Section 433 of the Companies Act, 1956

HIGH COURT OF BOMBAY ICICI Lombard Gen. Insurance Co. v . AFL (P.) Ltd. Dr. D. Y. Chandrachud J. C. P. NO. 146 of 2006 March 14, 2007 Section 433 of the Companies Act, 1956 read with sections 8 and 9 of Carriers Act, 1865 - Winding up - Circumstances in which a company may be wound up - A consignment was transported through respondent - company by ‘H’ Ltd. - Goods were insured by ‘H’ Ltd. with petitioner - ‘H’ Ltd. lodged claim with petitioner on account of loss suffered by consignor - Respondent had issued certificate of damage/ shortage/non-delivery - ‘H’ made claim with petitioner which was duly paid - By declaration executed by ‘H’ Ltd. in favour of petitioner, petitioner was subrogated to rights and remedies of insured under insurance policy - Thereupon, petitioner issued notice under sections 433 and 434 calling upon respondent to make payment of outstanding dues - Eventually petition for winding up was instituted - Respondent resisted petition on ground that right of petitioner to recover loss or damages allegedly on account of negligence of company could only be proved in civil suit and, thus, winding up petition was not maintainable - Whether unless negligence of carrier stands established in accordance with provisions of sections 8 and 9 of Carriers Act, 1865, there is no occasion for a debt being due, for there is no ascertained liability - Held, yes - Whether question as to whether or not negligence has been established is a matter which necessitates adjudication on basis of evidence recorded at trial of civil suit - Held, yes - Whether, therefore, respondent rightly contended that petition for winding up in circumstances of case was not maintainable - Held, yes FACTS A consignment was transported through the respondent-company by ‘H’ Ltd. under three lorry receipts. The goods were insured by ‘H’ Ltd. with the petitioner; an insurance company ‘H’ Ltd. lodged a claim for Rs. 1,75,000 with the petitioner on account of loss suffered by the consignor. The respondent had issued a certificate of damage/shortage/non-delivery. ‘H’ Ltd. made a claim of Rs. 1.70 lakhs with the petitioner under the insurance cover provided by the petitioner. The claim was paid by the petitioner. By a declaration executed by ‘H’ Ltd. in favour of the petitioner, the petitioner was subrogated to the rights and remedies of the insured under the policy of insurance. Thereupon, the petitioner issued a statutory notice under sections 433 and 434 calling upon the respondent to make payment of the outstanding dues of Rs. 1.70 lakhs. Eventually, a petition for winding up was instituted. The maintainability of the company petition had been called in question on the ground that the claim of the petitioner was to recover a loss or damage sustained allegedly on account of the negligence of the respondent-company. The respondent submitted that this could only be proved in a civil suit and the winding up petition was not maintainable. On the other hand the petitioner’s contention was that under the Carriers Act, 1865, the plaintiff in a suit for loss, damage and non-delivery of goods against a common carrier was not required to prove that such loss, damage or non-delivery was due to the negligence or a criminal act of the carrier, his servants or agents. HELD The plain consequence of section 8 of Carriers Act is that a common carrier is liable for loss or damage to the property delivered to him for carriage where such loss or damage has arisen either from (i) a criminal act of the carrier or of his servants or agents ; or (ii) the negligence of the carrier or his servants or agents. [Para 5] Section 9 of the Carriers Act, however, provides that in such a suit against a common carrier for loss, damage and non-delivery of goods entrusted, it shall not be necessary for the plaintiff to prove that such loss, damage or non-delivery was on account of the negligence or criminal act of the carrier or of his servants or agents. [Para 6] The liability under section 8 of the Carriers Act is conditioned upon the negligence or a criminal act of the carrier, his agent or servant. The plaintiff in the suit does not have to prove that the loss, damage or non-delivery of goods entrusted was not (sic.) due to negligence or a criminal act of the carrier. The burden lies on the carrier to establish that he had exercised due diligence and reasonable care in the transportation of the goods. Section 8 of Carriers Act provides for the conditions in which liability can be fastened. Section 9 of Carriers Act deals with the burden of proof. Section 9 of Carriers Act does not detract from the basis on which liability is attracted. The liability under section 8 of carriers Act would be fastened upon the criminal act of the carrier or where a loss or damage has arisen from his negligence or the negligence of his servants. [Para 7] A company petition for winding up under sections 433 and 434 can be entertained where there is a debt due or in other words, where there is an ascertained liability. A debt is a sum of money which has become payable or which becomes payable in future by reason of a present obligation. Unless the negligence of the carrier stands established in accordance with sections 8 and 9 of the Carriers Act there is no occasion for a debt being due, for there is no ascertained liability. Whether or not negligence has been established is a matter which necessitates adjudication on the basis of evidence recorded at the trial of a civil suit. The report of a surveyor has to be tested on the anvil of evidentiary principles when evidence is adduced in a suit for recovery. The report of the surveyor does not ipso facto establish a debt due and payable. The remedy in winding up is clearly not available when there is a bona fide dispute. The ascertainment of liability and the quantification of damages are issues on which evidence has to be adduced at the trial of a civil suit and a finding of fact has to be recorded. [Para 8] In view of aforesaid, the petition for winding up was clearly not maintainable. [Para 10] CASE REVIEW Kudremukh Iron Ore Co. Ltd. v. Kooky Roadways (P.) Ltd. [1990] 69 Comp. Cas 178 (Kar.) - Distinguished on facts.