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IN THE HIGH COURT OF CALCUTTA
I.P. MUKERJI, J.
Dena Bank - Appellant
Versus
Kamlapur Sugar and Industries Ltd. - Respondent
C.P. No. 241 of 2009
Decided On : 30-07-2010
WINDING UP - INABILITY TO PAY DEBTS - CERTIFICATE ISSUED BY DEBTS RECOVERY TRIBUNAL - LIMITATION - RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993 - SECTION 34 - OVERRIDING EFFECT - WINDING UP APPLICATION - COMPETENCY - INTERPRETATION.
Fact of the Case:
Petitioner, a creditor, filed a winding-up application against the company for non-payment of a debt. The debt arose from a loan taken by the company from the petitioner in 1997. The petitioner had obtained a certificate from the Debts Recovery Tribunal (DRT) in 2008, which was affirmed by the Debts Recovery Appellate Tribunal (DRAT) in 2008. The company contended that the winding-up application was barred by limitation and that it was not competent as the petitioner had not taken recourse to execution proceedings under Section 434(1)(b) of the Companies Act, 1956. The company also relied on Section 34 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, arguing that it had an overriding effect and barred the winding-up application.
Finding of the Court:
The court held that the winding-up application was not barred by limitation. It held that the certificate issued by the DRT was a decree and that the winding-up application was filed within three years of the decree, as required by Article 137 of the Limitation Act. The court rejected the company's contention that the winding-up application was not competent as the petitioner had not taken recourse to execution proceedings under Section 434(1)(b) of the Companies Act, 1956. It held that Section 434(1)(a) and (b) were disjunctive and that a creditor could file a winding-up petition without first obtaining an unsatisfied execution process. The court also held that Section 34 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 did not bar the winding-up application. It held that the Act did not prevent a creditor from seeking winding up of a company under the Companies Act, 1956.
Issues: 1. Whether the winding-up application was barred by limitation? 2. Whether the winding-up application was competent as the petitioner had not taken recourse to execution proceedings under Section 434(1)(b) of the Companies Act, 1956? 3. Whether Section 34 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 barred the winding-up application?
Ratio Decidendi: 1. The winding-up application was not barred by limitation as it was filed within three years of the decree issued by the DRT, as required by Article 137 of the Limitation Act. 2. The winding-up application was competent as the petitioner was not required to first obtain an unsatisfied execution process under Section 434(1)(b) of the Companies Act, 1956. 3. Section 34 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 did not bar the winding-up application as it did not prevent a creditor from seeking winding up of a company under the Companies Act, 1956.
Final Decision: The winding-up application was allowed.
I.P. Mukerji, J.
Facts and arguments:
1. This is a winding up application corning up for final judgment. Only the petitioning creditor and the company have appeared. No other person either supporting or opposing the winding up has appeared.
2. The company had borrowed substantial sums of money from the petitioning creditor from 1997. A legal notice was served by the petitioning creditor upon the company on September 18, 2003 asking them to pay up the outstanding. Proceedings were taken by them before the Debts Recovery Tribunal, Lucknow. The said Tribunal issued a certificate on February 14, 2008 to the effect that the petitioning creditor was entitled to recover a sum of a little more than Rs. 17,00,00,000 from the company. The company preferred an appeal against such order before the Debts Recovery Appellate Tribunal at Allahabad, which, on December 15, 2008, affirmed the said final order of the said Tribunal while dismissing the appeal for default.
3. This winding up application has been filed on the ground that the company is unable to pay the said sum mentioned in the certificate of the said Tribunal.
4. The company has taken no point regarding the merits of the claim. It has taken two technical points. The first is that the claim on which the winding up application is founded is barred by the laws of limitation on the ground that the claim of the petitioning creditor necessarily arose before the notice dated September 18, 2003. Since the winding up application had been filed in 2009, the debt had become barred by limitation. The certificate or decree by the Debts Recovery Tribunal should not be the basis of the claim. The underlying debt should be the basis. When the period of limitation for a right to sue is computed, the time when the right first arose has to be taken into account and not any later event. Secondly, the winding up application is founded on a decree. Since no execution process is returned unsatisfied u/s 434(1)(b) of the Companies Act, 1956, the winding up application is incompetent.
5. Thirdly, reliance was placed on Section 34 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, to argue that this Act had over-riding effect. When recourse was taken to this Act, recourse could not have been taken to filing of a winding up application under the Companies Act, 1956.
6. The learned senior advocate appearing for the petitioning creditor on the other hand contended that prosecution of its claim before the Debts Recovery Tribunal did not prevent them from filing this winding up application. Filing of a winding up application is availing of a statutory remedy provided to a creditor to apply for winding up of a company for non-payment of a debt. Secondly, the winding up application was competently filed on the certificate issued by the Debts Recovery Tribunal as affirmed by the Appellate Authority.
7. The arguments on behalf of the petitioning creditor and on behalf of the company are dealt with in detail under the heading, "Discussion and Findings".
Discussion and findings:
8. Let us assume, for there is no contradiction of this, that a certificate issued by the Debts Recovery Tribunal is like a decree. Section 433(e) of the Companies Act enacts that a company may be wound up if it is unable to pay its debts. Now, the question is whether this certificate or decree of the Tribunal is to be considered as a debt. There is absolutely no dispute that the company has not paid any part of this decree. Considerable confusion has been created by the interpretation given by the company to the language employed by Section 434 of the Companies Act, which specifies the situations when a company would be "deemed" to be unable to pay debts. Two paragraphs of that section are brought to my notice. The first paragraph being (a) is that the company would be so deemed if a creditor has given notice to the company to pay a debt and the company has neglected to pay such amount. Second, being paragraph (b), t
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