2010 (12) TMI 1315 - HC - Companies Law

Summary

Issues Involved:
1. Admissibility of Co. Pet. No. 380/2008.
2. Admissibility of Co. Pet. No. 8/2009.
3. Admissibility of Co. Pet. No. 107/2009.
4. Commercial solvency and its relevance in winding up petitions.
5. Doctrine of privity of contract.

Issue-wise Detailed Analysis:

1. Admissibility of Co. Pet. No. 380/2008:
The court dismissed Co. Pet. No. 380/2008 filed by M/s Welldone Estate Projects Private Limited. Despite the Respondent company admitting receipt of Rs. 5,19,00,000, the absence of a written contract between the Petitioner and the Respondent made it impossible to ascertain the exact nature of the transaction. The court emphasized that in the absence of a written agreement, the rival contentions based on oral understandings could not be examined in summary proceedings before the Company Court. The court clarified that it had not expressed any opinion on the merits as a civil suit was already pending between the parties.

2. Admissibility of Co. Pet. No. 8/2009:
Co. Pet. No. 8/2009 was filed by Mr. Sunil Kothari, supported by a written agreement/MOU dated 26th August 2006. The agreement detailed the terms of sale and joint development, including a return of 14.11% and 14.50% of annual rental revenue for Anchor and Non-Anchor stores, respectively. The Respondent's defense that it acted as an agent of LIT was rejected for several reasons:
- The defense was not specifically pleaded in the reply to the company petition.
- The agreement did not state that the Respondent was merely acting as an agent.
- The agreement was a principal-to-principal agreement, and the Respondent had accepted personal liability.
- The Respondent had admitted receipt of Rs. 4,02,00,000 from the Petitioner in a letter dated 27th September 2006.

3. Admissibility of Co. Pet. No. 107/2009:
Co. Pet. No. 107/2009 was filed by Mr. Balwant Singh, who had booked office space of 1239 square feet for Rs. 50,17,350. The Respondent had issued several receipts for the amount paid in installments. The Respondent's reply to the notice dated 17th April 2007 acknowledged the booking and agreed to refund the booking amount after deducting up to 10% of the basic sale price as earnest money. The court found that the Petitioner was entitled to a refund due to the Respondent's inability to complete the project because of disputes with LIT/Government of Punjab.

4. Commercial Solvency and its Relevance in Winding Up Petitions:
The court addressed the issue of commercial solvency by referring to the Supreme Court's judgment in M/s IBA Health (I) Private Limited v. M/s Infor-Drive Systems Sdn. Bhd. The court noted that commercial solvency is relevant in determining whether the refusal to pay debt is a result of a bona fide dispute or an inability to pay. However, if a debt is undisputedly owing, the company must pay it regardless of its solvency. The court emphasized that a company cannot avoid payment to creditors by proving solvency at the statutory demand stage.

5. Doctrine of Privity of Contract:
The court discussed the doctrine of privity of contract, which means that only parties to a contract can enforce its terms. The Petitioners were not concerned with the disputes between the Respondent and LIT/Government of Punjab. The court held that the Respondent was bound by the terms of the contract with the Petitioners and could not avoid its obligations due to disputes with a third party. The court cited various legal principles and precedents to support this view.

Conclusion:
The court dismissed Co. Pet. No. 380/2008 and admitted Co. Pet. No. 8/2009 and Co. Pet. No. 107/2009. However, the court deferred the order on admission, appointment of Provisional Liquidator, and publication of citations for six weeks to enable the Respondent to negotiate with the Petitioners or deposit the principal amounts in the Court. The question of interest was left open. The court also provided detailed reasoning on the relevance of commercial solvency and the doctrine of privity of contract in the context of the petitions.