CERAMICS INDIA Vs. HARYANA STEEL AND ALLOYS LTD

JUDGEMENT

(1.) THIS petition under Section 433 (e) and (f) of the Companies Act, 1956, read with rule 9 of the Companies (Court) Rules, 1959, has been filed by Ceramics India through its managing partner for the winding up of the respondent-company on the plea that it is unable to pay its debt as also that it is just and equitable to wind up the respondent-company. Briefly, the facts stated in the petition are that the petitioner-company entered into business transactions with the respondent-company and in the course of business, the respondent-company placed various orders for laddie sleeves from time to time which the petitioner supplied as per terms and conditions as were agreed upon between the parties. The material was received by the respondent-company but payment was not made corresponding to the bills so raised and as such the petitioner opened a running account of the respondent-company and entries in respect of the bills were duly debited to the account of the respondent-company. The petitioner kept the account of the respondent-company in the registers maintained in the regular course of business. A notice was served under Section 434 of the Companies Act, 1956, on December 3, 1988, for payment of the admitted amount and due debt said to be amounting to Rs. 45,262. 50 as principal and interest at the rate of 24 per cent. calculated up to November 30, 1988, amounting to Rs. 13,005. 38. Besides, the petitioner also claimed an amount of Rs. 890. 48 for want of supply of sales tax forms for which the petitioner had to suffer payment of tax to that extent. Notice is said to have been received by the respondent-company which instead of making the payment replied raising all kinds of pleas inclusive of that the petitioner had supplied defective material. It is the case of the petitioner that till date it had not received any communication that the goods supplied by it were defective. There was a clause in the terms and conditions as agreed upon between the parties which clearly stipulated that rejection of goods would be intimated to the petitioner within seven days failing which it shall not be responsible in any manner and it is the case of the petitioner that no intimation was ever received within the stipulated time. The petitioner is said to have sent a detailed reply to the communication received from the respondent-company in response to the notice under Section 434 of the Act and the whole matter was again explained to it. Also it was denied that there was any rejection made by the respondent-company or communicated to the petitioner. It is pleaded that the respondent-company had in fact given confirmation of the balance amount of Rs. 45,262. 50 as on March 31, 1989. A copy of the confirmation has been placed on record as annexure P-12. On the aforesaid facts it is pleaded that the respondent-company has failed to make any payment of the admitted and due debt within the stipulated period as contained in the bills and as such the petitioner is also entitled to interest as per the stipulation, i. e. , 24 per cent. from the date when the amount fell due. The total amount inclusive of interest as due is stated to be Rs. 77,263. 36. Besides the debt stated to be due to the petitioner, it is also pleaded that the financial position of the respondent-company is not very encouraging and the same is in arrears so far as payment towards provident fund of the employees is concerned and so also in respect of the E. S. I. (Employees' State Insurance) and is also under the liability of the taxation itself. The pleading further is that the respondent-company is not in a position to make the payment of salary to its employees and labour. Since, despite the statutory notice having been served upon the respondent-company it has failed and neglected to make the payment of the admitted and due debt within the statutory period as provided under Section 434 of the Companies Act, it is prayed by the petitioner that the respondent-company be wound up. In response to the notice issued to the respondent-company a written statement was filed wherein by way of preliminary objection it has been pleaded that the petitioner has not come to this court with clean hands and has suppressed material facts. The allegation of the petitioner contained in paragraphs Nos. 10, 11 and 12 that the respondent has failed or has neglected to pay the admitted debts, is pleaded to be altogether false to the knowledge of the petitioner. With regard to its financial position it is pleaded that there were no arrears of the payment of provident fund, Employees' State Insurance and the company was also paying salary to its employees regularly. Its financial position is stated to be sound and a perusal of the six monthly reports ending September 30, 1990, shows that its turnover has almost doubled during the six months ending September 30, 1990, i. e. , it is Rs. 1,637. 94 lakhs while in the previous year it was Rs. 1,538. 95 lakhs for the whole year. Also, the net profits during the said period are to the tune of Rs. 71. 65 lakhs. It has 350 employees and daily turnover is stated to be between Rs. 10 lakhs and Rs. 15 lakhs and there are no arrears of salary/provident fund, Employees' State Insurance. The latest monthly report ending September 30, 1990, has been annexed with the written statement. The plea of limitation has also been raised as the goods were supplied between December 24, 1986, and April 16, 1987, whereas the petition was filed in July, 1990. In so far as the confirmation letter, annexure P-12, is concerned the case of the respondent-company is that the same is a manufactured/fabricated document with the ulterior motive to bring the claim within the period of limitation. There are other pleas also but the same need no detailed mention. On the merits, the case of the respondent company is that laddie sleeves were supplied, vide invoice No. 248, dated February 26, 1987 ; that the laddie sleeves supplied by the petitioner, vide the said invoice, were defective and were not capable of any use. Vide letter dated March 21, 1987, a detailed intimation was sent to the petitioner. A copy of this letter has been annexed as annexure R-1. Shri I. P. S. Arora had assured the respondent-company to supply the laddie sleeves of the quality and standard for which the order was placed, the consignment of laddie sleeves through invoices Nos. 307 dated April 16, 1987, and 320 dated May 13, 1987, were accepted but the laddie sleeves received through these consignments were also sub-standard and were not capable of being put to use and as such the respondent-company vide its letter dated May 20, 1987, informed the petitioner-company that the goods are not of standard and it was not possible for the company to use the said material. The petitioner was asked to depute their representative so that the matter could be discussed and sorted out and in the meanwhile the payment of the bills was stopped. A copy of the letter dated May 20, 1987, has been placed on record as annexure R-2. On receipt of the letter dated May 20, 1987, the petitioner is stated to have deputed its representative Shri Arora who visited the premises of the respondent-company on July 22, 1987, and was fully satisfied about the defective and substandard quality of laddie sleeves and consequently agreed to send 100 laddie sleeves for trial with an undertaking to take corrective measures for the replacement of the defective material supplied through invoices Nos. 248, dated February 26, 1987, 307, dated April 26, 1987, and 320, dated May 13, 1987. It is, however, stated that no corrective steps were taken by the petitioner and the respondent, vide letter dated August 25, 1987, reminded it of the assurance and undertaking given by its representative and failure to take corrective steps. A copy of the letter dated August 25, 1987, has been placed on record as annexure R-3. It is in the manner aforesaid, the payment of the aforementioned bills to the tune of Rs. 45,262. 50 which was in regard to defective goods was stopped.

(2.) ON the facts, as have been reproduced above, learned counsel for the petitioner contends that it has been overwhelmingly proved on record of the case that the company is unable to pay its debts. Not only that the receipt of the goods has been admitted, but it has also been admitted that an amount of Rs. 45,262. 50 is due and the plea raised by the respondent-company that the payment has been withheld on account of defective goods besides being false has been raised for the first time when statutory notice under Section 434 of the Companies Act was issued. It is also contended by Mr. Narang that the entire defence raised by the respondent-company is false as shall be proved from the confirmation letter, annexure P-12 which is dated March 31, 1989, and, therefore, all documents a mention of which has been made in the written statement and which have also been relied upon to defend the present petition being earlier to annexure P-12 have been simply manufactured. With a view to get necessary relief, i. e. , winding up of the respondent-company, Mr. Narang has relied upon Simon-Carves India Ltd. v. Punjab Sulphur Products Ltd. [1987] 62 Comp Cas 214 (P and H), Northern India Iron and Steel Co. Ltd. v. Haryana Ispat (P.) Ltd. [1990] 68 Comp Cas 42 (P and H) and Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd, [1972] 42 Comp Cas 125 (SC) as also a judgment recorded by M. S. Liberhan J. in Company Petition No. 63 of 1990, decided on September 6, 1991.

(3.) MR. Kapoor, learned counsel appearing for the respondent-company, however, seriously contests the claim of the petitioner and contends that immediate information of defective goods was given to the petitioner and that even after assurance was given to the respondent-company, that the defective goods shall be replaced/corrected on inspection of the goods by the representative of the petitioner no remedial steps were taken, the respondent-company had no choice but to stop the payment with regard to the goods that were found defective. All letters, reference to which has been made above, it is stated by Mr. Kapoor, were duly written and received by the petitioner. It is annexure P-12, confirmation letter, which, on the other hand, is said to be a forged document with a view to prop up "a false claim and also to bring the same within the period of limitation, contends learned counsel.