CP/215/2013 of Dr. M. Sanjeeva Rao, Vs M/s. Leo Meridian Infrastructure Projects AND Hotels Ltd, on 31 December 2013

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD(Original Jurisdiction)

TUESDY, THE THIRTY FIRST DAY OF DECEMBERTWO THOUSAND AND THIRTEENPRESENT

THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR

COMPANY PETITION No.215 of 2013

Between

Dr. M. Sanjeeva Rao.

AND

…PETITIONER

M/s. Leo Meridian Infrastructure Projects & Hotels Ltd, Hyderabad.

…RESPONDENT

Counsel for the Petitioner: MR. SAMA SANDEEP REDDY

Counsel for the Respondent: MR. SRINIVASA RAO BODDULURI

The Court made the following:ORDER:

This company petition is filed under Section 433(e) of the CompaniesAct, 1956 (for short ‘the Act’) seeking winding up of the respondentcompany.

2. The allegations in the company petition are that the petitioner is aformer employee of the respondent company. It is stated that the petitionerhad previously worked with Nagarjuna Construction Company as JointGeneral Manager – Human Resources and was drawing a salary of Rs.16Lakhs per annum. It is further stated that on 03.05.2010, he was interviewed by the Managing Director of the respondent company and was selected forthe post of Vice President-Human Resources and that on mutualnegotiations, the respondent company agreed to pay a salary ofRs.9,50,000/- per annum divided into 12 monthly installments of Rs.79,167/-and Rs.8 Lakhs per annum as Cost-to-Company (CTC) divided into fourquarterly installments of Rs.2 Lakhs each. A Letter, Annexure-P3, dated09.06.2010 is stated to have been issued to the petitioner by the CMD of therespondent company confirming that besides regular salary, petitioner wouldbe paid Rs.8 Lakhs CTC per annum, as above. Annexure P4, dated10.06.2010, is the order of appointment containing the terms and conditionswherein it is mentioned that the petitioner will be paid monthly gross salary ofRs.79,167/- subject to statutory deductions as per law.

3. Petitioner states that he, accordingly, joined the respondent companyand worked in the said post from 10.06.2011. Petitioner claims that onaccount of his hard work and responsibility discharged towards IntegratedManagement Systems, he was given a further position as ManagementRepresentative for Implementation and Certification Process of internalmanagement systems under letter of the respondent company dated01.09.2010. While the petitioner claims that he received the monthly grosssalary, the CTC promised to him was not paid by the respondent companyand it is stated that on account of the petitioner’s work three ISO certificateswere awarded to the respondent company. But since the CTC was not paid, the petitioner resigned under Annexure-P9 dated 16.06.2011, citing healthgrounds and requested settlements of accounts. The said letter wasfollowed by petitioner’s further letter dated 08.10.2011, Annexure –P10,stating that the petitioner was relieved from service on 24.06.2011 andrequested for settlement of salary and settlement of accounts.

4. It is further alleged that since there was no response from therespondent company, petitioner sent a legal notice under Section 434 of theAct, Annexure-P11, dated 17.12.2011 specifically alleging that CTC having remained unpaid, the respondent company has not responded to any of thedemands and hence, the entire amount with interest at 24% per annum wasdemanded. The said notice was replied to by the respondent company underreply notice, Annexure-P12, dated 09.01.2012 denying that any additionalremuneration than the gross salary was ever agreed to be paid to thepetitioner.

The respondent company, therefore, denied that any CTC of Rs.8 Lakhs or any amount towards petrol charges is payable and that sincethe petitioner was paid till he worked i.e. 24.06.2011, no amount is said to bedue and payable. In view of the said reply, this company petition is filed.

5. The respondent filed a counter reiterating that the respondent companynever agreed to pay Rs.8 Lakhs towards CTC and their letter dated09.06.2010, Annexure-P3, is stated to be fabricated, taking advantage of therole of the petitioner in the Human Resource Department. The respondentcompany also denied that there is any default in payment of salary due to thepetitioner and asserted that no additional CTC or emoluments were promisedto the petitioner. It was also stated in para 14 of the counter that the allegationthat the respondent company was unable to pay debts was incorrect and infact, the respondent is a growing concern and hence, winding up petition wasopposed.

6. Petitioner filed a reply reiterating that he was getting Rs.16,88,000/- perannum in Nagarjuna Construction Company where he was earlier workingbefore joining the respondent company.

The documents in support of the same was filed as Annexure-P13 and itwas contended that it was incomprehensible that petitioner would work in therespondent company at half the salary than what he was getting from theprevious employer.

7. This company petition has been heard at the stage of admission withthe consent of both the learned counsel.

8. Learned counsel for the petitioner placed strong reliance upon thecircumstance that the petitioner was getting more than Rs.16 Lakhs in the previous employment and in normal course, would neverhave agreed to join the respondent company at only Rs.9,50,000/- perannum. The other circumstance relied upon by the learned counsel is theletter Annexure-P3 dated 09.06.2010 signed by the CMD under his rubberstamp wherein the CTC was promised to the petitioner to the tune of Rs.8Lakhs. Learned counsel, therefore, submits that though in the appointmentorder Annexure-P4 dated 10.06.2010 gross monthly salary of Rs.79,167/- ismentioned, the same is explained on the ground that other persons in the managementneed not know the actual amount receivable by the petitioner, as per thedesire of the management of the respondent company. Learned counsel,therefore, submits that this properly explains non-mentioning of Rs.8 LakhsCTC in the order of appointment and the said claim of the petitioner issupported by Annexure-P3.

9. Learned counsel also submits on the basis of the decision of theSupreme Court in IBA HEALTH (I) PVT. LTD. v. INFO-DRIVE SYSTEMS

[1]SDN. BHD.(paras 21 and 22) that once the liability to pay is established,prima facie, the financial position of the company does not stand alone as adefence in a winding up petition. A decision of this Court in P.L. SHIPPING &

[2]LOGISTICS PRIVATE LTD. v. A.GA. PUBLICATION LTD.whichfollowed the aforesaid decision of the Supreme Court, is relied upon,particularly, paras 32 and 33 thereof. Another decision of this Court in B.S.DEMOGRAY v. VIF AIRWAYS LTD.[[3]]is relied upon in support of theproposition that an employee, whose dues are not settled by the company,would also stand in the shoes of a creditor and would be entitled to presentand prosecute a petition for winding up under Section 433(e) of the Act as debt includes a claim of the employee against the employer. A DivisionBench judgment of this Court in M. SURYANARAYANA v. STILES INDIA

[4]LIMITEDis also relied upon to substantiate that salary dues recoverablefrom the respondent company is a debt for which a petition for winding up ismaintainable.

10. Respondent counsel, on the other hand, submits that a demand forCTC of Rs.8 Lakhs made by the petitioner is clearly an after thoughtinasmuch as the letter of resignation, Annexure-P9, did not make any suchclaim. The second letter, Annexure-P10, dated 08.10.2011 also does notspecifically refer to the CTC of Rs.8 Lakhs and as such, for the first time, inthe legal notice, Annexure-P11, dated 17.12.2011 when the petitioner madesuch a claim, the same was emphatically denied in the reply notice,Annexure-P12 dated 09.01.2012. Learned counsel, therefore, submits thatthe very basis of the claim of the petitioner having not established, it cannotbe said that the petitioner is a debtor so far as the respondent company isconcerned. Consequently, the presentation and prosecution of this windingup petition is only pressure tactics adopted by the petitioner. Reliance is alsoplaced upon by the learned counsel on a decision of the Supreme Court inMEDIQUIP SYSTEMS (P) LTD. v. PROXIMA MEDICAL SYSTEM

GMBH[[5]]for the proposition that for exercising discretion under Section433(e) of the Act, the petitioner must establish that there is a debt due andthat the company is unable to pay the same and that the machinery forwinding up will not allowed to be used merely as a means for realizing thedebts due from the company though the debt is bonafide disputed and thedefence is substantial.

11. In the facts and circumstances of the case, therefore, it has to beconsidered whether the petitioner has, prima facie, established the debt andif so, whether the said debt is disputed bonafide by the respondent company.

12. The petitioner’s employment with the respondent companycommences with the letter of appointment, Annexure-P4, dated 10.06.2010,which contains various terms and conditions including the remunerationpayable to the petitioner, which is Rs.79,167/- monthly gross salary. There isno controversy with regard to the payment of the said amount and no debt isclaimed with regard to the said remuneration. Petitioner’s claim for CTC ofRs.8 Lakhs, however, arises with reference to letter, allegedly, issued by theCMD on 09.06.2010, Annexure-P3, which is a day earlier to the letter ofappointment issued to the petitioner. There is no material to substantiate thesaid claim of the petitioner on the basis of Annexure-P3 and the letter ofresignation of the petitioner, Annexure-P9, dated 16.06.2011 does not refer toany pending claim except generally requesting for settlement of account.Thereafter, there is no correspondence between the parties for over twomonths till the petitioner sent further letter, Annexure-P10, dated 08.10.2011wherein also there is a general reference in para 11 of the letter but nospecific claim for CTC of Rs.8 Lakhs and assuming that the petitioner madea claim for the said CTC under Annexure-P10 dated 08.10.2011, that wouldbe almost four months after his relief from the respondent company as perhis resignation letter dated 16.06.2011. Thus, the petitioner having workedwith the respondent company from 10.06.2010 up to 24.06.2011 i.e. over ayear’s time, there is no correspondence where he demanded disbursementof said CTC in quarterly installments of Rs.2 Lakhs each, as alleged in thepetition.

13. On the facts and examining the averments in the company petitionfrom the point of view of, prima facie, establishment of debt required for thepurpose of maintaining this winding up petition, I am unable to find any material in support of the petition.

14. Though an employee’s unpaid salary falls within the definition of debt,on the basis of material produced by the petitioner, I am unable to find anymaterial to substantiate the petitioner’s claim with respect to the said CTC of Rs.8 Lakhs. The ratio of the decision of the Supreme Court in IBA HEALTH(I) PVT. LTD.’s case (1supra) would not assist the petitioner inasmuch asexistence of a debt itself is not established to the satisfaction of the Court.Moreover, a specific claim made by the petitioner in that respect in thestatutory notice under Section 434 of the Act in Annexure-P11 was denied bythe respondent company in their reply notice dated 09.01.2012. Though theclaim of the petitioner is squarely based upon the letter of CMD dated09.06.2010, Annexure-P3, since the said letter is seriously disputed by therespondent, it cannot be taken into consideration for the purpose of arriving at aconclusion of a debt in favour of the petitioner.

15. Learned counsel for the respondent, during the hearing, also filedannual report of the respondent company, which contains balance sheet ason 31.03.2013. The current and non-current assets therein show substantialassets of about Rs.11,902,987,698/- and the profit after tax is shown to beRs.72,54,95,862/-.

16. Keeping in view the financial position of the respondent company, itwould be highly unjust to direct winding up of the respondent company whenthe petitioner has, prima facie, failed to establish the debt claimed.

` The company petition is accordingly dismissed at the stage ofadmission. However, petitioner is at liberty to approach the competent civilCourt and establish the debt, as claimed by him. It is also made clear thatthe observations made hereinabove are only for the purpose of and from thestand point of considering the maintainability of the company petition underSection 433(e) of the Act and the civil Court shall not be influenced by any ofthe said observations while entertaining the petition, if any, filed by thepetitioner. As a sequel, the miscellaneous applications, if any, shall standdisposed of as infructuous. However, there shall be no order as to costs.

December 31, 2013DSK

[1](2010) 10 SCC 553

[2](2012) 173 CompCas 55 (AP)

[3](1998) 94 CompCas 291 (AP)

[4](2003) 116 CompCas 448 (AP)

[5](2005) 7 SCC 42

_____________________

VILAS V. AFZULPURKAR, J