2017 (7) TMI 826 - HC - Companies Law

Cancellation of contract - suit for recovery - outstanding amount - entitlement to interest - Held that - Even though the Defendant had stated that they had issued letters to the Plaintiff that the delay was on the part of the Plaintiff, I hold that the Plaintiff is entitled for a sum of ₹ 6,88,009/-. In so far as the interest is concerned, it is an admitted fact that the Defendant Company had been wound up and the Official Liquidator is in charge towards the liability of various creditors. The Official Liquidator has to honour the claim of the Plaintiff. Consequently, hold that the Plaintiff is entitled only to 6% interest from the date of the suit till the claim being adjudicated by the Official Liquidator. In these circumstances, with respect to issue (1), I hold that the Petitioner is entitled for a judgement and decree for a sum of ₹ 6,88,009/- with interest at 6% p.a. from the date of the plaint till the date of judgement. Towards this decreetal amount, the Plaintiff has to prefer a claim with the Official Liquidator and the Official Liquidator has to discharge the said claim in accordance with the rules and in accordance with prorata basis as other claims of similar nature are settled. Issue (1) is answered accordingly. Cancellation charges - Held that - The Plaintiff stated that the materials were dispatched on 12.9.1995. However, on 19.10.1995, the Plaintiff stated that due to unavoidable circumstances, the Engineer Thiagarajan could not visit and would visit on 25.10.1995. The Engineer visited only on 11.12.1995. The Defendant issued a reminder letter on 28.12.1995. Again the Defendant issued a letter on 16.5.1996 to take back the material and return the advance. Further reminders were issued on 5.6.1996 and 6.7.1996. Finally, the Plaintiff deputed M.Sasindran in connection with the lift erection work. It was under such circumstances that on 23.6.1997, the Defendant informed that they were not interested in installing the lift. These facts in the written statement of the Defendant had not been specifically denied by the Plaintiff in their reply statement. Consequently, I hold that the Plaintiff cannot turn around and blame the Defendant for cancelling the contract. Consequently, I hold that the Plaintiff is not entitled for cancellation charges of 35%, which worked out to ₹ 3,17,350/-. The issue (2) is answered against the Plaintiff. Separate payment by way of a counter claim - Held that - As stated in Issue (1), the advance amount paid of ₹ 2,58,150/-, had already been adjusted by the Plaintiff and the said amount actually been accepted by the Plaintiff and the claim of the Plaintiff had been determined only after deducting the advance amount. When such deduction has been made, the Defendant is not entitled for separate payment by way of a counter claim. In fact, the issue of counter claim can never arise. Under these circumstances, the Defendant could only have a claim of set off which relief the Plaintiff had already granted both in its pleadings and in the evidence on record. Consequently, hold that the Defendant is not entitled for any counter claim. The issue (3) is answered against the Defendant.

Issues Involved:
1. Entitlement of the Plaintiff to recover a sum of ?8,37,922/- with interest at 18% p.a.
2. Entitlement of the Plaintiff to ?3,17,350/- towards cancellation charges.
3. Entitlement of the Defendant to a counterclaim with interest.
4. Other reliefs the parties are entitled to.

Issue-wise Detailed Analysis:

Issue 1: Entitlement of the Plaintiff to recover ?8,37,922/- with interest at 18% p.a.
The Plaintiff, engaged in manufacturing and erecting elevators, entered into an agreement with the Defendant for the supply and installation of a specialized flame-proof freight lift. The contract price was ?9,07,000/- with a price adjustment of ?59,213/- and sales tax of ?1,29,859/-. The Defendant paid an advance of ?2,58,150/-. The Plaintiff claimed that the Defendant delayed making the building suitable for installation, leading to partial erection and subsequent cancellation of the contract by the Defendant. The Plaintiff raised invoices for ?7,47,222/- and sought recovery of ?8,37,922/- after deducting the advance amount. The court held that the Plaintiff is not entitled to the price adjustment of ?59,213/- but is entitled to recover the sales tax of ?1,29,859/-. After adjustments, the value of materials supplied was ?6,88,009/-. The Plaintiff was awarded ?6,88,009/- with 6% interest p.a. from the date of the plaint till the date of judgment, to be claimed from the Official Liquidator.

Issue 2: Entitlement of the Plaintiff to ?3,17,350/- towards cancellation charges
The Plaintiff claimed 35% of the contract price as cancellation charges. The Defendant contended that the Plaintiff delayed the supply and erection of the lift, substantiated by multiple reminders and letters. The Plaintiff's failure to deny these contentions led the court to conclude that the Plaintiff cannot blame the Defendant for the contract cancellation. Consequently, the Plaintiff was not entitled to the cancellation charges of ?3,17,350/-.

Issue 3: Entitlement of the Defendant to a counterclaim with interest
The Defendant's counterclaim included the advance amount of ?2,58,150/- with 18% interest, totaling ?3,83,934/-. The court noted that the Plaintiff had already adjusted the advance amount in their suit claim. Therefore, the Defendant was not entitled to a separate counterclaim. The Defendant's claim could only be considered a set-off, which the Plaintiff had already accounted for. Hence, the Defendant was not entitled to any counterclaim.

Issue 4: Other reliefs the parties are entitled
The court directed that the Plaintiff must prefer a claim before the Official Liquidator, who is responsible for discharging the claim in accordance with the rules and on a prorata basis with other similar claims.

Conclusion:
The civil suit was allowed in part, awarding the Plaintiff ?6,88,009/- with 6% interest p.a. from the date of the plaint till the date of judgment. The Plaintiff must file a claim with the Official Liquidator for the decreed amount. The Plaintiff's claim for cancellation charges was denied, and the Defendant's counterclaim was dismissed.

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