2013 (8) TMI 541 - HC - Companies Law

Petition for Winding up Demurrage Charges - Petitioner contended that the company was indebted to the petitioner-company in a sum towards demurrage charges - Held that - The grounds of dispute raised by the respondent was a bona fide dispute and it was not either illusory or misconceived -there were no good ground to admit the petition There was no privity of contract between petitioner and respondent Merely because respondent-company entered into back to back contracts for Merchandising Trade for facilitating purchase or sale of metal scrap by establishing a Letter of Credit in favour of sellers of metal scrap and pursuant to the same respondent had paid the amounts to its sellers by entering into such tripartite agreement itself would be a pointer to the fact that there was no privity of contract between petitioner and respondent. While examining the prayer for winding up of a company, a duty was cast on the company court to examine as to whether the defence put up by the respondent resisting such claim was a bona fide dispute or a spurious defence the dispute should be of substantial and genuine and not an ingenious method invented by it to deprive the creditor of its just an honest entitlement - Winding up petition was not a legitimate means to seek enforcement of a debt which was genuinely and bona fide disputed by the respondent Costs were ordered to be paid to the Defendant Decided against petitioner.

Issues Involved:
1. Claim for demurrage charges.
2. Privity of contract between petitioner and respondent.
3. Ownership of cargo.
4. Bona fide dispute.
5. Commercial insolvency and winding up of respondent company.

Detailed Analysis:

1. Claim for Demurrage Charges:
The petitioner sought the winding up of the respondent company, alleging that the respondent owed Rs. 2,04,82,067.08 towards demurrage charges from 29.07.2009. The petitioner contended that the respondent had acknowledged its liability through various communications and emails, and despite this, the respondent failed to make the necessary payments.

2. Privity of Contract between Petitioner and Respondent:
The court examined whether there was a privity of contract between the petitioner and the respondent. It was found that the petitioner had shipped the cargo at the instance of third parties (Asia Metals and Commodities Pte Ltd., Al Mustaqbal Metals, and American Metal Management Inc.) and not at the behest of the respondent. The respondent had entered into back-to-back contracts with FMPL/FEIPL and had merely facilitated the transactions by establishing letters of credit. Therefore, there was no direct contractual relationship between the petitioner and the respondent.

3. Ownership of Cargo:
The respondent claimed ownership of the cargo based on letters of credit and tripartite agreements. However, the court noted that merely claiming ownership through such agreements did not establish a direct contract with the petitioner. The cargo was shipped to Mirae Metals Co. Ltd., which failed to take delivery. The court concluded that any claim by the petitioner should be directed towards the shippers or the importers, not the respondent.

4. Bona Fide Dispute:
The court emphasized the need to determine whether the dispute raised by the respondent was bona fide or spurious. It was found that the respondent's defense was substantial and genuine, as it involved complex tripartite agreements and breaches by overseas buyers and sellers. The respondent was also addressing these issues separately, including a case registered with the Central Bureau of Investigations against the directors of FMPL/FEIPL for alleged fraud.

5. Commercial Insolvency and Winding Up of Respondent Company:
The petitioner argued that the respondent was commercially insolvent and unable to pay its debts, warranting a winding-up order under Section 433(e) of the Companies Act. However, the court concluded that the dispute was bona fide and not an attempt by the respondent to evade payment. As such, the petition for winding up was not a legitimate means to enforce the debt, and the court rejected it.

Conclusion:
The court found that there was no privity of contract between the petitioner and respondent, and the dispute raised by the respondent was bona fide. The petition for winding up the respondent company was rejected, with costs of Rs. 25,000 payable by the petitioner to the respondent.

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