petitioner, in the affidavit, filed in support of the C.P. and in these circumstances it is not possible to ascertain who is the petitioner before this court and to whom the alleged amounts are due to be paid. Thus, the petition for winding up is not maintainable. It is also not stated as to how the petitioner was representing Neeth and Company, because in the cause title it is stated "Neeth and Co., Chartered Accountants" and there is no agreement whatever between Neeth and Co. and the respondent-company and Neeth and Co. was not a party to the MOU dated 25/09/1993, and there was no notice issued by or on behalf of Neeth and Co., under section 433 of the Companies Act, 1956, and on this count also the petition is liable to be dismissed. It is further stated in the counter that the petitioner Sri G. Subba Rao was promoter and director of the respondent-company along with Sri K. S. S. Niranjan Rao. The further allegation of the petitioner that a sum of Rs. 3 lakhs was due from the respondent-company towards his professional services was not true and correct and there is no agreement between the petitioner and the respondent-company regarding any professional services alleged to have been rendered by the petitioner. There was no such proposal before the company nor is there any resolution to that effect by the company for entering into the agreement between the petitioner and the respondent-company for professional services. Further, it is stated that the petitioner was not the creditor of the company much less an unsecured creditor and no amounts were due to the petitioner from the respondent-company. The further allegation of the petitioner that the petitioner made unsecured advance to the company in his capacity as Hindu undivided family is denied. Even the allegation regarding the commission on the alleged guarantee executed on behalf of the company in favour of the financial institution is denied. It is further stated that both Sri G. Subba Rao and Sri K. S. S. Niranjan Rao signed an agreement dated 2/05/1996, entered into between the respondent-company and A.P. Industrial Development Corporation and these agreements prohibit payment of any commission for the guarantee. It is further stated that no amount was due to Neeth and Co., even as on 10/10/1991, from the respondent-company. The alleged MOU, dated 25/09/1993, was not between the petitioner and the respondent-company and Mr. K. S. S. Niranjan Rao did not represent the respondent-company. It is further stated that the entire claim put forth by the petitioner against Sri K. S. S. Niranjan Rao was in his individual status but not on behalf of the respondent-company. The managing director cannot enter into any agreement or undertaking to make any financial commitment without the board of directors approving and passing a resolution. The said MOU is not valid since it is not signed by a duly constituted attorney on behalf of the company under the seal of the company in terms of section 48(2) of the Companies Act, 1956, and article 131.2 of the articles of association of the respondent-company. Regarding the payment of Rs. 1,00,000 by the respondent-company to the petitioner, it is stated that the petitioner expressed that he was in dire need of money urgently and accordingly Sri K. S. S. Niranjan Rao directed the office to repay Rs. 50,000 the unsecured loan of the petitioner and another amount of Rs. 50,000 by way of payment out of a part of the unsecured loan to Sri K. S. S. Niranjan Rao and it is towards this amount only the cheque for Rs. 1,00,000 was issued to the petitioner and as such it was not the payment towards the first instalment by the respondent-company in terms of the MOU. Moreover, vide letter dated 19/01/1994, the responent-company informed the petitioner that Sri K. S. S. Niranjan Rao cannot bind the company by his individual acts and by another letter dated 23/01/1995, the respondent-company denied categorically the alleged MOU. It was in those circumstances the petitioner invoked arbitration clause 4(8) of the MOU. It is stated that the alleged liability being disputed it cannot be treated as a debt for the purpose of sections 433 and 434 of the Companies Act, 1956. The averment that the respondent-company is unable to pay its debts is false and incorrect and in fact the petitioner was the director of the respondent-company till the end of December, 1993, and knows the balance-sheet of the company and its assets also. It is further stated that after repaying the term loans to the financial institutions aggregating to more than Rs. 5 crores, within time, the respondent-company has declared dividend of 15 per cent., 20 per cent. and 20 per cent. during the last four consecutive years and the respondent-company has reserves to the extent of Rs. 1,74,01,764 and the same is reflected in the last audited balance-sheet adopted at the 11th annual general meeting. It is also stated that the A.P.S.F.C. has placed the respondent-company in "A" category. Moreover, the alleged liability under the MOU are barred by limitation. In these circumstances it is not a case for winding up in terms of sections 433 and 434 of the Companies Act, 1956. The present petition is filed only to harass the respondent and bring down the reputation of the respondent-company. It is also filed to pressurise the company to extract the money which the company is not liable to pay and absolutely there are no bona fides on the part of the petitioner in filing the petition. Accordingly, the respondent-company prayed for the dismissal of the C.P. In the additional affidavit filed in C.A. No. 103 of 1997, the respondent-company stated that without prejudice to the contentions, to show the company's bona fides the respondent-company is prepared to deposit to the credit of the company petition the principal amount claimed to be due by the respondent to the petitioner and on such deposit this court may direct the petitioner to file a civil suit in a civil court to establish the claim within a particular time this court may prescribe.