2010 (7) TMI 773 - HC - Companies Law

Winding up - inability to pay - petitioner relied upon term of the purchase order that 85 per cent of the invoice value shall be paid after 60 days from the date of dispatch but since such payment has not been made the respondent has failed to discharge contractual obligations - respondent that the UPS unit supplied by the petitioner were defective Held that - defence of the respondent cannot be said to be untenable only for the purpose of defeating the claim of the petitioner. There exist serious disputes between the parties in respect of quality of the goods and the time when such defects were rectified. It cannot be said that it is a case of non-payment of admitted liability petition is dismissed

Summary

Issues:
Petition for winding up due to non-payment of admitted amount by respondent company.

Analysis:
The petitioner, a sole proprietorship firm, sought winding up of the respondent company for non-payment of an alleged admitted amount for goods supplied. The respondent, a limited company, had placed an order for uninterrupted power supply units from the petitioner. The purchase order specified payment terms of 85% after 60 days from dispatch and the remaining 15% after successful commissioning and acceptance by Power Grid Corporation of India. A dispute arose when the respondent failed to pay the balance amount of Rs. 15,40,000 out of the total Rs. 18,40,000 for the goods supplied by the petitioner. Despite a statutory notice under the Companies Act, 1956, the respondent raised defenses regarding the quality of goods supplied, including issues raised by the Power Grid Corporation regarding the UPS units.

The respondent contended that the UPS units supplied were defective, as highlighted in communications from the Power Grid Corporation regarding problems with the UPS units since commissioning. The respondent argued that the defects were not rectified despite being informed early on, leading to delays in functionality. The respondent maintained that the dispute over the quality of the goods supplied was genuine and required adjudication in a competent court. The petitioner, on the other hand, relied on the issuance of Form C as evidence of completion of the transaction and entitlement to payment. The petitioner argued that the non-payment by the respondent indicated a failure to meet contractual obligations and discharge admitted liabilities, justifying winding up.

The court analyzed the arguments presented by both parties and found that the respondent's defense regarding the defective supply of UPS units and the subsequent rectification of defects created a genuine dispute over the quality of goods supplied. The court noted that the petitioner had agreed in a meeting that payment would be made only after final payment for the UPS units was released by the Power Grid Corporation to the respondent. Given the serious disputes between the parties regarding the quality of goods and the timing of defect rectification, the court concluded that it was not a clear case of non-payment of admitted liability. Therefore, the court dismissed the petition for winding up but allowed the petitioner to pursue its claim in the appropriate legal forum.

In conclusion, the judgment delves into the complexities of contractual disputes, quality of goods supplied, and the significance of agreed payment terms in determining the outcome of a winding-up petition based on non-payment of admitted amounts.