THE PRADESHIYA INDUSTRIAL & INVESTMENT CORPORATION OF UTTAR PRADESH versus NORTH INDIA PETRO CHEMICAL LTD. AND ANR.

Citation: [1994] 1 S.C.R. 815 · Decided: 09-02-1994 · Supreme Court of India · Bench: M.N. VENKATACHALIAH, S. MOHAN

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

THE PRADESHIYA INDUSTRIAL & INVESTMENT 
A 
CORPORATION OF UTTAR PRADESH 
v. 
NORTH INDIA PETRO CHEMICAL LTD. AND ANR. 
FEBRUARY 9, 1994 
B 
(M.N. VENKATACHALIAH, CJ., ANDS. MOHAN, J.) 
Companies Act, 1956: Sections 433, 434 and 439--Petition for winding 
,. 
j. 
up-When Company unable to pay its debts-Debt must be detennined or a 
definite sum, not a disputed or doubtful amount-Promoters agreement c 
entered into between State owned Corporation and a Company for promoting 
another company-Promoters agreement cancelled subsequently-Claim filed 
before Arbitrator a/so-Maintainability of winding up petition-Held: Defence 
raised was substantial-No creditor-debtor relationship-Financial position of 
Corporation sound-Hence winding up petition not maintainable. 
D 
The appellant corporation had a collaboration/promoters agreement 
> 
with Respondent No. 2 for manufacture of certain items. This was super-
seded by a Shareholders Agreement or Promoters Agreement. The first 
Respondent Company came to be incorporated in 1985 under the Com-
panies Act, 1956, as agreed to in the collaboration agreement. 
E 
Differences arose between the second respondent and the appellant. 
The second respondent got the disputes referred to arbitration as per 
clause 27 of the Promoters agreement of 1988 and nominated its ar-
bitrator. Appellant also nominated its arbitrator. Both the arbitrators 
~ 
appointed a Chairman for the arbitration. Thereafter the first respondent F 
issued a notice under section 434 of the Companies Act, to the appellant, 
stating that an amount of Rs. 140.33 lakhs had been spent in the Project 
and an amount of Rs. 72.50 lakhs was payable by the appellant under the 
terms of the promoters agreement. The appellant replied denying its 
liability to pay the said amount and stated that since the disputes raised G 
by the second respondent had already been referred to arbitration, 
Respondent No. 1 was not entitled to take any action . 
...,.__..._ 
Respondent No. 1 filed a winding up petition under Sections 433, 434 
and 439 of the Companies Act, before the High Court. It was alleged in the 
petition that the sum of Rs. 72.50 lakhs was a debt payable by the appellant H 
815 
816 
SUPREME COURT REPORTS 
[1994] 1 S.C.R. 
A 
to the first respondent on the basis of the promoters agreement between 
the appellant and the second respondent for promoting the first respon-
dent-Company. It was also alleged that there was a breach of promoters 
agreement for failure to pay the dues on account of share capital and the 
expenses of exploratory work, and therefore, the appellant was a creditor. 
B 
c 
D 
E 
The appellant denied the liability to pay the amount on various 
grounds viz. that the amount in question was one of the claims in the 
statement of claims before the arbitrators; that the promoters agreement 
stood cancelled; and that the claim itself was doubtful and the matter 
required adjudication. Therefore the appellant claimed that the Respon-
dent No. 1 was not a creditor. The preliminary objections were overruled 
by a Single Judge of the High Court, who took the view that a prima facie 
case has been made out. An appeal was preferred to the Division Bench 
and it dismissed the appeal. Hence this appeal by special leave. 
Allowing the appeals, this Court 
HELD: 1.1. The basis of the claim of the first respondent for Rs. 
72.50 lakhs is the promoters agreement dated 1.7.88. This agreement has 
been cancelled by the appellant by notice dated 31st October, 1992. Though 
the Single Judge referred to this aspect he had not pursued it further. He 
has not considered as to what would be the consequence. Unfortunately, 
the Division Bench has overlooked this aspect. [825-B, CJ 
1.2. The first respondent is not a creditor. The appellant is not a 
debtor because it is a financial institution which has agreed to subscribe 
to the share capital. Neither the Single Judge nor the Division Bench 
F 
decided this important question whether there is a debt and the Company 
has either neglected or is unable to pay it. [825-E, F] 
1.3. The claim made in the winding up petition is the subject matter 
of arbitration wbich is pending adjudication. Therefore, there is no 
G definiteness about it. There is no prima f acie dispute as to the debt. [825-F] 
1.4. The defence raised is a substantial one and not mere moon-shin. 
It is difficult to appreciate the reasoning of the Single Judge when be holds 
that there are arguable issues and, therefo

Excerpt shown. Read the full judgment & AI analysis in Lexace.