While admitting a petition U/S.433 of Companies Act, 1956, it is not necessary to establish that the entire claim is undisputed: Supreme Court of India
Whether the defense of a Company is in good faith or as to whether it is of a substance and as to whether it is likely to succeed in point of law and as to whether the company adduces prima facie proof of the facts on which defense depends, would depend upon the facts of each case. This was held in SHITAL FIBERS LTD. V. INDIAN ACRYLICS LIMITED[CIVIL APPEAL NO. 1105 OF 2021] in the Supreme Court of India by division bench consisting of JUSTICE R.F. NARIMAN, JUSTICE B.R. GAVAI, and  JUSTICE HRISHIKESH ROY. The facts are that the appellant had entered into an agreement with the respondent. For which payment was not made by the appellant. On the basis, the respondent filed a Company Petition seeking winding up, which learned Company Judge had admitted. The appellant had appeared in the High Court, which was dismissed. This appeal has been filed with regard to interest at the rate of 24% per annum claimed by the respondent. The counsel for the petitioner contended that the claim of the respondent could not stand even if it was made under Order XXXVII of CPC. That requirements U/S.433(e) and (f) of the Companies Act, 1956 stood on a higher pedestal, and as such, the learned Company Judge has erred in admitting the petition and the claim of the respondent for interest does not stand. The counsel for the respondent submitted that demand notice under Section 434 read with S.433 (e) of the said Act was duly served upon the appellant, no specific defense was taken. That no interference would be warranted in the concurrent findings of fact. The court made reference to the Apex court judgment in Madhusudan Gordhandas &amp; Co. vs. Madhu Woollen Industries Pvt. Ltd., “Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt, see Re. A Company. [94 SJ 369] 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 Re Tweeds Garages Ltd. [1962 Ch 406] The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends.” The court also referred to the judgement of Vijay Industries vs M/S. Natl Technologies, wherein the Apex Court had made the following observations, “ In the present case, on the date of filing of the application, dues in respect of at least a part of the debt which was more than the amount specified in Section 433 [sic Section 434(1)(a)] of the Companies Act was not denied. It is not a requirement of the law that the entire debt must be definite and certain”
order passed by the Division Bench of the Punjab Haryana High Court in Company Appeal No. 58 of 2015 dated 29.4.2016 arising out of the order passed by the learned Company Judge of the said Court in Company The facts in brief giving rise to the present in village Harkrishanpura District Sangrur. There was a and the respondent ­ M s Indian Acrylics Limited under which the respondent was to supply acrylic yarn to the supply of raw material commenced from 20.4.2007. The respondent supplied material worth Rs.81 98 014.45. There such a sum of Rs. 6 22 073 ­ was credited by the respondent in the account of the appellant on account of material returned and also a credit note of Rs.5 00 000 ­ respondent appellant had made a payment of Rs.61 83 218 ­. However there was an outstanding balance of Rs.8 92 723 ­ as on 28.7.2008. Since despite repeated requests balance amount was not paid the despite notice being duly served on the appellant the respondent filed the aforesaid Company Petition seeking admitted debts. The learned Company Judge vide order while doing so the learned Company Judge observed that since the appellant was an on­going concern an Being aggrieved thereby the appellant preferred Court while issuing notice stayed the publication of the admission notice subject to the appellant paying the amount in question by 31.12.2015. Accordingly the Though the Division Bench of the High Court and as such there was no question of directing the respondent to repay the amount since the appellant had with regard to interest at the rate of 24% per annum is However the Division Bench clarified that the dismissal of the appeal was without prejudice to the respondent’s behalf of the appellant submits that the defence of the specific case of the appellant that on account of the who was entitled to receive the damages from the respondent. He submitted that in view of the specific defence which could not be said to be a moonshine defence Company Petition. He submitted that the claim of the proceedings under Order XXXVII of the Code of Civil Procedure 1908. He submitted that requirements under Section 433(e) and of the Companies Act 1956 same reason the Division Bench has also erred in not Shri Nehra further submitted that since there balance delayed payment the direction issued by the in Mediquip Systems Ltd. vs. Proxima Medical System Gmbh1 Vijay Industries vs. NATL Technologies Ltd.2 and IBA Health Private Limited vs. Info­ behalf of the respondent submits that since the appellant do so it was required to issue statutory demand notice 17 SCC 42 23 SCC 527 310 SCC 553 the appellant and also replied to. Apart from making a a matter of record no specific defence was taken. He stand taken by it before the learned Company Court as notice. He therefore submits that the learned Company rightly held that the defence of the appellant was not a This Court in the case of Gordhandas & Co. vs. Madhu Woollen Industries Pvt “20. Two rules are well settled. First if the debt is bona fide disputed and the defence is a substantial one the court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the 43 SCC 632 company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. LR 19 Eq a creditor who claimed payment of an agreed sum for work done for the company when the company contended not allowed. 35 Beav 21. Where the debt is undisputed the particular debt see Re. A Company.as on 8.5.2008 after of Rs.26 22 073.00 as mentioned In reply to the said notice the appellant has it is a matter of records and it clearly shows about the business it is a matter of record. However there is nothing due to your client from my client rather on the contrary is true as mentioned in and does not depict the correct client himself had been coming to my client and settled the amount and agreed to return Rs. 25 Lacs Para no.7 of your notice is wrong and incorrect. Detailed reply has already been given in previous in paragraph 6 it is stated that the respondent had himself the Company Petition it would reveal that the main contention of the appellant was that it was a running raw material by the respondent. However with effect from 26.6.2007 it was noticed that raw material supplied was defective and the goods which were sold in the market complaints. It was stated that the goods which were supplied by the respondent vide invoices dated 26.6.2007 the appellant company using the said raw material were returned by the dealers and importers Company had returned the defective raw material to the respondent Company which remained unused. It was credited an amount of Rs.6 22 073 ­ in the account of the appellant. It is further stated that after various meetings appellant on account of supply of defective material by issuing a credit note of Rs.5 lakh. It was further stated that as per the account of the appellant an amount of Rs.53 648 ­ was receivable from the respondent after Company written by it to the petitioner Company regarding statutory notice issued by the petitioner Company the stand Rs.25 00 000 ­ supplied by the petitioner Company to the respondent company was lying Rs.25 00 000 ­ credit note of only Rs.5 00 000 ­ was given. against a claim of Rs.8 92 723 ­ Rs.11 07 297 ­ is due from the petitioner company to the respondent company on account of yarn supplied. Demand of the aforesaid amount was raised. In is altogether different. No doubt issue regarding defective material was raised however it was stated that the entire material supplied by the petitioner company was used as a result of which the product was defective which was not marketable and on that account the respondent company suffered losses. products were sold in the market which were returned back. No communication has been referred to which was addressed by the respondent company to the petitioner company pointing out note of Rs.5 00 000 ­ in May 2008 the petitioner company agreed to Rs.8 55 370.65 Rs.8 66 788.29 Rs.9 07 891.19 Rs.8 84 726.17 Rs.35 14 776.3 Rs. 6 22 073.00 Rs.14 46 351.3 Rs.15 00 000.00 Rs.28 92 703.3 Balance payable Rs.14 46 352.0 evident that now the stand is that the respondent­ company is to recover a sum of Rs.53 648 ­ from the petitioner company whereas to the tune of Rs.11 07 297 ­. It is reply to the petition the story that settlement between the parties had an after thought just to defeat the when reply to the statutory notice do not find that the defence raised by the respondent company is reasonable as the debt cannot be been paid despite statutory notice and even pendency of the present deserves to be admitted. Ordered with regard to the products of the respondent being defective in quality was by way of an after­thought of such contention. It was further found that whereas in reply to the notice the appellant had claimed that it was entitled to recover an amount of Rs.11 07 297 ­ in the calculations given in written statement the amount is This finding of fact is affirmed by the Division inference. Indeed the grant of credit would also indicate that the respondent fairly acknowledged the defects when there were any and with the contractual specifications It is necessary therefore to examine the other surrounding facts and circumstances to judge the rival dispute about the quality and the same was acknowledged by the respondent it was reflected in its were any other defects and in any event if the appellant’s case was that the goods were defective it would have recorded the same in some manner or the other. The appellant however contends that The appellant’s case has varied between its reply to the statutory The respondent served a statutory notice dated 25.08.2008 The appellant’s reply dated 10.09.2008 to the statutory notice much less an agreement by the respondent to pay the appellant for the alleged defective goods. This belies the There is yet another fact which clearly disentitles the appellant to goods. The appellant admittedly retained the goods and in fact used the goods namely synthetic yarn such as blankets. Having done so the appellant cannot refuse to pay for the same. If the goods were defective the appellant ought to have rejected the same. Having the respondent it is now not even the appellant nowhere raised the contention that its customer who purchased the final product raised grievance Moreover the appellant has not furnished any details regarding its transactions with its customers involving the sale of is nothing to indicate that the appellant suffered any damages on account thereof or that the no bona fide dispute raised by the in respect of It is thus amply clear that both the learned Company Judge as well as the Division Bench upon regard to the quality of the material supplied by the the respondent and it was reflected in its conduct by the grant of credit. It observed that the respondent had fairly reasonable to presume that if there were any other defects it would have recorded the same in some manner or the other. The Division Bench further found that it was difficult to accept the case of the appellant that the It further found that in the reply to the statutory notice appellant that the goods manufactured utilizing the defective raw material supplied by the respondent being facts it was also found that the appellant had taken contradictory stand in order to defeat the claim of the respondent. It was also concurrently found that the appellant had failed to adduce prima facie proof of facts Insofar as the contention of the appellant that Insofar as the reliance placed by the learned learned single judge that a debt is prima facie due and such on facts the said judgment would not be applicable to In the case of Vijay Industries relied by the appellant the learned single judge after finding that a petition. However in appeal the Division Bench set aside the order of the learned single judge. This Court while “41. In the present case on the date of at least a part of the debt which was more than the amount specified in requirement of the law that the entire debt must be definite and certain. The Division Bench of the High Court proceeded on the basis that the entire the company petition that the petitioner had come to know that obligations and as therefore become commercially insolvent the petitioner has not taken necessary care to prima facie establish the same. The only piece of evidence available on the side of the petitioner is that the respondent is indebted to the petitioner a sum a moment that the respondent paid the said amount to the respondent neglected to pay the particularly when of payment of interest on the no such written agreement in between the parties for such facts of the matter formulated the valid ground for admission of the contain at the foot a clause for payment of interest on delayed payments. Such a clause even judgment of the Rajasthan High cannot constitute an agreement between the parties for payment of interest. The legal position thus ground that it is unable to pay its the company is ascertained and requisite ‘neglect to pay’ as envisaged under clause of sub­ when the company bona fide the defence taken up by it is of “Having regard to the facts and circumstances of the instant case we are of the considered view that the claim of the petitioner towards interest on delayed payments since not covered by any specific se is a contentious issue and the dispute as regards the payment of therefore legitimately be concluded pay. The petitioner who pleaded the trade practice payments made shall be adjusted towards interest first and balance if any shall be adjusted towards principal later of any such trade practice appropriating the amounts towards towards principal next becomes inappropriate in which event the claim of the petitioner that the respondent is liable to pay Rs 65 15 947 basing upon such calculations cannot be accurate The total amount claimed by the matter becomes doubtful and not definite. It is still got to be ascertained if the claim of the respondent were to be considered that there has been no agreement for payment of interest on delayed cannot be presumed prima facie reason firstly because the Division not proved by cogent evidence secondly only after the company petition is admitted and thirdly issuance of After observing the aforesaid this Court further clearly held that it is not necessary while admitting the fail to understand as to how the said judgment of this facts of the present case. As a matter of fact in the said issued a direction to grant the interest as claimed by the referred to the said issue. The Division Bench therefore case of IBA HealthPrivate Limited would the said case it will be relevant to refer to the following and “29. On a detailed analysis of the well as the compromise deed and the in the company petition which is substantial in nature. The Company Court while exercising its powers under Act 1956 would not be in a position to of settlement and the compromise deed which calls for detailed investigation of facts and examination of evidence and calls for interpretation of the various terms and conditions of the deed of settlement and the compromise entered This Court held that the company court while exercising its powers under sections 433 and 434 of the who was at fault in not complying with the terms and conditions of the deed of settlement and the compromise deed. It was found that in the said case a detailed investigation of facts and examination of evidence and settlement and the compromise entered into between the parties was necessary in adjudicating the claim which the said Act. In the said case it was also noticed that the claim was in respect of contingent debt and that the disputes between the parties had been compromised in that the defence of the appellant could not be said to be We are therefore of the considered view that there is no merit in the appeal. The same is accordingly dismissed. There shall be no order as to costs. Pending applications if any shall stand disposed of