Allowed

Krishnamurthy and Co., a Prop Firm of Atthornesy , Ms.Naina Krishnamurthy v. Mchek India Payment Systems Pvt.Ltd.

Bombay HC18 Sept 2014CA/340/2013

Case brief

AI extract

What is this about?

This court disposed of a petition for winding up mChek India Payment Systems Pvt. Ltd. The petitioner, a law firm, sought winding up on grounds of non-payment of professional fees. The court found the company commercially insolvent based on its own admissions of losses and lack of revenue, leading to an order for winding up.

What did the court decide?

The respondent company is wound up, and an Official Liquidator is appointed to take charge of the assets.

Krishnamurthy and Co., a Prop Firm of Atthornesy… — Company and Corporate | Bombay HC (2014)

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

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COMPANY PETITION NO.411 OF 2013 WITH COMPANY APPLICATION NO.340 OF 2013

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Krishnamurthy and Co. versus

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mChek India Payment Systems Pvt. Ltd.

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… Petitioner

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… Respondent

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Mr. Sanket Sethia, for Petitioner. None for Respondent.

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CORAM: S.J. KATHAWALLA, J.

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DATE: 18^th SEPTEMBER, 2014

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P.C.:

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The above Company Petition is filed by the Petitioner seeking

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winding up of the Company – M/s. mChek India Payment Systems Pvt. Ltd. on the ground that it is unable to pay its debts. The Company Petition is taken up for hearing and final disposal.

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The Petitioners are a law firm. The proprietor of the Petitioner's firm is a practicing Advocate. The present petition seeking winding up of the Company is filed on the footing that the Company is indebted to the Petitioner in the sum of Rs.21,61,983/- and that it has, without just cause, neglected to pay the said amount despite receipt of the statutory notice under Section 433

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and 434 of the Companies Act, 1956.

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The petitioner was engaged by the Company for various legal services. These related principally to the protection of the intellectual property rights in various technologies. The petitioner assisted the Company in filing 35 patent applications overseas, 22 patent applications in India and seven applications under the Patent Cooperation Treaty.

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The company made periodic payments to the petitioner. Some of these were on account of advance payments and were adjusted subsequently against invoices later raised. In some cases, the petitioner did not insist on advances. By early April 2010, the petitioners’ professional fees exceeding Rs.34 lakhs under various invoices remained unpaid. The petitioners asked for payment by their e-mail of 6th April 2010. A copy of that e-mail is on record. There than ensued considerable e-mail correspondence between the two parties for recovery of these professional fees. By an e-mail dated 16th April 2010, a representative of the Company acknowledged that payments were due and asked that a payment schedule be worked out. They asked for copies of the invoices separated in different categories. On 21.4.2010, a representative of the Company wrote to the petitioners. A copy of this e-mail is at Exhibit E to the petition. In this e-mail, the company acknowledged the services rendered by the petitioner. It expressed regret that payment could not be made and said

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that this is due to a current cash crunch. The company proposed two

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alternatives. The first was that the company would issue a cheque of Rs.12 lakhs against the outstanding invoices of Rs.34 lakhs by 26th April 2010. This was proposed in full payment of the petitioners’ claim. The second proposal was that the entire balance of Rs.34,11,140/- then admitted to be due, would be paid in 10 equal installments, each installment to be paid before 10th of every month, and the first cheque being released on 23rd April 2010. This e- mail was in response to the petitioners’ forwarding copies of their invoices as previously requested.

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The petitioners replied by their e-mail of 22nd April 2010. They rejected the first proposal. They suggested an alternative, under which immediate payment of Rs.12 lakhs would be made, and the balance would be payable in installments. The Company, in reply, confirmed that it would make payment of Rs.12 lakhs, but said that the petitioners would than “have to wait” for funding to come in “to close on the remaining invoices”. Alternatively, it proposed payment in installments.

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From this it is abundantly clear that at least till this time the Company did not dispute that the amounts claimed by the petitioner were due and that the Company was liable to make the payments demanded by the petitioners.

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There are further e-mails that followed. It seems from this that the

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Company did in fact, make some payments on installments. The company’s email of 2nd August 2010 (Exh.H to the petition) makes it clear that it delayed making payment of an installment cheque. All this must lead to the conclusion that the petitioners’ contention that there was an agreed arrangement for payment between the parties is not only credible, but cannot be said to have been disputed at any time.

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The Company continued to be in default. The petitioners sent reminders. By this time, the company had stopped even acknowledging the emails reminders from the petitioners. It was not till as late as June 2011 that the company first began to raise some disputes or issues and began to question the petitioners’ bills. It appears that there was a change in the management or control of the company at or around this time, and this is what prompted the Company volte face. On 23rd June 2011, one Gautam Chitnis of the Company wrote to the petitioners’ Nikhil Krishnamurthy in regard to the outstanding

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payment. This is the first record of any dispute being raised about the petitioners’ invoices. This e-mail makes no reference whatsoever to the previous e-mails and discussions, or, for that the matter, even to the previous payments made by the company to the petitioners. The petitioners’ Nikhil Krishnamurthy responded and at some great length by his e-mail of 24th June, 2011. A further e-mail followed from Nikhil Krishnamurthy on 21st July, 2011.

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In this e-mail chain the petitioners dealt with every single question raised by the Company.

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This is where matters rested through 2011 till 2013. The last payment received by the petitioners was on 5th October 2010. On 16th January 2013, the petitioners through its advocate sent a statutory notice to the Company at its registered office address. Enclosed with this notice were complete details of the payments due and copies of the relevant invoices. A copy of this notice is at Exh.U to this petition. It was received by the Company on 17th January 2013. A copy of the acknowledgment card is at Exh.B. There was no reply to that notice.

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The petition was then filed on 20th June, 2013 and duly served. It was not till as late as 24th December 2013 that the Company filed an affidavit in reply. It is in this reply that the company reiterates its allegations that payments were made to the petitioners without authorization. Disputes are sought to be raised not only in respect of the petitioners’ bills but also in regard to the work done by the petitioners as part of professional engagement as advocates and legal consultants for the Company. However, paragraphs 9 and 10 contain important admissions. The first of these is that in 2009 the Company had a cash flow crisis. The second is that it is on account of this financial crisis that the company offered the petitioners a one time payment of

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Rs.12 lakhs. In the affidavit in reply, the company, however, continues to maintain that the person who had all along dealt with the petitioners on behalf of the company was not authorized so to do. This allegation is reiterated in paragraph 14, where the company claims that it is on account of the appointment of a new CEO that the previous commitments are being disputed. Paragraphs 18, 19 and 20 of the affidavit in reply are relevant. They read as under:

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“ 18. With reference to para 32 I say that it is admitted fact that the Respondent is presently not in current business and not making any revenue. Proper letters were served to all bank / financial institutions to close down the service as the Respondent was making losses. The article appeared in the newspaper are largely based on hearsay and factually distorted which is extraneous.

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19. With reference to para 33 it is true that the respondent has been making loss which has shown in the balance sheet for the year 2011-2012 and 2012-2013. However, the respondent were not in loss from its inception 2006.

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21. With reference to para 35 I say that the respondent is not carrying on any business now and therefore, the question of if permitted the respondent to fritter away its assets and incur further losses does not arrive. I say that the respondent has no significant assets left behind it.

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By an order dated 06-02-2014, the above Petition was admitted

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by this Court (Coram : G.S.Patel, J.). Paragraph No.10 of the said order is relevant and is reproduced hereunder :

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“10. There can be no manner of doubt that the Company is, on its own admission, commercially insolvent. It is doing no business. It has no revenue. It admits that it is making losses. There is, in my view, no bona fide, tenable, valid or cogent defence to this petition at all. The defence raised is entirely without substance. It is specious and is really intended to withhold from the petitioner the amount that is lawfully due to it. The company has received a statutory notice. It has not replied. It has not complied with the demand made in it. It must, therefore, deemed to be unable to pay its debts within the meaning of Section 433 and 434 of the Companies Act, 1956”.

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Pursuant to the order dated 06-02-2014, the Petition has been advertised in the newspapers as well as Government Gazette. Notice under Rule 28 of the Companies Court (Rules), 1959 is also served on the Company. However, none appear for the Respondent Company. Even at this stage, the Company has not filed its Affidavit-in-Reply to oppose the above Petition. In view thereof, what is stated in the Company Petition and the statutory notice have remained uncontroverted. I am therefore, satisfied that the Company is

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unable to pay its debt, is commercially insolvent and deserves to be wound up.

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The Company Petition is therefore, allowed in terms of prayer clauses (a), and (b) which are reproduced hereunder :

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“(a) that the Respondent, having its registered office situated at 3/519, Cabin No.1 Navjivan Commercial Society, Lamington Road, Mumbai 400 008, be wound up by and under the directions of this Hon'ble Court under the provisions of the Companies Act, 1956;

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(b) that the Official Liquidator be appointed the Liquidator of the company to take charge of the assets, books of account and properties of the Respondent with all powers under the provisions of the Companies Act, 1956;”

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The Official Liquidator shall forthwith act on a copy of this order without waiting for any Notification.

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The Company Petition is accordingly disposed of. The Company Application No.340 of 2013 also stands disposed of.

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( S.J.KATHAWALLA, J. )

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Krishnamurthy and Co., a Prop Firm of Atthornesy , Ms.Naina Krishnamurthy v. Mchek India Payment Systems Pvt.Ltd.

Case brief

What is this about?

What did the court decide?

Krishnamurthy and Co., a Prop Firm of Atthornesy , Ms.Naina Krishnamurthy v. Mchek India Payment Systems Pvt.Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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