Universal Bearing Agency & Other v. Wpil Limited

(1) THIS appeal is against the order dated 31. 1. 2005 passed by a learned Single Judge of this Court in C. A. No. 756 of 2004 arising out of C. P. No. 651 of 2001 whereby and whereunder he was pleased to direct that if the appellants have any further claim in respect of interest then they would be at liberty to take steps before the appropriate forum.

(2) IN order to appreciate the arguments, it will be necessary to advert, very briefly, to the facts which are involved in this case. It appears that the appellants herein filed a winding up petition alleging that the respondent company was indebted to them to the extent of Rs. 14,81,239. 20/- on account of the balance price of the goods sold and delivered which, according to them, the company had failed to pay notwithstanding service of notice under section 434 of the Companies act, 1956. The aforementioned application for winding up was taken up on 10. 10. 2002 by a learned Single Judge of this Court who admitted the application after holding that the said; company was indebted to the appellant/petitioning creditor to the extent of Rs. 14,81,239. 20/-on account of balance price of the goods sold and delivered which the said company was liable to pay together with interest at the rate of 12% per annum under section 61 of the Sale of Goods Act from the date of the respective bills till the date of payment. The appellant/petitioning creditor was also held entitled to costs which was assessed at 300 GMs.

(3) AFTER having held in the manner indicated above, the learned Single Judge admitted the application and directed the appellant/petitioning creditor to cause an advertisement to be punished, one in the Statesman and the other, in the ananda Bazar Patrika within a period of 3 weeks after vacation and also directed that the matter the made returnable 6 weeks after the vacation.

(4) IT appears that thereafter, the advertisements were published. Thereupon, an appeal was preferred by the company before a Division Bench of this Court but it was dismissed on the ground that after such publication, the winding up notice and the winding up petition had assumed a representative capacity. It further appears that the Division Bench observed that all creditors and contributors will appear before the Company Court either in support of or in opposition to the said winding up proceedings.

(5) BY an order dated 17. 11. 2003, the matter was disposed of by directing the respondent company to make payment of Rs. 14,81,239. 20/-in 10 equal monthly instalments and the first of such instalments was to be paid by 15th December, 2003 and all subsequent monthly instalments by the 15th day of each and every succeeding month. In default of the payment of the first instalment or of any one of the instalments, the Official Liquidator was directed to take possession of the assets or properties of the company. Nothing was said with regard to the interests and costs which had been ordered by the other learned judge of this Court by his order dated 10. 10. 2002.

(6) IT appears that thereafter on 13. 1. 2005 the matter again came up before the learned company Judge and it was observed that the payment of Rs. 14,81,239. 20/- had already been made by the company but the cost of 300 GMs had not been paid along with the last instalment. However, the company submitted that they were agreeable to pay the costs in spite of the fact that they had paid the last instalment except the cost and submitted that the appellant/petitioning creditor should be asked to accept the same. The learned judge, after having noted the aforementioned submissions, held that since a "winding up order" was discretionary and since, the principal amount had already been paid by the company, it would only be proper to direct the appellant/ petitioning creditor that if they had any further claims, in respect of interest, they would be at liberty to apply before the appropriate forum. In other words by order dated 31. 1. 2005, no specific order was passed in respect of the interest component that was passed initially by order dated 10. 10. 2002.

(7) IT appears that in a similar situation, the Delhi High Court held that where the liability to pay the principal amount is not disputed by the company the creditor need not be forced to initiate separate litigation for recovery of the interest amount and the interest can be determined by the Company Judge in the winding up proceedings and on failure to pay that amount, the company can be ordered to be wound up on the ground that it is unable to pay its debts. This was held in the case of Devendra Kumar Jain vs. Polar Forgings and tools Ltd. reported in 1995 (84) Comp Cas 766 (Del).

(8) IN the abovementioned judgment, the Delhi High Court also agreed with the opinion expressed by a Division Bench of the Punjab and Haryana High court in the case of Stephen Chemical Ltd. vs. Innosearch Ltd. , 1986 (60) Comp cas 702, on the point that the forum of the Company Judge was the appropriate forum for determining as to whether the creditor was entitled to interest where the company admits its liabilities and in fact, pays the amount.

(9) IN the instant case, it is evident from the order dated 31. 1. 2005 that the company had already made payment of the principal amount to the extent of rs. 14,81,239. 207 -. It is also evident from the same order that the company had submitted before the learned Company Judge that they were agreeable to pay costs.

(10) LEARNED Counsel appearing for the respondent submits, with reference to Rule 96 of the Companies (Court) Rules, 1959 that the order dated 10. 10. 2002 was an order of admission and it merged with the order dated 17. 11. 2003. He submits that since, in the order dated 17. 11. 2003, there was no order to make payment of interest, therefore, they cannot be compelled to make payment of the interest component. We are unable to agree with the aforementioned contention of the learned Counsel. Once the company had paid the principal amount and once they had also made a submission to the effect that they were agreeable to pay costs as was originally ordered, it does not stand to reason as to why the appellant should be forced to approach another forum for realisation of the interest component which was found to be a liability vide order dated 10. 10. 2002 along with the principal sum of Rs. 14,81,230. 20/ -. Under these circumstances, this Court is of the view that the order of payment of interest should have been passed by the appropriate forum and in the instant case, for all practical purposes, the appropriate forum was the Company Judge himself, as has been held by the Delhi High Court following the decision of the Division bench of the Punjab and Haryana High Court. The photocopy of the judgment which was produced by the learned Counsel appearing for the appellants is taken on record and the relevant portion is quoted below:

"i am in respecful agreement with the opinion expressed by a Division Bench of the Punjab and Haryana High Court in Stephen Chemical Ltd. vs. Innosearch Ltd. , 1986 (60) Comp Cas 702 and the Single Bench decision of the same Court in Delhi Cloth and General Mills Co. Ltd. vs. Stepan chemicals Ltd. , 1986 (60) Comp Cas 1046 to the effect that the forum of the company Judge is the appropriate forum for determining as to whether the creditor is entitled to interest where the company admits its liability and, in fact, pays the amount. My conclusion is that in a case where the liability to pay the principal amount is not disputed by the company the creditor need not be forced to initiate separate litigation for recovery of the interest amount and the interest amount can be determined by the Company Judge in the winding up proceedings and on the failure of the company to pay that amount the company can be ordered to be wound up on the ground that it is unable to pay its debts. "

(11) FOR the reasons stated, this Court is of the opinion that this appeal must succeed and it is accordingly allowed to do so. The order dated 31. 1. 2005 is modified to the extent by ordering the respondents to pay the interest component as ordered on 10. 10. 2002. The appellants need not go to any other appropriate forum for realisation of the interest component. Appeal allowed.