Shin Satellite Public Company Limited vs ATN International Limited

Patherya, J.—This is an application filed under Sections 433, 434 and 439 of the Companies Act 1956 for winding up of ATN International Limited (Company).

The case of the petitioning Creditor is that for supply of Satellite service to the Company rent agreed between the parties was to be paid. A sum was also deposited on account of security deposit and for default in payment of the monthly rent a notice was issued u/s 434 of the Companies Act 1956 whereby the agreements between the parties was terminated with immediate effect and a sum of US Dollar 2,12,452.78 was demanded alongwith interest. In its reply to the Section 434 notice payment of a part of the demanded sum was admitted. The forfeiture of the security deposited was disputed. There is No. reason for disputing the forfeiture of the security deposit as under Clause 6.3 of the agreement the petitioning creditor is entitled to forfeit security deposit in case of termination of agreement for the reasons contained in Clause 6.2 of the agreement. The arbitration clause has No. application and neither in the reply to the 434 notice nor in the affidavit in opposition bar of the arbitration clause has been pleaded. No. payment was made within the credit period of 40 days and the payment schedule suggested was also not honoured. There is No. denial of outstanding and in spite of confirmation to pay as per the agreed schedule No. payment was forth coming. Therefore, the notice u/s 434 was issued. As held in 1994 (5) SCC 688 in winding up proceeding an application u/s 8 of the 1996 Act is not maintainable. As the agreement between the parties has been terminated under Clause 6.2, Clause 6.3 (a) has become operative and the petitioning creditor was entitled to forfeit the security deposit. Although in the affidavit in opposition filed by the company it has been contended that the services rendered was not up to the mark this is not a point taken in reply to the notice issued u/s 434 of the 1956 Act. No. counter claim of 75,000 US dollar has been made nor has any proceeding been initiated by the company to dispute such forfeiture. Reliance is placed on 1993 Butterworths Company Law Cases 131 for the proposition that mere existence of cross claim is not a good reason to refuse payment. Reliance is placed on Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd., for the inapplicability of the laws of Singapore and the arbitration clause to winding up proceedings. For all the said reasons order as sought be passed.

Counsel for the Company submits that in the statutory notice although a claim has been made, there is No. admission in the reply given to such statutory notice as admission must be taken as a whole and not in part as held in Hanumant Vs. The State of Madhya Pradesh, The winding up Court is not a debt collecting Court and in case of the slightest doubt the petitioning creditor will not be entitled to relief as held in 1994 (1) CHN 409 and SRC Steel (P) Ltd. Vs. Bharat Industrial Corporation Ltd., The validity of termination contained in notice issued u/s 434 cannot be decided in winding up proceeding as the question of alleged breach cannot be considered by winding up Court. No. notice has been issued under Clause 6.2 and in view of Clause 13 and 14 of the agreement the parties have agreed that the disputes be decided by the laws of Singapore and to refer the disputes to arbitration. Therefore this winding up application cannot be entertained.

The claim made has not been established as there is No. admission and No. particulars of the amounts claimed has been specified. The reply given to the notice issued u/s 434 makes it evidently clear that there is No. admission on the part of the company. As held in AIR (1954) SC 583 the Company Court exercises discretionary power even if the debt is proved. In fact Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd., is of assistance to the Company. There is No. evidence of commercial insolvency shown in the petition and winding up application is not a remedy for collecting a debt. For all the said reasons No. order be passed on this application.

In reply Counsel for the petitioning creditor submits that there is No. dispute regarding payment of the principal sum of US dollar 1,57,467.90 along with delayed payment interest which aggregates to the claim mentioned in the notice u/s 434 of the Companies Act. The dispute is only in respect of the security deposit and forfeiture thereof. The sum of 1,57,467.90 US dollars is on account of security deposit of 75,000 US $ and 82,467.90 US dollars on account of rental. There has been default in payment of rentals and thereafter the proposal to make payment and in spite of such proposal No. remittance was made, by the company. By virtue of non remittance the forfeiture clause became operative. The decision reported in AIR 1952 Supreme Court 583 is distinguishable on facts and can have No. bearing to the facts of the instant case. Even if the question of forfeiture is not considered the sum of 82,467.90 US dollar is payable by the Company to the petitioning creditor. It has nowhere been pleaded nor is it the case of the company that the forfeiture is contrary to the agreement. The decision reported in 1994 (1) CHN 409 and SRC Steel (P) Ltd. Vs. Bharat Industrial Corporation Ltd., are distinguishable on facts. Reliance is placed on Madhusudan Gordhandas and Co. Vs. Madhu Wollen Industries Pvt. Ltd., . To deal with the question of applicability of the Laws of Singapore and the arbitration clause, the decision report in Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd., has already been cited.

Having considered the submissions of the parties, by agreement dated 29th May, 2000 the petitioning creditor agreed to provide digital channel service to the Company against a service fee for the agreed period. A credit period of 40 days was provided and security deposit given.

For non-payment of sums the petitioning creditor terminated the agreement between the parties on 3rd July, 2003. The security deposit was also forfeited. A Notice u/s 434 of the 1956 Act was issued whereby the Company was called upon to pay US $ 2,12,452.78. A reply was given to the said notice wherein forfeiture of the Security deposit was disputed so also payment of US $ 2,12,452.78.

The plea of arbitration clause which is sought to be relied on in the affidavit in opposition was not taken in the reply to the Notice issued u/s 434 of the 1956 Act. No. reference has been filed nor arbitration clause invoked.

In the e-mail of 17th July, 2002 outstanding balance has been admitted and a payment schedule contemplated. On 18th July, 2002 a confirmed payment schedule was sent to the petitioning creditor by the Company and in September, 2002 a statement of Account was sent by the Company to the Income Tax Department. Such statement was till June 2002 and showed a sum of US $ 82,467.90 payable by the Company to the petitioning creditor.

Therefore a sum of US $ 82,467.90 is due and payable to the petitioning creditor by the Company and accordingly the Company is directed to pay the said sum of US $ 82,467.90 within 6 weeks from the date of receipt of this order alongwith interest at the rate of 12% per annum on and from the date when the said sum became payable and till payment on the reducing balance.

In default advertisements be issued, once in Bartaman and once in the Asian Age.

As a bonafide dispute has been raised in respect of forfeiture of the Security deposit the said cannot be decided in this application and the parties will be entitled to take steps in accordance with law.

Matter is made returnable 4 weeks after publication of advertisements.