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High Court Of Calcutta
BABOO LALL JAIN
BUSINESS FORMS LTD. - Appellant
Versus
ASHOKA AGENCIES - Respondent
COMPANY PETITION 94 Of 1994
Decided On : 07/24/1995
COMPANY LAW - WINDING UP - COMPULSORY WINDING UP - ADMISSION OF LIABILITY - ACKNOWLEDGMENT OF DEBT - PROMISE TO PAY - SECTION 25(3) OF THE INDIAN CONTRACT ACT, 1872 - INTERPRETATION - CONFIRMATION OF ACCOUNT - ACCOUNT STATED - INTEREST - SALES TAX DECLARATION FORMS - STAY OF PROCEEDINGS - CONDITIONS.
Fact of the Case:
The petitioner, Ashoka Agencies, filed a petition for the compulsory winding up of M/s. Business Forms Ltd. The petitioner claimed that the company owed it Rs. 24,32,416.01p. as on March 31, 1992, for supplies of paper made to the company. The company admitted its liability in writing on September 21, 1992, and promised to make payment. The petitioner also claimed interest at the rate of 24% per annum from the expiry of 60 days of the receipt of the bills and an amount in lieu of sales tax declaration forms amounting to Rs. 1,29,934.00p. The company denied the claims and filed an affidavit in opposition.
Finding of the Court:
The court held that the document dated September 21, 1992, amounted to a promise to pay and not merely an acknowledgment of a time-barred debt. The court also held that the company had no bona fide defense to the claim of the petitioner and that the entire defense was mala fide and intended to delay the realization of the claim of the petitioning creditor.
Issues: 1. Whether the document dated September 21, 1992, amounted to a promise to pay or merely an acknowledgment of a time-barred debt? 2. Whether the company had a bona fide defense to the claim of the petitioner?
Ratio Decidendi: 1. The court held that the document dated September 21, 1992, amounted to a promise to pay and not merely an acknowledgment of a time-barred debt based on the following: * The language of the document used the words "confirmation of Account" and "payable by us". * The court relied on the Full Bench Judgment of Lahore High Court in Shanti Parkash v. Harnam Das, which held that words such as "is payable" or "to be paid" amount to a promise to pay within the meaning of Section 25(3) of the Indian Contract Act, 1872. * The court also relied on the Privy Council decision in Maniram v. Seth Bupchand, which held that an acknowledgment of a right to have accounts settled and a promise to pay the balance ascertained in favor of the claimant amounts to a conditional promise to pay. 2. The court held that the company had no bona fide defense to the claim of the petitioner based on the following: * The company's affidavit in opposition was evasive and did not provide a satisfactory explanation for the admission of liability in the document dated September 21, 1992. * The company did not produce any evidence to support its claim that the acknowledgment was for a time-barred debt. * The company's defense was mala fide and intended to delay the realization of the claim of the petitioning creditor.
Final Decision: The court admitted the company petition and directed the company to pay the petitioner Rs. 17,38,647.00p. with interest at the rate of 12% per annum from the expiry of 60 days from the respective dates of the respective bills and to supply the Sales Tax Declaration Forms within a period of two months. In default of payment or supply of Sales Tax Declaration Forms, the petitioner was entitled to proceed with the advertisement and the application would appear in the list on the returnable date.
( 1 ) THIS application has been made by Ashoka Agencies for the compulsory winding up of M/s. Business Forms Ltd.
( 2 ) THE case of the petitioner is, inter alia, to the effect that pursuant to and in terms of several orders placed by the company on the petitioner, the petitioner from time to time sold and delivered 'paper' to the company on agreed rates as per specification given by the company. Petitioner also raised bills in respect of such supplies on the company. The company accepted such bills without raising any objection with regard thereto, and also made diverse payments in respect of the said 4 bills. After giving due credit for such payment made by the company to the petitioner in respect of the bills raised by the petitioner on the company in order of time a total sum of Rs. 24,32,416 Olp. remained due and payable by the company to the petitioner as on March 31, 1992. The further case of the petitioner is that the company duly accepted the aforesaid and by writing duly acknowledged and admitted its liability to the petitioner in respect of the said sum as will be evident from a communication dated September 21, 1992 addressed by the company to the petitioner. It has also been stated that by the said communication the said company also promised to make payment of the said sum of Rs. 24,32,416. Olp. Thereafter, subsequent to March 31, 1992, pursuant to several orders placed by the company on the petitioner the Company from time to time and up to September, 1993 sold and delivered to the company diverse quantities of papers at agreed rates and as per specification given by the company to the petitioner, The company accepted the said supplies and without raising any objection with regard thereto. Petitioner also raised bills in respect of the said further supplies. Particulars of the said bills are set out in the schedule annexed to the petition, and marked 'b'. The company accepted the said bills without raising any objection with regard thereto.
( 3 ) AS per annexure 'b' the total bills of the petitioner between 15th March, 1992 to 14th September, 1993, came to Rs. 37,18,977. 00 p. It appears from the schedule of payments made during the period from 21st April, 1992 to 29th June, 1993 and thereafter, and taking into account a credit note of about Rs. 98,000. 00 p. for the goods returned, that a total sum of Rs. 44,12,745. 95 p. was paid by the company and/or was credited to the company.
( 4 ) THE first supply invoice after 31st March, 1992, was on 15th May, 1992 and the further invoices were submitted thereafter. However, from the schedule of payments it appears that up to 14th May, 1992 the company paid to the petitioning creditor about Rs. 8,17,032,00 p.
( 5 ) THESE payments were made by the company between 21st of April, 1992 and 14th of May, 1992 which payments were apparently made before the first invoice was submitted on behalf of the first supply after 31st of March, 1992. Presumably, these payments must be on account of the duel which were already there in existence prior to 15th of May, 1992, when the first invoice was submitted after 31st of March, 1992. The total invoices submitted on/or after 15th of May, 1992 came to Rs. 37,18,975. 00 p whereas the total payments including the credit note for goods returned came to Rs. 44,12,745. 95 p. This shows that about Rs. 7,00,000. 00 p were paid in excess of the supplies made between 15th of May, 1992 onwards.
( 6 ) ACCORDING to the petitioner, after taking into account the amount due as on 31st of March, 1992 and the supplies made thereafter and after taking into account the payments made and/or the credit note for the goods returned a balance sum of Rs. 17,38,647. 95 p. remained due and payable on account of the principal amount due for goods supplied. The petitioner is claiming interest at the rate of 24 per cent per annum calculated on and from the expiry of 60 days of the receipt of the bills and it is alleged by the petitioner that i
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