2017 (1) TMI 1344 - HC - Companies Law

Winding-up petition - disputes about the complete execution and implementation of the contract - Held that - Mere supply of the Code Keys with liberty to the respondent-Company to download the same, which fact itself is disputed by the respondent-Company, and in the absence of evidence being produced on record by the petitioner-Company of the said Software actually being downloaded by the respondent-Company in pursuance of the License Keys supplied to the respondent-Company, no clear finding can be arrived at this stage because the contract was required to be executed and implemented by the petitioner-Company or its parent Company-PTC to the satisfaction of the respondent-Company. In the view of the settled legal position, these kind of disputes about the complete execution and implementation of the contract, cannot be gone into in the winding-up jurisdiction of this Court and it cannot be said that the liability of the respondent-Company in the present case is admitted or undisputed and in such cases, the only appropriate civil remedy is by way of filing a civil suit for recovery of money or any other appropriate remedy like Arbitration etc., and the winding-up petition cannot be converted into a money recovery suit as is sought to be done in the present case. Thus, the winding-up petition against the respondent-Company is liable to be dismissed

Summary

Issues:
Winding-up petition under Sections 433 and 434 of the Companies Act, 1956 for failure to discharge debts. Dispute over contractual obligations regarding supply and installation of software. Jurisdiction of the court in winding-up petitions.

Analysis:
1. The petitioner filed a winding-up petition against the respondent for failing to pay debts amounting to ?85,25,816.32. The respondent argued that the software supply contract was not fully executed due to changes in technology by the American supplier, PTC. The respondent disputed the need to pay for software installation, as the contract was not completed as per the terms agreed upon.

2. The petitioner contended that the software supply was completed as per the purchase order, and the respondent's refusal to pay constituted a valid cause for the winding-up petition. However, the respondent claimed that the petitioner failed to install the new software under a subsequent Annual Maintenance Contract (AMC), leading to a bona fide dispute over payment obligations.

3. The court noted that the dispute raised by the respondent appeared bona fide and not an admitted liability. It highlighted that the initial software supply contract was not fully implemented, and the respondent was asked to enter into a new AMC due to software technology changes. The court emphasized that the petitioner could not evade its obligation to install the software to the satisfaction of the respondent.

4. The court concluded that disputes regarding contract execution and implementation were not within the scope of winding-up jurisdiction. It stated that such disputes should be resolved through civil suits or alternative remedies like arbitration. Consequently, the court dismissed the winding-up petition, emphasizing that it should not be used as a means for money recovery, and declined to invoke its winding-up jurisdiction in the case.

5. The court dismissed the winding-up petition against the respondent, along with the application for the appointment of a Provisional Liquidator, as the main petition was rejected. No costs were awarded in the matter, and the court clarified that winding-up jurisdiction was not appropriate for resolving contractual disputes but rather for specific winding-up matters.