IN THE HIGH COURT OF DELHI AT NEW DELHI SUBJECT : Companies Act CO.APP. 12/2005 Date of decision : 22 nd November, 2007 FOURSEASONS MARKETING PVT.LTD.... Appellant Through Mr.K.K. Bhatia, Advocate versus THE INDURE LTD.... Respondent Through Mr.Rishi Agrawala with Mr.Bhagvan Swarup Shukla, Advocates CORAM: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJIV KHANNA DR. MUKUNDAKAM SHARMA, CJ : (oral) 1. This appeal is directed against the order dated 17 th December, 2004 passed by the learned Company Judge dismissing the Company Petition filed by the appellant herein under Sections 433, 434 and 439 of the Companies Act on the allegation that an amount of Rs.18,75,000/- is due and payable from the respondent company, which has not been paid despite Company Appeal No.12/2005 page 1 of 11
service of notice. 2. The aforesaid petition was filed before the learned Company Judge praying for winding up of the respondent company on the ground that it is indebted to the appellant and is unable to pay the debt. 3. The respondent entered appearance and contested the aforesaid petition on merits and that the claim of the appellant was barred by limitation. 4. In view of the aforesaid pleas raised, the learned Company Judge made reference to the correspondence exchanged between the parties and several decisions to hold that the claim made in the winding up petition was barred by limitation. It was observed by the learned Company Judge that there was also dispute about the payment of the alleged claim as the respondent had stated that the appellant had not performed its part of the agreement and disputed question of fact had been raised, which cannot be determined by way of summary proceeding in terms of the provisions of Sections 433, 434 and 439 of the Companies Act. 5. The aforesaid findings are challenged by the counsel for the appellant before us. Company Appeal No.12/2005 page 2 of 11
6. We have heard the counsel appearing for both parties at length and have also referred to the various documents on record to appreciate the contentions raised before us. Commercial relationship between the appellant and the respondent is governed by an agreement, which was entered into between the parties on 16 th June, 1997. The liability to pay commission under the aforesaid agreement is governed by the clause under the heading your commission, which reads as follows: Your Commission: We are agreeable to compensate by you paying a lump sum commission of Rs.7,500,000/- (Rupees Seven million five hundred thousand only) as follows: a) 50% on receipt of advance payment from the customer. b) 50% pro rata during execution of the contract. 7. The aforesaid clause is immediately followed by a clause of validity, which is extracted below: Validity: This appointment will remain valid for a period of 24 months or uptil conclusion of the contracts whichever is later. Company Appeal No.12/2005 page 3 of 11
8. Relying on the said validity clause, it is submitted by the counsel for the appellant that the lump sum commission of Rs.75 lacs was to be paid in two parts. The first part was to be paid on advance payment from the customer, whereas the second 50% i.e. the remaining commission was to be paid pro rata during execution of the contract. It is submitted that since the agreement was valid for a period of 24 months or uptill conclusion of the contract, whichever is later, therefore, it was wrong on the part of the learned Company Judge to hold that the aforesaid claim is barred by limitation as the claim for payment could be made till expiry of the contract or 24 months, whichever is later. 9. The contentions raised are refuted by the counsel for the respondent, who has drawn our attention to the notice issued by the appellant under Section 434 of the Companies Act, which is a mandatory notice. The only claim that was made was with regard to non-payment of the earlier part (part-a) of total 50%, which was payable on receipt of advance payment from the customer. 10. The records before us indicate that a total amount of Rs.75 lacs was payable on account of commission out of which 50% of Company Appeal No.12/2005 page 4 of 11
the amount, namely, Rs.37,50,000/- was payable on receipt of advance payment from the customer. The balance amount of Rs.37,50,000/- was payable pro rata during execution of the contract. The appellant herein raised an invoice for a sum of Rs.37,50,000/- on 3 rd July, 1997. Admittedly, the said invoice is in respect of first part of the dues payable i.e. 50% which is payable on receipt of advance payment from the customer. As against the aforesaid invoice raised for Rs.37,50,000/-, payment of an amount of Rs.18,75,000/- being 50% of the said amount was paid by the respondent to the appellant on 10 th July, 1997. The appellant herein sent a notice to the respondent as envisaged under Section 434 of the Companies Act for winding up of the respondent company for non-payment of the balance 50% payable on receipt of advance payment i.e. Rs.18,50,000/-. The said notice is a mandatory notice to be sent by the claimant to the defaulter before he could take resort to filing a petition under the Companies Act for winding up of the company. Claim in respect of balance 50% was not made subject matter of the notice and in fact no invoice was ever raised claiming the balance 50% amount mentioned in clause (b). Company Appeal No.12/2005 page 5 of 11
11. We have carefully perused the said notice, which was issued on 27 th July, 1998, a copy of which is placed on record. In order to come to an effective conclusion, we would like to extract a few paragraphs from the aforesaid notice: 2. That on or about 16.06.97, you entered into an Agreement for liasoning and related services for the said projects under HINDALCO INDUSTRIES LTD. (RENUSAGAR POWER DIVISION) on an agreed remuneration/lump sum commission of Rs.7,500,000/- (Rupees seventy five lacs only) to be paid in the following manner: i. 50% was to be paid on receipt of advance payment from the customer. ii. 50% pro rata during the execution of the contract. 3. That our client made their efforts and as a result thereof, you were awarded the said contract and were paid the mobilisation advance on 1/2 nd July, 1997 and as such our client became entitled to the first instalment of the payment of their remuneration. 4. That on 03.07.1997, our client raised their Invoice No.1 for the payment of 50% of their lump sum Commission on A/c of their Company Appeal No.12/2005 page 6 of 11
liasoning and related services rendered to you in the project as aforesaid for Rs.37,50,000.00 and as part payment thereof, you issued a cheque No.169470 dated 10.07.97 for Rs.18,75,000.00 in favour or our client, and promised to pay the balance in a short time. 5. That it seems that you became dishonest after you procured the said project with the help and good offices of our client as such on or about 21.08.97, instead of making payment of the balance amount, you sent a Fax Message No.VG/IND/FMPL/19141 dated 20.08.97 to illegally avoid the said payment of the balance amount. 6. That the aforesaid contentions were immediately refuted by our client vide their letter dated 22.08.1997 and requested you to make payment of the balance amount. Even the reminders dated 12.09.97, 15.09.97, 16.09.97, 18.09.97, 24.09.97 and 01.10.97 have bore no fruit. 7. That you are thus liable to pay the aforesaid amount of Rs.18,75,000.00 together with interest thereon @ 24% p.a. within seven days from the receipt hereof, failing which our client has instructed us to initiate Company Appeal No.12/2005 page 7 of 11
necessary legal proceedings for the recovery thereof and also for the winding up of your company after the expiry of the statutory period of 21 days on account of your aforesaid inability to pay at your cost, risk and responsibility. 12. The aforesaid contents of the notice would indicate that the appellant restricted his claim in the aforesaid notice only to 25% of the amount, which allegedly remained due and payable by the respondent to the appellant after payment of Rs.18,75,000/- was made on 10 th July, 1997. The demand made in the said notice is for payment of an amount of Rs.18,75,000/-, which is the balance amount payable pertaining to the claim of 50% on receipt of advance payment from the customer. Therefore, the Company Petition, which was filed, was restricted to the claim of Rs.18,75,000/-, which was due and payable on receipt of advance payment from the customer. In the said notice itself the appellant has clearly stated that the advance payment from the customer was received by the respondent company on 1 st and 2 nd July, 1997 and, therefore, according to their own showing the appellant became entitled to first instalment of their remuneration on 1 st and 2 nd of July, 1997. That claim was made Company Appeal No.12/2005 page 8 of 11
on the ground that it was the time specified in the contract itself and, therefore, provisions of Article 27 of the Limitation Act are applicable in the instant case, which provides as follows: DESCRIPTION OF SUIT PERIOD OF LIMITATION TIME FROM WHICH PERIOD BEGINS TO RUN 27. For compensation for breach of a promise to do anything at a specified time, or upon the happening of a specified contingency. Three years When the time specified arrives or the contingency happens. 13. Therefore, in our considered opinion, the learned Single Judge was justified in holding that the aforesaid claim of the appellant was barred by limitation as the said claim was raised beyond the period of three years of the time specified in terms of the agreement. The winding up petition was filed on 21 st March, 2001, whereas payment became due in July, 1997 and part payment was made on 10 th July, 1997. Company Appeal No.12/2005 page 9 of 11
14. Besides, the reply, which was sent by the respondent to the appellant to the notice of the appellant under Section 434 of the Companies Act, would also indicate that the payment of the balance amount is disputed on the ground that the appellant had not carried out the assignments satisfactorily and that none of the engineers of the appellant had visited Renusagar with engineers of the respondent for negotiations. They had stated categorically in their reply that the appellant was not in a position to render any assistance and, therefore, the respondent company had to intervene and use other resources to do the job assigned to the appellant. Since the aforesaid claim of the appellant is disputed and prima facie on valid grounds, therefore, such a claim could not have been decided through a petition under Section 434 of the Companies Act, which is required to be decided in a summary manner. 15. We, therefore, find no error in the judgment of the learned Single Judge. The appeal has no merit and is dismissed. Sd/- CHIEF JUSTICE Company Appeal No.12/2005 page 10 of 11
Sd/- SANJIV KHANNA, J Company Appeal No.12/2005 page 11 of 11