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In a recent judgment, Supreme Court has set aside the Calcutta High Court Judgment and held that order passed by the Company Judge on the concession made by the junior advocate of the respondent could not have been said to be made by mistake as it was done with a view to delay the winding up of the Respondent Company.

Case Details:
Civil Appeal No. 7373/2005, 7374/2005
Stantech Project Engg. Pvt. Ltd (Appellant)  vs Nicco Corporation Ltd (Respondent)
Date of Order : 13-08-2015
Coram: Justice Vikramajit Sen, Justice Shiva Kirti Singh

Facts of the Case(s):
Appellant had filed Winding-up petitions against the Respondent company on the ground that debts admittedly payable by the Respondent to the Petitioner had remained outstanding even subsequent to the issuance of a statutory Notice issued under Section 434 of the Companies Act, 1956. In both the appeals, the claim was for principal amount plus interest together with Tax Deducted at Source (TDS). These amounts were admitted by payable as per letter dated 8.2.2000 and also in the Affidavit of the Manager-Corporate who was then Principal Officer of the respondent company.

The Company Judge vide Orders dated 24.7.2002 ordered that if these payments were not made, the Winding-up petitions would stand admitted and it would be open to the Appellant to pray for advertisement/citation. Later on 8.8.2002, the foregoing Orders were modified by the consent of the parties to the effect that it would be open to the Respondent to pay off the dues together with the interest accrued in eight monthly installments instead of four monthly instalments.

These orders which was passed with the concurrence of the counsel for the  respondent were challenged by the Respondent before Calcutta High Court which ruled that question should be referred to the Company Judge. The Company Judge rejected the prayer for re-hearing or modification of the consent Order, primarily on the premise that the so-called junior and an inexperienced counsel had rightly made the statement that the admitted debt would be paid in instalments and the conduct of the Respondent was not found to be bona fide.

The order was challenged before High Court again and the Division Bench held that the concession was made mistakenly by the counsel appearing for the Respondent and the Order was set aside and the Company Petition was remanded to be heard once again. This order of the Calcutta High Court dated 29-09-2003 is the subject matter of the present case.

Held:
The Apex Court set aside the order of  the High Court holding that the junior advocate made the concession intentionally and the Respondent has abused the judicial process in order to delay the discharge of an acknowledged debt for almost a quarter of a century, in which period it has continued in business

Excerpts from the Judgment:
It is palpably clear that the statement made by the learned counsel for the Respondent that these amounts would be paid in ten equal installments commencing from 16.8.2002, was so done in order to avert the ordering of an advertisement/citation in the proceedings by the Company Judge.

We find no justification whatsoever, in law or in equity, for the rationale adopted by the Division Bench in the impugned Order. The Company Judge had no alternative but to proceed for Winding up of the Respondent Company since it had failed to discharge the admitted debt even after the service of the afore-noted statutory notice. The said junior Advocate of the Respondent had, in fact, displayed legal sagacity in getting the winding-up of the Company postponed and avoided the publication in the Winding-up petition by praying for and obtaining leave to pay the debt in installments. Had he not done so, the Respondent would have had to pay the entire debit at once or face certain commercial death as a consequence publication/citation of Winding-up petition. It is note worthy that the Respondent so is transacting business even today. The Division Bench has been inexplicably and unjustifiably considerate towards the Appellant. It is this kind of leniency that results in proliferation and prolongation of litigation, which approach has led to an almost insurmountable pendency of litigation. Learned counsel for the Appellant rightly relies on the decisions of this Court in Shrimati Jamilabai Abdul Kadar v. Shankarlal Gulabchand (1975) 2 SCC 609 and State of Maharashtra v. Ramdas Shrinivas Nayak (1982) 2 SCC 463.

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Supreme Court-Concession made by Respondent’s Counsel before Company Judge was made to Delay the Winding up of Respondent’s Company | 14-08-2015 |