Dismissed

Ashco Niulab Industries Ltd. - L28920MH1986PLC039437 v. Agilent Technologies India Pvt. Ltd.

Bombay HC27 Jul 2012APP/601/2012

Case brief

AI extract

What is this about?

The court dismissed an appeal challenging a Company Judge's order that rejected a preliminary objection claiming a Section 434 statutory notice was invalid for specifying a payment period of less than three weeks. The court held that the notice was valid as it granted the company sufficient time to pay.

What did the court decide?

The appeal was dismissed, upholding the validity of the statutory notice despite the specified period being less than three weeks.

Ashco Niulab Industries Ltd. - L28920MH1986PLC039437 Vs… — Company and Corporate | Bombay HC (2012)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL (LODGING) NO.517 OF 2012 IN COMPANY PETITION NO.58 OF 2012

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Ashco Niulab Industries Ltd. Versus

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Agilent Technologies India Pvt. Ltd.

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... Appellant

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... Respondent

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Mr. Punit Chaturvedi i/by M/s.S.C.Chaturvedi & Co. for the appellants.

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CORAM : MOHIT S. SHAH, C.J. & N.M. JAMDAR, J. Friday, July 27, 2012

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P .C.

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This appeal is directed against the judgment and order dated 29 June 2012 of the learned Company Judge rejecting the preliminary objection raised by the appellant-respondent only before the learned Company Judge that the statutory notice dated 9 September 2011 issued by the advocate for the petitioning creditor of the appellant-company was not a valid notice.

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By the notice dated 9 September 2011, the petitioning creditor called upon the appellant to pay the dues of the petitioning creditor that is sum of INR 64,40,265 alongwith interest at the rate of 24% per annum from the date of payment till the date of receipt by the petitioning creditor. The notice further read as under:-

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“We hereby called upon you to remit the same to our clients within 7 days of receipt hereof, failing which our clients shall be constrained to take such civil and criminal action against you and/or your Director/s and/or officer/s in charge as they may be advised.”

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Section 434 of the Companies Act, 1956 under which the above notice was given, reads as under:-

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“434. Company when deemed unable to pay its debts- (1) A Company shall be deemed to be unable to pay its debts- (a) if a creditor, by assignment or otherwise, to whom the Company is indebted in a sum exceeding [one Lakh rupees] then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor; (b) …..............”

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After hearing the learned counsel for the parties, the learned Company Judge has followed the decision of another learned Single Judge of this Court in Lyka Labs Limited v. Rokadia Chemical Company Pvt.Ltd., (1990)4 CLA (Snr.) 58 (Bom.) and has held that merely because the period specified in the notice is less than three weeks, it does not render notice invalid. All that is necessary is that the company must get three weeks time to pay and it is of no consequence that the lesser time is specified in the notice. The learned Judge also found that similar view is taken by the Allahabad High Court in Babu Ram and Anr. v. Krishna Bharadwaj Cold Stores and General Mills Co. (Pvt) Ltd. and ors., (1965) II Com.L.J. 215, and Delhi High Court in Devendra Kumar Jain v. Polar Forgings and Tools Ltd., (1995)84 Company Cases 766.

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The learned counsel for the appellant relied on the aforesaid decisions in support of his contention that any of the sections is required to be interpreted strictly and that as per the said provision, the petitioning creditor is bound to give three weeks notice. None of the decisions relied upon by the

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learned counsel for the appellant dealt with the question which has been raised in the present appeal.

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Section 434(1)(a) provides that if after the petitioning creditor serves on the company a demand requiring the company to pay a sum so due exceeding Rs.1 lakh, “the company has for three weeks thereafter neglected to pay the sum” then only the petitioning creditor can file winding up petition.

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Obviously therefore, the legislative intent is that the company should get three weeks time to pay the sum demanded and in case of failure of the company to pay within three weeks, it renderes itself liable to face the consequences as provided in Sections 433 and 434 of the Companies Act. Admittedly, in the facts of the present case, the winding up petition was presented after expiry of three weeks from the date of receipt of the notice by the appellant-company. Even in the reply dated 16 September 2011, the learned advocate for the appellant-company admitted the dues and promised to pay the amount within 45 days. (Exhibit `I' at page 124).

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In fact, the appellant-company admitted the dues and pointed out their financial difficulties and requested for waiver of interest. The company has specifically prayed for time to make the payment in the following words:-

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“Without prejudice to the above, our clients state that they have placed multiple orders for purchase of goods from your clients, however there was no deliberate default done by our clients vide their E-mail dated 10^th August 2011, wherein it was clearly specified about the unforeseen circumstances, due to which the payments were delayed.”

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“Under the circumstances, our clients once again request you clients to grant a grace period of 45 (forty five) days to enable them to pay the outstanding dues, as they confirmed earlier in their E-mail.”

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The learned counsel for the appellant states that the admission in the above reply was not to pay the dues which were demanded by the petitioning-creditor but the dues which are outstanding according to the appellant. We do not propose to go into the controversy about the amount due and payable by the company to the petitioning creditor. All that we wish to point out is that in their reply to the notice also, the appellant-company did not raise any objection about the short period specified in the notice. In any view of the matter, as indicated above, the statutory notice was not invalid on account of the appellant-company having been given one week's time to make the payment.

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8. The appeal is accordingly dismissed.

CHIEF JUSTICE

N.M. JAMDAR , J .

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Ashco Niulab Industries Ltd. - L28920MH1986PLC039437 v. Agilent Technologies India Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

Ashco Niulab Industries Ltd. - L28920MH1986PLC039437 v. Agilent Technologies India Pvt. Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

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Cases cited

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Coram

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