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TMI Blog2010 (12) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... company has failed to pay the undisputed/admitted debt in spite of service of statutory notice dated 21-1-2008 under section 434(1)(a) of the Act. Clause (c) of section 434(1) is also evoked by the petitioner. 2. The respondent-Company has defended the present proceedings, inter alia, on the ground that the debt claimed is not debt due but a disputed debt and the present proceedings are nothing but arm-twisting tactics. It is also alleged that the petitioner has not approached the court with clean hands. 3. Both the parties have not disputed that they had entered into an Agreement dated 15-12-2002 ( the Agreement ) and that an amount of Rs. 4.73 crores was paid by the RPGCL to the respondent-Company. 4. The Agreement, as per Schedule I required the respondent-Company to develop the equipment, including software, mentioned in it and transfer of rights to enable RPGCL to manufacture the said product. Schedule I reads as under : "Specified product 1. Specifies Product shall include (switching functionality) CoT Broad Band Router meeting the clause 6.5.2.1 and all its sub-clauses (6.5.2.1.1 to 6.5.2.1.3 and 6.5.2.1.3.1 6.5.2.1.3.3) of the TEC, BSNL specification for Generi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were required to be paid adequate and suitable salary. It is submitted that the respondent-Company had to put in great efforts and on account of the personal credibility of directors and after putting in money from all sources, they had developed the first prototype CoT broadband router and that the respondent-Company had thus complied with the terms of the Agreement. 8. As far as delay is concerned, it appears that there were delays on both the sides. There was delay on the part of RPGCL in making payments and payments were not made as fixed in Schedule-IV. The respondent-Company also did not adhere to the time schedule with regard to milestones mentioned in Schedule-II. Apparently, both the parties did not abide by the time schedule stipulated in the Agreement. The same was not regarded as binding and essence of the contract. Leverage was granted by both the parties and the delays were ignored and not taken seriously. Thus delay alone does not entitle the petitioner to claim refund with interest. Neither the petitioner nor the respondent had cancelled/terminated the agreement on the ground of delay by the other side. When there was delay in making the payments on the part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 26-7-2004 are the same routers which are referred to in Schedule-I of the Agreement. Thus, as per the case of the respondent-company the equipment mentioned in Schedule I was developed by them and this fact is admitted and acknowledged by RPGCL. In what context, how and why this letter dated 26-7-2004 was written is disputed and can be explained by RPGCL but this would require oral evidence for any determinative finding. It is also noticed that RPGCL has not mentioned or referred to their letter dated 26-7-2004 in the present petition. This fact was concealed. 13. Para 19 of the winding up petition reads : "19. The Petitioner was further surprised to find out that the Company had in fact, developed some of the products undertaken to be developed by the Company for the Petitioners and have been illegally trading the same in the market under its own brand name. It is therefore, clear that the Company diverted the funds invested by the Petitioner to their own use and falsely informed the Petitioner that the products could not be developed. Thereafter, the Company failed to repay the said amounts and made repeated false promises only to hoodwink and betray the Petitioner. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised. This payment of Rs. 20 lakhs, as per the respondent-company, was unconnected with the agreement. During the course of argument the respondent had produced before the court an invoice dated 22-12-2005 for supply of equipment worth Rs. 21,55,787 raised by RPGCL against the respondent-company. These are again disputed questions of fact, which cannot be decided without oral evidence, cross examination etc. 17. As per the points of the agreement exchanged in the e-mails, the respondent-company had to refund Rs. 1 crore out of the investment of Rs. 5 crores. Rs. 1 crore was payable after the respondent-company received soft loan from the Department of Scientific and Industrial Research (DSIR). The e-mails referred to, state that a legal agreement was to be drafted and that RPGCL and respondent-company would sign the same to concretely agree on the path forward. No such formal agreement was signed or even exchanged. RPGCL has not based its claim on the points of agreement mentioned in the e-mail. The claim of RPGCL is for refund of Rs. 4.73 crores with interest at the rate of 14 per cent per annum and not for Rs. 1 crore out of which payment of Rs. 20 lakhs has been received. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt, see Re. A Company. Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely See Re Tweeds Garages Ltd.. The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends." 19. In Mediquip Systems (P.) Ltd. v. Proxima Medical System GMBH [2005] 7 SCC 421, the Supreme Court has observed : "18. This Court in a catena of decisions has held that an order under section 433(e) of the Companies Act is discretionary. There must be a debt due and the company must be unable to pay the same. A debt under this section must be a determined or a definite sum of money payable immediately or at a future date and that the inability referred to in the expression "unable to pay its debts" in section 433(e) of the Companies Act should be taken in the commercial sense and that the machinery for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court should dismiss the petition so as to avoid the abuse of the procedure of winding up. It was observed : "17. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor s debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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