Full Judgment Text
IN THE HIGH COURT OF DELHI AT NEW DELHI
CO.PET. 612 of 2012
PLD INTERNATIONAL PVT LTD ..... Petitioner
Through: Mr. Arun Kathpalia, Mr. Yoginder
Handoo, Mr. Angad Mehta and
Mr. Samaksh S. Goyal, Advocates
versus
REEBOK INDIA COMPANY ..... Respondent
Through: Mr. C. Mukund, Mr. Ravi Kumar and
Ms. Firdouse Qutb Wani, Advocates.
CORAM: JUSTICE S. MURALIDHAR
O R D E R
04.01.2013
1. By this petition under Section 433 of the Companies Act 1956 (‘Act’), the
Petitioner, PLD International Pvt. Ltd., seeks the winding up of the
Respondent M/s. Reebok India Company.
th
2. The case of the Petitioner is that in terms of an agreement dated 26
April, 2010 entered into between the parties, a copy of which agreement is
enclosed with this petition as Annexure P-2, the Petitioner gave on rent to
the Respondent the ground floor of the property at 422-425, Ghitorni
CP No.612 of 2012 Page 1 of 8
Market, Opposite Metro Pillar No.132, MG Road, New Delhi-110 030
(hereafter ‘rented premises’) on a monthly rent of Rs.4,25,000/- subject to
deduction of tax at source on applicable rate and payment of service tax,
st
with effect from 1 May, 2010. It is asserted by the Petitioner, which
assertion is disputed by the Respondent, that possession of the rented
st
premises was handed over by the Petitioner to the Respondent on 1 May,
2010. It is further stated that the Respondent defaulted in payment of the
st
rent from 1 May 2010 and finally some cheques were received in January,
2011 which did not clear the arrears. Even thereafter the Respondent
continued to be irregular in the payment of rent. It is stated that till
September 2011 as against the total outstanding rent of Rs.72,25,000/-
(exclusive of service tax), the Respondent had paid only Rs.49,72,500/-
(exclusive of TDS).
3. It is stated that since in the meanwhile this Court had, in a batch of
petitions to which the Respondent was a party, upheld the levy of the service
tax on rented property. Consequently service tax also was liable to be paid
th
by the Respondent. The Petitioner sent an e-mail to the Respondent on 26
September, 2011 demanding the outstanding rent and arrears of service tax
enclosing an account statement for the period from May 2010 till September
CP No.612 of 2012 Page 2 of 8
2011 with break ups for TDS, service tax, rent due, rent paid etc. The
service tax amount i.e. outstanding for this period was Rs.7,44,175/-
(without interest) calculated at Rs.43,775/- per month, while the outstanding
rent was Rs.15,30,000/-. It is stated that in December 2011 the Respondent
paid the service tax amount, without interest up to date. However, the arrears
of rent were not cleared.
st
4. On 1 March, 2012, the Petitioner received a letter from the Respondent
terminating the tenancy and stating that the vacant possession of the
st
premises would be handed over to the Petitioner on 31 May, 2012. The
th
Petitioner in response thereto sent a legal notice to the Respondent on 27
March, 2012 calling upon the Respondent to pay a sum of Rs.31,84,534/-. It
sent separately another notice on the same date regarding unpaid electricity
bills in the sum of Rs.60,580/-. With the Respondent continuing to not pay
nd
the sums and another notice was sent by the Petitioner on 2 May 2012
st
which quantified the outstanding amount as on 31 May 2012 at
Rs.42,90,904/-.
5. It is stated that apart from not making payment of arrears the Respondent
also did not hand over vacant possession of the rented premises to the
CP No.612 of 2012 Page 3 of 8
st th
Petitioner on 31 May, 2012. A reply dated 9 July, 2012 was received to
the Petitioner’s legal notice in which the Respondent claimed that
possession of the rented premises was handed over to it only in December
st
2010 and that it had been wrongly made to pay rent from 1 May 2010
onwards. It accordingly claimed the said sum from the Petitioner. According
th
to the Petitioner this was a false defence since in its e-mail dated 26 June,
2012 the Respondent had paid service tax for the period from May 2010
onwards.
6. In the petition it is averred that when the Petitioner’s representative met
the representative of the Respondent and the Respondent ‘orally’
acknowledged its liability to pay the admitted dues. However, since the
th
dues were not paid and the statutory notice dated 14 May, 2012 sent to the
Petitioner under Section 434 of the Act was also not replied to, the Petitioner
filed the present petition seeking the winding up of the Respondent.
7. This Court has heard the submissions of Mr. Arun Kathpalia, learned
counsel for the Petitioner and Mr. C. Mukund, learned counsel for the
Respondent.
CP No.612 of 2012 Page 4 of 8
8. In response to the query from the Court as to the availability of the
alternative remedy to the Petitioner in view of the arbitration clause in the
agreement, Mr. Kathpalia relied upon the decisions in Haryana Telecom
Ltd. v. Sterlite Industries (India) Ltd., AIR 1999 SC 2354 and Prime
Century City Developments Pvt. Ltd. v. Ansal Buildwell Limited, 102
(2003) DLT 445 to contend that where the defence by the Respondent is
“palpably false” and “dishonest”, the petition for winding up should be
admitted.
9. The Court drew the attention of Mr. Kathpalia to the fact that although the
lease was for a period of three years the agreement was not registered. Mr.
Kathpalia responded by stating that the tenancy was not denied and even
otherwise it could be proved irrespective of the agreement. In response to
query whether there is any document to show that in fact possession of the
st
vacant premises was handed over on 1 May, 2010 and not December, 2010
th
as contended by the Respondent in its reply dated 9 July, 2012 to the
th
Petitioner’s legal notice dated 14 May, 2012, Mr. Kathpalia submitted that
correspondence exchanged between the parties and the payments made by
the Respondent of service tax in December 2011 itself acknowledged that
rent became payable from May 2010. His submission was that if in fact
CP No.612 of 2012 Page 5 of 8
possession had not been handed over in May 2010 itself the Respondent
ought to have raised such an objection when called upon to pay the service
tax. He submitted that service tax for the period from May 2010 was paid
without demur by the Respondent and this itself demonstrated the defence
now taken was sham.
10. In the absence of any document showing that in fact possession of the
premises were handed over to the Respondent in May, 2010 and in light of
the stand taken by the Respondent that possession was handed over to it only
in December 2010, the said issue raises a disputed question of fact which
cannot be decided without evidence led by the parties. In the circumstances
this Court is unable to come to the conclusion at this stage that the defence
of the Respondent is sham, false or mala fide. If indeed there is an
arbitration agreement between the parties there is no reason as to why it
cannot avail of that remedy and must necessarily seek the remedy of
winding up.
11. In Prime Century City Developments Pvt. Ltd. the Court passed a
common judgment in two petitions. In the first petition the Court was
satisfied that a substantial defence had been raised which was not possible to
CP No.612 of 2012 Page 6 of 8
be viewed “as moonshine or as lacking bona fides.” It was observed that the
said defence “can be properly adjudicated upon in regular and not summary
proceedings”. In the circumstances it was held that “it would be
inappropriate to entertain this petition; the parties must seek their remedies
in arbitration to which they have expressly agreed”. It was categorically
held “once a bona fide defence is shown to exists, arbitration can be
efficacious and proper remedy; where the defence is mala fide and
moonshine, arbitrable disputes would not exist in actuality”. However, in the
facts of the second case which was also decided by the same judgment the
Court was satisfied that the defence of the Respondent was dishonest and
accordingly admitted the petition for winding up.
12. In the present case this Court is not satisfied at this stage, on the basis of
the documents placed on record by the Petitioner that the defence of the
Respondent is moonshine or false. The Court recalls the observation in
NEPC India Ltd. v. Indian Airlines Ltd. (2003) 2 Comp. LJ 122 to the
effect that “the machinery of winding up should not be allowed to be utilised
merely as a means of realizing its debts.”
13. Accordingly, this Court declines to entertain the present petition and
CP No.612 of 2012 Page 7 of 8
dismisses it as such. It would be, however, open to the Petitioner to seek
other appropriate remedies that may be available to it in accordance with
law.
S. MURALIDHAR, J
JANUARY 04, 2013
mm
CP No.612 of 2012 Page 8 of 8
CO.PET. 612 of 2012
PLD INTERNATIONAL PVT LTD ..... Petitioner
Through: Mr. Arun Kathpalia, Mr. Yoginder
Handoo, Mr. Angad Mehta and
Mr. Samaksh S. Goyal, Advocates
versus
REEBOK INDIA COMPANY ..... Respondent
Through: Mr. C. Mukund, Mr. Ravi Kumar and
Ms. Firdouse Qutb Wani, Advocates.
CORAM: JUSTICE S. MURALIDHAR
O R D E R
04.01.2013
1. By this petition under Section 433 of the Companies Act 1956 (‘Act’), the
Petitioner, PLD International Pvt. Ltd., seeks the winding up of the
Respondent M/s. Reebok India Company.
th
2. The case of the Petitioner is that in terms of an agreement dated 26
April, 2010 entered into between the parties, a copy of which agreement is
enclosed with this petition as Annexure P-2, the Petitioner gave on rent to
the Respondent the ground floor of the property at 422-425, Ghitorni
CP No.612 of 2012 Page 1 of 8
Market, Opposite Metro Pillar No.132, MG Road, New Delhi-110 030
(hereafter ‘rented premises’) on a monthly rent of Rs.4,25,000/- subject to
deduction of tax at source on applicable rate and payment of service tax,
st
with effect from 1 May, 2010. It is asserted by the Petitioner, which
assertion is disputed by the Respondent, that possession of the rented
st
premises was handed over by the Petitioner to the Respondent on 1 May,
2010. It is further stated that the Respondent defaulted in payment of the
st
rent from 1 May 2010 and finally some cheques were received in January,
2011 which did not clear the arrears. Even thereafter the Respondent
continued to be irregular in the payment of rent. It is stated that till
September 2011 as against the total outstanding rent of Rs.72,25,000/-
(exclusive of service tax), the Respondent had paid only Rs.49,72,500/-
(exclusive of TDS).
3. It is stated that since in the meanwhile this Court had, in a batch of
petitions to which the Respondent was a party, upheld the levy of the service
tax on rented property. Consequently service tax also was liable to be paid
th
by the Respondent. The Petitioner sent an e-mail to the Respondent on 26
September, 2011 demanding the outstanding rent and arrears of service tax
enclosing an account statement for the period from May 2010 till September
CP No.612 of 2012 Page 2 of 8
2011 with break ups for TDS, service tax, rent due, rent paid etc. The
service tax amount i.e. outstanding for this period was Rs.7,44,175/-
(without interest) calculated at Rs.43,775/- per month, while the outstanding
rent was Rs.15,30,000/-. It is stated that in December 2011 the Respondent
paid the service tax amount, without interest up to date. However, the arrears
of rent were not cleared.
st
4. On 1 March, 2012, the Petitioner received a letter from the Respondent
terminating the tenancy and stating that the vacant possession of the
st
premises would be handed over to the Petitioner on 31 May, 2012. The
th
Petitioner in response thereto sent a legal notice to the Respondent on 27
March, 2012 calling upon the Respondent to pay a sum of Rs.31,84,534/-. It
sent separately another notice on the same date regarding unpaid electricity
bills in the sum of Rs.60,580/-. With the Respondent continuing to not pay
nd
the sums and another notice was sent by the Petitioner on 2 May 2012
st
which quantified the outstanding amount as on 31 May 2012 at
Rs.42,90,904/-.
5. It is stated that apart from not making payment of arrears the Respondent
also did not hand over vacant possession of the rented premises to the
CP No.612 of 2012 Page 3 of 8
st th
Petitioner on 31 May, 2012. A reply dated 9 July, 2012 was received to
the Petitioner’s legal notice in which the Respondent claimed that
possession of the rented premises was handed over to it only in December
st
2010 and that it had been wrongly made to pay rent from 1 May 2010
onwards. It accordingly claimed the said sum from the Petitioner. According
th
to the Petitioner this was a false defence since in its e-mail dated 26 June,
2012 the Respondent had paid service tax for the period from May 2010
onwards.
6. In the petition it is averred that when the Petitioner’s representative met
the representative of the Respondent and the Respondent ‘orally’
acknowledged its liability to pay the admitted dues. However, since the
th
dues were not paid and the statutory notice dated 14 May, 2012 sent to the
Petitioner under Section 434 of the Act was also not replied to, the Petitioner
filed the present petition seeking the winding up of the Respondent.
7. This Court has heard the submissions of Mr. Arun Kathpalia, learned
counsel for the Petitioner and Mr. C. Mukund, learned counsel for the
Respondent.
CP No.612 of 2012 Page 4 of 8
8. In response to the query from the Court as to the availability of the
alternative remedy to the Petitioner in view of the arbitration clause in the
agreement, Mr. Kathpalia relied upon the decisions in Haryana Telecom
Ltd. v. Sterlite Industries (India) Ltd., AIR 1999 SC 2354 and Prime
Century City Developments Pvt. Ltd. v. Ansal Buildwell Limited, 102
(2003) DLT 445 to contend that where the defence by the Respondent is
“palpably false” and “dishonest”, the petition for winding up should be
admitted.
9. The Court drew the attention of Mr. Kathpalia to the fact that although the
lease was for a period of three years the agreement was not registered. Mr.
Kathpalia responded by stating that the tenancy was not denied and even
otherwise it could be proved irrespective of the agreement. In response to
query whether there is any document to show that in fact possession of the
st
vacant premises was handed over on 1 May, 2010 and not December, 2010
th
as contended by the Respondent in its reply dated 9 July, 2012 to the
th
Petitioner’s legal notice dated 14 May, 2012, Mr. Kathpalia submitted that
correspondence exchanged between the parties and the payments made by
the Respondent of service tax in December 2011 itself acknowledged that
rent became payable from May 2010. His submission was that if in fact
CP No.612 of 2012 Page 5 of 8
possession had not been handed over in May 2010 itself the Respondent
ought to have raised such an objection when called upon to pay the service
tax. He submitted that service tax for the period from May 2010 was paid
without demur by the Respondent and this itself demonstrated the defence
now taken was sham.
10. In the absence of any document showing that in fact possession of the
premises were handed over to the Respondent in May, 2010 and in light of
the stand taken by the Respondent that possession was handed over to it only
in December 2010, the said issue raises a disputed question of fact which
cannot be decided without evidence led by the parties. In the circumstances
this Court is unable to come to the conclusion at this stage that the defence
of the Respondent is sham, false or mala fide. If indeed there is an
arbitration agreement between the parties there is no reason as to why it
cannot avail of that remedy and must necessarily seek the remedy of
winding up.
11. In Prime Century City Developments Pvt. Ltd. the Court passed a
common judgment in two petitions. In the first petition the Court was
satisfied that a substantial defence had been raised which was not possible to
CP No.612 of 2012 Page 6 of 8
be viewed “as moonshine or as lacking bona fides.” It was observed that the
said defence “can be properly adjudicated upon in regular and not summary
proceedings”. In the circumstances it was held that “it would be
inappropriate to entertain this petition; the parties must seek their remedies
in arbitration to which they have expressly agreed”. It was categorically
held “once a bona fide defence is shown to exists, arbitration can be
efficacious and proper remedy; where the defence is mala fide and
moonshine, arbitrable disputes would not exist in actuality”. However, in the
facts of the second case which was also decided by the same judgment the
Court was satisfied that the defence of the Respondent was dishonest and
accordingly admitted the petition for winding up.
12. In the present case this Court is not satisfied at this stage, on the basis of
the documents placed on record by the Petitioner that the defence of the
Respondent is moonshine or false. The Court recalls the observation in
NEPC India Ltd. v. Indian Airlines Ltd. (2003) 2 Comp. LJ 122 to the
effect that “the machinery of winding up should not be allowed to be utilised
merely as a means of realizing its debts.”
13. Accordingly, this Court declines to entertain the present petition and
CP No.612 of 2012 Page 7 of 8
dismisses it as such. It would be, however, open to the Petitioner to seek
other appropriate remedies that may be available to it in accordance with
law.
S. MURALIDHAR, J
JANUARY 04, 2013
mm
CP No.612 of 2012 Page 8 of 8