JUDGMENT S.P. Mehrotra, J.
1. The present Company Petition purporting to be under Section 433 of the Companies Act, 1956 has been filed by M/s Magnanimous Trade and Finance Limited (hereinafter also referred to as "the Petitioner-Company"), interalia, praying that the Company, namely, M/s U.P. Alloys Private Limited having its Registered Office at 93-A, Factory Area, Fazalganj, Kanpur Nagar-208012 (hereinafter also referred to as "the Respondent-Company") be wound up by and under the directions of this Court.
2. It is, interalia, stated in the Company Petition that the Petitioner-Company is a Company Limited by shares and has been incorporated under and in accordance with the provisions of the Companies Act, 1956; and that the Petitioner-Company has its Registered Office at 26/76, Karachi Khana, Kanpur Nagar.
3. It is, interalia, further stated in the Company Petition that the Respondent-Company is a Company limited by shares, haying been incorporated under and in accordance with the provisions of the Companies Act, 1956, and has its Registered Office at 93-A, Factory Area, Fazalganj, Kanpur Nagar-208012.
4. It is, interalia, further stated in the Company Petition that in the year 1997, the Respondent-Company approached the Petitioner-Company with a request for a loan of Rs. 20 lacs with an offer that it Shall pay interest @ 15% per annum; and that the Petitioner-Company acceded to the request of the Respondent-Company, and a sum of Rs. 20 lacs was given to the Respondent-Company as a loan by Cheque No. 581027 dated 25.2.1997 drawn on State Bank of India, Phoolbagh Branch/Kanpur Nagar with the stipulation that the said amount shall be repayable alongwith interest @ 15% per annum.
5. It is, interalia, further stated in the Company Petition that the interest, as per the stipulation agreed to between the parties i.e., (c) 15% per annum has been duly paid by the Respondent-Company from time to time upto the period ending 31.3.1998; and that the said amount towards interest has been paid after deducting Income Tax at source in terms of the provisions of the Income Tax Act, and the certificate of deduction of tax at source was also duly issued.
6. It is, interalia, further stated in the Company Petition that the liability to pay interest and the rate thereof thus stood acknowledged by the Respondent-Company.
7. Photostat copies of the Certificates of Deduction of Tax at Source issued by the Petitioner-Company have been filed as Annexure-I to the Company Petition.
8. It is, interalia, further stated in the Company Petition that besides a sum of Rs. 20,849/- paid towards interest for the period ending 31.3.1998, the Respondent-Company also repaid a sum of Rs. 10 Sacs towards principal on 21.6.1997 by Cheque No. 794211; and that the said amount was duly adjusted in the account of the Respondent-Company.
9. Photostat copy of the extract of the account maintained by the Petitioner-Company in ordinary course of business has been filed as Annexure-II to the Company Petition.
10. It is, interalia, further stated in the Company Petition that the Company is still liable to pay a sum of Rs. 10 lacs, being the balance principal amount, and interest thereon for the period beginning from 1.4.1998.
11. It is, interalia stated in the company Petition that after 31.3.1998 nothing has been paid by the Respondent-Company either towards interest or towards principal.
12. It is, interalia, further stated in the Company Petition that as on 31.10.1999, the liability of the Respondent-Company was to the tune of Rs. 12,50,625/- consisting of a sum of Rs. 10 lacs being, the outstanding towards principal amount and a sum of Rs. 2,50,625/-being the interest calculated at the agreed rate of 15% for the period starting from 1.4.1998.
13. It is, interalia, further stated in the Company Petition that the Respondent-Company has been neglecting to discharge its liability towards the Petitioner-Company despite repeated assurances and the promises made that it would discharge the liability in full; and, that when despite repeated request and reminders, the Respondent-Company kept on neglecting to discharge its liability, the Petitioner-Company had no option left but to cause a statutory notice in terms of Section 434 of the Companies Act, 1956 to be served upon the Respondent-Company under registered cover.
14. Photostat copy of the said statutory notice dated 22.10.1999 has been filed as Annexure-III to the Company Petition. Photostat copies of the postal receipts regarding registered post have been filed and collectively numbered as Annexure-IV to the Company Petition.
15. In paragraph 16 of the Company Petition, it is, interalia, stated that as on 31.12.1999, the liability of the Respondent-Company was for Rs. 12,79,3757/-. Details of the said amount of Rs. 12,79,375/- have been given in paragraph 16 of the Company Petition.
16. It is, interalia, stated in paragraph 17 of the Company Petition that the statutory notice was duly served, and the acknowledgment card containing the endorsement of service on dated 26.10.1999 was duly received by the Petitioner-Company.
17. Photostat copy of the Acknowledgment Due Card evidencing service of notice on the Respondent-Company has been filed as Annexure-V to the Company Petition.
18. It is, interalia, stated in paragraph 18 of the Company Petition that despite service of notice, the Respondent-Company has neither given any reply nor has discharged its liability by making payment of the aforesaid amount.
19. It is, interalia., stated in paragraph 19 of the Company Petition that the Respondent-Company has become financially insolvent and its liability far exceeds its assets; and that the Respondent-Company is not even discharging its statutory obligation of filing Balance Sheet with the Registrar of Companies, Kanpur.
20. It is, interalia, further stated in paragraph 19 of the Company Petition that since 1996 when the Respondent-Company was incorporated till date the Respondent-Company has not filed any Balance Sheet to the Registrar of the Companies, Kanpur which can lead to only one inference that the Respondent-Company is not carrying on any business or has failed to commence business since its. inception.
21. An affidavit sworn on 12.1.2000 by Sudhir Kumar Parasrampuria, stated to be one of the Directors of the Petitioner-Company has been filed in support of the Company Petition.
22. Subsequently, it appears that an application being Civil Misc. Application No. 76139 of 2003 (Paper No. A-6) was filed alongwith an affidavit on behalf of the Petitioner-Company. It is, interalia, stated in the said application that the affidavit filed in support of the Company Petition was sworn before the Notary Public at Kanpur; and that the said affidavit did not seem to be in order; and that in the circumstances, in order to support the assertions as made in the Company Petition, the affidavit, was being filed alongwith the said application.
23. The affidavit filed alongwith the said application (Paper No. A-6) was sworn by Sudhir Kumar Parasrampuria on 21.04.2003 before the Oath Commissioner, High: Court, Allahabad.
24. In the said affidavit, the averments made in the Company Petition have been reiterated.
25. Let the said affidavit filed alongwith the said application (paper No. A-6 be taken on record.
26. It is further pertinent to note that by the order dated 28.1.2000 passed on the Company Petition, notice was directed to be issued to the Respondent-Company. The said order dated 28.1.2000 is quoted below:
"Issue notice to the respondent's Company i.e. M/s U.P. Alloys Pvt. Ltd At the address, of its registered office mentioned in para-3 of the Petition.
List after expiry of the notice period.
27. It further appears that in response to the notice issued, as directed by the said order dated 28.1.2000, Shri Pankaj Bhatia, Advocate put in appearance on behalf of the Respondent-Company on 21.4.2000. On prayer made by Shri Pankaj Bhatia, he was granted, by the order dated 21.4.2000, one month's time for filing counter affidavit/objections against the Company Petition, Rejoinder affidavit was to be filed within one week thereafter. The said order dated 21.4.2000 is as follows:
"Sir Pankaj Bhatia has put in appearance on behalf of respondent company and has filed his Vakalatnama. He prays for and is allowed one moth's time to file counter affidavit/objection) against winding up application. Rejoinder affidavit, if any, be filed within one week thereafter. List after expiry of the aforesaid period showing the name of Sri Pankaj Bhatia as counsel for the respondent-company."
28. By the order dated 4.7.2000, Shri Pankaj Bhatia, learned counsel for the Respondent-Company was allowed three 'weeks' and no more time for filing counter affidavit. The said order dated 4.7.2000 is quoted below:
"Sir Pankaj Bhatia, learned counsel for the respondent-company prays for and is allowed three weeks and no more time to; file counter affidavit. Rejoinder affidavit, if any, be filed within one 'week' thereafter."
29. On 3.8.2000, the case was passed over on the request of Shri Pankaj Bhatia, learned counsel for the Respondent-Company, and was directed to be listed after 10 days.
30. A perusal of the ordersheet shows that the case was thereafter listed on various dates but no counter affidavit was filed on behalf of the Respondent-Company.
31. In the meantime, as noted above, the aforementioned Civil Misc. Application No. 76139 of 2003 (Paper No. A-G) was filed on behalf of the Petitioner-Company.
32. On 31.7.2003, the case was listed before the Court. On the said date, i.e., 31.7.2003, on prayer made by Shri Pankaj Bhatia, learned counsel for the Respondent-Company, 10 days' time was granted for bringing on record the proposal for the payment of dues of the Petitioner-Company. The said order dated 31.7.2003 is quoted below:
"On 21.4.2000 Shri Pankaj Bhatia, learned counsel for the respondent-company was granted one month time for filing counter affidavit/objections against the winding up petition. Again, on 4.7.2000, Shri Bhatia, learned counsel for the respondent-company was granted 3 weeks' and no more time for filing counter affidavit. However, no counter affidavit has been filed so far on behalf of the respondent-company.
Shri Pankaj Bhatia, learned counsel for the respondent -company submits that he proposes to file an affidavit on behalf of the respondent-company containing proposal for the payment of dues of the petitioner, and for this purpose, 10 days' time may be granted to him. The time prayed for is granted.
List this case after the expiry of the aforesaid period."
33. On 15.9.2003, the case was directed to be listed after 10 days," on the request made by learned counsel for the Respondent-Company.
34. The case was thereafter listed before the Court on 29.9.2003. On the said date, i.e., 29.9.2003, the Court passed the following order:
"Neither counter affidavit nor any affidavit on behalf of respondent Company containing proposal for the payment of dues of the petitioner as directed by order dated 31.7.2003 has been filed.
List is revised. No one appears for the respondent. Learned counsel for the petitioner is present.
List peremptorily in the next cause list."
35. Pursuant to the said order dated 29.9.2003, the case was listed before the Court on 10.10.2003.
36. On the said date, i.e., 10.10.2003, an application (Paper No. A-7) alongwith an affidavit, sworn on, 28.9.2003 by Haripat Singh Chhatwal, stating himself to be the Managing Director of the Respondent-Company, was filed. In the circumstances, the Court passed the following order:
"Application on behalf of Managing Director of the Company for dismissing the Company petition has been filed, which & taken on record.
Learned counsel for the petitioner prays for and is granted two weeks time to file reply/counter affidavit.
List after two weeks."
37. It further appears that in reply to the aforesaid application (Paper No. A-7) and its accompanying affidavit filed on behalf of the Respondent-Company, a counter affidavit sworn on 30.11.2003 by the said Sudhir Kumar Parasrampuria was filed alongwith Civil Misc. Application No. 213960 of 2003 (Paper No. A-8) on behalf of the Petitioner-Company on 3.12.2003.
38. It further appears that the case was, thereafter, listed before the Court on various dates but was adjourned in view of the circumstances mentioned in the respective orders passed on such dates.
39. On 27.9.2004, Shri Pankaj Bhatia, learned counsel for the Respondent-Company stated that he had no instructions in the matter. In the circumstances, the Court passed the order dated 27.9.2004 directing the case to be listed in the next cause list. The said order dated 27.9.2004 is quoted below:
"Sri Pankaj Bhatia, learned counsel for the respondent-company states that he has no instructions in the matter.
In the circumstances, the case is directed to be listed in the next cause list."
40. I have heard Shri Ashish Srivastava holding brief for Shri Vipin Sinha, learned counsel for the Petitioner-Company. None is present for the Respondent-Company.
41. Shri Ashish Srivastava submits that the Respondent-Company in the affidavit sworn on 28.9.2003 filed alongwith the said application (Paper No. A-7) has admitted the liability for Rs. 10 lacs towards principal amount. It is further submitted that the denial of liability in respect of interest made in the said affidavit filed on behalf of the Respondent-Company is not correct, as it is fully established on record that there was stipulation for payment of interest by the Respondent-Company.
42. Shri Srivastava refers to the Photostat copes of the Certificates regarding Tax Deducted at Source filed as Annexure-I to the Company Petition.
43. It is further submitted by Shri Ashish Srivastava that the statutory notice under Section 434 of the Companies Act, 1956 was duly served on the Respondent-Company, and as the Respondent-Company neglected to pay the sum demanded within the period mentioned in Section 434(1)(a) of the Companies Act, 1956, the Respondent-Company would be deemed to be unable to pay its debts in view of the provisions of Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956.
44. I have considered the submissions made by Shri Ashish Srivastava holding brief for Shri Vipin Sinha, learned counsel for the Petitioner-Company, and perused the record.
45. Paragraph 3 of the said affidavit sworn on 28.9.2003 by the said Haripat Singh Chhatwal (filed alongwith the said application -Paper No. A-7) is as follows:
"That the deponent submits that a sum of Rs. 10 lakhs was due towards principal and no amount was payable towards interest. The Company M/s U.P. Alloys Private Limited is reeling under financial pressure and as on 24.4.2002 the company owes Rs. 171.70 lakhs to the U.P. financial Corporation, Rs. 12,55,335.00 towards Central/Excise duty and Rs. 2,17,05,000.00 toward electricity dues. Heavy losses have been suffered the of Rs. 11,195,597.94. However, on account of the efforts made for increasing the productivity and sale it is expected that the company is likely to recover financing The Company has entered into a settlement with U.P. Financial Corporation and litigation is going on with the U.P. Power Corporation Limited and Central Excise Department which the applicant hopes to be in its favour. In view of the severe financial crisis that the company is facing, the company proposes to pay the principal amount of Rs. 10 lakhs in six monthly instalments spread over of 5 years commencing with effect from March, 2004."
46. Paragraphs 3, 4 and 5 of the counter affidavit sworn on 30.11.2003 filed on behalf of the Petitioner-Company on 3.12.2003 alongwith the aforementioned Civil Misc. Application No. 218960 of 2003 (Paper No. A-8) in reply to the aforesaid affidavit sworn on 28.9.2003 fifed on behalf of the Respondent-Company, are reproduced below:
"3. That by means of the affidavit under reply the respondent company has offered to pay only the principal amount of Rs. 10 lacs and that too in 6 monthly installments spread over 5 years commencing from March 2004.
4. That thus ft is dear from the offer as made by the company in its affidavit that an attempt is being made to delay the proceedings as otherwise the company has no intention of paying its dues, the deponent submits that the proposal of the respondent company is not acceptable because what they are proposing to pay does not meet/fulfill the interest amount as on 31st October 2003.
5. That the deponent humbly submits that loan was granted on mutual understanding that the respondent company will regularly pay interest on quarterly basis which is also not being paid by them and inspite of it they are unwilling to pay any interest and even the principal amount is proposed to be paid in a 5 years span of six monthly installment.
The Hon'ble Court may also appreciate the fact that even if the compound interest @ 15% on Rs. 21,67,808/- is calculated for remaining 5 months upto 31st march 2004 and thereafter for a further period of 5 years it will be approximately Rs. 24,43,014/-.
Thus it is dear from the offer as made by the respondent company in its affidavit in question that the respondent company is not willing to pay interest which will accrue in five years time span.
The deponent is annexing hereto, for the convenience of this Hon'ble High Court, copy of statement of account of the respondent company from 1st April 2000 to 31st March 2001, from 1st April 2001 to 31st March 2002, 1st April 2002 to 31st March 2003 and 1st April 2003 to 31st March 2004 and the same are being collectively marked as Annexure-CA-1 to this counter affidavit."
47. A perusal of paragraph 3 of the said affidavit sworn on 28.9.2003 filed on behalf of the Respondent-Company alongwith the said application (Paper No. A-7) shows that the Respondent-Company has admitted its liability to pay Rs. 10 lacs towards principal amount to the Petitioner-Company. However, in the said paragraph 3 of the said affidavit sworn on 28.9.2003, there is denial of liability to pay any amount towards interest.
48. In the said paragraph 3 of the said affidavit sworn on 28.9.2003, the Respondent-Company has further made a proposal for making payment of the said principal amount of Rs. 10 lacs in six monthly instalments spread over a period of 5 years commencing with effect from March, 2004.
49. The said proposal made on behalf of the Respondent-Company has not been accepted by the Petitioner-Company as is evident from a perusal of paragraphs 3, 4 and 5 of the counter affidavit sworn on 30.11.2003 filed on behalf of the Petitioner-Company alongwith the aforementioned Civil Misc. Application No. 218960 of 2003 (Paper No. A-8). The main ground for not accepting the proposal made by the Respondent-Company has been stated to be the unwillingness expressed by the Respondent-Company to pay the interest amount.
50. It is, thus, evident that as per the own admission of the Respondent-Company, an amount of Rs. 10 lacs is due from it to the Petitioner-Company in respect of the principal amount.
51. As regards the denial of liability to pay the interest, this Court is prima-facie of the opinion that the said denial is neither bonafide nor Correct.
52. A perusal of the copies of the certificates: issued by the Respondent-Company to the Petitioner-Company in Form No. 16-A in respect of Tax Deducted at Source under the provisions of the Income Tax Act, 1961, prima-facie shows that the interest amount was being paid by the Respondent-Company to the Petitioner-Company for the period upto 31.3.1998, and the tax in respect of such amount was also being deducted by the Respondent-Company under the provisions of the Income Tax Act, 1961.
53. It is further evident that a statutory notice dated 2240.1999 under Section 434 of the Companies Act, 1956 was given on behalf of the Petitioner-Company to the Respondent-Company by registered post. Copy of the said notice dated 22.10.1999 has been filed as Annexure-III to the Company Petition, and appears at page 21 of the Paper Book of the Company Petition. Photostat copies of the postal receipts in respect of the registered post have been collectively filed as Annexure-IV to the Company Petition, and appear at page 24 of the Paper Book of the Company Petition.
54. The said statutory notice was duly served on the Respondent-Company as is evident from the Photostat copy of the Acknowledgement Due Card filed as Annexure-V to the Company Petition, appearing at page 26 of the Paper Book of the Company Petition.
55. It is, interalia, stated in paragraph 18 of the Company Petition that despite service of notice, the Respondent-Company has neither given any reply nor has it discharged its liability by making payment of the amount demanded.
56. It is, thus, prima-facie, evident that the Petitioner-Company by serving notice by registered post on the Respondent-Company made demand for the said amount, but the Respondent-Company neglected to pay the sum demanded by the Petitioner-Company within 3 weeks of the service of the said notice. Evidently, therefore, the Respondent-Company, prima-facie, will be deemed to be unable to pay its debts in view of the provisions of Section 434(1)(a) read with Section 434(e) of the Companies Act, 1956.
57. In view of the aforesaid discussion, this Court is prima-facie of the opinion that the Respondent-Company is unable to pay its debts. As such, the Company Petition is admitted. Let the Company Petition be advertised in accordance with the provisions of Rule 24 read with Rule 96 of the Companies (Court) Rules, 1959. The advertisement will be issued fixing 3.5.2005 as the date for hearing. The advertisement will be published in one issue of the English Newspaper "Hindustan Times" published from Lucknow in its Edition having circulation in the District-Kanpur Nagar and one issue of the Hindi Newspaper "Dainik Jagran" published from Kanpur Nagar. The Company Petition will also be advertised in one issue of the Official Gazette of the State of Uttar Pradesh.
58. The aforesaid advertisements will be taken out not less than 14 days before the aforesaid date fixed for hearing.