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Tuesday, August 18, 2015

Allowing to pay debts installment wise in Liquidation Proceedings Postponing Publication - 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. 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

                                                                  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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