2010 (11) TMI 833 - HC - Companies Law

Winding up default in payment to creditors - petitioner issued a notice of demand for the recovery of USD 582,095.40, stating, inter alia, respondent had never previously objected to the quality of the components/goods supplied by the petitioner no settlement was possible - Held that - winding up petition has been admitted and the Official Liquidator attached to this Court has been appointed as the provisional liquidator of the company

Summary

Issues Involved:
1. Jurisdiction of the Court
2. Validity of the termination of the Exclusive Collaboration Agreement
3. Allegations of defective goods and breach of contract
4. Acknowledgment of debt and liability
5. Appointment of a provisional liquidator and winding up proceedings

Issue-wise Detailed Analysis:

1. Jurisdiction of the Court:
The respondent contended that the High Court lacked jurisdiction to entertain the winding-up petition due to the pendency of a civil suit and arbitration. The Court rejected this argument, stating that the issue of whether the respondent company should be wound up is within the exclusive jurisdiction of the Company Court and not available to the Civil Court or the arbitrator. The Court referenced the case of Resham Singh & Co. (P.) Ltd. v. Daewoo Motors India Ltd. [2003] 116 Comp. Cas. 529 (Delhi) to support its decision.

2. Validity of the Termination of the Exclusive Collaboration Agreement:
The petitioner terminated the Agreement on 18-12-2007 due to non-performance by the respondent. The respondent argued that the termination was invalid as it was not mutually agreed upon and violated the Agreement's terms. The Court found that the termination notice was given more than 90 days before the expiry of the Agreement, which was in compliance with Article 7.2-2 of the Agreement. The respondent's continued placement of purchase orders after the termination indicated either an acceptance of the termination or the formation of a new contract without the exclusivity clause.

3. Allegations of Defective Goods and Breach of Contract:
The respondent claimed that some goods supplied by the petitioner were defective and that the petitioner breached the Agreement by selling goods to third parties. These allegations were first raised on 25-10-2008, after multiple acknowledgments of debt by the respondent. The Court found that the respondent failed to provide contemporaneous evidence or particulars to support these claims. The Court noted that the respondent's conduct, including continued business dealings and acknowledgment of debt, contradicted its allegations of defective goods and breach of contract.

4. Acknowledgment of Debt and Liability:
The petitioner provided evidence of repeated acknowledgments of debt by the respondent through emails dated 17-8-2008, 21-8-2008, and 25-8-2008. The respondent admitted to owing USD 582,095.40 but later sought to offset this amount with claims of defective goods and discounts. The Court found that the respondent's acknowledgments constituted an admission of debt and that the respondent failed to establish a genuine, bona fide dispute regarding the debt. The Court also noted that even if the respondent's claims were accepted, a balance of USD 197,588.19 would still be due to the petitioner.

5. Appointment of a Provisional Liquidator and Winding Up Proceedings:
The Court admitted the winding-up petition and directed the publication of citations in specified newspapers and the Delhi Gazette. The Official Liquidator was appointed as the Provisional Liquidator and instructed to take over the respondent company's assets, books of account, and records. The Court ordered the ex-Managing Director and other principal officers of the company to furnish a complete statement of affairs within 21 days. The Court scheduled a status report to be filed and re-notified the case for 28-1-2011.

Conclusion:
The Court found no merit in the respondent's defenses and admitted the winding-up petition. The Official Liquidator was appointed to take control of the company's assets, and further proceedings were scheduled. The respondent's attempts to dispute the debt were deemed unconvincing, and the petitioner's claims were upheld.