Wacker Metroark Chemicals Pvt. Ltd. v. McCoy Silicones Ltd.

1. This appeal arises out of order dated 17th May, 2012, whereby the petition filed by the appellant/petitioner under Section 434 and 439 of the Companies Act has been dismissed, with liberty to the appellant to file a recovery proceedings in accordance with law.

2. Learned senior counsel for the appellant has submitted that the respondent-Company has admitted in its books of accounts that a sum of Rs.31,52,563.42 is due and payable to the appellant. Learned senior counsel for the appellant further submits that this is an unequivocal admission of debt and since the said amount has not been paid, the presumption is that the respondent-company is unable to pay its debts. 2013:DHC:2359

3. Learned counsel for the respondent on the other hand submits that the said sum of Rs. 31,52,563.42 is not an admitted liability and the said figure was mentioned in the statement of account, which was sent to the appellant for the purposes of reconciliation and as part of an overall discussions between the respondent-Company on one side and the appellant and appellant’s holding Company on the other side. Learned counsel for the respondent submits that the holding company of the appellant is liable to pay monies in excess of Rs.[8] crores to the respondent and as discussions were taking place between the parties for an overall settlement of all disputes between them, the statement of account of the respondent was sent.

4. Learned counsel for the respondent points out the email dated 19th February, 2012, wherein it was explained that by sending of the said statement of account, there was no admission of any sort of any liability and that parties had met for resolving all outstanding issues and that the settlement discussions were on without prejudice basis and without admission of any liability by any side.

5. Learned counsel for the respondent also pointed out to the reply dated 20th March, 2012, sent on behalf of the respondent Company to contend that a bonafide dispute had been raised, wherein it was clearly mentioned that the appellant and its holding Company were liable to pay huge sums of monies in excess of Rs.[8] crores to the respondent.

6. Learned counsel for the respondent pointed out to letter dated 5th January, 2004, issued by the appellant to show that since the respondent was having business dealings both with the appellant and the holding Company of the appellant, the doctrine of single economic entity would come into play and as such they should be treated as one entity and accordignly the respondent was entitled to refuse to pay to the appellant in view of its claim against the holding Company of the appellant.

7. We have examined the aforesaid pleas and find substance in the defence to the appeal raised by learned counsel for the respondent. The respondent really never admitted the liability in pursuance to the notice issued under Section 434 (1) (a) of the Companies Act, 1956. No doubt, there were endeavours made earlier for settlement of account inter se the parties and though there was some difference of amount, it was found that in the inter se account a sum of Rs.31,52,563.42 would be payable by the respondent to the appellant. However, simultaneously the respondent was also wanting settlement of accounts with the holding company to work out the net figures, which is what resulted in the break down of the settlement. Thus, a bona fide dispute has been raised vide reply dated 20th March, 2012.

8. We find merit in the plea of the respondent based on the doctrine of single economic entity in view of the amounts allegedly outstanding from the holding company to the respondent. Learned counsel for the appellant did raise the plea of the claims being barred by time but that would be an aspect to be examined in civil proceedings.

9. The triangular relationship including with the holding company is not a figment of imagination of the respondent, as is apparent from the letter dated 5th of January, 2004, sent by the appellant to the respondent, where it was stated as under:- “It is the mutual understanding that the company purchases the products on its own account either from WMC or Wacker Chemie GmbH. McCoy sells this products under its own name and on its own account in India. McCoy will maintain adequate stock of the products and store the products according to the relevant security regulations.”

10. Learned Company Court vide the impugned order has held that the defence raised by the respondent-Company needed to be examined, which the Company Court exercising summary jurisdiction could not do so. The learned Company Court has relied on a judgment of the Hon’ble Supreme Court in Ms. IBA Health (I) P. Ltd. Vs. M/s. Info- Drive Systems SDN.BHD.(2010) 10 SCC 553, in which it is held as under:- "the Company Court is expected to ascertain that the Company’s refusal is supported by a reasonable cause or a bonafide dispute in which the dispute can only be adjudicated by a trial in a civil court.

11. We are in agreement with the finding of the learned Single Judge that the defence raised is reasonable and bonafide and needs to be examined, which could only be done by a civil court, for which liberty has already been granted to the appellant to file a recovery proceedings in accordance with law.

12. We find no infirmity in the impugned order. Appeal is accordingly dismissed with no orders as to costs.

SANJEEV SACHDEVA, J. MAY 07, 2013 SANJAY KISHAN KAUL, J. n