2012 (2) TMI 315 - HC - Companies Law

Failure to pay Consideration - recovery - Purchase Order for Conveyor System - Rs 1,67,19,053 were paid out of Rs 1,90,83,443 - Agreement entered Respondent Co. to pay balance amount petitioner to help in working of conveyor belts - Cheques dishonored - Draft Can-celled - Co.is in winding up - Held That - Defense of respondent co. is sham. Liquidator to take over the entire assets. Respondent company, its directors, officers, employers, authorised representatives are restrained from selling, transferring, alienating, encumbering and parting with the possession of any movable and immovable assets and funds of the respondent company. They are also restrained from withdrawing any money from the accounts of the respondent company.

Issues Involved:
1. Preliminary objections regarding the authority to file the winding-up petition.
2. Privity of contract between the petitioner and the respondent.
3. Alleged excess payment by the respondent and defects in the conveyor system.
4. Contingency of payments based on the petitioner's performance under the agreement.

Issue-wise Detailed Analysis:

1. Preliminary objections regarding the authority to file the winding-up petition:
The respondent raised a preliminary objection that the Board Resolution dated 8th December 2007 was for the recovery of outstanding dues and not for filing the winding-up petition. The Court found this objection untenable, noting that the resolution was later ratified by a new Board Resolution dated 12th November 2010. The Court cited the Supreme Court judgment in United Bank of India v. Naresh Kumar, which established that a company could ratify the actions of its officers in signing pleadings. Therefore, the Court held that it had the power to take the ratified Board Resolution on record.

2. Privity of contract between the petitioner and the respondent:
The respondent contended that there was no privity of contract between the petitioner and the respondent company, asserting that the transactions were with another company, Praja Technologies Ltd. The Court dismissed this objection as well, referencing an order dated 30th August 2007, which approved the Scheme of Amalgamation whereby Praja Technologies Ltd. was merged with Praja Mechanicals Private Limited, making the objection legally untenable.

3. Alleged excess payment by the respondent and defects in the conveyor system:
The respondent claimed that it had made an excess payment and that the conveyor system had defects from the beginning, citing numerous letters written between 2004 and 2006. The Court found the reliance on correspondence prior to the Agreement dated 27th July 2006 misplaced, stating that the agreement superseded all prior correspondence. The Court emphasized that the respondent had not taken any action to set aside the agreement, making the respondent bound by it. The Supreme Court in Subodh Kumar Gupta v. Shrikant Gupta was cited to reinforce that an agreement cannot be disregarded without being set aside by a competent court.

4. Contingency of payments based on the petitioner's performance under the agreement:
The respondent argued that payments were contingent on the petitioner identifying and solving problems with the conveyor system. The Court found that the agreement dated 27th July 2006 did not stipulate that payments were contingent upon the petitioner completing the work. The agreement clearly stated that an amount of Rs. 23,64,390/- was due and payable without demur. The Court highlighted that the agreement explicitly mentioned that Praja was not responsible for the current functioning or non-functioning of the system, which had been attended to by outside agencies on Vardaan's instructions.

Conclusion:
The Court concluded that the defense set out by the respondent was a sham and moonshine. The petition was admitted, and the Official Liquidator attached to the Court was appointed as Provisional Liquidator for the respondent company. The Official Liquidator was directed to take over the assets and records of the respondent company, with the assistance of local police if necessary. The directors of the respondent company were restrained from selling, transferring, or encumbering any assets and were directed to hand over all records and file their statements under Rule 130 within twenty-one days. The petitioner was directed to deposit Rs. 50,000/- with the Official Liquidator for expenses related to publishing citations in newspapers and the Delhi Gazette. The case was listed for the next hearing on 8th May 2012, with a status report to be filed by the Official Liquidator.

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