Case Note & Summary
The case arose from a company petition filed under Sections 433 and 434 of the Companies Act, 1956 by Clicquot Asia Limited, a foreign manufacturer of wines and champagne, seeking winding up of Red Robin International Ltd., an Indian distributor. The dispute originated from an exclusive distributorship agreement dated 6.10.2001 between the parties' under which the petitioner supplied goods. An invoice dated 20.12.2001 for 236,751.33 Euros was raised by Clicquot Hongkong Limited, a wholly owned subsidiary, and the goods were received and accepted by the respondent. Part payments were made, and after a debit note, the balance outstanding was 220,273 Euros. A statutory notice dated 10.3.2003 was issued on behalf of both Clicquot Asia Limited and Clicquot Hongkong Limited, but no payment was made. Consequently, the petition was filed on 24.7.2003. The respondent did not dispute the supply of goods or the outstanding amount but raised two preliminary objections. First, it contended that the petition was not maintainable because the statutory notice was issued before the deed of assignment dated 1.4.2003, and thus the petitioner was not a creditor at the time of the notice. Second, it claimed a set-off for unliquidated damages arising from an alleged breach of the exclusive distributorship agreement, which had expired by efflux of time, arguing that the debt should be adjusted against compensation for loss of reputation and business. The court dealt with both contentions. On the first issue, it examined Section 434 and relied on Dawn Communications (P) Ltd. v. Rajasthan Petro Synthetics Ltd., holding that the section does not require the notice to be given by the petitioner who files the petition; it can be given by the creditor who assigned the debt. The notice having been issued on behalf of both entities, the objection was rejected. On the second issue, the court held that a claim for unliquidated damages must be proved and crystallised before it can be set off against an admitted debt. The respondent had not filed any suit and the claim was vague, hence the defence was not accepted. The judgment provided in the text ends abruptly without recording the final operative order, but the court's reasoning indicated that the winding up petition was maintainable and the objections were overruled.
Headnote
A) Company Law - Winding Up - Statutory Notice - Validity when issued by original creditor before assignment - Companies Act, 1956, Sections 434(1)(a), 439(1)(b) - The respondent argued that the statutory notice dated 10.3.2003 was invalid as the assignment deed was executed on 1.4.2003, and the petitioner was not a creditor at the time of notice. Following Dawn Communications (P) Ltd. v. Rajasthan Petro Synthetics Ltd., the court held that section 434 does not require the notice to be given by the petitioner who files the petition; it can be given by the creditor who has assigned the debt. The notice issued on behalf of both the original creditor and the petitioner was sufficient. Held, the objection was without force and the petition was maintainable. (Paras 9-12) B) Company Law - Winding Up - Defence of Set-Off - Unliquidated damages claim cannot defeat admitted debt - Companies Act, 1956, Sections 433, 434 - The respondent claimed a set-off for alleged breach of exclusive distributorship agreement, seeking adjustment of the admitted debt against unliquidated damages. The court held that a claim for compensation for damages must be proved and crystallised; until then, it cannot defeat an admitted debt in winding up proceedings. The court found the claim vague and not crystallised as no suit had been filed, and rejected this defence. Held, the admitted debt remained payable. (Para 8)
Issue of Consideration
Whether a company petition for winding up is maintainable when the statutory notice under section 434 was issued before the assignment of the debt to the petitioner, and whether an unproven claim for unliquidated damages can be set off against an admitted debt
Final Decision
Not mentioned in the provided text
Law Points
- Statutory notice under section 434 of Companies Act
- 1956 does not require that the notice be given by the petitioner who files the company petition
- it can be given by the creditor who has assigned the debt
- Claim of compensation for damages has to be proved and till then the amount cannot be treated as crystallised or payable
