Himatsingka Chemicals Private Limited and Others vs Dynamic Herbikem India Private Limited

Ashim Kumar Banerjee, J.—These two appeals would have identical facts and law involved. Hence, we wish to dispose of the said appeals by a common judgment and order. However, when we would refer to the facts that would relate to Himatsingka Chemicals Private Limited being C.P. No. 694 of 2014.

The parties to the appeal had commercial relationship for long. The respondent company placed an order for supply of Caustic Soda Flakes, upon the appellant on credit basis. The appellant supplied the goods as per requisition and received payments in part. After giving credit to the sums already received Himatsingka Chemicals Private Limited found a sum of Rs. 10,62,900/- still remaining due and payable as on September 7, 2011. Despite repeated reminders, such sum would remain unpaid. Moreover, respondent would fail to submit sale tax declaration forms amounting to Rs. 51,696/-. Himatsingka Chemicals Private Limited issued a statutory notice of demand intending to apply for winding up of the respondent. The respondent company duly received the said statutory notice of demand dated March 11, 2013 and replied to the same vide letter dated March 25, 2013, inter alia, denying their liability as to the alleged transactions. Himatsingka Chemicals Private Limited filed winding up petition being C.P. No. 338 of 2013. The company contested the said proceeding by filing affidavit. We are told, after a prolonged hearing, the appellant withdrew the said winding up petition with liberty to apply afresh. However, learned Company Judge while granting the prayer for withdrawal, granted liberty "to take steps in accordance with law." Himatsingka Chemicals Private Limited again served a notice of demand on June 16, 2014 followed by a petition for winding up being C.P. No. 694 of 2014. The learned Company Judge dismissed the second application on the ground, it was not maintainable as being hit by res judicata. The relevant extract of the order of the learned Single Judge is quoted below:

"Having heard the learned advocates for the parties and upon perusing the instant application, it appears that in the facts and circumstances of the instant case, the petitioning creditor had earlier approached this Court by filing a winding up petition, being C.P. No. 338 of 2013, which was dismissed as withdrawn on 24th April, 2014. While dismissing the application as withdrawn, the Court, however, granted liberty to the petitioning creditor to take steps in accordance with law, if so advised. Now, on the same cause of action, the petitioning creditor has approached this Court once again, citing a second statutory notice. There cannot be any iota of doubt that this application is barred by the principles of res judicata. Even if, the second statutory notice was issued by the petitioning creditor, the cause of action remains unchanged since the latter statutory notice reflects the same claim of the petitioning creditor as stated in its first statutory notice.

In such circumstances, the application is liable to be dismissed and is, accordingly, dismissed."

Being aggrieved Himatsingka Chemicals Private Limited and PH Trading Limited filed the above appeals that we heard on the above mentioned dates.

CONTENTIONS:

Mr. Reetabroto Mitra learned Counsel appearing for the appellant would submit, once His Lordship permitted the winding up petition to be withdrawn with liberty to apply afresh the plea of res judicata would not be applicable. Mr. Mitra would also contend, since there was no decision on merit in the earlier petition the plea of res judicata would not be available. Moreover, the new winding up petition would have a distinctive feature as the claim for sales tax was subsequently added.

Per contra, Mr. Prabal Mukherjee learned senior Counsel appearing for the respondent would dispute the claim. Mr. Mukherjee would submit, there was fruitful hearing of the first winding up petition when the appellant by their own choice, allowed the petition to be dismissed as withdrawn without any express leave being obtained for filing a fresh winding up petition hence, the second petition on the self-same cause of action would not lie.

While replying, Mr. Mitra would rely upon a letter dated January 19, 2015 whereby the respondent categorically assured liquidation of the outstanding bill amount. Once they would admit the claim and assure repayment the winding up petition would be maintainable.

The parties cited the following decisions to support the rival contentions:

Keekangote Narayana Tantri Vs. Nagappa and Others reported in All India Reporter 1918 Madras Page - 126.

Khudi Rai vs. Lalo Rai and Others reported in All India Reporter 1926 Patna Page - 259.

Sheodan Singh Vs. Daryao Kunwar reported in All India Reporter 1966 Supreme Court Page - 1332.

Shivashankar Prasad Sah and Another Vs. Baikunth Nath Singh and Others reported in All India Reporter 1969 Supreme Court page - 971.

Kewal Singh Vs. Mt. Lajwanti reported in All India Reporter 1980 Supreme Court Page 161.

Escorts Farms Limited Vs. Commissioner, Kumanon Division, Nainital and Others reported in All India Reporter 2004 Supreme Court Page - 2186.

OUR VIEWS:

The concept of justice delivery system would not support multiplicity of proceedings. The preamble of our procedural law would suggest, there would be one lis for one dispute between the same parties. Similarly, if A and B have a dispute over X and Y transaction they would have to bring one lis having a comprehensive claim against the other covering both the transactions. If they do not want to do so, they must specifically and reserve their liberty to go for the other in a separate proceeding. Otherwise, the second proceeding without reservation of such liberty would be invalid. Any final decision and/or adjudication of any dispute would prevent repetition of the identical grievance brought subsequently in a Court of law. If someone wishes to withdraw the litigation by reserving his liberty to bring it afresh, he would have to apply for withdrawal with the specific prayer for bringing a fresh action on the same dispute. Court may or may not allow. If the court allows to withdraw and remains silent on the issue of a fresh action, it would be presumed, Court granted such liberty by implication that the age-old Patna and Madras decisions cited at the Bar would suggest. The other four decisions cited at the Bar would support the proposition; there must be a final adjudication on the issue that would prevent the subsequent action on the identical issue to be raised before the court once again.

This is our understanding of the law as we gather by looking to the various provisions of Code of Civil Procedure that would include Section 11, Order II Rule 1 and 2 and Order XXIII Rule 1 of the Code.

Section 11 would deal with the aspect of res judicata that, inter alia, prevents any court to try any issue which was directly or substantially in issue in a former litigation between the same parties where a final adjudication had already been made. Order II Rule 1 and 2 would suggest a comprehensive action to be brought and any subsequent action between the same parties where the plaintiff omitted to reserve their liberty, would be invalid. It provides, every suit shall, as far as practicable, be framed so as to afford ground for final decision upon the subjects in dispute and to prevent further litigation concerning them. The whole claim must be brought in a comprehensive action and in case of omission to bring any other relief, subsequent action would be invalid unless a specific liberty was reserved and obtained by the plaintiff while filing the former suit.

APPLICABILITY OF LAW IN THE PRESENT SCENARIO:

The Code of Civil Procedure would lay down the procedure, inter alia, for suits. The Company (Court) Rules 1959 would make the Code applicable in the company proceedings as well, as far as possible and practicable in terms of Rule 6 thereof.

The appellant filed the winding up petition on a claim for goods sold and delivered that would include claim for non-submission of Sales Tax Declaration. Mr. Mitra was not correct to say otherwise. We have verified the averments made in the earlier proceeding.

The respondent contested the said proceeding by filing affidavit. We do not know under what circumstance the appellant withdrew the said proceeding. We also do not know whether any leave was specifically asked for to bring further winding up petition. We have looked into the pleadings in both the proceedings. We are also not sure as to what necessitated the appellant to withdraw the earlier one and file the later one. Neither Mr. Mitra nor Mr. Mukherjee would highlight on this aspect. We find, learned Judge granted liberty to bring a fresh action in accordance with law. We also find, there was no final adjudication on merit by the learned Judge in the earlier proceeding. Hence, in our considered view, and with all humility, may we say, the learned Judge was perhaps not correct to say, it was barred by res judicata. If it is at all barred, it would not be under Section 11 but under Order XXIII Rule 1 where the plaintiff, after institution of the suit, withdraws the same without permission to bring a fresh suit on the same issue, his subsequent action would be invalid. Hence, we hold, the subsequent winding up proceeding was not barred by res judicata.

The question would still remain, whether the Order XXIII Rule 1 would have any application.

We are not sure whether the appellant prayed for liberty to file a fresh winding up proceeding and if so, whether the learned Judge granted so. As observed earlier, none of the parties would highlight on this aspect.

Looking to the order permitting the appellant to withdraw the winding up proceeding with liberty to bring action in accordance with law, we feel, the subsequent action would be valid.

The matter would rest here, if we send it back to the learned Judge on merits. However, to avoid unnecessary delay in the process we proceed to deal with the winding up proceeding on merit. We do so as the learned counsel appearing for the parties addressed us on merit as well.

DECISION ON MERIT:

The facts would reveal, the appellant supplied goods and received part payment. They were not provided with Sales Tax forms. The claim, that would arise, would include claim for balance outstanding on account of supply as well as claim on account of Sale Tax due to non-submission of ''C'' Form. Correspondence exchanged by the respondent, right from 2012, would raise no dispute at any point of time. We would find, one Dilip Choudhury was dealing with the matter. He resigned from the Board. Hence, the respondent was handicapped to examine the veracity of the claim. Right from 2012 to the last correspondence referred to above during the pendency of the appeal, would suggest, the respondent way buying time. The reply to the statutory notice of demand would make a vague denial without any specific observation as to merit. In course of hearing, we enquired from Mr. Mukherjee as to what would be his objection to the claim, he would express his inability to make any specific objection as, according to him, his clients were still unable to examine the veracity. We asked Mr. Mukherjee, whether the respondent was in a position to deposit the entire claim to show their bona fide so that we could relegate the parties to the suit. He did not give any positive reply that would suggest insolvency of the respondent.

If we look at the problem from a different angle we would find the same answer. The learned Judge specifically granted liberty to the appellant to bring fresh action. The respondent contended, it could not be the winding up proceeding. Giving credence to such argument, even if we assume, the respondent was precluded from doing so, the suit, he would file on the self same cause of action, would also result to an obvious decision against the respondent as the respondent could not raise any plausible defence. In fact, we do not find any defence at all, such suit would automatically succeed. Process of winding up is a statutory remedy, any unsecured creditor can avail such remedy. Learned company Judge would have wide discretion to deal with the proceeding. Even if His Lordship is satisfied as to the claim he would still deny the ultimate relief if the order of winding up would unfairly prejudice the shareholders creditors and workers at large. The order of winding up is passed not only after being satisfied with the just debt but also looking to all aspects pertaining to the company.

Whether the claim is just and without any defence, is examined by the Company Judge applying the principles that the Court would adopt in an action under Order XXXVII of the Code or Chapter XIII A of the Rules of this Court in its Original Side. Applying such principles of law, the Court may not admit the winding up petition, once it is satisfied, the claim is bona fide disputed, when the Court is not sure as to the chance of success of the defence, it would often direct the company to show their bona fide by depositing the claim amount or any part thereof. In the instant case, the respondent miserably failed either to show, they had a plausible defence or show, they were otherwise solvent. In the instant case, we do not find any defence to the claim. The respondent is not prepared to deposit the entire principal claim. In our considered view, the winding up petition is liable to be admitted.

RESULT:

The appeals succeed and are allowed. The judgment and order of the learned Judge impugned herein is set aside. The winding up petition being CP No. 694 and 695 of 2014 are admitted subject to scrutiny by the department.

C.P. No. 694 of 2014:

The appellant would be entitled to advertise the notice once in Times of India and once in Bartaman, publication in Calcutta gazette is dispensed with. Publication would, however, not be made in case the respondent would pay the principal sum amounting to Rs. 37,54,570/- and the Sale Tax Dues amounting to Rs. 3,77,300/- aggregating to Rs. 41,31,870/- together with interest at the rate of 9 per cent per annum on or from June 16, 2014 being the date of the statutory notice of demand, until payment. The respondent would be entitled to clear off the aforesaid dues in 12 equal monthly installments. The interest would be calculated on the reducing balance and be paid by way of 13th installment. The first of such installments would be paid on or before April 10, 2015 and thereafter on the 10th day of its succeeding months. In default of payment of any one installment, the order of stay would stand vacated and the appellant would be entitled to proceed with the advertisement as directed above.

The appeals are disposed of without any order as to costs.

Samapti Chatterjee, J.

I agree.