Sarkar Estates (Private) Ltd. v. Kusumika Iron Works (Private) Ltd. And Others

The Judgment of the Court was delivered by

Bose, J.:— This is an appeal from an order of U.C Law, J., dated March 4, 1960, directing the winding up of the appellant company. The appellant company was incorporated under the Indian Companies Act, 1913, on May 30, 1945. The Registered Office of the company is at 34A-B Sashi Bhusan Dey Street, Calcutta. The authorised capital of the company is Rs. 10,00,000/- divided into 8,000 shares of Rs. 125/- each and the issued and paid up capital of the company is Rs. 1,000/- divided into 8 shares of Rs. 125/- each. It appears that under instructions from the appellant company the respondent company undertook certain constructional work in respect of premises Nos. 167C and 167/1 Bowbazar Street, Calcutta, and disputes and differences having arisen between the parties, the respondent company instituted a suit in this Court being Suit No. 3983 of 1948 against the appellant company for realisation of the sum of Rs. 85,902-15-0 for work done and materials supplied. On August 22, 1958 a decree was passed against the appellant company for Rs. 62,712-15-0 after giving credit for the value of certain raw materials which remained in the possession of the respondent company. On March 14, 1959, the respondent company sent a letter of demand by registered post with acknowledgment due, to the appellant company at its Registered Office, under the hand of its Solicitors, Messrs Charu Chandra Bosu, demanding payment of the sum of Rs. 62,712-15-0 with interest and costs which was due under the said decree. It is alleged in paragraph 7 of the petition for winding up by the respondent company that the letter so sent was not accepted by the appellant company and was returned to the respondent Company's Solicitors with the postal endorsement “refused”. The original postal cover is annexed to the petition and is marked ‘B’ As the appellant company did not pay the amount demanded, the respondent company presented a petition for winding up on September 7, 1959, before this Court for admission and usual preliminary directions. In paragraph 9 of this petition it is further alleged that the appellant company had obtained a loan from the Calcutta National Bank Limited of No. P-2 Mission Row Extension, Calcutta, by creating a mortgage by deposit of title deeds in respect of several immovable properties belonging to the appellant company. The amount of the loan was Rs. 7,11,007-0-9. It is further alleged in this petition that the appellant company is unable to pay its debts and is in insolvent circumstances and it is, therefore, just and equitable that the company should be wound up by an order of this Court. In the verification clause of this petition which was affirmed on September 5, 1959 by one Shibanitosh Ghatak, Manager of the respondent company, paragraph 7 of the petition, which contained statements as to the service of the letter of demand on the appellant company, was verified as true to the knowledge of the deponent. It appears, however that at the time of the presentation of the petition for winding up for admission by the Court on September 7, 1959, direction was asked for, for reverification of this petition and G.K Mitter, J., before whom the petition was presented for admission, gave leave to the respondent company to re-verify the petition. Pursuant to this order of G.K Mitter, J., the manager of the respondent company re-verified the petition, but it appears from this re-verification clause that paragraph 7 of the original petition was verified in this clause as based upon information received from the applicant's Solicitors Messrs Charu Chandra Bosu and believed to be true. This re-verification was done in compliance with form No. 13 of the Companies Rules of the Original Side of this Court read with R. 52 of the Companies Rules as given in Appendix VII. In the affidavit-in-opposition, which was affirmed on behalf of the appellant company on December 9, 1959, by one Gostha Behari Sirkar, who describes himself as the Governing Director of the appellant company, paragraph 7 of the petition for winding up is dealt with in paragraph 8 of the said affidavit which is as follows:

“With regard to the allegations contained in paragraphs 7 and 8 of the said petition, I say that no such letter was ever received by the company and nobody on behalf of the Sarkar Estates Ltd., had ever returned the same. The petitioner company must have procured an alleged refusal to create evidence. I deny that any valid demand was ever made or that the company has failed or neglected to make any payments or compound any claim as alleged. I say that the alleged notice is bad, invalid and of no effect as alleged or otherwise.”

2. The verification clause of this affidavit shows that only part of this paragraph up to the words “no such letter was ever received by the company” was verified as true to knowledge, but the portion “nobody on behalf of Sarkar Estates Ltd., had ever returned the same” was verified as based on information received from the employees of the company and believed to be true. In the affidavit-in-reply which was filed on behalf of the respondent company and affirmed by the said Manager, Sibenitosh Ghatak, paragraph 8 of the affidavit-in-opposition was dealt with in paragraph 8 of the affidavit-in-reply. But the statements in this paragraph—paragraph 8—were verified as true to the knowledge of the deponent. Thus there is contradictory verification with regard to the statements in paragraph 7 of the petition and in paragraph 8 of the affidavit-in-reply, and upon this state of the affidavits the first point that is argued by the appellant is that the fact of service of the letter of demand has not been satisfactorily established or proved before the Court and this Court should, therefore, reject the statements in paragraph 7 of the petition as untrustworthy or should at least remand the case and direct a trial on evidence by the trial Court. As I have pointed out already, the original envelope containing the letter of demand has been produced before the Court and it is annexed to the petition for winding up. The postal marks on this envelope leave no room for any doubt that the letter of demand was duly posted and sent. The address of the registered office of the appellant company is correctly given on the envelope but the name of the company is given a “Sarkar Estates Limited”. It is pointed out that the correct name of the appellant company is “Sarkar Estates (Private) Ltd.”, and so the addressee's name as given on the envelope is not correct. It appears that when the decree was passed against the appellant company it was passed against the appellant company in its name as Sarkar Estates Limited. Moreover, it is not suggested on behalf of the appellant company that any other company of the name of Sarkar Estates Limited carries on any business at the registered address of the appellant company. It is clear that by reason of the provisions of the Indian Companies Act, 1956, the word “private” had to be introduced in the name of this company which was a private company. (See Sections 13(1) and 24(1) of the Indian Companies Act, 1956.) But there is no scope for any doubt that the letter bearing the name and address would have reached the appellant company and would have been delivered to the appellant company, if the appellant company had chosen to take delivery of the letter which had been sent through registered post. The appellant company, in our view, has not suffered any prejudice by its not being described on the envelope with the word “private” before the word “Limited”. Further, from the supporting creditors' affidavit which is affirmed by Kanai Lal Baneijee on November 28, 1959, it appears that a letter of demand which was sent on behalf of the supporting creditors was similarly refused by the appellant company, although it bore the correct name and address of the appellant company and the word “Private” also found place in the name of the company. The original postal cover containing this letter of demand is annexed to the affidavit of Kanai Lal Banerjee and this letter also bears evidence of its being sent and refused. The relevant paragraph of the affidavit which deals with this fact of service of the letter of demand on the appellant company is paragraph 5. Then again in paragraph 7 of this supporting affidavit it is stated that after the said letter of demand dated September 4, 1959, had been returned by the Post Office the deponent personally went to Gosto Behary Sarkar, who is one of the directors of the said company, and showed him, a copy of the said letter and requested him to make the payment, bus he expressed his inability to make any such payment. Gosto Behary Sarkar has not come forward with any affidavit to deny this. Thus, although there is some contradiction between the re-verification clause of the petition and the verification in the affidavit-in-reply of the respondent company, we are satisfied that the facts stated in paragraph 7 of the petition as supported by the re-verification clause are correct and the trial Court was justified in accepting the case of the petitioner as true on the materials as produced before the learned trial Judge.

3. It has been argued that as the verification clause in the petition does not comply with the requirements of Order 19, Rule 3 of the CPC, the statement in paragraph 7 of the petition should be ignored altogether and the Court should not rely on the statements or allegations as appearing in that paragraph as to the service of the letter of demand. It is pointed out that there is no Supporting affidavit by the Solicitors Messrs Cham Chandra Bosu or any of their employees to corroborate the statements which are set out in paragraph 7 of the petition. It may be pointed out, however, that the verification clause of the petition for winding up has been made is accordance with the Company Rules of this Court and in compliance with the requirements of Form No. 13 in Appendix VII of the Company Rules of this Court. It is well settled that the Company, Rules which govern the practice and procedure of the matters relating to companies, which are dealt with in the Criminal Side of this Court, override the general provisions of the Code of Civil Procedure. There is therefore no substance in the contention of the appellant company that the verification clause not being in accordance with Order 19, Rule 3 of the Code, there is no legal evidence before the Court to prove the service of the letter of demand upon the appellant company.

4. The other point which has been argued on behalf of the appellant company is that section 434(1)(a) of the Indian Companies Act, 1956, requires that the statutory notice of demand has to be served on the company “by causing it to be delivered at its registered office, by registered post or otherwise”; but as in the present case the registered letter of demand was not delivered or left at the registered office, but was-returned to the respondent company by the Post Office, there was no service within the meaning of clause (a) of sub-sec. (1) of sec. 434 and further no presumption of due service can be drawn or made from an endorsement of refusal on the registered envelope because the section contemplates that the letter of demand has to be actually delivered to the company and has to be accepted by the company at the registered office. Sec. 434(1)(a) is as follows:

“A company shall be deemed to be unable to pay its debts:

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor”.

5. Now it is well known that under section 163 of the Indian Companies Act, 1913, the relevant words-were “by leaving the same at its registered office”, but these words were replaced by the words “by causing the same to be delivered by registered post or otherwise at its registered office” under the Companies (Amendment) Act, 1936. So a conscious and deliberate departure was made by substituting the word “delivered” in place of ‘leaving’ and providing that such delivery may be made by registered post or otherwise. But the word “leaving” was retained in Section 148 of the Companies Act of 1913 which read as follows:

“A document may be served on a company by leaving it at, or sending it by post to, the registered office of the company”.

6. In the Act of 1956 sec. 148 has undergone certain modifications and the modifications are embodied in Section 51 of the Act which reads as follows:

“A document may be served on a company or an officer thereof by sending it to the company or officer at the registered office of the company by post under a certificate of posting or by registered post, or by leaving it at its registered office”.

7. Now, there can be no doubt that the Legislature while providing in sec. 434(1)(a) that a letter of demand has to be delivered by registered post and not by ordinary post did so with a purpose. It is possible that as a letter of demand is a highly formal and important document to use the expression of Sir George Rankin in the case of Japan Cotton Trading Co. Ltd. v. Jajodia Cotton Mills, Ltd.*, AIR 1927 Cal 625—and as more care is taken by the postal authorities of registered letters in the matter of their delivery to the addressee and a receipt is obtained for it, which makes its arrival at the destination more easy to prove, that the Legislature insisted on the letter of demand being sent by registered post. But can it be suggested that if the registered letter of demand is tendered to the addressee by the postal peon but the addressee refuses to accept the letter, there is no delivery of the letter within the meaning of section 434(1)(a) of the Indian Companies Act, 1956? In my view, the answer should be in the negative. I do not think that as a matter of construction it is reasonable to limit the meaning of the expression “delivered” to cases when the registered letter is accepted by the addressee. A tender of a registered letter which is refused by the addressee is as good a delivery as a letter which is accepted and the refusal precludes the addressee from pleading ignorance of its contents, for, otherwise, a dishonest debtor may refuse to accept a registered letter tendered by the postal peon and he may also refuse to accept the letter when it is tendered by the creditor personally or through a messenger of the creditor and thus avoid service of the statutory notice of demand and can render the provisions of sec. 434(1)(a) nugatory for all practical purposes. Moreover, it is well known that a postal peon cannot leave a registered letter with the addressee without obtaining a receipt therefor. So it the company refuses to accept the letter, the postal peon or the Post Office has no other alternative but to return the letter to the sender with the endorsement of refusal and I am not prepared to hold that it is open to the company in such a case to say that because it did not accept the registered letter there was no delivery of the letter to the company. It appears to me that when a registered letter of demand, which is properly addressed, comes back with the endorsement of refusal made by the postal peon, the ordinary presumption which arise in the case of service by registered post under Section 27 of the General Clauses Act and Sections 114 and 16 of the Indian Evidence Act is available to the creditor and the creditor can rely on the endorsement of refusal for proof of the fact that the letter had been duly delivered or tendered to the company, but it refused to accept the letter. The expression “served by post” which occurs in Section 27 of the General Clauses Act is also used in sec. 434(1)(a) and the expression “causing it to be delivered at its registered office, by registered post or otherwise” has not, in my view, the effect of excluding the operation of the ordinary presumption. Service comprehends delivery. The expression “causing it to be delivered” has been introduced to indicate and clarify the place where delivery is to be effected, that is, at the registered office of the company.

8. It is true that in the case before us the company has denied by its affidavit that the letter was ever received by it, but this denial by itself does not rebut the normal presumption. As pointed out by the Division Bench of this Court in the case of Sushil Kumar Chakravarty v. Ganesh Chandra Mitra, 62 Cal WN 193 : (AIR 1958 Cal 251), unless the Court believes the fact that the registered letter was not received by the addressee or delivered to the addressee, the presumption is not rebutted. The relevant observations which were made by Das Gupta, J., in that case are as follows:

“The ordinary way of rebutting a presumption of service was denial on oath by the defendant. Where this denial is believed, the presumption certainly stands rebutted. It is, however, open to the court to believe him. If the court is not prepared to believe his testimony, the presumption stands unrebutted”.

9. I have pointed out already the facts which make it difficult for the Court to accept the version of the appellant company that the letter of demand in the present case was not tendered to the company. Rankin, C.J, in the case of Hari Pada Dutta v. Joy Gopal Mukherjee, 39 Cal WN 934, has also pointed out the scope and effect of the presumption arising from refusal of letters sent by registered post. The learned Chief Justice in dealing with this question of presumption made the following observations at page 937:

“The letter was sent by the Sheriff; it was returned with the endorsement “refused”. It appears to me, if the defendant was minded to satisfy the Court that he got no opportunity to get this letter, it was for him rather than for the plaintiff to call upon the peon or call evidence to make good the not very probable story which he asks us to accept. The position, as I understand the matter, is that under Chap. VIII, R. II of the Rules of the High Court, it has to be shown that the document was tendered to the addressee. If it was refused, no doubt that in itself, until explained, is prima facie good enough evidence that he had an opportunity to accept it. It is quite true that it is open to the defendant to show that he never refused it and that he had no opportunity to accept it. But in my judgment, it is necessary for the defendant under R. 13 of O. 9 of the CPC, to make good that case”.

10. Those observations of the learned Chief Justice were made in connection with a case where the service of the writ of summons was in question. Bearing these observations in mind, there can be no doubt that there are not sufficient materials before the Court of a convincing nature to satisfy the Court that the case set up on behalf of the company as to the letter of demand not being tendered to the company or being refused by the company, can be accepted as true. There is thus no substance in the contention based on the construction of Section 434(1)(a) of the Indian Companies Act, 1950.

11. It was also faintly argued that the petitioning creditors' debt is a disputed debt and so cannot form the foundation of a winding up petition. The argument is that the appellant company has filed a suit against the respondent company claiming over three lacs of rupees and if this suit, which is pending, succeeds, the appellant company will be entitled to set off the amount of the decree that may be passed against the claim of the respondent company. But I fail to see how the mere fact that a claim has been put forward against the respondent company and which is pending adjudication by the Court can make the claim of the respondent company, which arises out of a decree passed in favour of the respondent company after contest, a disputed debt.

12. It is no doubt alleged in the affidavit-in-opposition that an appeal has been preferred against the decree and the appeal is pending, but it is well settled that the mere fact that an appeal is pending does not prevent the judgment-debt from being made the foundation of a winding up petition unless stay of execution of the decree is obtained pending the disposal of the appeal. So this point also appears to be devoid of any substance.

13. For all these reasons we hold that this appeal must fail and it is accordingly dismissed with costs.

14. Certified for two counsel.

Lahiri, C.J:— I agree.

CE/KB.

15. Appeal dismissed.