2018 (12) TMI 1717 - HC - Companies Law

Maintainability of petition - breach in terms of AMC contract - It is the case of the respondent that the instant petitions are not maintainable as the respondent is not liable to discharge any debt and the sum claimed by way of compensation is not a debt as defined under law but the same are damages and hence the Company petitions are not maintainable - availability of alternative remedy of appeal - HELD THAT - In the instant case as stated supra it is not just a case of mere denial but there is also a counter claim. Hence the contention that the sum offered by way of a goodwill gesture has to be construed as an admitted debt is baseless and requires to be rejected. More so in the light of the fact that the respondent has categorically stated in the correspondence that the offer stands withdrawn. The respondent has categorically asserted in the legal notice that as the petitioner failed to accept the proposal in full and final settlement the proposal has been withdrawn. A claim for damages for breach of contract is therefore not a claim for a sum presently due and payable and the purchaser is not entitled in exercise of the right conferred upon it under Clause 18 to recover the amount of such claim by appropriating other sums due to the contractor - it is not necessary for us to consider the other contention raised on behalf of the respondent namely that on a proper construction of Clause 18 the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor or in case of dispute adjudicated upon by a court or other adjudicatory authority. Therefore the appellant had no right or authority under Clause. 18 to appropriate the amounts of other pending bills of the respondent in or towards satisfaction of its claim for damages against the respondent and the learned Judge was justified in issuing an interim Injunction restraining the appellant from doing so. As held by the Hon ble Apex Court in UNION OF INDIA VERSUS RAMAN IRON FOUNDRY 1974 (3) TMI 105 - SUPREME COURT where the claim is admittedly one for damages for the alleged breach of terms of the contract executed between the parties a petition for winding up does not lie. It has held that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. In the instant case also the claim is one for compensation for damages suffered on account of the alleged non-supply of vehicles which fact is disputed by the respondent and it is stated that the Trucks have been supplied and three Trucks continues to remain with the petitioner even after completion of the contract. The fact of the three Trucks being in the possession of the petitioner is also admitted by the petitioner. Petition dismissed.

Summary

Issues Involved:
1. Maintainability of the petitions.
2. Whether the amount claimed by the petitioner constitutes 'a debt' enabling the petitioner to maintain the Company petitions.

Issue-wise Detailed Analysis:

1. Maintainability of the Petitions:
The petitions were filed under Section 433(e) and (f) of the Companies Act, 1956, seeking the winding up of the respondent company due to its failure to compensate for breach of the Annual Maintenance Contract (AMC). The respondent argued that the petitions were not maintainable as the amount claimed was not a debt but damages, which required adjudication. The court noted that the respondent had supplied replacement vehicles as per the AMC and that the petitioner continued to hold three trucks belonging to the respondent even after the contract period had expired.

2. Whether the Amount Claimed Constitutes 'a Debt':
The petitioner claimed compensation for lost man-hours due to the respondent's failure to provide substitute vehicles under the AMC. The petitioner argued that the compensation was a debt since the respondent had agreed to pay ?120 per hour for lost hours. The court examined various rulings cited by the petitioner, including cases from the Hon'ble Apex Court and other High Courts, which discussed the nature of debts and damages. The court found that the amount claimed was for unliquidated damages, which do not constitute a debt until adjudicated by a court. The court cited the case of Union of India vs. Raman Iron Foundry, which held that a claim for damages does not become a debt until adjudicated. The court concluded that the petitioner's claim was for compensation for damages, which required adjudication and thus did not constitute a debt.

Conclusion:
The court dismissed the petitions, stating that the claim for damages did not amount to a debt and required adjudication. The court also noted that there was no evidence of the respondent's financial inability to pay debts, further supporting the dismissal of the petitions.