2019 (2) TMI 968 - HC - Companies Law

Recovery of outstanding dues - company under liquidation - performance guarantees - encashment of Bank Guarantees - Held that - There is an outstanding amount of about ₹ 16.88 Crores payable to the various vendors of the Company in liquidation, towards the ONGC project. The Court found that if the vendors were paid 75% of their outstanding payment upfront, they can take up the balance work and complete the same in accordance with the project specifications. It was found that the ONGC was to pay an amount in the region of ₹ 30 Crores, to the Company in liquidation towards the project. The Court further observed that as indicated by Mathews, the project can be completed within a period of six months at an estimated cost of about ₹ 3,35,94,440/- plus the project management cost of ₹ 91,50,000/-. Though the learned counsel appearing on behalf of the Respondent No.2 ONGC was in broad agreement with the proposal, but had expressed apprehension that since amounts have to be paid to the various vendors with a view to enable them to take up and complete the balance work, this will be in the nature of advance payment and therefore requested that ONGC may be permitted to charge interest in accordance with its prevailing policy and adjust the same towards the final amount payable to the vendors or the company in liquidation. While considering the aforesaid objection, the learned Company Judge observed that, the payment is directed to be made by ONGC as part of its past dues and not as an advance payment. The learned company Judge, therefore, specifically observed that there is no question of ONGC charging any interest towards amount paid under the orders of this Court. There is no merit in the Appeal challenging order dated 26th April, 2018. The Appeal is, therefore, dismissed.

Summary

Issues Involved:
1. Challenge to the order dated 26th April, 2018, passed by the Company Judge.
2. Performance guarantees and completion of the ONGC contract by GOL Offshore Ltd.
3. Appointment of Official Liquidator and winding up of GOL Offshore Ltd.
4. Payment to vendors and completion of the remaining contract work.
5. Objections and compliance by ONGC regarding the payment orders.
6. Subsequent appeal and stay orders.

Issue-wise Detailed Analysis:

1. Challenge to the order dated 26th April, 2018:
The appeal challenges the order dated 26th April, 2018, passed by the Company Judge, which directed the completion of the remaining work of the ONGC contract by appointing M/s Mathew Associates Hook-Up & Weld Services (Mathews) as Project Management Consultants (PMC). The order included directions for ONGC to pay ?12.66 crores towards 75% of the outstanding dues of the vendors.

2. Performance guarantees and completion of the ONGC contract by GOL Offshore Ltd:
GOL Offshore Ltd was awarded a contract by ONGC for laying sub-sea pipelines. Axis Bank and ICICI Bank provided performance guarantees for the completion of this work. Due to the incomplete project, these banks faced the threat of encashment of their guarantees.

3. Appointment of Official Liquidator and winding up of GOL Offshore Ltd:
The Export and Import Bank of India filed a Company Petition for recovering past dues from GOL Offshore Ltd. The Company Judge appointed an Official Liquidator on 6th March, 2017, to take charge of the company's assets and directed the winding up of the company on 4th December, 2017.

4. Payment to vendors and completion of the remaining contract work:
Due to the incomplete work, the Official Liquidator held meetings with ONGC, sub-contractors, and ex-directors of the company to assess the possibilities of completing the remaining work. The sub-contractors communicated that they required payment of past dues to commence and complete the balance work. The Company Judge found that an outstanding amount of ?16.88 crores was payable to various vendors and directed ONGC to pay ?12.66 crores to Mathews for the completion of the project.

5. Objections and compliance by ONGC regarding the payment orders:
ONGC expressed apprehension about making advance payments to vendors and requested to charge interest on such payments. The Company Judge clarified that the payments were part of past dues and not advance payments, thus rejecting ONGC's request to charge interest. ONGC was directed to make payments to Mathews, who would then pay the vendors.

6. Subsequent appeal and stay orders:
Following the Company Judge's order on 26th April, 2018, ONGC did not make the required payments, leading Mathews to file another application. The Company Judge ordered ONGC to deposit ?30 crores with the court. ONGC filed appeals against both the 26th April and 29th October orders. The Division Bench stayed the 29th October order, subject to ONGC depositing ?12.66 crores. The High Court dismissed ONGC's appeal against the 26th April order, citing ONGC's conduct and the broad acceptance of the arrangement by all stakeholders.

Conclusion:
The High Court upheld the Company Judge's order dated 26th April, 2018, directing ONGC to make payments to Mathews for the completion of the ONGC project. The appeal was dismissed, and the Company Judge and Official Liquidator were instructed to proceed with the disbursements. ONGC's request for a stay of the High Court's order was rejected.