It is red from the affidavits of KUMAR that the company has been purchasing goods from VIJAYA BROTHBROTHERS Bombay since 1992 and
the said goods have been freighted to the Company via Singapore by the Petitioner.
The Company says that in 1993 two consignments of goods weceived but it was discovered that the "goods were were overpriced and of poor workmanship". The Petitioner's agent Bhindi was told about it and the Company was advised to accept the consignment of goods, sell them and make
payment by instalment and it acted on this.
Mr. Kumar accepted in his affidavit of 1 May 1996 that prior to acceptance of invoice No. 1009 he expressed his concern at the quality
of merchandise but Bhindi assured him that in future if he found the goods unsatisfactory Company would be at liberty to return the
goods. He said that relying on such assurance he accepted the Bills of Exchange but at the time of acceptance he was not in a position
to examine the goods but that he accepted "because I was sure I would return the same if the same were unsatisfactory".
When the Company got the 3rd consignment (the one the subject-matter of this action)nformed its Bank not to hono honour the drafts
because as KUMAR said (item 12 of affidavit of 1 May 1996) he discovered "that the goods were not satisfactory in that they did not correspond with the orders and were overpriced and of inferior quality". Kumar said, that provided he was not charged any interest he agreed with Bhindi to sell the goods and make payment by instalment.
The Petitioner's evidence and submission
The Petitioner says that the Petition relates to only one Invoi. 1009 dated 31 October 1993 for the value of SGD $101,818.,818.27
made up of Bills of Exchange (B/E of 31st October for SGD $51,000.00 and SGD $50,818.27). This invoice and the Bills of Exchange
were accepted by the Company on 25 November 1993. The Bank of Baroda schedules relating to the B/E set out the interest payable on
the two Bills of Exchange.
It is this consignment of goods in Ie No. 1009 which is the subject of the Petition in which thch the balance sum of SGD$34,422.20
is owing by the Company. The fourth consignment has nothing to do with the present claim.
Bhindi denies that either he or the Petitioner gave the Company indulgence toby instalment but the CompaCompany was pleading for time
to pay in respect of Invoice No. 1009. Although there was no arrangement to pay by instalment the Petitioner had "no alternative but to accept what the Company could pay from time to time". Payment began to decrease in amount in 1994. Then on 18 November 1994 'demand' was issued whereupon some payments were made and provision was made to pay the whole amount as quickly as possible but this did not
happen. In paragraph 17 of his affidavit sworn 19 February 1996 Bhindi said:
"That annexed hereto and marked with letter "G"a schedule of payment prepaprepared by the Defendant with interest thereon
as at 2nd February 1996 on Invoice No. 1009 and Bills of Exchange dated 31st day of October 1993 for SGD$51,000.00 and SGD$50,818.07.
This schedule shows that the principal owing is SGD$12,622.87 and interest to date as SGD$21,799.33. The total amount owing by the
plaintiff therefore is SGD$34,422.20. There is no dispute about this amount as the goods have been accepted by the Plaintiff and
already sold by it. Interest is payable at the rate of 15.5% per annum as stated in the schedule to the Bill of Exchange. Even its
Solicitor Mr. Kohli wrote to the Defendant promising payment. Annexed hereto and marked with letter "H" is a copy of the
letter dated 31st March 1994".
The said letter of 31 March 1994 states: "We act for the above client for whom we are reae rearranging finance. The said arrangement will be finalised within 21 days
excluding Bank holidays. Our client will settle your Bill on or before 30th of April 1994."
Consideration ofissue
I have carefully considered the affidavit evidence before me and have listened to submissions made by both counsel.
The determination of the issue depends on my findings of fact and the application of the law relating to Bills of Exchange to those
facts.
Findings of fact
The Petitioner has petitioned to wind up the Company on the ground stated hereabove but the ny denies the debt because ause the goods
in consignment No. 3 contained in Invoice No. 1009 were, inter alia, not of the quality expected and that it is not liable to pay
under the Bill of Exchange as it (B/E) was withdrawn. Hence it says it should not have to pay any interest.
On the affidavit evidence before me I find as fact that the balance principal sum of SGD $12,622.87 is due and payable by the Company
under the B/E. In fact it had admitted owing this amount and accordingly the said sum has been ordered to be paid into Court and
which it did.
The question that remains is whether in the circumstances of this case interest of SGD $21,799s payable under the B/E.
But before I deal with this aspect of the matter, I would like to consider certain arguments put forward by Mr. Kohli regarding the
claim which is being disputed by the Company and the allegation of it being "unable to pay its debts".
The arguments put forward by Mr. Kapadia are sound and I agree with him on the material aspects of the issue before me.
I find as fact that the Company had unconditionally accepted not only all of the goods contained in Invoice No. 1009/93 but also the
two Bills of Exchange dated 31 October 1993. These B/E had the Schedule of Bank of Baroda attached being FTDC number 2355 which indicated
the interest payable on the B/E. In regard to this acceptance there is clear evidence of it when one looks at the endorsement on
the B/E. (See annexure 'B' to Bhindi's affidavit filed 6 May 1996). The Company sought further time to pay on the B/E after having accepted them on 25 November
1993. There was no dispute regarding payment of interest on the B/E and in this regard I do not accept Kumar's assertion that interest
payment was waived by Bhindi.
p class=MsoNormal stal style="margin-top: 0; margin-bottom: 0"> There is idence that the Cohe Companormed the Bank not to honour the drafts. In fact all the evhe evidence that there is and which
I accept is that there was unconditionceptance of the B/E except that there was extension thereofereof at the request of the Company.
It is also a fact and I do so find that the Bank of Baroda, by advise dated 28 February 1994 to UCD Bank, Singapore after the bills
remained unpaid for three months, informed them that the drawee had promised to pay the B/E shortly. This shows that even as at 28
February, Company was seeking further time to pay on the B/E after having accepted them on 25 November 1993. Kumar's own affidavit
filed on 8 February 1996 shows that the Company accepted the B/E and requested extension of time to pay on the B/E as evidenced by
these words of Kumar in paragraph 8:
"that upon his request I accepted the goods .... I was granted indulgence by N. Bhindi of Vagh and Bhindi .... to pay for the
goods by instalment and upon his advise I wrote to the Defendant Company seeking extension of time for payment until matters were
sorted out ....."
and in paragraph 9 he says:
"that in reliance upon this arrangement I accepted the goods and made payments by instalment".
The company commenced to pay by inent direct to the Petitioner from 27 May 1994 which was even after the Company's solicitor itor
Mr. Kohli had written to the Petitioner on 31 March 1994 (as stated above) advising that the Company would settle the B/E on or before
30 April 1994 (annexure 'H'in the first affidavit of Bhindi).
I find that as far as the status of B/E is concerned it was as stated below by Mr. Kapadiparagraph 15 of his writtenitten submission
herein when he said:
"On the 8th July 1994 Bank of Baroda wro UCO Bank advising that Ramt Ramans had made arrangements to pay the Bills of Exchange
directly to Harimaya and requested the authority to withdraw the Bills of Exchange."
This is the normal practice when the bills remain unpaid for long periods of timfurther agree with him that that the withdrawal of
the Bill of Exchange from the collecting Bank in Fiji does not mean that the Bill of Exchange are discharged or cancelled in any
way and they continued to be valid and substantive. I also agree that the Bills of Exchange remain due and payable and indeed Ramans
continued to make instalment payments to Harimaya in Singapore. In this regard see article 21 of the ICC uniforms Rules of Collection
the annexure "F" in the second Affidavit of Manilal Bhindi.
The reasons for withdrawing the bills are, as Bhindi stated, that after a period of 8 months unnecessary Bank Charges are levied for
unpaid bills and it is not practical to keep the unpaid bills with Bank of Baroda. After this legal action on the Bills can be taken
directly against the Plaintiff by the Defendant. The Bank of Baroda was merely a collecting agent and after withdrawal from the Bank
the B/E remained valid and actionable.
p class=MsoNormal stal style="margin-top: 0; margin-bottom: 0"> The Bank of Baroda had by letter dated 29 April 1996 advised the Petitionet the documents were releaseleased to the Company "upon acceptance of all terms and conditions as per schedule" (annexure 'C' of Bhindi's second affidavit) and by annexure 'D' in the same affidavit the collecting bank was advised not to waive bank changes and interest on the B/E. Here the B/E was overdue
and unpaid. The company at no time either refused the B/E or refused to pay interest as per UCO Bank Schedule.
Even on 18 November 1994 when the Petitioner made a demand it includedrest upto 17 November 1994.1994. There was no objection to interest
being payable then. In fact the Company made increased instalment payment after that demand. Furthermore, as already stated, Mr.
Kohli even wrote to the Petitioner on 31 March 1994 advising that full settlement will be made before 30 April 1994. There was no
objection to interest even at that time.
I therefore find thathe evidence before me there are no merits in the Company's contention that it was not requirequired to pay any
interest on the Bills of Exchange.
The Law and its application to this case
This is a case pure and simple on a claim under Bills of Exc. Under the BILLS OF EXCHANGE ACT CAP CAP 227 of the Laws of Fiji, bill of exchange is defined as:
"an unconditional order in writing, addressed by one person to another, signesigned by the person giving it, requiring the person
to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a
specified person, or to bearer."
The compas raised a number of so called defences in its efforts not to pay under the said bills of s of exchange.
I have already stated hereabhe Company's contentions, and the law being what it is pertaining to bills of exchange none none of these
defences have a leg to stand upon. In support of this statement of the law I refer to CEBORA S.N.C. v S.I.P (INDUSTRIAL PRODUCTS) LTD 1976 1 Lloyd's Rep. 271 where it was held:
"that the ordinary rule was that bills of exchange were to beted as cash, and judgment sent should be given upon them as for
cash and was not to be held up by virtue of some counterclaim which the defendant might assert, and there was no justification for
departing from it in the present case."
ass=MsoNormal stal style="margin-top: 0; margin-bottom: 0"> Further on cerdefences not being available SIR ERIC SACHS in CEBORA (/i> (supra) at 278 said:
"Any erosion of the application by our Courts of the law merchant relating to bill bills of exchange is likely to work to the
detriment of this country, which depends on international trade to a degree that needs no emphasis. For some generations one of those
certainties has been that the bona fide holder for value of a bill of exchange is entitled, save in truly exceptional circumstances,
on its maturity to have it treated as cash, so that in an action upon it the Court will refuse to regard either as a defence or as
grounds for a stay of execution, any set-off, legal or equitable, or any counter-claim, whether arising on the particular transaction
upon which the bill of exchange came into existence, or a fortiori, arising in any other way. This rule of practice is thus, in effect,
pay on the bill of exchange first and pursue claims later."
(emphasis added).
In considering the issue before me one cannot lose sight of the manner in which the Company had purported to dishonour the bills of
exchange. Here we are dealing with international trade and it is highly desirable that the principles relating to payments under
bills of exchange are not eroded and I find the following words of the Master of Rolls in BROWN SHIPLEY & CO. LTD v ALICIA HOSIERY LTD (1966) 1 Lloyd's Rep. 668 apt:
"I think that it must be in mind that the world is getting smaller, that both EnglaEngland and Italy are members of the Common
Market and that bills of exchange are well-known international instrument for the payment of obligations and that their negotiability
and equivalence to cash should be maintained."
Similarly, LORD JUSTICE BRIDGE giving the leading judgment in the case >MONTECCHI v SHIMCO LTD (1980) 1 Lloyd's Rep 50 said at 51:
"It is elementary that as en the immediate parties to a bill of exchange, which is tris treated in international commerce as
the equivalent of cash, the fact that the defendant may have a counterclaim for unliquidated damages arising out of the same transaction
forms no sort of defence to an action on a bill of exchange and no ground on which he should be granted a stay of execution of the
judgment in the action for the proceeds of the bill of exchange."
Similar view was expressed by the Fiji Court of Appeal in COIR INDES LIMITED v LOUVRE WINDOWSNDOWS LIMITED 1984 30 FLR 45 when SPEIGHT V.P delivering the judgment of the Court said:
"The law on Bills of Exchange, unfortunately for the appellant, is quite clear. Once a Bill has been unconditionally accepted,
it is the equivalent of cash, and the only excuse available in support of subsequent dishonour is failure of consideration or that
its acceptance has been procured by fraud".
"There is nothing to suggest that fraud could be construed from the increased pric price which it is acknowledged would be disclosed
on the shipping documents available to the appellant before the Bills were accepted. Nor can a suggestion of fraud arise from the
allegation that a comparatively small quantity of the goods were defective, or from the claim that there was short supply or that
some were damaged or that insurance cover had not been perfected. These are common incidents in trading relationships. The acceptor
of a Bill of Exchange undertakes payment as if by cash, and any dissatisfaction, short of total failure of consideration, must be
a matter for subsequent counterclaim."
Also in ATKIN'S COURT FORMS 2nd Ed. 6 (1985) p.318 at para. 28 it is stated:
"It is universally accepted that a bill of exchange can eated by the drawee or hold holder as the equivalent of cash. In consequence,
an action founded upon a dishonoured bill is in a different category from other actions. It is no defence for the drawer or acceptor
to say that he has counterclaims against the drawee or holder arising out of the same transaction, which he can plead as a defence
by way of set-off. The only defences to an action on a bill which is accepted as genuine are that it has been obtained by fraud or
illegality or where there has been a total failure of consideration. Summary judgment may usually be obtained by the drawee of a
dishonoured bill and if the plaintiff's claim to be a bona fide holder for value is not in issue or if it can be supported by the
evidence of contemporary documents the plaintiff will have discharged the onus of proof upon him and he will be entitled to judgment."
As far as the facts of case are concerned, I reject the submission made on behalf of the Company. The circumstancstance here are not
so special to permit me to allow an erosion of the principles and practice relating to bills of exchange. The answer to Company's
contention about the goods the subject-matter of bill of exchange being defective and its unwillingness to pay for it has been succinctly
answered in these words by SIR ERIC SACHS in CEBORA (supra) at p.280:
"N reject the suggestion that by any side wind the defendants can build a case for leave to d to defend or a stay of execution
upon allegations of defects in the goods for which the bills of exchange were given as payment, and a fortiori for defects in other
goods delivered. Such a suggestion flies in the face of established authority.
At thint it may be convenient to refer quite briefly to the defe defendants' seven heads of counterclaim as formulated in the lengthy
defence and counterclaim. The first four set up allegations of (i) defects in the goods for which the bills of exchange were given
(par. 10), (ii) defects in goods delivered on other occasions (par. 15), (iii) failure to deliver goods under confirmed contracts
(par. 13), and (iv) failure to confirm orders given by the defendants (par. 14). These claims for damages, totalling some 34,000, all fall most clearly within the categories to which the rule pay first and claim later applies." (emphasis added)
In this case ourt is bound by clear authority to apply the elementary rule as stated above by Lord BridgBridge and give judgment for
the amount claimed, although part of it is principal and the balance which is disputed is for interest for they are all part of the
sum claimed under the Bills of Exchange.
Conclusion on issue of bills of exchange
To sum up, this was a case of claim under Bills of Exchange. These were accepted by the company and instalment payments were made
but then it stopped paying when the Petitioner had no alternative but to Petition the Court for its winding-up. There were no allegations
of fraud to justify stopping payment for goods the subject-matter of the bills of exchange. I also do not find that there was any
qualified acceptance and even if there was the law as to bills of exchange does not permit of rejection of bills of exchange on that
ground for it allows nothing else but pay cash and claim later if it wishes on the authorities cited above for this is a bill of
exchange case and different principles apply. Even no special arrangement as that alleged between the parties will be of avail for
SPEIGHT V.P. in LOUVRE WINDOWS LIMITED (supra) at 49 said:
"The only real defence which was advanced on the general question of liability was the allegation, set out in paragraph 4(v)
(supra), and repeated in the supplementary affidavit, that there was a special arrangement between the parties. Mr. Gulabdas deposed
that the appellant would accept bills, but without prejudice to its right to make a claim against the respondent and dishonour if
a dispute arose within 14 days of arrival. This, of course, would be a most dramatic departure from ordinary commercial practice
and would mean in effect that the supplier of goods from overseas was placing himself entirely in the hands of the purchaser who
might, for valid or invalid reason, pretend to be dissatisfied. In effect it would mean that the supplier was sending goods on approval.
It would need clear evidence to sustain any such contention."
It is clear from the evidence that payment of interest under the bills of exchange was never waived and the Company was well aware
that it cannot escape paying that as this item forms part of the whole transaction.
For these reasons I find the Company liable to pay by way of interest the said sum of SGD $21,799.33 to the Petitioner. The Company
is also liable to pay the said sum of SGD $12,622.87 which is not in dispute and which is held by the Court.
ass=MsoNormaNormal style="margin-top: 0; margin-bottom: 0"> On the issue of opposition to winding up
I refer to my findings of fact as hereabove.
The "Pen" is presented under s.220 of the Companies Act which provides inter alia, that "a company may be wound up by the Court, if .... (e) the Company is unable to pay its debts; (f) the Court is of opinion that
it is just and equitable that the company should be wound up;...."
In this case a demand was made but there was no response from the Company until afterPetition was presented when when under a separate
writ action (C.A. 5/96) the Company applied for interim injunction restraining the Petitioner from advertising the petition alleging
breaches of contract.
Not having responded to the demand, the company fell withe definition of a company being "unable to pay itsy its debts". The term "inability to pay debts" is defined by s.221 of the Companies Act as follows:-
"221. A Company shall be deemed to be unablpay its debts -<
/p>
(a) if a creditor, by assignment or otherwio whom the company is indebindebted in a sum exceeding $100 then due has served on the
company, by leaving it at the registered office of the company, a demand under his hand requiring the company to pay the sum so due
and the company has, for 3 weeks thereafter, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction
of the creditor;....."
The demand has not been met by the Company. The Company had disputed the payment of interest but I have found there is no substance
in the arguments advanced.
To be able to succeed when disputing the amount claimed, the Company has to prove that the dispute is on 'substantial grounds' (Re LYMPNE INVESTMENTS LTD 1972 2 AER 385). If the debt is contested on 'substantial grounds' then the Court has a discretion to decline to hear the petition (OFFSHORE OIL N.L. and INVESTMENT CORPORATION OF FIJI LIMITED (Civ. App. 29/84 F.C.A.).
I therefore reject Mr. Kohli's arguments on the Company's "inability to uot; as it has not been been proved. The creditor has to prove a negative, that negative being that the company cannot pay its debts. The
headnote to IN re GLOBE NEW PATENT IRON and STEEL COMPANY [1875] UKLawRpEq 129; (1875) LR 20 Eq. 337 is pertinent to this case and there it is stated:
"A company bought goods, giving in part payment its acceptance, which was dishonoured on presentation, and continued unpaid:
and the vendor presented a petition for winding up the company:-
/p>
Held, that the dishonour of the bill was proof to the satisfaction of the Court under sect. 80, sub-sect. 4 of the Companies Act,
1862, that the company was unable to pay its debts, although the Petitioner had not served a demand requiring payment under sub-sect.
1."
As in this case even in a case where the Company admits xistence of a debt but disputed the amount of the debt alle alleged in the
Petition it was held in IN re TWEEDS GARAGES LTD (1962) 1 Ch. p.42 at p.408:
"that the only qualification required of the Petitioner was thatas a creditor; and that, wht, where there was no doubt (and there
was none here) that the petitioner was a creditor for a sum which would otherwise entitle it to a winding-up Order, a dispute as
to the precise sum owed was not a sufficient answer to the petition".
In this case I find that the creditor's debt is clearly established and that there is no dispute on substantial grounds. That being
the case, the approach would be not to interfere with the Petition for as stated by HARMAN J in CORNHILL INSURANCE PLC v IMPROVEMENT SERVICES LTD and OTHERS (1986 1 WLR 114) quoting UNGOED-THOMAS J in MANN v GOLDSTEIN (1968 1 WLR 1091 at 1096) where he said:
