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Anil Pratap Singh. v. Onida Savak Ltd.
Factual and Procedural Background
The Petitioner filed a petition under Sections 433(e) and 434(1)(a) of the Companies Act seeking the winding up of the Respondent Company on the ground of indebtedness amounting to Rs. 10,62,022.96 as on 31.8.1997. The claimed amount included Rs. 6,18,035.00 as principal and Rs. 4,43,987.96 as interest, arising from various bills for advertising services provided by the Petitioner to the Respondent. The Petitioner issued a statutory notice dated 6.10.1997, which was replied to by the Respondent through a letter dated 27.10.1997, asserting a connection with sister concerns and adjustments against bills. The Respondent also relied on a letter dated 24.4.1995 from the Petitioner to a sister concern, which acknowledged certain limitations on deductions and adjustments. The Petitioner additionally submitted a Memorandum dated 5.5.1995 to establish common control and management between the groups involved. The Respondent argued that the winding-up petition was a counterblast to suits filed against it and contended that mere statements of accounts were insufficient to sustain the petition, further asserting that the claim was barred by limitation.
Legal Issues Presented
- Whether the Respondent Company is indebted to the Petitioner for the claimed sum as a basis for winding up under Sections 433(e) and 434(1)(a) of the Companies Act.
- Whether statements of accounts alone are sufficient evidence to establish liability for winding up purposes.
- Whether the Petitioner's claim is barred by limitation.
- Whether a bona fide defence exists to dismiss the winding-up petition.
Arguments of the Parties
Petitioner's Arguments
- The Respondent is indebted to the Petitioner in a sum exceeding Rs. 10 lakhs for advertising services rendered.
- The statutory notice dated 6.10.1997 was duly served and remains outstanding.
- The Memorandum dated 5.5.1995 evidences common control and management, supporting the claim against the Respondent.
- The Petitioner denied any connection with other Angad Group businesses despite acknowledging adjustments and common claims in earlier correspondence.
Respondent's Arguments
- The winding-up petition is a retaliatory measure to four suits filed by the Respondent and is intended to coerce an unjust settlement.
- A winding-up petition cannot be based solely on entries in statements of accounts without corroborative evidence.
- The claim is barred by limitation as the earliest debts date back to February 1994, exceeding the three-year limitation period.
- Reliance on the precedent of Chandradhar Goswami and Others v. Gauhati Bank Ltd. to emphasize the requirement of proof beyond book entries and the application of limitation laws.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Chandradhar Goswami and Others v. Gauhati Bank Ltd., AIR 1967 SC 1058 |
|
The Court relied on this precedent to hold that the Petitioner must prove the debt beyond mere account entries and that the claim was barred by limitation for the older debts claimed. It supported the dismissal of the winding-up petition due to lack of sufficient evidence and the existence of a bona fide defence. |
Court's Reasoning and Analysis
The Court examined the correspondence and documents submitted, including the letter dated 24.4.1995 and the Memorandum dated 5.5.1995, to ascertain the relationship between the Petitioner and the Respondent's group companies. It found that the Petitioner's own documents admitted common claims and adjustments within the group, undermining the Petitioner's contention of no connection. The Court accepted the Respondent's argument that the winding-up petition was a retaliatory tactic linked to pending suits and emphasized that winding-up cannot be predicated merely on statements of accounts without corroborative evidence. Applying the principles from Chandradhar Goswami's case, the Court noted that liability cannot be established solely on book entries and that the limitation period barred the claim on older debts. Considering these factors, the Court concluded that a bona fide defence existed, warranting dismissal of the petition.
Holding and Implications
The winding-up petition is dismissed.
The dismissal directly affects the parties by rejecting the Petitioner's attempt to wind up the Respondent Company based on the alleged indebtedness. The Court did not establish any new precedent but reaffirmed the established legal principles that winding-up petitions require substantiated claims beyond mere account entries and must respect limitation periods. The decision underscores the necessity of credible evidence and bona fide claims in such petitions.
Vikramajit Sen, J.— The Petition has been filed under Sections 433(e) and 434 (1)(a) of the Companies Act praying for the winding up of the Respondent Company on the ground that it is indebted to the Petitioner for a sum of Rs. 10,62,022.96 as on 31.8.1997 It has been averred that the statutory notice dated 6.10.1997 claiming the afore-mentioned sum of money, comprising Rs. 6,18,035.00 as the principal sum and Rs. 4,43,987.96 as interest was outstanding against various bills raised for providing advertising services to the Respondent Company by the Petitioner.
2. Admittedly, the statutory notice was duly replied to in terms of the letter dated 27.10.1997 In it, reliance was placed on letter dated 24.4.1995 written by the Petitioner to M/s. Adonis (India) Ltd. which is undisputably a sister concern of the Respondent Company. It reads as follows:—
“Dear Sir,
This has reference to our discussions at your office on 20th April, 1995 regarding the Hoarding sites in Delhi metro. As decided and agreed mutually between you and us, we would like to inform you that we will not accept are sort of deductions or adjustments on our bills beyond 1st April 95 against goods supplied or any outstanding on our sister concerns (such as Angad Panasonic Pvt. Ltd., M/s. Angad Electronics & M/s. Angad Enterprises).
We will appreciate a line of confirmation on the above to maintain your Hoardings effectively and provide prompt service.
Thanking you and assuring you of our best services at all times.
Yours truly,
for Angad Communication (India)
Sd/- Anil Pratap Singh Chauhan
Chief Executive.
Despite these statement, Mr. R.P Sharma Learned Counsel for the Petitioner, has put forward the ipse dixit that the Petitioner has no connection with the other Angad Group of business, on the lines of Paragraph 8 of his legal notice.
3. A perusal of the said letter dated 24.4.1995 will make it abundantly clear that the qualification sought to be recorded therein was that no deductions or adjustments in respect of the Petitioner's Bills beyond 1.4.1995 would be considered. It is a clear admission, otherwise that common claims and adjustments had been regularly made.
4. The commonality in the control and management of the Angad Group of Companies as well as the Respondent Group is also borne out from a Memorandum dated 5.5.1995 issued to Angad Communications, of which the Petitioner claims to be the sole proprietor. This document has been filed by the petitioner along with the Supplementary Affidavit dated 11.5.2001 The advantage which the Petitioner was seeking to extract from this Memorandum was that the Respondent, had acknowledged liability of a sum of Rs. 43,52,179/-. Even in this Memorandum there is a mention of Angad Panasonic Pvt. Ltd., which company was also mentioned in the letter dated 24.4.1995 along with M/s. Angad Electronics and M/s. Angad Enterprises. Furthermore, the so called admission of liability has been assumed by Vaka Electronics Pvt. Ltd., Savak Ltd. which is the Respondent Co. in CP No. 61/1998. The Petitioner cannot be allowed to approbate and reprobate. It is palpably obvious that there are two Groups of Companies on either side and adjustments of claims were to be freely made within the two Groups.
5. Learned Counsel appearing for the Respondents has submitted that four suits have been filed on the Original Side of this High Court in January, 1998 and that the present winding-up petition has been initiated purely as a counterblast thereto and in order to pressuries the Respondent Company into accepting an unjust settlement. It is also contended, that a winding-up petition cannot be predicated merely on statement of accounts. Such accounts have to be duly proved by corroborated evidence. Reliance has been placed on Chandradhar Goswami and Others v. Gauhati Bank Ltd., AIR 1967 SC 1058. It was observed as follows
“No person can be charged with liability merely on the basis of entries in books of account, even where such books of account are kept in the regular course of business. There has to be further evidence to prove payment of the money which may appear in the books of account in order that a person may be charged with liability thereunder, except where the person to be charged accepts the correctness of the books of account and does not challenge them.
The original entries alone under S. 34 of the Evidence Act would not be sufficient to charge any person with liability and as such copies produced under S. 4 of the Bankers' Books Evidence Act obviously cannot charge any person with liability.”
6. Mr. Nath Learned Counsel for the Respondent has also contended that the claim itself is barred by limitation. It is evident that the first eight entries in the Statement of Account dated 4.9.1997 constitute the debts which were incurred in February 1994. From the pleadings it is clear that the remaining amounts are interest unilaterally charged by the Petitioner. The debt is palpably barred since over three years have elapsed before the filing of the present petition. This question had” also been considered in Chandradhar's case (supra). The following passage from the judgment is self explanatory:—
“Then we come to the question of limitation. The suit is clearly within time insofar as the liability for sale under the mortgage-deed is concerned as it was filed within 12 years of the execution of the mortgage (see Art. 132 of the Limitation Act of 1909). As to the personal liability under this deed, that is beyond time as the suit was filed more than six years after the execution of the mortgage (see Art 116 ibid). Nor does the entry of payment of Rs. 100 in the accounts help the bank in this behalf. That entry is of no value under S. 19 or S. 20 of the Limitation Act for neither a writing signed by the appellants nor an acknowledgment of payment in the handwriting of the appellants or in a writing signed by them has been proved. Nor does Art. 85 of the Limitation Act of 1908 help the bank. Assuming this is a case of an open, current and mutual account, the last payment was made in November 1949. Article 85 gives limitation of three years from the close of the year in which the last item admitted or proved is entered in the accounts, (such year to be computed as in the account). The account in this case shows that the year was calender year. The mutuality in this case came to an end in 1949 for we find from the account that thereafter there are only entries of interest due to the bank upto October 31, 1952. So the bank would get three years from the end of 1949 under Art. 85 and as the suit was filed on April 9,1953, this entry will be of no help to the bank. We are, therefore, of opinion that the bank cannot get a decree fixing personal liability on the appellants and all that it is entitled to is a decree for sale of the mortgaged property.”
7. For these manifold reasons, I am satisfied that a bona fide defence has been put forward by the Respondent. The winding-up petition is accordingly dismissed.
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