1. In this petition, filed on 15-12-1989 under Section 433(e) and (f) read with Section 439(1)(b) of the Companies Act for the winding up of the respondent-company, the petitioner alleges that in the course of business the respondent had purchased M.S Ingots and billets and other materials worth Rs. 28,14,658.50 from it during the period from July, 1984 to December, 1986 and that the respondent is due as on 30-11-1989 in a sum of Rs. 20,74,531.83 inclusive of interest at 24% per annum. The respondent failed to pay the amount in spite of repeated reminders. The petitioner issued statutory notice under Sec. 434(a) and (c) of the Companies Act on 11-11-1989 and the Company in its reply denied the liability. The respondent filed counter denying its liability to pay any amount and averring that the petitioner has waived its claim, that in any event, the claim is barred by limitation, that in order to overcome the bar of limitation the petitioner has filed this petition and that the financial condition of the respondent-company is sound. It is also stated in the additional counter that there were differences between the families of the Managing Director of the petitioner-company and of the Director of the respondent-company, who are related to each other, that the Director of the respondent was kidnapped by the Managing Director of the petitioner-company on 29-9-1988 and that C.C No. 214 of 1989 on the file of the IX Metropolitan Magistrate, Hyderabad, was pending. It is further stated that the company petition was filed in order to wreak vengeance against the Director of the respondent-company.
2. The question that arises for consideration is whether the defence of the respondent denying its liability on the ground inter alia that it is barred by time is bona fide?
3. Mr. Vinod Poddar, Managing Director and Mr. V.C Jain, Accounts Officer, were examined as P.Ws 1 and 2, while Mr. Nirmal Kumar Gupta, the Director of the respondent-company gave deposition as R.W 1.
4. P.W 1 says that as per the statement of account, Ex. A-7, sent to the respondent along with the stat tory notice an amount of Rs. 20,74,531.33 is due, which claim the petitioner has never waived and that the respondent has admitted its liability by its letter dated 13-9-1986, Ex. A-5. He has also stated that the criminal case ended in acquittal. P.W 2, Accounts Officer, says that the petitioner has not sent any debit note to the respondent for interest and that the outstanding amount relates to Bills Nos. 2, 3, 4 and 5 dated 2-7-1984 (Exts. A-11, 19, 27 and 35) for Rs. 2,56,041/-, Rs. 2,42,959.50, Rs. 2,32,227/- and Rs. 2,45,794.50, totalling to Rs. 9,77,022/-. The balance represents the interest after deducting Rs. 1,50,000/- paid by the respondent from March, 1986 to December, 1986, which has been adjusted towards interest. Though there is no trade practice to charge interest on delayed payment, condition No. 9 in the bills stipulates payment of interest.
5. Mr. C. Malla Reddy, learned counsel for the petitioner, has contended that as per the letter dated 13-9-1986 (Ext. A-5) written by the respondent, in reply to the demand made by the petitioner, the respondent has admitted its liability and requested the petitioner to accept payments at the rate of Rs. 15,000/- per month as the respondent is facing some liquidity problem and acute shortage of working expense. He further submitted that as the account is mutual, current and open, the debt is not barred by limitation under Article I to Schedule to the Limitation Act as the last payment of Rs. 15,000/- was made on 27-12-1986, while the company petition was filed on 15-12-1989. On the other hand, Mr. A.V Krishna Koundanya, learned counsel for the respondent, submitted that even assuming that the petitioner has not waived its right to claim the amount and even assuming that the petitioner is entitled to charge interest, the claim is barred by limitation since the amounts relate to Bills dated 2-7-1984. He contended that even assuming that the balance is not struck and the account is current and open, it is not mutual, as there are no mutual transactions, the petitioner figuring always as creditor only and hence Article I of Schedule to the Limitation Act does not apply. He further submits that the relevant Article applicable is Art. 15, under which limitation is three years after expiry of the period of credit and as the period of credit expired by 28-7-1984 as per the Hundis, Exts, A-10, A-18, A-26 and A-34, the limitation is 28th July, 1987. He relies on Ext. B-1, which is the copy of the statement of account sent by the petitioner to the respondent.
6. From the statement of account, Ext. B-1, it is clear that the last supply was made by the petitioner on 5-10-1984 covered by Bill No. 131 for Rs. 1,91,304.50 which has been paid by the respondent on 11-10-1984. There were no supplies by the petitioner from 5th October, 1984 and thereafter till 27-12-1986, the respondent has been paying periodically certain amounts. The petitioner, as supplier, has always figured as creditor and the respondent as debtor. There were no counter transactions. The counter transactions referred to in Ext. B-5 letter dated 13-9-1986 are with the Continental Projects Limited, which is associate concern of the petitioner.
7. In Raghunath and Sons v. Pandam Tea Co., 1976 Tax LR 1566 (Cal), the claim of the petitioner was that the loan was acknowledged in the balance sheet as on 31-12-1968 signed by the Directors of the debtor company on 26-7-1970. In the balance sheet, the Directors observed that they were of the opinion that the amount shown as payable to the creditor-company was barred by limitation and, hence, was not confirmed. Confirming the order of the learned single Judge, the Division Bench of Calcutta High Court, held that unless the statement made in the balance sheet as on 31-12-1968 and the Director's report are treated as admissions of liability, the company petition filed on 9-3-1972 may have been barred by limitation and thus as there is bona fide dispute it is not a case for winding up. In the instant case the question of acknowledgment in the balance sheet does not arise as it is not the case of even the petitioner. Even assuming that Ex. A-5 is treated as acknowledgment, as it is dated 13th September, 1986, the limitation will be over by 13th September, 1989. The plea of the respondent that the debt is barred by time under Art. 15 is substantial defence and accordingly it cannot be said that the defence is not bona fide. The other decision in C.P No. 58 of 1989 dated 19-11-1992, unreported judgment of Justice S. Parvatha Rao, relied on by the counsel for the respondent, does not help him. In that case the Company petition filed by the petitioner sister-concern Continental Projects Limited against the respondent herein was dismissed at the admission stage on the ground that the claim was, prima facie, barred by time. There, the transactions ended on 12-3-1985 and the company petition was filed on 10-3-1989. As it was dismissed at the stage of admission and as there are no details about the nature of account, this decision is not of much help.
8. Mr. C. Malla Reddy, learned counsel for the petitioner, relies on three decisions, i.e Pandam Tea Company Ltd., In Re, (1975) 45 Cop Cas 67 : (1972 Tax LR 1923) (Cal); Synthetic Wire Industries Pvt. Ltd., In Re, (1984) 56 Comp Cas 461 (Cal); and Northern India Iron and Steel v. Haryana Ispat, (1990) 68 Comp Cas 42 (Punj & Har).
9. In Pandam Tea Company Ltd., In Re (supra), the debtor company admitted the liability in its balance sheet year after year attracting Section 18 of the Limitation Act. In those circumstances it was found by the learned single Judge of Calcutta High Court that denial of the liability, prima facie, is neither bona fide nor reasonable and that the winding up petition cannot be rejected at the stage of admission. This decision is distinguishable as in the present case there is no acknowledgement of liability in the balance sheet, and the question whether debt is time barred under Art. 15 or within time under Article I is debatable.
10. The next decision is Synthetic Wire Indusries Pvt. Ltd., In Re, (1984 (56) Com Cas 461) (Cal) (supra). This is also a case of admission of winding up petition and in view of the loan being recorded in the minutes of the meeting of the Board of Directors and the letter from the Company to the creditor stating that due to paucity of funds the repayment could not be made and assuring that the loan would be paid before a particular date, at was held by the Calcutta High Court that there was acknowledgment of the debt and that the defence of the company denying the granting of the loan and taking inconsistent plea that the amount due to the creditor had been paid was not bona fide. In this case there is no inconsistent stand and the respondent has been contending that the debt is barred by limitation ever since its reply to statutory notice, Ex. A-8. Thus this decision is a distinguishable.
11. The last decision relied on by the learned counsel for the petitioner is Northern India Iron and Steel v. Haryana Ispat, (1990 (65) Com Cas 42) (Punj & Har) (supra). There, again the facts were different. The creditor filed earlier petition for winding up and in view of the compromise the petition was dismissed with permission to the petitioner to file a fresh petition, if the debtor company did not pay the debt under the terms of the compromise. Some amounts were paid, leaving a balance of Rs. 2,25,000/-. As this was not paid the creditor filed another petition for winding up, enclosing the statement of accounts. The debtor-company disputed the quantum of debt in the written statement contending that the creditor has supplied defective material and that the creditor was liable to pay certain amount to the sister concern of the debtor. In those circumstances, the learned single Judge of the Punjab and Haryana High Court held that the petitioner had led prima facie proof that the amount claimed in the petition was due from the company. In view of the fact that the correctness of the statement was not doubted in the written statement and in view of the non-denial of the liability in the reply to the statutory notice and failure by the company to produce extracts of its ledger and balance sheet to corroborate its assertion in the written statement, the Court held that the company's defence was not one of substance but only an afterthought and that the dispute is not bona fide. Here, the respondent raised plea of limitation which is debatable and which cannot be rejected as being not bona fide. This decision also does not help the petitioner.
12. It has been held by the Supreme Court in Madhusudan Gordhandas & Co. v. Madhu Woolen Industries Pvt. Ltd., AIR 1971 SC 2600 as follows (para 21):—
“Two rules are well settled. First if the debt is bona fide disputed and the defence is a substantial one the Court will not wind up the company………………Where the debt is undisputed the Court will not act upon a defence that the company has the ability to pay the debt but chooses not to pay that particular debt: In re: A Company, (1894) 2 Ch 349 (Ch D). Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed, the Court will make a winding up order without requiring the creditor to quantify the debt precisely. (See In Re: Tweeds Garages Ltd., 1962 Ch 406 : (1962) 32 Com Cases 795). The principles on which the Court acts are (1) that the defence of the company is in good faith and one of substance; (2) the defence is likely to succeed in point of law; and (3) the company adduces prima facie proof of the facts on which the defence depends.”
13. This was reiterated in a recent case Pradeshiya Industrial and Investment Corpn. of U.P v. North India Petrochemicals Ltd., (1994) 79 Comp Cas 835 : (1994 AIR SCW 2495), where petition for winding up was not admitted since relationship of creditor and debtor did not exist and the same was subject matter of arbitration which was pending adjudication and the defence raised was a substantial one.
14. Applying the principle laid down by the Supreme Court in the above two cases. I hold that the petitioner cannot seek the relief of winding up since there is prima facie case in the plea of the respondent that the debt is barred by limitation. It is, however, made clear that whatever stated in this Judgment about the debt being barred by limitation is only prima facie view and it is open to the petitioner to recover the amount claimed in appropriate forum, if permitted by law. The company petition is accordingly dismissed. No costs.
Petition dismissed.