M/S Shital Fibres Ltd. vs M/S Indian Acrylics Ltd. on 6 April, 2021


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Supreme Court of India

M/S Shital Fibres Ltd. vs M/S Indian Acrylics Ltd. on 6 April, 2021

Author: B.R. Gavai

Bench: Rohinton Fali Nariman, B.R. Gavai, Hrishikesh Roy

                                                     1


                                                                    REPORTABLE



                                   IN THE SUPREME COURT OF INDIA
                                   CIVIL APPELLATE JURISDICTION

                                 CIVIL APPEAL NO.    1105        OF 2021
                         [Arising out of Special Leave Petition (Civil) No.2353 of
                                                  2017]


                         SHITAL FIBERS LTD.                  ...APPELLANT(S)

                                                 VERSUS


                         INDIAN ACRYLICS LIMITED            .... RESPONDENT(S)



                                            JUDGMENT

B.R. GAVAI, J.

1. Leave granted.

2. The present appeal challenges the judgment and

order passed by the Division Bench of the Punjab &

Haryana High Court in Company Appeal No. 58 of 2015

dated 29.4.2016, arising out of the order passed by the
Signature Not Verified

Digitally signed by R
Natarajan
Date: 2021.04.06
17:16:59 IST
Reason:

2

learned Company Judge of the said Court, in Company

Petition No.106 of 2009 dated 28.9.2015.

3. The facts, in brief, giving rise to the present

appeal are as under:

The respondent – M/s Indian Acrylics Limited is a

manufacturer of acrylic yarn having its manufacturing unit

in village Harkrishanpura, District Sangrur. There was a

transaction between the appellant – M/s Shital Fibers Ltd.

and the respondent ­ M/s Indian Acrylics Limited under

which the respondent was to supply acrylic yarn to the

appellant on credit basis. As per the said arrangement, the

supply of raw material commenced from 20.4.2007. The

respondent supplied material worth Rs.81,98,014.45. There

were certain issues raised by the appellant with regard to

the quality of the material supplied by the respondent. As

such, a sum of Rs. 6,22,073/­ was credited by the

respondent in the account of the appellant on account of

material returned and also a credit note of Rs.5,00,000/­

was given on account of some defect in quality. As per the

respondent, appellant had made a payment of
3

Rs.61,83,218/­. However, there was an outstanding

balance of Rs.8,92,723/­ as on 28.7.2008. Since despite

repeated requests, balance amount was not paid, the

respondent issued a statutory notice to the appellant. The

same was duly responded to. As the payment was not made

despite notice being duly served on the appellant, the

respondent filed the aforesaid Company Petition seeking

winding up of the present appellant for its inability to pay

admitted debts. The learned Company Judge vide order

dated 28.9.2015 admitted the Company Petition. However,

while doing so, the learned Company Judge observed, that

since the appellant was an on­going concern, an

opportunity should be granted to it to settle the accounts

with the respondent by 31.12.2015. Only in case of failure

of the settlement, the citation was directed to be published.

Being aggrieved thereby, the appellant preferred

an appeal before the Division Bench of the High Court. By

an order dated 24.12.2015, the Division Bench of the High

Court, while issuing notice, stayed the publication of the

admission notice, subject to the appellant paying the
4

amount in question by 31.12.2015. Accordingly, the

amount was so paid by the appellant.

Though the Division Bench of the High Court

came to a conclusion, that there was no bona fide dispute

and as such, there was no question of directing the

respondent to repay the amount, since the appellant had

satisfied the respondent’s claim to the extent mentioned in

the order impugned in the appeal, it dismissed the appeal.

However, insofar as the claim of the respondent

with regard to interest at the rate of 24% per annum is

concerned, the Division Bench of the High Court found it

not necessary to enter into the question, as to whether the

appellant was liable to pay interest to the respondent since

the learned Company Judge had not gone into that issue.

However, the Division Bench clarified, that the dismissal of

the appeal was without prejudice to the respondent’s

contention regarding interest which may be claimed either

by way of an application for clarification before the learned

Judge or by way of an appeal or by any other proceeding.

Being aggrieved thereby, the present appeal.
5

4. Shri Karan Nehra, learned counsel appearing on

behalf of the appellant submits, that the defence of the

appellant was a bona fide one. He submitted, that it was a

specific case of the appellant, that on account of the

defective material supplied by the respondent, the appellant

had suffered huge losses and as such, it was the appellant

who was entitled to receive the damages from the

respondent. He submitted, that in view of the specific

defence, which could not be said to be a moonshine defence,

the learned Company Judge ought not to have admitted the

Company Petition. He submitted, that the claim of the

respondent could not stand even if it was made in summary

proceedings under Order XXXVII of the Code of Civil

Procedure, 1908. He submitted, that requirements under

Section 433(e) and (f) of the Companies Act, 1956

(hereinafter referred to as “the said Act”) stood on a much

higher pedestal and as such, the learned Company Judge

has erred in admitting the petition. He submitted, for the
6

same reason, the Division Bench has also erred in not

interfering with the direction of the learned Company Judge.

5. Shri Nehra further submitted, that since there

was no agreement between the parties to pay interest on the

balance/delayed payment, the direction issued by the

Division Bench of the High Court to consider the claim of

the respondent for interest does not stand the scrutiny of

law.

6. Shri Nehra relies on the judgments of this Court

in Mediquip Systems (P) Ltd. vs. Proxima Medical

System Gmbh1, Vijay Industries vs. NATL Technologies

Ltd.2, and IBA Health (India) Private Limited vs. Info­

Drive Systems Sdn. Bhd.3.

7. Shri Tarun Gupta, learned counsel appearing on

behalf of the respondent submits, that since the appellant,

in spite of various communications sent by the respondent

requesting it to pay the outstanding amount, had failed to

do so, it was required to issue statutory demand notice

under Section 434 read with Section 433 (e) of the said Act.

1 (2005) 7 SCC 42
2 (2009) 3 SCC 527
3 (2010) 10 SCC 553
7

It is submitted, that the said notice was duly served upon

the appellant and also replied to. Apart from making a

vague denial and stating that the claim of the respondent is

a matter of record, no specific defence was taken. He

further submits, that the appellant had totally changed the

stand taken by it before the learned Company Court as

against the stand taken by it in the reply to the statutory

notice. He therefore submits, that the learned Company

Judge as well as the Division Bench of the High Court had

rightly held, that the defence of the appellant was not a

bona fide one. He submitted, that no interference would be

warranted in the concurrent findings of fact.

8. This Court in the case of Madhusudan

Gordhandas & Co. vs. Madhu Woollen Industries Pvt.

Ltd.4, observed thus:

“20. Two rules are well settled. First, if
the debt is bona fide disputed and the
defence is a substantial one, the court
will not wind up the company. The court
has dismissed a petition for winding up
where the creditor claimed a sum for
goods sold to the company and the
4 (1971) 3 SCC 632
8

company contended that no price had
been agreed upon and the sum
demanded by the creditor was
unreasonable. (See London and Paris
Banking Corporation [(1874) LR 19 Eq
444] ) Again, a petition for winding up by
a creditor who claimed payment of an
agreed sum for work done for the
company when the company contended
that the work had not been properly was
not allowed. (See Re. Brighton Club and
Horfold Hotel Co. Ltd. [(1865) 35 Beav
204])

21. Where the debt is undisputed the
court will not act upon a defence that the
company has the ability to pay the debt
but the company chooses not to pay that
particular debt, see Re. A Company. [94
SJ 369] Where however there is no doubt
that the company owes the creditor a
debt entitling him to a winding up order
but the exact amount of the debt is
disputed the court will make a winding
up order without requiring the creditor to
quantify the debt precisely See Re
Tweeds Garages Ltd. [1962 Ch 406] The
principles on which the court acts are
first that the defence of the company is in
good faith and one of substance,
secondly, the defence is likely to succeed
in point of law and thirdly the company
adduces prima facie proof of the facts on
which the defence depends.”
9

9. It is therefore well settled, that if the debt is bona

fide disputed and the defence is a substantial one, the court

will not wind up the company. It is equally well settled, that

where the debt is undisputed, the court will not act upon a

defence that the company has the ability to pay the debt but

the company chooses not to pay that particular debt. It is

equally settled, that the principles on which the court acts

are first, that the defence of the company is in good faith

and one of substance, secondly, the defence is likely to

succeed in point of law and thirdly the company adduces

prima facie proof of the facts on which the defence depends.

10. As to whether the defence of a Company is in

good faith or as to whether it is of a substance and as to

whether it is likely to succeed in point of law and as to

whether the company adduces prima facie proof of the facts

on which defence depends, would depend upon the facts of

each case.

11. In the present case, in the statutory notice dated

25.8.2008, the respondent – Company has specifically

stated as under:

10

“4. That in that regard a sum of
Rs.35,14,776.30 was outstanding
against you against various bills as
on 25.8.2007 against the material
supplied to you by my client, vide
following invoices:

      S.No.   Invoice        Date      Amount (Rs.)
              No.

      1       162            26.6.07   8,55,370.65

      2       177            30.6.07   8,66,788.29

      3       216            16.7.07   9,07,891.19

      4       300            25.8.07   8,84,726.17

              Total                    35,14,776.30


5. That after the said invoices no
material has been supplied to you
by my client and the above amount
of Rs.35,14,776.30 was payable by
you to my client. My client
requested to you vide various
communications dated 16.11.07,
22.11.07, 23.11.07, 26.11.07,
27.11.07, 28.11.07, 26.11.07,
1.12.07, 3.12.2007, 5.12.2007,
6.12.2007, 7.12.2007, 8.12.2007,
10.12.2007, 11.12.2007,
12.12.2007, 13.12.2007,
15.12.2007, 17.12.2007 and
21.12.2007 to pay the above said
outstanding amount.

6. That in response to the above
letters/faxes no communications
11

have been received from you by my
client rather you made lumpsum
payments of Rs.15 lac through
cheques, material returned by you
worth Rs.6,22,073.00 and
adjustment of Rs.5 lac was made by
way of credit note. The details of
which are as follows:


S.No. Date     Particulars Amount (Rs.)

1     29.9.07 Material    6,22,073.00
              returned

2     21.3.08 Chq. No.    4,00,000.00
              935641/
              20.3.08

3     4.4.08   Chq. No.   6,00,000.00
               935692/
               31.3.08

4     7.5.08   Credit     5,00,000.00
               Note

5.    8.5.08   Chq. No.   5,00,000.00
               990459/
               7.5.08

                          26,22,073.00


The     total    amount      remains

recoverable by my client from you is
Rs.8,92,723.45p (8,92,703.30 +
20.15) as on 8.5.2008 after
receipt/credit of the above amounts
of Rs.26,22,073.00 as mentioned
above.”
12

12. In reply to the said notice, the appellant has

stated thus:

“4. In reply to para no.4 of your notice,
it is a matter of records and it
clearly shows about the business
worth of my client.

5. In reply to para no.5 of your notice,
it is a matter of record. However,
there is nothing due to your client
from my client, rather on the
contrary is true as mentioned in
previous paras.

6. Para no.6 of the notice is not correct
and does not depict the correct
picture, rather on the contrary your
client himself had been coming to
my client and settled the amount
and agreed to return Rs. 25 Lacs
out of which Rs.5 lacs returned, rest
of the amount was not returned.

7. Para no.7 of your notice is wrong
and incorrect. Detailed reply has
already been given in previous
paras.”

13. It is thus clear, that in response to paragraph 4

and 5 wherein the respondent has specified its claim, the

only reply given is, that it is a matter of record and that it

shows about the business worth of his client. No doubt, that

in paragraph 6, it is stated, that the respondent had himself
13

been coming to the appellant and settled the amount and

agreed to return Rs.25 lakh out of which only Rs. 5 lakh

was returned.

14. From the perusal of the written statement filed to

the Company Petition, it would reveal, that the main

contention of the appellant was, that it was a running

company making profits and further, that the claim of the

respondent was not admitted by it. It was contended, that

the petition was filed only to pressurise the appellant to pay

the dues which were neither admitted nor legally due.

15. It was also stated in the written statement that

till 26.6.2007 there was no issue with regard to supply of

raw material by the respondent. However, with effect from

26.6.2007 it was noticed, that raw material supplied was

defective and the goods which were sold in the market

utilizing the said raw material were received back with some

complaints. It was stated, that the goods which were

supplied by the respondent vide invoices dated 26.6.2007

onwards were defective and the products manufactured by

the appellant – company using the said raw material (i.e.
14

acrylic yarn) were returned by the dealers and importers

due to defective quality. It was stated, that the appellant –

Company had returned the defective raw material to the

respondent – Company, which remained unused. It was

stated, that the respondent had acknowledged the same and

credited an amount of Rs.6,22,073/­ in the account of the

appellant. It is further stated, that after various meetings

and negotiations, the respondent agreed to compensate the

appellant on account of supply of defective material by

issuing a credit note of Rs.5 lakh. It was further stated,

that as per the account of the appellant, an amount of

Rs.53,648/­ was receivable from the respondent after

making all the adjustments.

16. The learned Company Judge after considering the

rival contentions observed thus:

“8. There is no document referred to by
learned counsel for the respondent –
Company written by it to the
petitioner – Company regarding
defect in quality. In response to the
statutory notice issued by the
petitioner – Company, the stand
taken by the respondent – company
in reply was that raw material worth
Rs.25,00,000/­ supplied by the
15

petitioner – Company to the
respondent – company was lying
with it in poor condition and could
not be used in production. Against
promised compensation of
Rs.25,00,000/­, credit note of only
Rs.5,00,000/­ was given. As
against a claim of Rs.8,92,723/­
claimed by the petitioner, a sum of
Rs.11,07,297/­ is due from the
petitioner – company to the
respondent – company on account
of losses suffered due to poor quality
of yarn supplied. Demand of the
aforesaid amount was raised. In
reply to the petition, the stand taken
is altogether different. No doubt,
the issue regarding defective
material was raised, however, it was
stated that the entire material
supplied by the petitioner –
company was used, as a result of
which the product was defective,
which was not marketable and on
that account, the respondent –
company suffered losses. The
products were sold in the market,
which were returned back. No
communication has been referred
to, which was addressed by the
respondent – company to the
petitioner – company, pointing out
such defects. It was further sought
to be claimed that after giving credit
note of Rs.5,00,000/­ in May, 2008,
the petitioner – company agreed to
give rebate to the extent of 50% on
the total invoices on account of the
16

defective material. The calculations
were made in the following terms.

     Inv. No.162         Rs.8,55,370.65
     Inv. No.177         Rs.8,66,788.29
     Inv. No.216         Rs.9,07,891.19
     Inv. No.300         Rs.8,84,726.17
     Total :             Rs.35,14,776.3
                         0
     Less: Goods         Rs. 6,22,073.00
     returned

     Balance             Rs.28,92,703.3
                         0
     Less: 50%           Rs.14,46,351.3
     Rebate
                         0
     Balance payable     Rs.14,46,352.0
                         0
     Already paid        Rs.15,00,000.00
     Excess paid:        Rs.
                         53,648.00
                         ­­­­­­­­­­­­­­­­­­­­

9. From the aforesaid calculations, it is
evident that now the stand is that
the respondent­ company is to
recover a sum of Rs.53,648/­ from
the petitioner – company, whereas
in reply to the notice, the claim was
to the tune of Rs.11,07,297/­. It is
further relevant to add here that in
reply to the petition, the story that
settlement between the parties had
taken place in May, 2008 regarding
rebate on the invoice value is merely
17

an after thought just to defeat the
petition, as no such plea was taken
when reply to the statutory notice
was given in September, 2008.

10. In view of the aforesaid discussion, I
do not find that the defence raised
by the respondent – company is
reasonable as the debt cannot be
said to be disputed, which has not
been paid despite statutory notice
and even pendency of the present
petition in this court for a period of
about six years. Hence, the petition
deserves to be admitted. Ordered
accordingly.”

17. It could thus be seen, that the learned Company

Judge has found, that the defence taken by the appellant

with regard to the products of the respondent being

defective in quality was by way of an after­thought,

inasmuch as, no document was placed on record in support

of such contention. It was further found, that whereas in

reply to the notice the appellant had claimed, that it was

entitled to recover an amount of Rs.11,07,297/­, in the

calculations given in written statement, the amount is

Rs.53,648/­.

18

18. This finding of fact is affirmed by the Division

Bench of the High Court with following observations:

“7. The contention is not well­founded.

We see no reason to draw such an
inference. Indeed, the grant of
credit would also indicate that the
respondent fairly acknowledged the
defects when there were any and
that the rest of the consignment met
with the contractual specifications.
It is necessary, therefore, to examine
the other surrounding facts and
circumstances to judge the rival
contentions.

8. Firstly, when the appellant raised a
dispute about the quality and the
same was acknowledged by the
respondent it was reflected in its
conduct by the grant of credit. It is
reasonable to presume that if there
were any other defects and, in any
event, if the appellant’s case was
that the goods were defective, it
would have recorded the same in
some manner or the other. The
appellant, however, contends that
the discussions in this regard were
only oral. In the facts of this case it
is difficult to accept this contention.
The appellant’s case has varied
between its reply to the statutory
notice and its written statement.

The respondent served a
statutory notice dated 25.08.2008.

The appellant’s reply dated
19

10.09.2008 to the statutory notice
does not refer to an oral agreement
much less an agreement by the
respondent to pay the appellant
compensation for the alleged
defective goods. This belies the
defence now raised in the reply.

9. There is yet another fact which
clearly disentitles the appellant to
any credit in respect of the balance
goods. The appellant, admittedly,
retained the goods and, in fact, used
the goods, namely, synthetic yarn,
in the manufacture of its products,
such as blankets. Having done so,
the appellant cannot refuse to pay
for the same. If the goods were
defective, the appellant ought to
have rejected the same. Having
utilised the raw material supplied by
the respondent, it is now not even
possible for the appellant to return
the same to the respondent.

Moreover, the appellant
nowhere raised the contention that
its customer, who purchased the
final product, raised grievance
regarding the quality of the product.
Moreover, the appellant has not
furnished any details regarding its
transactions with its customers
involving the sale of goods
manufactured from the raw material
supplied by the respondent. There
is nothing to indicate that the
appellant suffered any damages on
20

account thereof or that the
appellant was not paid for the same.

10. In these circumstances, the learned
judge rightly rejected the appellant’s
contentions. In our opinion, there is
no bona fide dispute raised by the
appellant in respect of the
respondent’s claim.”

19. It is thus amply clear, that both the learned

Company Judge as well as the Division Bench upon

appreciation of the materials placed on record have found,

that the defence as sought to be raised by the appellant with

regard to the quality of the material supplied by the

respondent being defective was by way of an after­thought.

The Division Bench found, that when the appellant raised a

dispute about the quality, the same was acknowledged by

the respondent and it was reflected in its conduct by the

grant of credit. It observed, that the respondent had fairly

acknowledged the defects when there were any and it was

reasonable to presume, that if there were any other defects,

it would have recorded the same in some manner or the

other. The Division Bench further found, that it was
21

difficult to accept the case of the appellant, that the

discussions with regard to defective material were only oral.

It further found, that in the reply to the statutory notice

there were no mention at all with regard to oral agreement.

The Division Bench further found, that the contention of the

appellant, that the goods manufactured utilizing the

defective raw material supplied by the respondent being

returned by the dealers and thereby the appellant suffered

any damages, was also not supported by any document.

20. It was concurrently found, that the defence of the

appellant was not bona fide one nor a substantial one. On

facts, it was also found, that the appellant had taken

contradictory stand in order to defeat the claim of the

respondent. It was also concurrently found, that the

appellant had failed to adduce prima facie proof of facts

contented by it.

21. Insofar as the contention of the appellant, that

the appellant was an on­going Company running into profits

and that the claim of the respondent was not admitted by it,

is concerned, it is not a requirement in law. Reliance in this
22

respect could be placed on various judgments of this Court

including the one in the case of Vijay Industries (supra).

22. Insofar as the reliance placed by the learned

counsel for the appellant on the judgment of this Court in

the case of Mediquip Systems (P) Ltd. (supra) is concerned,

in the said case this Court came to a finding, that there was

a bona fide dispute concerning the claim of the appellant. It

was also found, that there was no clear cut finding by the

learned single judge, that a debt is prima facie due and

payable by the Company to the petitioning creditor. It was

further found, that the company court had no jurisdiction to

direct the company to deposit the amount payable to a third

party or to a party other than the petitioning creditor. As

such, on facts, the said judgment would not be applicable to

the facts of the present case.

23. In the case of Vijay Industries (supra) relied by

the appellant, the learned single judge after finding, that a

prima facie case has been made out, admitted the company

petition. However, in appeal, the Division Bench set aside
23

the order of the learned single judge. This Court while

setting aside the order of the Division Bench observed thus:

“41. In the present case, on the date of
filing of the application, dues in respect of
at least a part of the debt which was
more than the amount specified in
Section 433 [sic Section 434(1)(a)] of the
Companies Act was not denied. It is not a
requirement of the law that the entire
debt must be definite and certain. The
Division Bench of the High Court
proceeded on the basis that the entire
sum covering both the principal and the
interest must be undisputed, holding:

“Except making a bald allegation in
the company petition that the
petitioner had come to know that
the respondent Company owes large
sums of money to its creditors and it
is not in a position to meet its debt
obligations and as, therefore,
become commercially insolvent, the
petitioner has not taken necessary
care to prima facie establish the
same. The only piece of evidence
available on the side of the
petitioner is that the respondent is
indebted to the petitioner a sum
which is claimed towards interest on
the delayed payment. Assuming for
a moment that the respondent
Company is liable to pay interest on
the delayed payments and it has not
paid the said amount to the
24

petitioner, could it be said that the
respondent neglected to pay the
debt, particularly when the
respondent is disputing the liability
of payment of interest on the
delayed payments and when there is
no such written agreement in
between the parties for such
payment of interest.”

42. The Division Bench upon noticing the
facts of the matter formulated the
question “as to whether the respondent is
liable to pay interest at 2% per month on
delayed payments and when that is being
disputed would it constitute prima facie a
valid ground for admission of the
company petition?” It was held:

“… The petitioner seeks to rely upon
the invoices which according to him
contain at the foot a clause for
payment of interest on delayed
payments. Such a clause, even
assuming is there, since it has not
been placed by means of any cogent
evidence in this case, in view of the
judgment of the Rajasthan High
Court in Kitply Industries
case [(1998) 91 Comp Cas 715 (Raj)]
, cannot constitute an agreement
between the parties for payment of
interest. The legal position, thus,
seems to be obvious. Before seeking
a company to be wound up on the
ground that it is unable to pay its
debts, it must be shown before the
25

Court that the debt claimed against
the company is ascertained and
definite and that the company failed
to pay the same. Mere failure to pay
the amount would not constitute the
requisite ‘neglect to pay’ as
envisaged under clause (a) of sub­
section (1) of Section 434 of the Act
when the company bona fide
disputes the very liability and hence
the defence taken up by it is of
substance.”

It was furthermore held:

“Having regard to the facts and
circumstances of the instant case,
we are of the considered view that
the claim of the petitioner towards
interest on delayed payments since
not covered by any specific
agreement between the parties inter
se is a contentious issue and the
dispute as regards the payment of
interest is bona fide and it cannot,
therefore, legitimately be concluded
that the respondent has neglected to
pay. The petitioner, who pleaded
inter alia in his petition that as per
the trade practice payments made
shall be adjusted towards interest
first and balance, if any, shall be
adjusted towards principal later,
failed to establish the same by any
prima facie evidence. In the absence
of any such trade practice,
26

appropriating the amounts towards
interest first and the balance, if any
towards principal next becomes
inappropriate, in which event the
claim of the petitioner that the
respondent is liable to pay Rs
65,15,947 basing upon such
calculations cannot be accurate.
The total amount claimed by the
petitioner as due in that view of the
matter becomes doubtful and not
definite. It is still got to be
ascertained if the claim of the
respondent were to be considered
that there has been no agreement
for payment of interest on delayed
payments. For the above reasons, it
cannot be presumed prima facie
that the respondent is unable to pay
its debts.”

43. The findings of the High Court, with
respect, are not correct for more than one
reason; firstly, because the Division
Bench did not hold that the invoices were
not proved by cogent evidence; secondly,
question of leading evidence would arise
only after the company petition is
admitted and, thirdly, issuance of
invoices and signature of the respondent
thereon is not disputed.”
27

After observing the aforesaid, this Court further

held, that the appellant was also entitled to the payment of

interest.

24. It can thus clearly be seen, that this Court had

clearly held, that it is not necessary while admitting the

petition to establish that the entire claim is undisputed. We

fail to understand, as to how the said judgment of this

Court in Vijay Industries (supra) would be applicable to the

facts of the present case. As a matter of fact, in the said

case, this Court on consideration of the invoices had come

to a conclusion, that the appellant was also entitled for the

interest on delayed payment.

25. In the present case, the Division Bench has not

issued a direction to grant the interest as claimed by the

respondent. On the contrary, it has declined to enter into

the question, as to whether the appellant was also liable to

pay the interest since the learned company judge had not

referred to the said issue. The Division Bench therefore,

while dismissing the appeal, has done so without prejudice

to the respondent’s contention regarding interest which may
28

be claimed either by way of an application for clarification

before the learned judge or by way of an appeal or by any

other proceeding.

26. We find, that the judgment of this Court in the

case of IBA Health (India) Private Limited (supra) would

also not be applicable to the facts of the present case. In

the said case, it will be relevant to refer to the following

observations of this Court.

“29. On a detailed analysis of the
various terms and conditions
incorporated in the deed of settlement as
well as the compromise deed and the
averments made by the parties, we are of
the considered view that there is a bona
fide dispute with regard to the amount of
claim made by the respondent Company
in the company petition which is
substantial in nature. The Company
Court while exercising its powers under
Sections 433 and 434 of the Companies
Act, 1956 would not be in a position to
decide who was at fault in not complying
with the terms and conditions of the deed
of settlement and the compromise deed
which calls for detailed investigation of
facts and examination of evidence and
calls for interpretation of the various
terms and conditions of the deed of
settlement and the compromise entered
into between the parties.”
29

27. This Court held, that the company court while

exercising its powers under sections 433 and 434 of the

Companies Act would not be in a position to decide, as to

who was at fault in not complying with the terms and

conditions of the deed of settlement and the compromise

deed. It was found, that in the said case, a detailed

investigation of facts and examination of evidence and

interpretation of various terms and conditions of the deed of

settlement and the compromise entered into between the

parties was necessary in adjudicating the claim, which

could not be done in the proceedings under Section 434 of

the said Act. In the said case, it was also noticed, that the

claim was in respect of contingent debt and that the

disputes between the parties had been compromised in

terms of settlement deed.

28. Such is not the case here. On facts, the learned

Company Judge as well as the Division bench have found,

that the defence of the appellant could not be said to be

bona fide, in good faith and of substance.
30

29. We are therefore of the considered view, that

there is no merit in the appeal. The same is accordingly

dismissed. There shall be no order as to costs. Pending

applications, if any, shall stand disposed of.

…….……………………, J.

[R.F. NARIMAN]

…….……………………, J.

[B.R. GAVAI]

…….……………………, J.

[HRISHIKESH ROY]

NEW DELHI;

APRIL 06, 2021



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