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High Court Of Calcutta
SATYABRATA MITRA
DYTRON (INDIA) LTD - Appellant
Versus
. - Respondent
Company Petition 644 Of 1987
Decided On : 04/22/1988
COMPANIES ACT - WINDING UP - NOTICE UNDER SECTION 434 (1) (A) - MENTION OF PERIOD FOR PAYMENT - VALIDITY - INSOLVENCY - PROOF - ADMISSION OF LIABILITY BY COMPANY - EFFECT.
Fact of the Case:
Petitioner, a printing company, filed a winding-up petition against the respondent company, Dytron (India) Ltd., on the ground of inability to pay debts. The petitioner had printed annual reports for the respondent company and delivered the materials in March 1986. The respondent company received and accepted the materials without objection and utilized them. The petitioner raised bills for a sum of Rs. 3,68,670.02p, which was received by the respondent company on 31st March, 1986. The respondent company made a part payment of Rs. 50,000 on 20th September, 1986, but failed to make any further payments. Despite demands for payment, the respondent company failed to pay the outstanding dues. The petitioner issued a statutory notice under Section 434 of the Companies Act on 17th October, 1987, but the respondent company did not respond. The petitioner filed the winding-up petition on 18th December, 1987.
Finding of the Court:
The Court held that the statutory notice under Section 434 (1) (a) of the Companies Act does not require to give or specify any particular date within which the Company has to pay and the mention of a lesser period in the said notice will not invalidate such notice. The true purport of Section 434 (1) (a) of the Companies Act has been very clearly discussed by the learned Judge in the Case reported in 1965 (2) CIJ 215 at 219. The requirement of Section 434 (1) (a) is that a demand is to be made by the creditor on the Company addressed to the Company which has to be left or served at the Registered Office of the Con1pany by registered post. If the Company after such service of the demand does not pay within a period of 21 days, insolvency will be presumed which will entitle a creditor to present a winding-up petition. Therefore, it is wholly immaterial and unnecessary whether any period is mentioned in the notice under Section 434 (1) (a) of the Act. The only requirement of the said section is that notice has to be served at the Registered Office of the Company and that the right of action of the creditor is only postponed till three weeks from the date of service of such notice. Reading the language of the section and while agreeing with the Cases relied on by Mr. Sarkar and considering the surrounding circumstances under which the notice was issued I hold that the notice in the instant case is a good one and a valid notice and the instant winding-up petition is sustainable on basis of such notice.
Issues: 1. Whether the statutory notice under Section 434 (1) (a) of the Companies Act is valid even if it mentions a period for payment that is shorter than 21 days? 2. Whether the respondent company's admission of liability in its letters to the petitioner constitutes proof of insolvency under Section 434 (1) (c) of the Companies Act?
Ratio Decidendi: 1. The Court held that the statutory notice under Section 434 (1) (a) of the Companies Act does not require to give or specify any particular date within which the Company has to pay and the mention of a lesser period in the said notice will not invalidate such notice. The true purport of Section 434 (1) (a) of the Companies Act has been very clearly discussed by the learned Judge in the Case reported in 1965 (2) CIJ 215 at 219. The requirement of Section 434 (1) (a) is that a demand is to be made by the creditor on the Company addressed to the Company which has to be left or served at the Registered Office of the Con1pany by registered post. If the Company after such service of the demand does not pay within a period of 21 days, insolvency will be presumed which will entitle a creditor to present a winding-up petition. Therefore, it is wholly immaterial and unnecessary whether any period is mentioned in the notice under Section 434 (1) (a) of the Act. The only requirement of the said section is that notice has to be served at the Registered Office of the Company and that the right of action of the creditor is only postponed till three weeks from the date of service of such notice. Reading the language of the section and while agreeing with the Cases relied on by Mr. Sarkar and considering the surrounding circumstances under which the notice was issued I hold that the notice in the instant case is a good one and a valid notice and the instant winding-up petition is sustainable on basis of such notice. 2. The Court held that the respondent company's admission of liability in its letters to the petitioner constitutes proof of insolvency under Section 434 (1) (c) of the Companies Act. The Court relied on the case of Gulamhussein Ahmedalli and Company vs. Canhag Private Limited, reported in (1972) 42 Company Cases 136, where it was held that where a company fails to pay a debt in accordance with a statutory notice of demand, insolvency is to be presumed.
Final Decision: The Court held that the winding-up petition was sustainable on the basis of the valid notice under Section 434 (1) (a) of the Companies Act. The Court also held that the respondent company's admission of liability in its letters to the petitioner constituted proof of insolvency under Section 434 (1) (c) of the Companies Act. The Court ordered the respondent company to pay the principal sum of Rs. 2,08,670.00 by monthly installments of Rs. 25,000 per month, along with interest at the rate of 12% per annum. The company was also ordered to pay the costs of the application.
( 1 ) THE Court. This is an application of M/s. N. K. Gossain and Co. Pvt. for winding up of Dytron (India) Ltd. on the ground of inability to pay the debts due to the petitioning creditor.
( 2 ) THE case of the petitioning creditor is that on 6th February, 1986 the Company placed orders to the petitioning creditor for printing of 38,000 copies of annual reports of the Company. The petitioning creditor after completing the printing job delivered those materials to the said Company in the month of March, 1986 the company received those materials and accepted them without raising any objection. It is the case of the petitioning creditor that the Company utilised the said materials and must be deemed to have accepted the printing job of those materials. Thereafter the petitioning creditor raised the bills on the 28th March, 1986 for a sum of Rs. 3,68,670. 02p which was received by Company on 31st March, 1986. The petitioning creditor states the Company made a part payment of Rs. 50,000 on 20th September, 1986 and thereafter no payment has been made towards the said bill by the Company. On demand being made payment of the outstanding dues the Company by a letter , dated 11th December, 1986 informed the petitioning creditor that Company had received the necessary sanctions from the Financial Institutions regarding their project which was explained to the representatives of the petitioning creditor. It was stated he said letter that the Company was expecting to receive the funds in the month of January, 1987 and will be releasing payments to the petitioning creditor in the month of January, 1987. Thereafter, on 28th January, 1987 the Company again wrote to the petitioning creditor reiterating the statements made in their letter of 11th December, 1986 but due to delay in receiving the sanctioned letter from the Industrial Credit and Investment Corporation of India and processing delay, the Company were yet to receive the fund and expected to receive the same within February/march 7, but in case they received the money at an earlier date they would make payment forthwith and regretted for the inconvenience caused to the petitioning creditor. Inspite of this assurance made, Company did not make payment and thereafter the petitioning creditor issued the statutory notice under Section 434 of the Companies Act on the 17th October, 1987. Not having received any reply to the statutory notice, the petitioning creditor had waited till 18th December, 1987 when they filed instant petition winding up of the Company.
( 3 ) AT the outside the learned Advocate Mr. Sarkar appearing on behalf of the petitioning creditor has very fairly and in the true tradition of the Bar submitted before me that due to some inadvertance or otherwise the outstanding amount was claimed to be paid in the statutory notice within 7 days from the receipt of the notice and he also submitted that this might not be in the usual form of notice but asserted that there is nothing in the Act under Section. 434 (1) (a) of the Companies Act whereby the said notice could be impeached as not having mentioned the dead line of 21 days as is appearing under Section 434 (1) (a) of the Companies Act. The learned Advocate appearing for the company had taken that point that the said notice was bad and not in conformity with the provision of the Act. Therefore, the matter was allowed to be adjourned for some time for consideration of the import of the Raid notice by the learned Advocates appearing for both the parties. Thereafter the matter came up before me for hearing on the limited question of admissibility of the winding up petition.
( 4 ) MR. Sarkar, learned Advocate appearing for the petitioning creditor, submitted that while construing the provision of Sec. 434 (1) (a) of the Companies Act there is nothing in the Act to show that the notice under Section 434 should mention the period within which the Company would have to payoff the dues of a creditor. The tru
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