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TMI Blog1998 (4) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... d 17-5-1993. The three purchase orders were as follows : "( a )P.O. 7/4.22/L/005 dated 17-5-1993 for Design Engineering -value of Rs. 90 lakhs. ( b )P.O.7/4.22/L/016 dated 17-5-1993 for Manufacturing, Testing Supply of 11.1 MW Steam Turbine Generator alongwith auxilia- ries and accessories - basic value Rs. 627 lakhs - Total value, including excise duty, CST and freight Rs. 6, 94,68,400. ( c )P.O. 7/4/22/L/007 dated 17-5-1993 for Erection, Commissioning Performance Testing of 11.1 MW Steam Turbine Generator Set - Contract value Rs. 33 lakhs." 3. It is the case of the petitioner that the work entrusted was duly completed. However, an amount of Rs. 93,28,324.55 remained to be paid. This was as per the reconciliation statement of the respondent itself forwarded to the petitioner alongwith its letter dated 6-5-1996. Since the payment was not forthcoming, the petitioner served a notice dated 17-5-1997 under section 434(1)( a ) read with section 433( e ) of the Act calling upon the respondent to pay that amount failing which they proposed to file a winding up petition. In that very notice, the petitioner also invoked the Arbitration clause of the agreement between the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Voluminous material has been placed on record and all the learned counsel have ably assisted me in analysing the factual as well as legal aspects. 6. As far as the first submission of Mr. Nanavati is concerned, the relevant rule 21 of the Company (Court) Rules reads as follows : "21. Affidavit verifying petition. - Every petition shall be verified by an affidavit made by the petitioner or by one of the petitioners, where there are more than one, and in the case the petition is presented by a body corporate, by a director, secretary or other principal officer thereof; such affidavit shall be filed alongwith the petition and shall be in Form No. 3 : Provided that the Judge or Registrar may, for sufficient reason, grant leave to any other person duly authorised by the petitioner to make and file the affidavit." The form of the affidavit given in Form No. 3 is as follows : "FORM NO. 3 Company Petition No..........of 19....... Affidavit verifying petition I, A.B., son of..................aged............residing at............do, solemnly affirm and say as follows : 1. I am a director/secretary/....../ of................Ltd., the petitioner in the above matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is affirmed with respect to this very petition. Mr. Nanavati has principally relied upon the judgment of the Punjab and Haryana High Court, first of all of a single Judge in the case of Mool Chand Wahi v . National Paints (P.) Ltd. [1986] 60 Comp. Cas. 198 which is confirmed by the Division Bench of that Court in Mool Chand Wahi v. National Paints (P.) Ltd. [1986] 60 Comp. Cas. 402. In that judgment the Single Judge as well as the Division Bench have held that from Rules 11,18 and 21 of the Company (Court) Rules it is evident that the petition for winding up is required to be accompanied by an affidavit in due form and if it is not so, no value can be attached to it. The judgment holds that the affidavit is to be filed so that the contents of the petition are treated as evidence and in the absence of the affidavit being in the exact form, that cannot be permitted. The judgment also holds that a subsequent correction of the affidavit is not permissible. 9. As against that, Mr. Seth, the learned counsel for the petitioner, relied upon the judgement of a Single Judge of the Bombay High Court (G.D. Kamat J., as he then was) in Suvarn Rajaram Bandekar v. Rajaram Bandeka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true and correct to the knowledge of the appellant. We do not think that the affidavit can be described as defective in any respect. But that apart, we are of the opinion that even if there is some slight defect or irregularity in the filing of the affidavit, the appellant should have been given an opportunity to rectify the same." [Emphasis supplied] In this view of the matter, as far as the first submission of Mr. Nanavati is concerned, it is difficult to accept the same and the petition cannot be rejected solely on this ground. I have examined this submission in spite of the fact that this plea has not specifically been taken in the reply. In fact, it is the petitioner who has contended that Shri K.M. Patel who has affirmed the reply for the respondent is not the principal officer and, therefore, his reply may not be looked into. As far as this aspect is concerned., another affidavit has subsequently been filed by the respon- dent placing on record that Shri K.M. Patel is a senior officer of the respondent-company authorised to swear the affidavit-in-reply. Hence, I am not prepared to accept this objection to the affidavit of Shri Patel also. 12. Then coming to the submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 1,68,000 to the respondent-company. The loss on this account is estimated approximately at Rs. 7.5 crores and it is contended that it is the respondents who have a stronger counter claim. To this reply, an earlier letter dated 15-5-1996 sent by the respondents is annexed wherein it is stated that in spite of complete supplies not being made, the respondent-company has released the payment and that even after 20 months after the scheduled date of commissioning the required components were not received and further that various defects were observed in the trial run from 12th December to 14-12-1995 and that the petitioners had agreed to rectify them. A detailed trial operation chart is also annexed to this affidavit which shows that the maximum load attained was 9.5 MW at the relevant parameters when the expected capacity was 11.1 MW. 14. To this reply a rejoinder is filed on 15-9-1997. It is contended therein that the arbitration clause does not bar or prohibit a winding up petition. Besides, reliance is specifically placed on clause 3( v ) of the payment terms which reads as follows : "3( v ) (Last) 10 per cent on successful completion of Performance Guarantee or within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d payments were to be released accordingly. The entire contract was for an amount of more than 7.5 crores and that the whole dispute was with respect to 10 per cent of the amount. This amount was payable only on the respondents issuing the acceptance certificate. The relevant clause ( d ) in this behalf reads as follows : "( d )10 per cent of basic order value on acceptance certificate. Howev-er, if this is delayed by ESSAR for more than 19 months from the effective date of this purchase order, then this 10 per cent payment shall be released against submission a separate bank guarantee of equivalent amount valid for further six months." Mr. Nanavati further pointed out that this concept of acceptance is defined in Part-D of the Bid document on General Conditions for Equip-ment Purchase which read as follows : "Acceptance, either provisional or Final, shall mean the acceptance of the equipment and material by ESSAR upon the achievement of the agreed minimum results of tests as defined in the specifications, and the issuance by ESSAR of an acceptance certificate to this effect." 17. Mr. Nanavati, therefore, submitted that by acceptance what was meant was the achievement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up order is not a normal alternative in the case of a company to the ordinary procedure for the realisation of the debts due to it; but nonetheless it is a form of equitable execution. Propriety does not affect the power but only its exercise." Mr. Nanavati submitted that there is no dispute with respect to power of the Court in an appropriate case. The question is with respect to the propriety of the exercise of the power in a given case and in his view in the instant case there was no occasion to exercise that power. 19. Mr. Nanavati then relied upon another judgment of the Supreme Court in the case of Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp. Cas. 456 wherein the Honourable Supreme Court held as follows : "It is well-settled that a winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the court. If a debt is bona fide disputed there cannot be 'neglect to pay' wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Corporation of UP v. North India Petrochemicals Ltd. [1994] 3 SEE 348. In that matter a claim sought to be agitated through winding up petition was subject matter of an arbitration which was pending between the parties. The Hon'ble Supreme Court held that, therefore, there was no 'definiteness' about the claim and did not entertain the petition. 22. The legal position which emerges from what is stated above is as follows : ( i )Where the debt is undisputed, the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt ; ( ii )A winding up petition is perfectly proper remedy for enforcing a just debt but it is not normal alternative to the ordinary procedure. Propriety does not affect the power but its exercise. ( iii )If, however, the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company. ( iv )If a debt is bona fide disputed, there cannot be a neglect to pay within the meaning of section 434(1)( a ) . If there is no neglect, the deeming provision does not come into application. ( v )The petition presented ostensibly for a wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n they ought to have been produced and had been misplaced as contended by the petitioner. Apart therefrom when there are charts signed by both the parties showing that requisite standards were never achieved, I cannot understand as to how such letters on the letter head of a sister concern can contradict the documents jointly signed by both the parties themselves. 25. There are two other applications filed alongwith this petition. One is Company Application No. 280 of 1997 which is for interim order restrain- ing the respondent-company from selling, alienating and mortgaging its property. The other one is Company Application No. 479 of 1997 for directing the respondent-company to file an attested true copy of the accounts for the years 1993-94, 1994-95 and 1995-96. Inasmuch as (for the reasons stated above) I am not inclined to entertain the main petition, these two applications are also not entertained. 26. The petition was filed principally contending that the company was unable to pay its debts and invoking the deeming fiction under section 434(1)( a ). As stated above, there is a dispute with respect to the petitioner's claim which is a bona fide dispute between the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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