Binayak Sarkar vs Shuvam Watch Straps P. Ltd.

Indira Banerjee, J.—This application under Sections 433, 434 and 439 of the Companies Act, 1956, has been filed for winding up of Shuvam Watch Straps P. Ltd., hereinafter referred to as the company.

The petitioning creditor claims to carry on business relating to inter alia advertising and publicity under the name and style of M/s. T. Sarkar. According to the petitioning creditor, the business was initially started by the father of the petitioning creditor in partnership with the petitioning creditor. After the death of the petitioning creditor''s father, the partnership business has been continued by the petitioning creditor as the sole proprietor, under the same business name.

The partnership firm M/s. T. Sarkar, of which the petitioning creditor was a partner, along with his father, since deceased, was appointed marketing and publicity agent of the company.

Pursuant to the aforesaid agreement, whereby the firm was appointed advertising and publicity agent of the company, the firm rendered various advertising, marketing and publicity services to the company.

The services alleged to have been rendered by the firm to the company, included the booking of slots in various television channels, both public and private for telecasting advertisements of various products manufactured and/or marketed by the company.

According to the petitioner, the firm incurred expenses for booking slots on behalf of the company, for telecasting advertisements, for which the firm was legitimately entitled to reimbursement, in addition to payment of its service charges.

According to the petitioner, the firm, from time to time raised bills on the company. According to the petitioning creditor, the said bills were payable within 45 days from the date thereof. In default, interest was to accrue, at the rate of 24 per cent, per annum.

It is alleged that the company duly accepted the bills raised by the firm on the company without objection. According to the petitioning creditor, the company acknowledged its liabilities at a meeting with the firm held on March 26, 2004, and assured the firm of payment in a short time.

According to the petitioning creditor, after giving credit for all the payments made by the company to the firm, there remained outstanding from the company to the firm, an aggregate amount of Rs. 65,21,836 for the period from April, 2003 to March, 2004. The company has, allegedly acknowledged liability of Rs. 62,37,312.73 to the firm as on March 31, 2003, in its Income Tax return.

According to the petitioning creditor, the transactions between the parties were running and continuous. The last payment was made on October 10, 2003, as such no part of the claim of the firm is barred by limitation.

A statutory notice dated June 21, 2006, of winding up of the company duly served to the company on behalf of the firm, u/s 434 of the Companies Act, 1956. The company neither replied to the notice of winding up nor paid the outstanding dues of the firm.

On behalf of the company, the locus standi of the petitioning creditor to file the winding up application has been questioned, on the ground that the transactions were with the partnership firm and not with the proprietorship concern of the petitioning creditor. It is urged that the proprietorship and the partnership firm are distinct from each other.

The submission of the company with regard to want of locus standi of the petitioning creditor, as the surviving partner, to claim the outstanding dues, if any, of the partnership firm, is difficult to accept.

A judgment is a precedent for what it decides. A judgment is, therefore, to be construed in the background of the facts and circumstances in which the judgment was rendered. In the case of Lahoriram Prashar Vs. State of West Bengal and Others, , the court was concerned with locus standi to apply for compensation on behalf of the partnership firm for loss of business of the partnership firm on account of requisition and/or acquisition of its property.

The Division Bench held that in the absence of an agreement where-under the surviving partner could continue business as sole proprietor on the death of the other partner, claim for compensation by a proprietorship concern for loss of business of a partnership firm was not maintainable.

That the judgment in the case of Afsaar Hussain and Another Vs. Trilokchand Premchand, , was rendered in the special facts and circumstances of the case where all the partners had not joined in the suit.

In Chhotelal Ratanlal v. Rajmal Milapchand AIR 1951 Nag 448, the court held that in actions on contract, it is the right of the defendant, if he takes the objection in proper time, to insist upon all persons with whom he contracted, being joined as plaintiffs.

In the instant case, the partnership firm was comprised of father and son. Upon the death of the father, there was dissolution of the partnership firm. The realizable dues constitute, the assets of the partnership firm, which are liable to be distributed amongst the partners and/or their respective heirs upon dissolution.

The petitioning creditor was himself a partner of the firm. The petitioning creditor was also heir and legal representative of the deceased partner, his father, who was the only partner other than the petitioning creditor. It is difficult to hold that a son and legal heir of a deceased partner, who was the only other partner of the firm would lack locus standi to pursue a debt due to the firm.

The application for winding up has been contested by the company not only on the ground of want of locus standi of the petitioner, but also on merits. It is submitted that many of the bills referred to in the statement of accounts appended to the winding up petition, had not at all been received. Moreover, the amounts claimed in some of the bills which had been received were disputed. It is contended that slots were obtained and advertisements telecasted, without the approval of the company.

The condition precedent for admitting an application for the winding up of a company is a finding of indebtedness of the company to the petitioning creditor. A winding up application cannot, therefore, be entertained, where the company has a plausible or even an arguable defence to the claim of the petitioning creditor.

In other words, this Court might admit a winding up application, only if the claim is admitted, or the company has no defence to the claim of the petitioning creditor. Of course, a sham defence is no defence.

The adjudication of the claim of the petitioning creditor against the company involves scrutiny of accounts. There is no clear and unambiguous acknowledgment of debt. The veracity of the documents alleged to have been submitted to the Income Tax authorities has been disputed as also the authority of the person under whose signature the documents had been submitted. There is a categorical statement that Mr. Kumar, who signed the documents was not even in the pay roll of the company.

This Court expresses no opinion on whether the documents submitted to the Income Tax authorities were genuine or not. The issue of whether the documents were, in fact, genuine and whether Mr. Kumar had authority to sign the documents are issues which can only be tried in regular trial.

The receipt of the bills have not been acknowledged. The question of whether any bills, as alleged, were actually raised and served on the company requires adjudication upon evidence. It cannot be held that the company has no defence at all to the claim of the petitioning creditor. The company has an arguable case.

The company court is not a debt collecting court. In view of the defence raised by the company, the claim of the petitioning creditor is relegated to a suit. The winding up application is dismissed.