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2009(1) Supreme 280
SUPREME COURT OF INDIA
S.B. Sinha and Cyriac Joseph, JJ.
M/s. Vijay Industries — Appellant
versus
M/s. NATL Technologies Limited — Respondent
Civil Appeal No. 7352 of 2008
[Arising out of SLP (Civil) No. 15672 of 2005]
Decided on : 17-12-2008
(1986) 60 CC 702; (1990) 68 CC 684; (1995) 84 CC 766; (1989) 66 CC 232; AIR 1998 Allahabad 320; (1998) 91 CC 715; (2001) 3 Comp LJ 413 (Karn); (1984) 56 CC 77(Karn); (1987) 3 Comp LJ 175 (Karn); (1985) CC 875 (P&H); (1996) 5 Comp LJ 342 (Bom) ; (1986) 60 CC 753; 2006 (2) CHN 530 – Referred.
(b)Companies Act, 1956 – Section 433(e) r/w section 434(1)(a) – If a company, indebted in a sum exceeding one lakh rupees then due, fails and/or neglects to pay the same within three weeks thereafter; winding up provisions could be invoked. (Para 29)
(1965) 35 CC 456; (1971) 3 SCC 632 – Relied upon.
(c)Companies Act, 1956 – Section 433 – Debt need not necessarily be a definite sum. (Para 33)
(d)Companies Act, 1956 – Section 434 – In case the due stands admitted but existence of an agreement for payment of interest or applicability of the rate of interest is raised, the application for winding up cannot be dismissed. (Para 33)
1962 Ch 406 – Relied upon.
(1985) 57 CC 236; (2005) 2 Comp LJ 235 – Referred.
(e)Companies Act, 1956 – Section 433(e) – Company Judge has no jurisdiction to issue a direction to the company to make payment to a third party. (Para 35)
(2005) 7 SCC 42 – Relied upon.
(f)Companies Act, 1956 – Section 433(e) – The existence of a dispute with regard to payment of interest cannot at all be construed as existence of a bona fide dispute relegating the parties to decide such a dispute before the Civil Court – In such an eventuality, the Company Court itself is competent to decide such a dispute in the winding-up proceedings. (Para 36)
(1990) 3 Comp LJ 322 – Cited with approval.
(g)Interest Act, 1978 – Section 3 – Interest is payable by way of restitution – It is also payable by way of accretion on capital – Where both principal and interest are due, the sums paid on account must be applied first to interest – Interest is also payable in terms of Section 62(1)(a), Sale of Goods Act and Sections 5 and 6, Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. (Paras 41 and 42)
(2004) 8 SCC 524; (2007) 3 SCC 545; AIR 1922 PC 233; (1969) 2 SCC 274; (2006) 8 SCC 457; (2005) 13 SCC 19 – Relied upon.
(2005) 128 CC 72 – Cited with approval.
Facts of the case :
1. Appellant is a small scale unit. It supplied Castor Oil to the respondent valued at Rs. 89,13,589/-. A sum of Rs. 49,99,000/- had been paid by the respondent. The invoices of the credit bills attached with each of the supply contained a clause relating to payment of interest
2. Appellant adjusted the amount first towards interest at the stipulated rate and balance against the principal amount.
3.A demand for a sum of Rs. 64,58,457/- together with future interest at the rate of 2% per month was raised.
4. Without disputing its liability, the respondent offered to pay a sum of Rs. 2,00,000/- per week to the appellant beginning from April, 2003. It is on that assurance the appellant agreed to restore supply of Castor Oil provided it deposited 50% of the outstanding dues and remaining 50% at the rate of Rs. 2,00,000/- per week.
5. A sum of Rs. 8 lakhs was paid in between the period 19.04.2003 to 11.07.2003. Thereafter an agreement was reached between the parties, but it was not adhered to. Respondents did not pay the amount.
6.Appellant filed a winding up petition under Section 433(e) and 433(f) read with Section 439 of the Companies Act on 23.01.2004.
7.The learned Single Judge, while admitting the company petition by an order dated 10.11.2004 held that a prima facie case has been made out therefor.
8.The Division Bench has allowed the appeal thereagainst.
Finding of the Court :
Impugned judgment cannot be sustained.
Result : Appeal disposed of.
JUDGMENT
S.B. Sinha, J. —
1.Leave granted.
2.Whether interest payable on the sum due would be a debt so as to attract the provisions of Sections 433 and 434 of the Companies Act, 1956 is the question involved herein.
3.Before, however, adverting to the said question, we may notice the fact of the matter.
Appellant is a small scale unit registered with the District Industries Centre. Admittedly, it supplied Castor Oil to the respondent valued at Rs. 89,13,589/-. A sum of Rs. 49,99,000/- had been paid by the respondent. The invoices of the credit bills attached with each of the supply contained a clause relating to payment of interest in the following terms :
“amount must be paid within seven days or you are liable to pay 2% interest per month.”
4.It is not in dispute that at the foot of each credit bill an officer of the respondent - company had put its signatures as a token of acceptance.
5.Appellant is said to have adjusted the amount first towards interest at the stipulated rate and balance against the principal amount. As despite demand the amount due and owed to it was not paid by the respondent, a legal notice was served upon it claiming interest on the said sum. It was stated that the appellant had appropriated account of payments made by it against the interest and balance, if any, against the principal amount. On the basis thereof, a demand for a sum of Rs. 64,58,457/- together with future interest at the rate of 2% per month was raised. The said legal notice was replied by the respondents, stating:
“We have received a legal notice from Sri Rao Raghunandan, Advocate dt. 06.01.2003. You are aware that after making payment of Rs. 10.00 lakhs towards Castor Oil Supplies to our plant, we have received a notice under Section 226 (3) of the Income Tax, 1961 from the Income Tax Department. As per the notice, we are directed to pay the amounts due to you on account of Castor Oil supplied directly to the department in view of your dues to the department to an extent of Rs. 25,43,737/-.
Subsequently, we have paid by way of cheques to Income Tax Officer Ward-8(3) on account of supply of castor oil as detailed below:-
Cheque No.BankDatedAmount (Rs.)
074013Allahabad Bank09.08.022,00,000/-
100313S.B.H.09.09.023,34,868/-
5,34,868/-
After adjusting the above amounts and our earlier payment of Rs.10.00 lakhs, the balance amount due to your company on account of oil supplies is only Rs. 27,40,882/-.
In view of the notice served by the Income Tax Department, we could not arrange any payment directly to your company. This matter was brought to your notice and also advised you to obtain a direction from the Income Tax Department to pay the dues directly to your company. In the circumstances, we have not intentionally defaulted in making arrangements for the payment of your dues on account of Castor Oil Supplies from time to time.
We request you kindly to obtain the clearance, so as to enable us to arrange payment of the outstanding amount due to you amounting to Rs. 27, 40,882/-. In the circumstances, we request you to kindly advice your advocate to withdraw the legal notice served on us forthwith.”
6.Without disputing its liability, however, in view of the correspondence that exchanged between the parties, the respondent offered to pay a sum of Rs. 2,00,000/- per week to the appellant beginning from April, 2003. It is on that assurance the appellant is said to have agreed to restore supply of Castor Oil provided it deposited 50% of the outstanding dues and remaining 50% at the rate of Rs. 2,00,000/- per week.
7.In its letter dated 8.09.2003, the respondent stated :
“...We have accounted your payments against the interest and balances against Castor Oil Supplies approximately. On such account being taken the balance of Rs. 64, 58,457/- upto November, 2002. Accordingly, the balance upto 31st March, 2003 stands Rs. 69, 75,134/-. This amount carries interest @ 2 % per month.”
8.A sum of Rs. 8 lakhs was paid in between the period 19.04.2003 to 11.07.2003. As evid
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