1994 (4) TMI 396 - HC - Companies Law

Summary

Issues Involved:
1. Whether the amount claimed by the petitioner is admittedly due or bona fide disputed.
2. Justification of deductions claimed by the respondent company.
3. Whether the winding-up petition is a suitable remedy for resolving the payment dispute.

Detailed Analysis:

1. Whether the amount claimed by the petitioner is admittedly due or bona fide disputed:

The court examined whether the claimed amount by the petitioner was genuinely due or if the respondent company had legitimate grounds for disputing it. The petitioner claimed an outstanding amount of Rs. 52,80,413 under two contracts related to detailed engineering, consultancy services, and supply of equipment for a Bar and Section Rolling Mill Complex. The company, however, contended that they had already made excess payments and raised counterclaims for various deficiencies and delays in the petitioner's performance.

2. Justification of deductions claimed by the respondent company:

The court scrutinized each deduction claimed by the respondent company to determine their validity:

(i) Cost of modification made by SSL as agreed by TDL in the Minutes of Meeting held on 11-5-1990:
The company deducted Rs. 13 lacs for modifications of the cooling bed, which was agreed upon in a meeting on May 11, 1990. The petitioner had acknowledged this deduction in a letter dated January 6, 1991. The court found this deduction justified based on the petitioner's admission.

(ii) Cost of Motor, Gear Box of under-rated capacity which are to be changed:
A sum of Rs. 18 lacs was withheld for the cost of an under-rated motor and gearbox. The company argued that the motor supplied could not handle the required load, causing operational issues. The court noted that meetings held on February 5-6, 1990, and May 11, 1990, confirmed the motor's inadequacy, and the petitioner had acknowledged this issue. Therefore, this deduction was deemed justified.

(iii) & (iv) Cost of Rolls of Wrong Specifications and Improper requirement of Cables:
The company sought to deduct Rs. 3.50 lacs and Rs. 1.15 lacs for these items. However, the respondent's counsel did not contest these deductions seriously, and even if credited to the petitioner, it wouldn't affect the excess payment claim by the company. Thus, these deductions were not pivotal to the decision.

(v) Liquidated damages for delay in supply of equipment:
The company withheld Rs. 21.34 lacs as liquidated damages for delays in equipment supply, as per Clause 7 of the second contract. The petitioner acknowledged some delays but attributed them to factors beyond their control. The court concluded that determining responsibility for the delays required a proper trial, and thus, the company's withholding of this amount was justified until resolved in a civil court.

3. Whether the winding-up petition is a suitable remedy for resolving the payment dispute:

The court emphasized that winding-up proceedings are not intended as an alternative to debt recovery through ordinary legal channels. Given the bona fide disputes over the claimed amounts and the existence of counterclaims, the court found the winding-up petition inappropriate. The petitioner had already initiated a civil suit for the recovery of the claimed amount, which was deemed the proper forum for resolving the disputes.

Conclusion:

The court dismissed the winding-up petition, concluding that the amount claimed by the petitioner was bona fide disputed. The petitioner was directed to pursue their claims through the pending civil suit. The court also clarified that its observations were solely for disposing of the present petition and would not influence the civil suit's outcome. The petition was dismissed with costs assessed at Rs. 5,000.