PEERLESS CONSULTANCY SERVICE P LTD Vs. ASHOKA AGENCIES

JUDGEMENT

(1.) The aforesaid two appeals have been preferred against the self-same order passed by the learned trial Judge on 27-6-2000 in disposing of a company petition being Company Petition No. 384 of 1993.

(2.) The Peerless Consultancy Service (P.) Ltd. is the appellant is in one appeal whereas; Ashoka Agency, is the appellant in the other appeal. When some arguments were advanced on the question of grant of interim relief, the learned counsel for the parties submitted before us that both the appeals can be disposed of by treating the same as on day's list instead of hearing the application for grant of interim relief. That being the stand takes by the parties before us. We decided to take up the hearing of the appeals and now both the appeals are being disposed of by this common judgment. Ashoka Agency had made an application under the Companies Act, 1956 for winding up of the Peerless Consultancy Services (P.) Ltd. By the impugned order the learned trial Judge came to a finding on consideration of the materials that it was a proper case where the parties should be relegated to suit. While holding as such, the learned trial Judge, however, directed the Peerless Consultancy Service (P.) Ltd. to furnish security to the tune of Rs. 1.25 lakhs. Feeling aggrieved by this direction on the Peerless Consultancy Service (P.) Ltd., it preferred this appeal (APO 564 of 2000, ACO 93 of 2000). So far as the other appeal (APO 572 of 2000, ACO 95 of 2000) is concerned, the applicant in the winding up petition has preferred the appeal against the impugned order questioning the same as to why the parties should be relegated to suit when the claim of the applicant-appellant was admitted by balance confirmation, dated 18-4-1991 issued by the Peerless Consultancy Service (P.) Ltd. to the applicant/ appellant and in the balance sheet. It was also alleged that question of the relegation to suit in view of the aforesaid admitted fact and also in view of the fact that the Central Tax Declaration Forms were also issued in respect of the aforesaid supplies by the Peerless Consultancy Service (P.) Ltd. and, accordingly, there was ho bona fide or genuine dispute raised by Peerless Consultancy Service (P.) Ltd. regarding the claim of the appellant. However, the learned Judge did not accept the aforesaid balance confirmation dated 18-4-1991 issued by the Peerless Consultancy Service (P.) Ltd. and the balance-sheet for the year 1990-91 as acknowledgement of date by the Peerless Consultancy Service (P.) Ltd.

(3.) Let us now first take up the hearing of the appeal (APO 564 of 2000, ACO 93 of 2000) of the Peerless Consultancy Service (P.) Ltd. for disposal. In this appeal, a question before us was whether the trial Court was justified in directing that security must be furnished although the Court felt that it was a proper case where the claim of the Ashoka Agency should be relegated to the suit as the issue that has been raised in the company petition could only be decided after adducing evidence. It is well settled that in hearing an application for judgment upon admission under order 12, Rule 6 of the Code of Civil Procedure or in hearing an application under order 37 of the same or in an application under Chapter XI1IA of the Original Side Rules of this Court, the Court shall impose condition of security upon a defaulting party in getting postponement of hearing by way of regular suit to test the bona fides. It is also well settled that such proceedings are not independent of the suits but the same arise out of suits. In the present case the learned trial Judge in the impugned order had already adjudged and found on consideration of the materials on record that it was a proper case where the applicant in the company petition or realisation of its dues should be relegated to suit and there are certain issues which can only be decided after adducing evidence. That being the finding arrived at by the learned trial Judge in the impugned order, we are of the view that question of imposition of security could not be made in the manner as proposed in the said order. We are also of the view that a company petition cannot be regarded as the process of recovery of money and the scope of company petition and the suit for recovery of money are totally distinct and different proceedings from each other. Company petition under Sections 433, 434 and 439 of the Act, is basically made for the purpose of winding up of a company provided a company falls under the conditions envisaged in Section 433. One of such conditions is Section 433(e), i.e., the company is unable to pay its debts. Therefore, when the Court holds that it is a proper case where the parties should be relegated to a suit and further when the Court is also of the opinion that there are certain issues which can only be decided by adducing evidence, it cannot be said that a company is unable to pay its debts. That being the position and in view of the finding of the learned trial Judge that the right to claim of the petitioning creditor from the Peerless Consultancy Service (P.) Ltd. was rightly challenged, there was no scope for the learned Judge to impose condition for the purpose of relegating the parties to the suit. There is another aspect. It is now well settled law that a company petition cannot be used as a weapon for the purpose of securing a disputed claim which can only be claimed in a suit. Discretion, if any, cannot supersede the legal entitlement. In the case of Mechalec Engineers & Mfrs. v. Basic Equipment Corpn. the Supreme Court while holding that triable issues had arisen for adjudication nevertheless, concluded that the defences were not bona fide and, therefore, it could not reasonably be expected to succeed. In such a case leave may be allowed to a party to proceed on his defence on conditions of imposition of security. But if the company satisfies the Court that he has a good defence to claim on merits, the applicant of the company petition is entitled to leave to proceed with the suit and in that case the person opposing the application for winding up would be entitled to unconditional leave to defend. In Mechalec Engineers & Mfrs. case (supra), the following principles have been laid down while considering the question of granting leave to defend :