Dismissed

Janana Mandal Ltd. v. Nepa Ltd.

Allahabad HC21 Jan 2019SPLA/225/1999

Case brief

AI extract

What is this about?

This intra-court appeal challenged a Single Judge's order in a winding-up petition which found a case for winding-up but granted a one-month reprieve for the respondent to pay off the debt. The Supreme Court dismissed the appeal, holding no manifest error existed as the Company was a running entity, and noted the discount claim required elaborate evidence not suitable for a primary winding-up proc

What the court decided

AI extract

Janana Mandal Ltd. Vs Nepa Ltd. — Company and Corporate | Allahabad HC (2019)

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Court No. - 34

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Case :- SPECIAL APPEAL No. - 225 of 1999

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Appellant :- Janana Mandal Ltd. Respondent :- Nepa Limited Counsel for Appellant :- Chandan Sharma, S.K. Shukla, U.N. Sharma

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Counsel for Respondent :- H.P. Singh, Krishna Chandra Tripathi, M.D. Singh Shekhar

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Hon'ble Sudhir Agarwal,J. Hon'ble Rajendra Kumar-IV,J.

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Heard Sri Jitendra Kumar, learned counsel for appellant and Sri M.D. Singh Shekhar, Advocate assisted by Sri K.C. Tripathi, learned counsel for respondent.

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This intra-Court appeal under Chapter VIII Rule 5 of Allahabad High Court Rules, 1952 (hereinafter referred to as “Rules, 1952”) read with Section 483 of Companies Act, 1956 (hereinafter referred to as “Act, 1956”) has been filed assailing judgment of learned Single Judge dated 19.02.1999 passed in Company Petition No. 38 of 1994 holding that a case for winding-up of appellant-Company was made out but taking a lenient view in the matter, Court granted an opportunity to appellant to pay off its debt to petitioner-respondent. Operative part of judgment of learned Single Judge reads as under:-

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“In view of the aforesaid reasons, a case for winding-up of the respondent-company is made out. However, it cannot be lost sight of that the respondent is a running company, which publishes a newspaper from various places within the State of U.P. and has wide circulation . Though it has not come out in the affidavit filed by the respondent yet it could be presumed that it must be employing large number of staff including workmen and livelihood of many will be at stake. In view of the same interest of justice demands that opportunity should be given to the respondent to pay-off its debt to the petitioner . It has already deposited a sum of Rs.75 lakhs as per the directions of the Division Bench given in the Special Appeal mentioned above. The said amount if not already withdrawn by the petitioner, they shall be entitled to withdrawn within one month from the date of this order. The respondent shall deposit the balance of the admitted amount of Rs. 2,28,64,054/- claimed in the statutory notice and simple interest at the rate of 15 per cent on the amount claimed from the date of the statutory notice dated 23.7.1994 till the date of

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payment of Rs. 75 lakhs and thereafter on the balance amount at the same rate till the date of this order, in three equal installments. The first installment shall be payable within two months from today, the second shall be paid within two months thereof and the third within two months from the date of payment of the second installment. The installments will be paid by means of Bank Draft in the name of the petitioner either directly to it or be presented before the Court. In case of default in paying/depositing any of the installments, the respondent-company shall be liable to be wound-up. It shall be open to the petitioner to apply for appropriate orders in case any default is committed by the respondent-company .”

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(emphasis added)

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3 . Facts in brief are that Respondent- M/s Nepa Limited, Nepanagar filed petition under Section 433(e) and (f) read with Section 439(b) of Act, 1956 for winding-up of appellant-Company on the ground that appellant-Company has failed to pay Rs. 2,43,58,920/since 1992-93. Details of various such bills are given in para-11 of Company Petition.

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Appellant contested winding-up petition stating that petitionerrespondent made supplies between 19.10.1992 to 11.06.1993 and received substantial amount of money as payment of their bill. Four consignments were rejected in Financial Year 01.04.1991 to 31.03.1992. Considering disputed amount of total value of newsprint supplied by petitioner-respondent to appellant which was to the tune of Rs. 4 crores whereagainst after deducting discount value of items which were substandard and rejected, entire amount has been paid by appellant. Details are given in para-5 of counter affidavit filed in winding-up petition and it would be useful to reproduce the same as under:-

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“5. That in reply to the contents of paragraph no.11 of the writ petition it is stated that the very statement of accounts referred to in the paragraph under reply and the notice annexed as Annexure-3 to the writ petition, it is evident that the petitioner alleges non-payment of Bills for the period 19.10.1992 to 11.6.1993. Consequently there is absolutely no dispute with regard to the period prior to that and after 11.6.1993, It is surprising that despite the pendency of the above amount and the dispute, which is being raised, the petitioner continued to supply newsprints to the Respondent regularly as per the order placed by the Respondent from time to time and continued

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receiving payment repeatedly with regard to the bills raised by the petitioner from time to time. This fact by itself indicates that there is a serious dispute between the parties with regard to the amount of bills for the period referred above, The fact, however, is that indicated above, there was series of dealings between the petitioner and the Respondent. For the perusal of this Hon'ble Court, the Respondent is submitting herewith the statement related to the petitioner's Company for the period 1.4.1991 to 30.11.1994. From the perusal of the above statement of Account, it will be evident that in fact the dispute begal from the period beginning from 1.4.1991. Various consignment of newsprints reels were sub-standard and were very old. In fact more than six months old as per the statement contained therein and, therefore, they were not suitable for user by the Respondent. Apart from that four consignments have been rejected in the financial year 1.4.1991 to 31.3.1992. As a consequences of the above supply of the sub-standard material and rejected material, the Respondent had intimated to the petitioner that the petitioner will be required to pay reduction/discount to the tune of approximately 4% on the Bill amounts raised by it during the said financial year. Taking into consideration the disputed amount the total value of newsprint supplied by the petitioner to the Respondent was to the tune of approximately Rs.4 crores. The Respondent had paid deducting the discount value of the items, which were substandard and rejected, the sum of Rs. 3 crores. Thus, in view of the discount, which the Respondent claimed from the petitioner for the above sub-standard and rejected material, the balance remained at the closing of the above financial year ending 31.3.1992 as Rs. 1 Crores which was carried forward as opening balance as on 1.4.1992 i.e. the next Financial year. In the Financial year 1992-93 also, the total value of newsprints supplied by the petitioner to the Respondent to the tune of Rs.2.81 crores approximately. Adding to this earned balance of Rs. 1 crores, the total amount of credit in favour of the petitioner as on 31.3.1993 was Rs. 3.81 crores. As against this, the Respondent made payment to the tune of approximately Rs. 3.51 crores. Remaining 24,50,000 Rupees was adjusted on account of discount agreed upon between the parties as claimed by the Respondent. This discount had been claimed in respect of supplies made by the petitioner to the Respondent during the financial year 1.4.92 to 31.3.1993. It will, therefore, be apparent that the balance amount of money in favour of the petitioner at the end of 31.3.1993 was only 30 lacs, which was carried forward as opening balance as on 1.4.1993 i.e. the next financial year 1993-94. The petitioner at the end of the said financial year 1993-94, made supply to the Respondent of newsprints to the tune of Rs.1.40 crores. From the said statement of Accounts, it may be further apparent that the Respondent had made payments as against the bills raised against the petitioner to the tune of Rs.1.60 crores which included the sum of Rs. 33 lacs and adds which the Respondent had claimed as discount for the rejected and damaged sub-standard reels supplied by the petitioner to the Respondent during the Financial year 1993-94. Thus taking all the facts and circumstances into consideration at the

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end of the financial year 1993, the balance due to the petitioner was only Rs. 12,62,802/- . A copy of the statement of accounts which demonstrates and proves the above fact, is annexed herewith and marked as Annexure-CA-1 to this Affidavit form the said statement of accounts, it will further be apparent that Rs. 12.62 lacs which was due at the end of the financial year 1993-94 was carried forward by the petitioner as opening balance of the next financial year 1994-95, against this amount the Respondent has further made payment to the tune of Rs 9,40,600/- and, therefore, after the above amount, the only amount that remains due to the petitioner from the Respondent is to extent of Rs 3,22,622.60 and not as claimed by the petitioner. The fact is that the Respondent has claimed the above amount completely ignoring the claim of the Respondent with regard to the discount for the damaged, rejected and sub-standard newsprints supplied by the petitioner for the last three years beginning from 1.4.1991. If the said adjustment which the Respondent has made on account of the above damaged sub-standard and rejected newsprints, is taken into consideration, then it will be apparent that the very small amount, approximately Rs. 3 lacs is due. The facts and circumstances as pleaded in the petition and as demonstrated in the statement of Accounts annexed as Annexure-CA-1 above to this Affidavit, it is apparent that the petitioner and the Respondent have a running account. This account continued to operate even after 11.6.1993 which is the last date contained in the statement of Accounts referred to in paragraph no.11 of the writ petition for receiving the last bill by the petitioner. It is absolutely unreasonable and not understandable as to why the petitioner despite the fact that the substantial amount of money as alleged by it, was not paid by the Respondent to it, were continuing supply of newsprints regularly as per demand placed by Respondent from time to time. The supply of newsprints after 11.6.1991 as well as demands made by the Respondent to the petitioner after 11.6.1993 clearly demonstrate that there was a running account between the parties as per which demands were made repeatedly and there was absolutely no dispute. The dispute has been raised by the petitioner only on account of fact that it is the disputed discount which the Respondent has claimed. That fact whether the discount has been rightly claimed or not depends on the answer to the question whether supply relating to the discount has been made, which were sub-standard, old and rejected as well as damaged or not. This is the question of disputed fact and a cannot be decided by means of this Company petition. Elaborate evidence is required to disprove the claims of the Respondent for discount as made by in its statement. The Respondent does not in any manner admit the claim of the petitioner. The statement of Accounts, which has been filed as Annexure-2 to the writ petition is not complete and correct copy of the statement of accounts, moreover, the facts as stated above, clearly demonstrates that the disputed period ended on 11.6.1993 and the petitioner did not raise any dispute in this regard. There is no letter annexed with the petition to show that any claim in this regard was raised prior to the issue of notice by the Advocate of the petitioner. Non-raising of such issue by the petitioner before the

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Respondent further demonstrates that in fact there was no such dispute existing between the parties and the running account was being operated and adhered to regularly. This system continued without any break when eventually the Company petition was filed in the month of November, 1994. This clearly proves the fact that the only dispute essentially between the parties relates to the discount claim made by the Respondent. This dispute cannot be raised by means of Company petition. Whether the claim of discount is correct or not can be decided by means of elaborate evidence and can only be settled by means of Company petition. The statement of account has been repeatedly shown to the officials of the Company. The fact that the dispute is one of discount between the parties is further evident from the perusal of Annexure-6 to the writ petition and the reply of the Lawyer of the Respondent to the Notice given by the petitioner's Company. The Respondent has never accepted any outstanding amount as alleged by the petitioner. The entire claim which is being raised by the petitioner is based on incomplete statement of account which has been annexed as Annexure-2 to the writ petition. In fact the Counsel of the Respondent has clearly demonstrated in his reply dated 9.6.1994 which has been annexed as Annexure-4 to the writ petition that the amount and the account submitted by the petitioner is totally wrong on account of the fact that they have despite the assurance not taken into consideration the discount to the tune of Rs.40-30% which has been earlier assured by them. It was on the basis of their assurance that the running account continued by means of Annexure-CA-1 to this Affidavit. The fact that the petitioner continued supplying newsprint clearly demonstrate that the assurance was in fact given and the question of discount was accepted by the petitioner and, therefore, the continued to make supply and it was for this reply the counsel of the Respondent had alleged in his reply to the notice sent on behalf of the petitioner that the petitioner has ignored the discount as a result of which the discrepancy has arisen which may be rectified.”

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Petitioner-respondent disputed the claim made by appellant in

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the rejoinder affidavit and said that after 11.06.1993 its total sum of Rs. 41,02,455/- was paid which was materially in respect of supply made prior to 11.06.1993. Further against supply made on 14.02.1994 amount of Rs. 1,46,643/- was paid. It is also stated that contents of para-11 that goods worth Rs. 2,43,58,920/- were received by appellant and consumed was not disputed. The calculation has been made by appellant on the basis of self-claimed 40 per cent deduction of total amount for alleged rejected/substandard newsprint, though no assurance was given by petitioner-respondent regarding such deductions.

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Learned counsel for appellant contended that during personal visits, representatives of petitioner-respondent assured of rebate which was calculated and accounted for by appellant and learned Single Judge has not properly examined this aspect while passing impugned judgment.

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However, we find no substance in the submission and at least nothing is substantiated from record. Supply of goods and consumption by appellant is not disputed. There is a letter dated 25.03.1992 sent by appellant to petitioner-respondent which shows that material was consumed by appellant and thereafter, it sought consent of petitioner-respondent for rebate on the assertion that it was assured by petitioner-respondent but no such assurance from record could be substantiated. Appellant's letter dated 25.03.1992 reads as under:-

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“The Dy. General Manager (Mktg) Nepa Limited., Nepa Nagar, (MP) Dear Sir,

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This has reference to your express telegram which we have received on 24.03.1992. We have gone through your special incentive/bulk purchase discount scheme etc. We are ready to purchase further rejected newsprint in bulk as per standard explained by you to be dispatched by Rake to Varanasi.

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We would request you to recall our number of discussions we had regarding our claims and settlement of old dues. During 1991-92 your supplied rejected and damaged newsprint were more of substandard and low grade quality as per specification given by you. This has also reference your inspection of our stock at our godown. You had agreed to allow heavy quality rebate on these supplies during your visit which is still pending. On assurances only we had consumed such quality of newsprint which has adversely affected our business and required growth of circulation.

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As per your telephonic instruction payments will be released within a couple of days by post dated cheques, meanwhile please try to settle account by issuing credit notes as assured.

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With regards.”

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Learned counsel for appellant drew our attention to Joint Inspection report dated 14.06.1992 wherein Inspection Body consisted

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representatives of both parties, and has observed as under:-

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“JOINT INSPECTION REPORT OF NEPA NEWSPRINT STOCK

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Messrs Jananamandal Limited have had been complaining for some time about the poor quality of newsprint supplied to them from NEPA LTD., especially in respect of bulk supply through rake loads made during end January/February, 1991, March '92 and April, '92. The nature of complaints are:-

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1) Supply of reject quality non-standard newsprint in place of standard newsprint.

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2) Inconsistency in grammage of newsprint.

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3) Newsprint is a poor strength.

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4) Variation of sheds.

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5) Cuts is several reels.

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Above was brought to the notice of Mr. S.G. Tharkurta, Deputy General Manager, Marketing during his visit on 14.06.1992 again to the office of Jnanamandal Ltd., Varanasi. Mr. S.V. Gupta, Managing Director of Jnanamandal Ltd., mentioned again the loss, the organisation has suffered due to above quality problems in printing in NEPA newsprint and he has insisted upon instruction the residual stock available at their godown/press. In order to verify their complaints, Mr. S.V. Gupta deputed Mr. Amitav Chakravorty, Financial Controller, Mr. N.S. Trivedi, Purchase Department and Mr. Girish Dubey, Store Incharge of Jnanamandal to make joint inspection of residual Nepa newsprint stock lying in the godown. Out of residual stock about 370 M.T. NEPA Newsprint lying in the godown on date as indicated by the Store Incharge, at random, thirty reels were segregated from different lots in the godown where the stock of NEPA Newsprint is kept and the following have been observed.

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1) WEIGHT OF REELS.

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Reels inspected were found to have different weight as under:

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i) Ten reels were found to have weight ranging from 163 Kg. to 220 Kg.

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ii) Five reels have weight ranging from 151 Kg. to 162 Kg. each.

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iii) Five reels have weight 221 Kg. to 240 Kg. each.

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iv) Five reels have weight from 250 Kg. to 289 Kg. each.

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2) QUALITY :-

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i) Twelve reels are found to be of reject grade but having label of standard newsprint on the reels.

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ii) Six reels seem to be of more than 52 GSM.

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iii) Fourteen reels have darker shade than the normal shade of NEPA newsprint.

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iv) Excluding of 12 reels of reject grade newsprint as referred above, eight reels out of balance 18 reels have come brittle which is liable to break in WEB machine at the time of printing.

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CUTS IN REELS :

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It was observed 5 reels out of 30 reels had side cuts.

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Later on at night, Deputy General manager, Marketing, Nepa Ltd. in presence of operator and visiting officials of Jnanamandal observed the printing process of 15 reels picked-up from selected 30 reels and have observed as under :-

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i) Heavy accumulation of dust on the blanket took place during printing process.

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ii) Frequent breaking of paper on WEB machine causing delay in printing and wastage of Newsprint.

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iii) Reluctance of operation to use such newsprint because of problem in its usage.”

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However, it is alleged that pursuant thereto an assurance was given by petitioner-respondent to appellant towards deduction etc., but no document has been placed before us to substantiate the same.

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Counsel for appellant drew our attention to various copies of accounts placed before us but having gone through the same, we find that accounting includes the so-called deductions/discounts calculated by appellant on its own but no such authority shown to have been given by petitioner-respondent. In absence of any such assurance or consent given by petitioner-respondents, it cannot be said that appellant can claim entitlement towards alleged discount/rebate in respect of goods which were admittedly supplied and consumed by appellant. Whatever amount has been paid by appellant was already adjusted by petitioner-respondent and we could not be shown that any amount which has been paid by appellant has not been adjusted.

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Counsel for appellant then contended that in the garb of winding-up petition, learned Single Judge could not have allowed recovery of debt by petitioner-respondent but we find that instead of passing a winding-up order, learned Single Judge has given an opportunity to appellant to pay all dues so as to absolve itself from the liability of winding up. This is an alternative arrangement and if it is

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not complied by appellant winding-up order will have to be passed by Company Judge. Judgment in question only gives an opportunity taking into account interest of appellant which was found a running Company.

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In these circumstances, we find no manifest error in the order of learned Single Judge warranting interference.

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Appeal lacks merit and is accordingly dismissed.

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Order Date :- 21.01.2019 Akram/AK

Janana Mandal Ltd. v. Nepa Ltd.

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Janana Mandal Ltd. v. Nepa Ltd.

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