STANTECH PROJECT ENGG. PVT. LTD. Vs. NICCO CORPORATION LTD.

COMPANIES ACT, 1956

Section 434 - Company when deemed unable to pay its debts

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 7373 of 2005, Judgment Date: Aug 13, 2015

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7373 OF 2005

STANTECH PROJECT ENGG. PVT. LTD. …APPELLANT

VERSUS
NICCO CORPORATION LTD. …RESPONDENT

WITH
C.A.NO. 7374 OF 2005

J U D G M E N T
VIKRAMAJIT SEN, J.
1 Both these Appeals assail the common impugned Order passed by the
Division Bench of the High Court at Calcutta on 29.9.2003, setting aside
the Order passed by the Company Judge rejecting the plea of the Respondent
that the so-called concession made by the Junior Counsel should not be
given curial recognition.
2 The facts, succinctly stated, are that the Appellant had filed
Winding-up petitions against the Respondent on the asseveration that debts
admittedly payable by the Respondent to the Petitioner had remained
outstanding even subsequent to the issuance of a statutory Notice issued
under Section 434 of the Companies Act. 1956. Keeping in perspective the
nature of the question of law raised before us, we need not go into the
genesis or the characteristics of the contract between the parties. So far
as Civil Appeal No. 7373 of 2005 is concerned, the claim was for a sum of
Rs.3,54,500/- together with interest at the rate of ten per cent per annum
together with Rs.1,09,958/- deducted by the Respondent on account of the
tax deducted at source (TDS). These amounts have remained unpaid even
after the receipt of the statutory notice. It is palpably clear that the
statement made by the learned counsel for the Respondent that these amounts
would be paid in ten equal installments commencing from 16.8.2002, was so
done in order to avert the ordering of an advertisement/citation in the
proceedings by the Company Judge. In Civil Appeal No. 7374 of 2005, the
claim was for a sum of Rs.8,08,314/- together with interest at the rate of
ten per cent per annum together with Rs.1,24,984/- which had been deducted
by the Respondent on account of TDS. It appears that these amounts were
admitted by the Respondent in terms of its letter dated 8.2.2000 as also in
the Affidavit of the Manager (Corporate) of the Respondent who, at the
material time, was its Principal Officer. In the said Affidavit, it was
admitted that the total amount payable was Rs.8,05,664/- which was being
retained awaiting final clearance from TISCO who had floated the subject
turnkey project. As in the foregoing instance, the Company Judge recorded
the statement of the counsel for the Respondent offering to pay the
principal sum of Rs.8,05,664/- together with Rs.1,24,984/- in four equal
installments commencing from 6.8.2002. It had been made clear by the
Company Judge vide Orders dated 24.7.2002 that if these payments were not
made, the Winding-up petitions would stand admitted and it would be open to
the Appellant to pray for advertisement/citation. A fortnight later, i.e.
on 8.8.2002, the foregoing Orders were modified by the consent of the
parties to the effect that it would be open to the Respondent to pay off
the dues together with the interest accrued in eight monthly installments
instead of four monthly installments as was directed in the Order dated
24.7.2002.
3 In these circumstances, these orders passed on the concession of the
learned counsel for the Respondent were challenged by the Respondent before
the Division Bench of the High Court, which we cannot but view as
extraordinary. The Division Bench disposed of the Appeal in terms of its
Order dated 6.1.2003 with the observation that an application should be
preferred before the learned Company Judge for modification of the order,
which were assailed before this Court. We had disposed of the Special
Leave Petition on 3.3.2003 thus:- “Whether such application for
modification is at all maintainable is a question which is expressly left
along with other questions for being decided by the learned Single Judge if
and when such application for modification is filed by the Respondent”.
4 Thereafter, a detailed Order came to be passed by the learned Company
Judge on 22.8.2003 rejecting the prayer for re-hearing or modification of
the consent Order, primarily on the premise that the so-called junior and
an inexperienced counsel had rightly made the statement that the admitted
debt would be paid in installments. The learned Company Judge had
recorded that the Respondent Company was fully aware that Winding-up
petitions were going to be admitted, which situation is always stigmatic
and therefore to be strenuously avoided since it inexorably leads to a
commercial death. The learned Company Judge found the conduct of the
Respondent not to be bona fide. The second salvo of litigation, therefore,
proved to be unsuccessful so far as the Respondent is concerned as the
petition/application was dismissed by the Company Judge with costs assessed
at 600 GMs. Thereafter, these Orders dated 24.7.2002 came to be assailed
once again before the Division Bench, which then passed the Orders now
impugned before us. The Division Bench was of the view that the concession
was made mistakenly by the counsel appearing for the Respondent and on this
predication, the Order was set aside and the Company Petition was remanded
to be heard once again.
5 We find no justification whatsoever, in law or in equity, for the
rationale adopted by the Division Bench in the impugned Order. The Company
Judge had no alternative but to proceed for Winding up of the Respondent
Company since it had failed to discharge the admitted debt even after the
service of the afore-noted statutory notice. The said junior Advocate of
the Respondent had, in fact, displayed legal sagacity in getting the
winding-up of the Company postponed and avoided the publication in the
Winding-up petition by praying for and obtaining leave to pay the debt in
installments. Had he not done so, the Respondent would have had to pay the
entire debit at once or face certain commercial death as a consequence
publication/citation of Winding-up petition. It is note worthy that the
Respondent so is transacting business even today. The Division Bench has
been inexplicably and unjustifiably considerate towards the Appellant. It
is this kind of leniency that results in proliferation and prolongation of
litigation, which approach has led to an almost insurmountable pendency of
litigation. Learned counsel for the Appellant rightly relies on the
decisions of this Court in Shrimati Jamilabai Abdul Kadar v. Shankarlal
Gulabchand (1975) 2 SCC 609 and State of Maharashtra v. Ramdas Shrinivas
Nayak (1982) 2 SCC 463.
6 We accordingly set aside the common impugned Order of the Division
Bench of the High Court. The Respondent has abused the judicial process in
order to delay the discharge of an acknowledged debt for almost a quarter
of a century, in which period it has continued in business.
7 These Appeals are allowed. We, however, modify the Orders of the
learned Single Judge by directing the Respondent to pay the said admitted
dues of Rs.3,54,500/- and Rs.8,08.314/- together with interest at the rate
of ten per cent per annum, as also the costs imposed by the learned Company
Judge at 600 GMs. If the two sums of TDS of Rs.1,09,958/- and Rs.1,24,984/-
have not been deposited with the Income Tax Department, these sums shall
also be paid to the Appellant. The Respondent shall also pay to the
Appellant the costs of these proceedings quantified at Rs.20,000/-. All
these amounts are payable within 45 days from today. No extension for
payment shall be granted since the accommodation and the indulgence granted
by the learned Company Judge has been abused by the Respondent. In the
event of failure to make the above mentioned payments, the Appellant shall
be entitled to once again move the learned Company Judge, who will
thereupon admit the Winding-up petition, and proceed with expedition under
the relevant provisions of law.
…………………………………J.
[VIKRAMAJIT SEN]

…………………………………J.
[SHIVA KIRTI SINGH]

New Delhi,
August 13, 2015.

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