| Judgement :
Ashim Kumar Banerjee, J. - I have the proud privilege to go through the well versed judgment and order of my esteem colleague My Lord justice Ashis Kumar Chakraborty. With deepest regard I have for His Lordship, and with all humility, may I say, I could not convince myself to agree with His Lordship's ultimate decision on the issue. His Lordship's appreciation of factual scenario is commendable and would need no repetition. So is the discussion on the point of law. However, my perception would give a relook to the legal proposition that would be relevant herein. In the present context, such relook would prompt me to hold otherwise.
2. The law of winding up as I understand from the statute law so explained by the judge made law so far pronounced, would perhaps not permit the company Court to admit this petition for winding up. Let me discuss the law as I understand:
In a winding up proceeding, the learned company Judge has wide discretion to exercise. Even if the learned Judge is satisfied on the claim of the creditor, it could be refused considering various other aspects. In a civil suit, where creditor seeks a debtor and the debtor has successfully proved his claim decree would be a natural course. In a petition for winding up, it would depend upon various other factors irrespective of proof of claim. At the pre admission stage, the company Court would examine the claim and if it is a just debt that would have no defence from the company, the admission would be inevitable. Section 434 of the Companies Act 1956 would give handle to an unsecured creditor to sue the debtor company for winding up on the strength of the presumption of insolvency. The provision would provide, when the creditor would raise a demand on the company, the company would have two courses left open, either to secure the claim to the satisfaction of the creditor or dispute the claim with plausible cause.
3. A creditor who has unpaid dues could only be reasonably satisfied if company has the means to pay. When the creditor serves the notice upon the company asking them to pay off the dues the company has option either to pay off or dispute the same. Even if the company has means to pay and does not pay without any reasonable cause it would be liable to be wound up.
4. Once the creditor established his right to claim the amount more than Rs. 500 the onus would shift on the company to rebut such claim by raising bona fide dispute. Once the bona fide dispute is raised it would weaken the chance of admission of the winding up petition, otherwise admission is an obvious consequence.
5. An unsecured creditor would maintain a winding up proceeding with a just claim upon service of statutory notice of demand that either remains unreplied or is dealt with without any plausible defence. For the company, once it faces a winding up proceeding followed by a statutory notice of demand it has to rebut the presumption of insolvency that would arise on service of the statutory notice. The presumption could only be rebutted on raising a bona fide dispute. Merely raising a dispute having no support from reality, would be moonshine, sham, colourable and would not be regarded as a good defence to resist a winding up proceeding. In this regard, I would be failing in my duty if I do not mention and rely upon the decision in the case of Mechalec Engineers and Manufacturers v. Basic Equipment Corporation AIR 1977 SC 577 that quoted the celebrated decision of this Court in the case of Kiranmoyee Dassi v. Dr. J. Chatterjee [1945] 49 Cal WN 246, five criteria stipulated therein, to deal with summary proceeding that would also be available for consideration by a Company Judge dealing with a winding up proceeding, would be apt in the present case and are quoted below:
| "(a) | | If the defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend. |
| (b) | | If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign and the defendant is entitled to unconditional leave to defend. |
| (c) | | If the defendant discloses such facts as may be deemed sufficient to entitle him to defend that is to say although the affidavit does not positively and immediately make it clear that he had a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security. |
| (d) | | If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend. |
| (e) | | If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the defendant on such condition and thereby show mercy to the defendant by enabling him to try to prove a defence." |
6. Having the mind set as discussed above, let me once again try to bring the factual scenario in a narrow campus. As observed herein before, My Lord has elaborately discussed the factual scenario. To me, Sett family was running Globe Forex and Travels Limited, they had their own investments in the company. Sanjay Sett was on the driver's seat, his son Siddharth Sett was assisting him having a considerable holding in the company. They decided to off-load the shareholding and control of the management. Both the groups entered into an agreement for transfer of shares and handing over of control. The agreement would make provision for hold-back of a part of the consideration amount to take care of the contingent liability being the tax liability and others so explained in the agreement. It may not be required to go deep into it. The agreement would also disclose the assets and liabilities that would not include the claim of Travelport, the villain of the peace. Sanjay Sett claimed the hold back amount as well as investment of Siddharth Sett that the Globe Forex and Travels Limited declined on various pleas including the two as set out herein;
| (i) | | Investment of Siddharth Sett was a complete distinct transaction and Sanjay Sett was not competent to claim. |
| (ii) | | Hold back amount could not be transferred in view of Travelport's claim made subsequently. |
7. The agreement would also provide, Sett family would not carry on similar business for two years. Present management would allege, Sett started of their own. Globe Forex and Travels Limited filed a suit and obtained injunction restraining Sett from doing so. The suit is pending as we are told. In this backdrop, Siddharth Sett would claim winding up of Globe Forex and Travels Limited for unpaid investment of Rs. 31.1 lakhs. Globe Forex and Travels Limited would deny taking plea of discord that they had with Sett on the hold-back and Travelport issue.
8. Learned Single Judge admitted the petition for winding up on the following reasons:
| (i) | | Claim of Siddharth Sett was admitted in the latest balance sheet. |
| (ii) | | Globe Forex and Travels Limited themselves contended, it was a distinct transaction. |
| (iii) | | Siddharth's claim had nothing to do with hold back agreement or pendency of the suit. |
9. In the appeal before us, My Lord considered the issue and observed, the defence, that Globe Forex and Travels Limited would take, could be available on the doctrine of equitable set-off. My Lord relied on two Apex court decisions in the case of Raja Bhupendra Narain Singha Bahadur v.Maharaj Bahadur Singh AIR 1952 SC 201 and Jitendra Kumar khan v. Peerless General Finance & Investment Co. Ltd. [2013] 8 SCC 769 and observed, since it was a distinct transaction unconnected with the other one the plea taken by Globe Forex and Travels Limited could not lawfully resist admission of winding up. His Lorship was of the view, appeal would be liable for dismissal. Here I join issue I fully agree with My Lord when His Lordship would describe the investment as independent transaction without having any nexus with the share transfer agreement. It was nobody's case, the agreement would prescribe the guideline and/or modality as to repayment of the investment as well. I fully agree, it was an out and out share transfer agreement coupled with modalities as to transfer of control and the available restrictions that is common in the likewise transaction. It would have been batter if the parties could bring to its fold all transactions between them. If I go by the strict letters of law, I would have no hesitation to observe, My Lord is perfectly correct. His Lordship's ultimate decision is accurate. However, my conscience would not allow me to stop therein as the doctrine of equitable set-off would be ringing the bell behind me.
10. The doctrine of equitable set-off is a century old concept. As far back in 1865 the Madras High Court and in 1889 the Calcutta High Court observed so in the case of Clark v. Ratnavallo Chetti[1865] MHRC 296 and G Chishlom v. Gopal Chunder Surma [1889] 16 Cal ILR 711.
11. Equitable set-off is not defined in any procedural law or otherwise. It is not contemplated anywhere in the statute. The concept would come from the broad principles of equity, justice and fair play.
12. A would have a claim against B for a distinct transaction whereby A would get Rs. 10 from B, B would also have a similar claim of Rs. 10 against A in a different transaction unconnected with the earlier one. The law would permit both of them to sue each other distinctively since the transactions are not interconnected, the plea of set-off would not be available to them under the Civil Procedure Code. However, the concept of equity, justice and fair play would permit them to take the defence that is commonly called as equitable set-off, acceptability of which would depend upon the sole discretion of the Court where such plea is taken.
13. I have carefully gone through both the decisions cited at the bar and relied on by My Lord. The facts involved in Raja Bhupendra Narain Singha Bahadur (supra) could be clearly distinguished. In the said case, there were different suits on the issue of transfer of possession of land when mesne profit was being claimed by the plaintiff in the subject suit. The defendant would take the plea of set-off for the issues and profits that the defendant would claim to be entitled to. Considering the factual scenario, the Apex Court observed, it would be unjust and improper. While making such comment, the Apex Court observed, "a plea in the nature of equitable set-off is not available when the cross-demands do not arise out of the same transaction." This sentence in my view, should not be read in isolation rather, paragraph 7 and 8 if read together, would describe the situation under which the Apex Court observed so. The Apex Court in paragraph 8 observed, "A wrongdoer who has wrongfully withheld moneys belonging to another cannot invoke any principles of equity in his favour and seek to deduct therefrom the amounts that during this period have fallen due to him. There is nothing improper or unjust in telling the wrongdoer to undo his wrong, and not to take advantage of it. Such a person cannot be helped on any principles of equity to recover amounts for the recovery of which he could have taken action in due course of law and which for some unexplained reason he failed to take and which claim may have by now become barred by limitation." I think the extract quoted (supra), would make the decision clear.
14. The principle of law that the Apex Court discussed in Jitendra Kumar Khan (supra) would rather support my view. Paragraph 11 and 16 being relevant herein are quoted below:
"On a reading of the aforesaid Rule it is noticeable that certain conditions precedent is to be satisfied for application of the said Rule. Two primary conditions are that it must be a suit for recovery of money and the amount sought to be set-off must be a certain sum. Apart from the aforesaid parameters there are other parameters to sustain a plea of set-off under this Rule. As far as equitable set-off is concerned, it has been enunciated in Clark v. Ratnavaloo Chetti that the right of set-off exists not only in cases of mutual debits and credits, but also where cross-demands arise out of the same transaction. The said principle has been reiterated by the Calcutta High Court in G. Chishlom v. Goal Chunder Surma.
From the aforesaid enunciation of law it is quite clear that equitable set-off is different than the legal set-off; that it is independent of the provisions of the Code of Civil Procedure; that the mutual debits and credits or cross-demands must have arisen out of the same transaction or to be connected in the nature and circumstances; that such a plea is raised not as a matter of right; and that it is the discretion of the court to entertain and allow such a plea or not. The concept of equitable set-off is founded on the fundamental principles of equity, justice and good conscience. The discretion rests with the court to adjudicate upon it and the said discretion has to be exercised in an equitable manner. An equitable set-off is not to be allowed where protracted enquiry is needed for the determination of the sum due, as has been stated in Dobson and Barlow Ltd. v. Bengal Spg. & Wvg. Co. and Giridharilal Chaturbhuj v. Surajmal Chauthmal Agarwal."
15. In my view, none of the decisions of the Apex Court would preclude us from considering the plea of equitable set-off. It would depend upon the discretion that the Court of law while considering the lis pending before it.
16. Proceeding for winding up is a discretionary relief. There are instances where despite the creditor having proved his claim the Court of law would deny winding up on some other context. An ultimate order of winding up would seal the fate of many people connected with the corporate entity. Their means of livelihood would be depending upon its existence. When the company Court would find any sustainable dispute between the parties on the admissibility of the claim the winding up process must not be set in motion.
17. In a proceeding for winding up, we ordinarily face with two types of defence; one, the defence that would be existing as on the date of issuance of the statutory notice of demand and the other, concocted and/or cooked up after receipt of the statutory notice with the sole purpose to resist an order of admission of winding up when the creditor would be having an admitted due that would have no plausible ground to reject. In the instant case, the parties had discord much prior to the issuance of the statutory notice of demand. Globe Forex and Travels Limited filed the suit prior to the statutory notice of demand issued by Siddharth Sett. In fact, Sanjay Sett never disputed the issue of Travelport. He would explain, Travelport waved the charges whereas Globe Forex and Travels Limited wanted to reopen the relationship with Travelport when they demanded their earlier dues. Whether such dispute would sustain or not, is nobody's concern in a proceeding for winding up. Rather, it should be decided the Civil Court being competent to deal with the same. If we follow Kiranmoyee Dassi(supra) and/or Mechalec Engineers and Manufacturers (supra), we would find, a defence for the sake of defence without any bona fide would definitely invite Court to reject such defence. In the instant case, the appellant Globe Forex and Travels Limited deposited the entire sum with the Registrar, High Court Original Side. Hence, it could not be said, they are in involved circumstance or insolvent. It is true, in case company purposely avoids any admitted claim despite having capacity to clear off, the order of winding up should be passed. In the instant case, rightly or wrongly, the company raised a plea that could not be said to be moonshine. The company could show their bona fide by depositing the entire principal claim. We feel, an opportunity should be given to them to have such discord adjudicated before a Civil Court, of course, with the continuation of the deposit that the Registrar is holding.
18. In my view, the judgment and order impugned should be set aside and the parties should be relegated to the suit coupled with a direction upon the Registrar to hold the said sum of Rs. 31.1 lakhs to be kept in fixed deposit renewed from time to time till a decision is taken on the issue by a Civil Court.
19. As observed herein before, winding up process is a totally discretionary relief. Where the relief would depend upon the discretion of the Court, the Court would always use such discretion judiciously and relying on the broad principles of justice, equity and fair play. In the instant case, applying such broad principle the facts would not permit me to put my seal of approval on the winding up process particularly when the company deposited the entire sum in Court.
20. In my view, appeal should be allowed on terms as indicated above.
Ashis Kumar Chakraborty, J.
21. In this appeal, the appellant company assails the order dated July 16, 2014 passed by the learned Company Judge admitting the application for its winding up for a sum of Rs. 31.10 lacs along with interest at the rate of 8% per annum from the date of issuance of the statutory notice till payment. The learned Company Judge, however, granted opportunity to the appellant to pay the said sum to the respondent/petitioning creditor in six equal monthly installments failing which there would be an advertisement of the winding up application in newspapers.
22. The appellant carries on the business, inter alia, of travel agent and tour operator.
23. Till April 02, 2013 the respondent creditor was a director of the appellant company. Between March, 2012 and December, 2012, he lent and advanced a sum of Rs. 45.60 lacs to the appellant out of which he was refunded Rs. 14.50 lacs, by account payee cheques drawn in his name. As on the date of cessation as a director of the appellant company, on April 3, 2013 a sum of Rs. 31.10 lacs remained outstanding to him. By a notice dated January 30, 2014, under Sections 433 and 434 of the Companies Act, 1956, the respondent called upon the appellant to repay the said sum of Rs. 31.10 lacs along with interest at the rate of 18% per annum on and from December 22, 2012 until repayment. By a letter dated February 20, 2014, the appellant through its advocates replied to the said notice dated January 30, 2013 and refused to pay any money to the respondent. According to the respondent creditor the allegations contained in the said letter dated February 20, 2014 are misconceived, and the same have no connection with him. In support of his claim the respondent relied upon the balance sheet of the appellant company as at March 31, 2013 where the appellant admitted that the said sum of Rs. 31.10 lacs was remaining outstanding to him. After March 31, 2013 no payment was made by the respondent to the appellant. In view of refusal of the appellant to pay the said sum Rs. 31.10 lacs, the respondent filed the winding up application.
24. The defence of the appellant before the learned Single Judge was that originally the company was owned by Sanjay Kumar Sett, the father of the respondent (hereinafter referred to as "Sanjay Sett") through his family members, friends and associates including the respondent and by a share purchase agreement dated December 22, 2012, (hereinafter referred to as the said "share purchase agreement") the said Sanjay Kumar Sett and his family members, friends and associates transferred the entire shareholding of the appellant company to Ram Krishna Forgings (P) Ltd.. They relied on various clauses of the said share purchase agreement providing for conduct of financial due diligence of the company and downward adjustment from the sellers purchase consideration in case of liability or expense exceeding the findings of said due diligence. Great emphasis was laid Clauses 7.6 and 10.5 of the said share purchase agreement permitting retention of sums from the purchase consideration till completion of Income- tax Assessment of the appellant company for three financial years up to 2012-2013 and the right to claim indemnification, after issuance of thirty days' notice, from both Sanjay Sett and the respondent in case of certain eventualities. The appellant also relied on Clause 9 of the said purchase agreement and sub-clauses thereunder, providing restriction upon the sellers from carrying on any similar business carried on by the appellant whether directly or indirectly for a period of two years from the effective date of the said share purchase agreement.
25. Before the learned Single Judge, the appellant contended that at the time of entering into the said share purchase agreement, the present management was not informed that the appellant company had huge outstanding dues to its vendors including a Company of United States of America, namely, Travelport (hereinafter referred to as "the said Travelport") and the assessment of the incoming dues of the company were pending and as such they were entitled to invoke Clause 9 of the said share purchase agreement for indemnification by the respondent. In support of the defence, the appellant also submitted that there was a breach of Clause 9 of the said share purchase agreement providing for negative covenant restraining, the sellers under the said agreement, carrying on same business of tours and travel and as such the appellant filed a suit together with Ramkrishna Forgrings Ltd., being C.S. No. 462 of 2013, before this Hon'ble Court, against the respondent , his father Sanjay Kumar Sett, company namely Good Earth Travel Group India (P) Ltd. and its employees claiming various reliefs of permanent injunction restraining breach of the negative covenant and as also decree for Rs. 5 crores against the said defendants on account of damages. They also placed reliance on the interim orders passed by a learned Single Judge restraining some of the defendants in the said suit, from making any representation to the clients of the appellant prejudicing them against the appellant and soliciting the clients of the appellant and diminishing the business of the appellant. The appellant asserted that since in the said suit, it had claimed a decree for Rs. 5 crore against the defendants, on account of damages, the respondent being one of defendant, could not maintain the winding up application.
26. None of the aforesaid contentions of the appellant found favour with the learned Company Judge and the impugned order was passed.
27. By an order dated August 6, 2014, while admitting the appeal , the Division Bench stayed the operation of the impugned order of the learned Company Judge subject to the appellant depositing a sum of Rs. 31.10 lacs with the Registrar, Original Side and the said order was complied with by the appellant.
28. Appearing in support of the appeal, Mr. Jishnu Saha, learned Senior Advocate urged before us that since the appellant had deposited the said sum of Rs. 31.10 lacs with the Registrar, Original Side of this Court, the appellant had proved its financial solvency and bona fide and as such we should relegate the claim of the respondent to be adjudicated in a suit. According to Mr. Saha, in any event the defence of the appellant to the claim of the respondent was bona fide and as such the learned Company Judge committed grave error in admitting the winding up application of the respondent.
29. Elucidating the bona fide defence of the appellant against the claim of the respondent creditor, Mr. Saha once again relied on the various clauses of the said share purchase agreement. He submitted that the appellant carried and was still carrying on the business of travel agent and tour conductor and in order to carry on such business, the appellant would have to use various portals of various companies including the said Travelport. Mr. Saha first relied on a communication dated July 5, 2013 issued by the said Travelport claiming payment of US $ 6,000 from the appellant on account of various invoices dated August 31, 2010, August 31, 2011 and August 31, 2012. Mr. Saha strenuously argued, at the time of execution of the said share purchase agreement, the previous management of the appellant company did not disclose the said outstanding dues of the said Travelport and as such the appellant company was entitled to invoke Clause 9 of the said share purchase agreement to claim indemnification from the respondent and his father for all the amount claimed by the said foreign company. He relied on various email communications exchanged between the appellant and the said Sanjay Sett the father of the respondent, when the said Sanjay Sett claimed that the said payment claimed by Travelport had been waived but he was unable to produce any document to prove such waiver. [Further according to the appellant, the dues of the Income Tax for the three years commencing from 2010-2011, 2011-2012 and 2012-2013 were far in excess that was represented to the new management at the time of execution of the said share purchase agreement.] Thus, Mr. Saha contended, the appellant was entitled to invoke Clause 10 of the said share purchase agreement claimed indemnification by the respondent and the respondent was not entitled to receive the said sum of Rs. 31.10 lacs from the appellant. He, however, admitted, the appellant did not issue any notice to the respondent claiming to be indemnify as required under Clause 10.5 of the said share purchase agreement.
30. Mr. Saha also relied upon the correspondence dated June 10, 2013, August 5, 2013 and September 12, 2013 exchanged between the appellant and the said Sanjay Sett (the father of the appellant and previous Managing Director of the appellant Company) and submitted that the said Sanjay Sett had accepted that in view of the aforesaid facts the appellant was entitled to claim indemnification and they could not realize any money from the hold back amount at the moment.
31. Mr. Saha placed the plaint filed in the suit being C.S. No. 462 of 2013 filed by the appellant and Ram Krishna Forgings (P) Ltd. and claimed that in the said suit the appellant has claimed decree for Rs. 5 crores against the respondent and other defendants on account of damages. According to him, since the said suit was filed even before the issuance of the notice dated January 30, 2014, the winding up application filed by the respondent was not maintainable as the claim of the appellant in the said suit against the respondent was far in excess of the claim of the respondent. Thus, in short, the defence of the appellant against the claim of the respondent creditor, in this winding up proceeding was that it was entitled to claim set-off all its claim arising out of the said share purchase agreement, against the said claim of the respondent along for Rs. 31.10 lacs and such defence was bona fide. In support of his contention that it was settled law that the Company Court should not admit a winding up petition when the company also had a bona fide claim against the petitioning creditor, Mr. Saha first cited an unreported judgment dated November 03, 2014 of Harish Tandon, J. of this Court in the case of Martin & Harris (P.) Ltd. v. Organon (India) (P.) Ltd. [C.P. No. 448 of 2012] His Lordship after considering the various decisions on the subject, refused to admit the winding up application as the company had already filed a suit against the petitioning creditor for recovery of its claims arising out of breaches committed by petitioning creditor of the contract. He also relied on the decision of the Division Bench of the Delhi High Court in the case of German Homoeopathic Distributors (P.) Ltd. v. Deutsche Homeopathic- Union DHU Arzneimittel GmBH & Co. [2009] 161 DLT 703 (DB) , where the Division Bench set aside the order of admission of the winding up application of the petitioning creditor, passed by the learned Company Judge on the ground that the company had disclosed substantial bona fide counter-claims against the petitioning creditor arising out of the same transactions.
32. Mr. Srenik Singhvi appearing for the respondent creditor, on the other hand, submitted, the appellant admitted to have received the loan from his client which was a transaction independent of the said share purchase agreement. He contended, the right of the respondent to recover the said sum of Rs. 31.10 lacs from the appellant was independent of the transactions under the said share purchase agreement. Mr. Singhvi relied on the balance sheet of the appellant company for the year ending March 31, 2013 acknowledging the said the dues of the respondent for Rs. 31.10 lacs. According Mr. Singhvi, from the correspondence dated June 10, 2013, August 5, 2013 and September 12, 2013 relied by Mr. Saha, it was evident, those were exchanged between the appellant and the said Sanjay Sett and not the respondent. In the said correspondence, even the said Sanjay Sett asserted that the claim of the respondent for refund of the loan granted to the appellant was independent of transactions under the said share purchase agreement. He further urged, from the plaint filed in the said suit being C.S. No. 462 of 2013, it was further evident that the appellant and its owner Ramkrishna Forgings Ltd. had filed the said suit against the respondent and other defendants for enforcement of their right of negative covenant under Clause 9 of the said share purchase agreement which prevented the sellers under the said share purchase agreement from carrying on any similar travel or tour business for a period of two years. Even the interim orders of injunction, obtained by the appellant in the said suit, as recorded by the order dated August 13, 2014 shall continue till December 21, 2014, that was, up to the expiry of two years of the said share purchase agreement. According to him, apart from the reliefs for injunctions, the appellant claimed a decree for Rs. 5 crores on account of alleged damages suffered by it, for alleged violation of their right of negative covenant, under Clause 9 of the said share purchase agreement, by all the defendants in the said suit and not the respondent alone. In any event, no damage has been quantified till now.
33. Lastly, Mr. Singhvi urged that the defence sought to be raised by the appellant against the claim of the respondent, in this appeal on the ground of set-off was not maintainable in law as the loan transaction between the appellant and the respondent was independent of the said share purchase agreement. In support of such contention, Mr. Singhvi relied on the decisions of the Supreme Court in Raja Bhupendra Narain Singha Bahadur (supra), India Oil Corporation Ltd. v. SPS Engg. Ltd.[2011] 3 SCC 507 and Jitendra Kumar Khan (supra). He also cited a decision of the Supreme Court in the case IBA Health (I) (P.) Ltd. v. Info-Drive Systems Sdn. Bhd. [2010] 104 SCL 367/8 taxmann.com 1 where it was held that if there is no dispute as to the company's liability, it was difficult to hold that the company should able to pay the debt merely by proving, it was able to pay the debts and if the debt was undisputedly owing, then it should be paid. Thus, he contended that mere deposit of the said sum of Rs. 31.10 lacs by the appellant with the Registrar Original Side would not entitle the appellant to have the winding up application rejected and the claim of the respondent being relegated to a civil suit.
34. In reply, Mr. Rishad Medora, on behalf of the appellant submitted that the reflection of the said amount of Rs. 31.10 lacs, remaining outstanding to the respondent only records that the company received that loan from the respondent. He did not dispute the proposition of law laid down in the aforesaid decisions cited by Mr. Singhvi.
35. We are alive to the well settled principle that a winding up petition is not a legitimate means of seeking to enforce payment of the debt and where the company has a "bona fide dispute", that is, it raises existence of a substantial ground for dispute to the claim of the petitioning creditor, the said claim should be relegated to suit for trial. Now, we proceed to find out whether the facts urged by the appellant as discussed above, constitute a bona fide dispute to resist the admission of the winding up application filed by the respondent.
36. So far as the deposit of the said sum of Rs. 31.10 lacs by the appellant with the Registrar Original Side of this Court, we are of view, that as has been held in paragraph 25 of the said decision of the Supreme Court in the case of IBA Health (I.) (P.) Ltd. (supra), that the same simpliciter substantiates, the ability of the appellant company, to pay the amount claimed by the respondent creditor and same alone would not prove the defence raised by the appellant on basis of the said suit being C.S. No. 462 of 2013 or set-off, the principle of equitable based on Clause 10 of the said share purchase agreement, to be bona fide.
37. It is well settled that when the company opposing the winding up application has already filed a suit against the petitioning creditor for realization of its dues arising out of the same contract or set of transactions, the same constitutes "bona fide dispute" for rejection of the winding up application. In this regard reference may be made to the decision of the Division Bench of this Court in the cases of and SRC Steel (P.) Ltd. v. Bharat Industrial Corporation Ltd. 2005(4) CHN 343. Even in the unreported decision of Harish Tandon, J. in the said case of Martin & Harris (P.) Ltd. (supra) before filing of the winding up application the company had filed a suit against the petitioning creditor for recovery their dues out of the same transaction and even the petitioner had filed its counter claim in the said suit. In those facts, the learned Single Judge rejected the winding up application.
However, in the instant case, from the plaint filed in the said suit being C.S. No. 462 of 2013 (appearing at pages 205 to 234 of the Paper Book) it is ex-facie evident that respondent is one of the defendants in the said suit and the cause of action of the appellant is alleged violation of the negative covenant provided in Clause 9 of the share purchase agreement, there is even no averment, in respect of the loan nor any relief claimed provided by the respondent in respect of the loan transaction between the respondent and the appellant. All the reliefs are claimed in the said suit for enforcement of the said negative covenant of the said share purchase agreement which is independent of the said loan transaction. Thus, the facts in the instant case are clearly distinguishable from the facts of the case of unreported decision of Harish Tandon, J. in the case of Martin & Harris (P.) Ltd. (supra). Thus, we are afraid, that we are unable to accept that filing of the said suit being C.S. No. 462 of 2013 by the appellant and the claim for Rs. 5 crores against all the seven defendants in the suit can be considered as a defence for rejecting the winding up application of the respondent.
38. Now, we deal with the question, whether the defence of the appellant on the basis of the principle of equitable set-off, i.e., claim for indemnification from the respondent under Clause 10 of the said share purchase agreement can be treated as a bona fide defence to disentitle the respondent to maintain the winding up application. From the correspondence exchanged between the appellant and the said Sanjay Sett, as also pleadings of the parties there is no dispute that the loan transaction between the respondent and the appellant is independent from the transactions arising out of the said share purchase agreement. There is also no dispute that a substantial part of the consideration amount under the said share purchase agreement is remaining outstanding from the appellant company to the sellers. In the said letter dated June 10, 2013 addressed to the said Sanjay Sett, the appellant claimed that on account of the demand raised by Travelport for US $ 6000 against it and due to the non-completion of the Income Tax assessment, as also on the ground of some people using the letter heads of Globe to carry on any Cargo business which may have potential, financial implication for them, they are entitled to claim indemnification from Sanjay Sett, in terms of the said Clause 9 of the share transfer agreement. In response to the said letter dated June 10, 2013, Sanjay Sett by his letter dated August 5, 2013 categorically asserted the loan granted by the respondent in this appeal to the appellant has got nothing to do with the share transfer agreement. The said letter was replied by the appellant, by its letter dated September 12, 2013 wherein the respondent did not dispute that the said loan transaction between them and the respondent was independent of the said share transfer agreement. All these letters were relied upon by Mr. Saha appearing for the appellant. Even in the balance sheet of the appellant as on March 31, 2013 [particularly at page 106 in the paper book], the respondent treated the loan and advances provided by the respondent as a different transaction on account of which said sum of Rs. 31.10 lacs remained outstanding to the respondent on March 31, 2013. The outstanding amount to Sanjay Sett in respect of the share transfer agreement is reflected in the said balance sheet separately. Further, in the plaint filed in the said suit being C.S. No. 462 of 2013 there is no averment that the respondent is not entitled to claim repayment of the said sum of Rs. 31.10 lacs on account of any liability to indemnify the appellant under the said share purchase agreement. The appellant claims for indemnification by the respondent under Clause 9 of the said share purchase agreement but there is conspicuous absence of any claim in writing to the respondent, nor any claim notice for indemnification was issued to the respondent under Clause 10.5 of the said share purchase agreement.
39. Further, as has been held by the Supreme Court in the said decisions of Raja Bhupendra Narain Singha Bahadur (supra) and Jitendra Kumar Khan (supra), the principle of equitable set-off is applicable only in respect of demands and cross-demands arising out of the same transaction. We have already found that the claim of the respondent against the appellant arise out of transactions, that is the loan transaction, which is independent of the said share transfer agreement. In any event, even if we, for arguments sake accept that the appellant can claim indemnification from the respondent under Clause 10 of the said share purchase agreement, then also there is no ascertained sum for which the appellant can claim indemnification. In the said decision of Indian Oil Corporation Ltd. (supra) relied upon by Mr. Singhvi on behalf of the respondent that the principle of equitable set-off cannot be made applicable in respect of an unascertained sum of money.
40. In view of the above findings as aforesaid I find no merit in this appeal.
Ashim Kumar Banerjee And Ashis Kumar Chkraborty J.J.
41. Since we could not be ad idem on the ultimate result we direct this matter to be placed before the Hon'ble Chief Justice for appropriate assignment of the controversy to a third judge to have His Lordship's views on the issue so that we could ultimately pass an order on the majority decision
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