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TMI Blog2012 (6) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment as before assigning work to any other agency during operation of the contract, the principal/employer would intimate the contractor that because of its default or negligence or delay or such other reason it is compelled to award contract to other agency- Respondent’s reply to the statutory notice has not mentioned the details about the extent of work executed by the petitioner and the extent of the work left out/left incomplete - the grounds of defense raised by the respondent are "some ingenious mask invented to deprive a creditor (in present case the petitioner) of its bonafide claim" – the respondent has come out with an afterthought dispute evident from the fact that the respondent has availed CENVAT & VAT credit - arbitration clause in the LOI also would not act as a restriction or obstacle or prohibition in maintaining a winding up petition - direction to Respondent to deposit the invoice amount covered in 3 invoices raised by petitioner within 4 weeks time - in favour of petitioner. - CO. PETITION NO. 170 OF 2010 - - - Dated:- 9-3-2012 - K.M. THAKER, J. Ashwin L. Shah for the Petitioner. Nanavati for the Respondent. ORDER 1. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said item work contract like dismantling 2 cranes, repacking parts, assemblies, etc. at the Respondent site.............After repairs and overhauling of the said materials, the Respondent's inspection team consisting of two persons visited the works of the petitioner in mid-February 2008 and stayed there for 5 days and supervised each and every aspect of repairs, overhaul and replacement etc. as per the LOI and expressed their satisfaction in that connection and approved the same for dispatch to the Respondent's site. Thereafter only, the said materials were dispatched to the Respondent's site. The entire rate contract work could have been completed within the time limit but for the respondent intervention for inspection as above which was not necessary. 12. In view of the above facts and circumstances, it is submitted that the Respondent has failed and neglected to pay the amount due to the Petitioner in spite of the above referred statutory notice and as such is presumed to be unable to pay its debts under Section 434 of the Act. Even otherwise, it is not able to pay its debts. For all this, it is liable to be wound up by an order of the Hon'ble Court under the provisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbent upon the petitioner to depute service engineers at the site of the respondent company to complete the remaining work and to make the cranes commissioned and operational but the petitioner miserably failed in doing so. It was also informed that power supply was never restricted and/or refused or not made available to the petitioner. As a manner of fact, since the petitioner did not carry out proper repairs of the cranes and did not bring the same to operational state, the respondent company had to get the incomplete work completed by appointing other agency named Hebenkraft, to which, the respondent company had to pay an amount of approximately Rs. 23,00,000/- excluding taxes for the work, which otherwise was to be completed by the petitioner." 5. Subsequently the respondent company filed additional affidavit, particularly to place on record certain documents and details in support of the factual aspects mentioned in its earlier affidavit. In para 2 of the said additional affidavit the respondent company mentioned that: "2. I state that I am filing the present affidavit only for the limited purpose of placing on record of the petition the documents related to the entrus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted that the respondent company has also neglected to make the payment even after due service of statutory notice at its registered office. On such premise, the learned counsel for the petitioner claimed that the respondent company is entitled for order of admission of the petition and the respondent company deserves to be wound up. The learned counsel for the petitioner relied on following judgments: (1) The decision of the Calcutta High Court in the case of Hind Hosiery Mills (P.) Ltd. v. Anand Chemicals Co. [2003] 115 Comp. Cas. 739/[2004] 50 SCL 46. (2) The decision of the Patna High Court in the case of Central Bank of India v. Sukhani Mining Engg. Industries (P.) Ltd. [1977] 47 Comp. Cas. 1. (3) The decision by the Madras High Court in case of Hoe Leong Corporation Ltd. v. Vaishnovi Infrastructure Engineering (P.) Ltd. [2011] 167 Comp. Cas. 324/109 SCL 530/14 taxmann.com 53. (4) The decision of the Apex Court in the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P.) Ltd. [1972] 42 Comp. Cas. 125. (5) The decision by the High Court of Delhi in case of Hotline Teletubes Components Ltd. v. A.S. Impex Ltd. [2004] 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r agency for which the respondent company had to incur additional expenses and that the said loss and financial burden is attributable to the petitioner company. Mr. Chudgar further submitted that the agreement under which the work was awarded to the petitioner company contains provision for arbitration in case disputes arise between the parties and that therefore also the petition does not deserve to be entertained. He submitted that the petitioner is not justified in seeking order of winding up against the respondent which is a going concern and at present has ship building orders of more than 900 million US$ and employs large number of employees, whereas the petitioner has failed to demonstrate that the respondent company is unable to pay the dues. The learned counsel for the respondent company relied on the below mentioned decisions in support of his contention: (1) The decision in case of IBA Health (India) (P.) Ltd. v. Info - Drive Systems Sdn.Bhd. [2010] 104 SCL 367/8 taxmann.com 1 (SC). (2) The decision in case of Pradeshiya Industrial Investment Corp. of U.P. v. North India Petro Chemicals Ltd. [1994] 79 Comp. Cas. 835 (SC). (3) The decision in case of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing time frame to complete the work. The said clause 3A reads thus: "Completion of the first crane will be six weeks from the date of start of the work and thereafter one crane in every two weeks." 9.4 Before proceeding further, one of the contentions by the petitioner can be considered at this stage. The petitioner has claimed that any time limit was not fixed. The said contention cannot survive and cannot be accepted in light of the above quoted clause 3A incorporated in the LOI. 9.5 On the strength of the said quotation and the LOI the petitioner company raised its 3 invoice which, according to the petitioner, has not been paid by the respondent company. 9.6 The respondent company did not pay the invoice amounts despite reminders by the petitioner company. Therefore, the petitioner served notice dated 30.08.2009 which was followed by notice dated 27.02.2010 and yet another notice dated 23.04.2010. 9.7 It appears that ultimately the respondent company responded to the notice dated 27.02.2010, vide its reply dated 04.05.2010 denying its obligation to make payment and claiming that it was due to the fault of the petitioner that the respondent had to assign the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n inquired for the purpose of confirmation, the learned counsel for the petitioner submitted that even until now the respondent company has not filed any counter claim in the said suit proceedings and/or has not raised any quantified demand against the petitioner company. 12. It emerges from the above referred record that the petitioner has claimed that the work of erection and commissioning was beyond the scope of its contract which was restricted to the work of repairs and overhauling of the cranes which included the task of dismantling, identifying and removing the parts and assembling etc. for repairing and fabricating and overhauling and transporting the parts and assemblies i.e. the 12 operational aspects of repairs, overhauls, supply and transport of the equipments. 12.1 The respondent on the other hand asserted that according to 'LOI' the petitioner was also obliged to undertake and completing the work of erection and commissioning as well. 13. The respondent company has resisted the petition on the ground that since the petition involves and raises disputed question of facts the petition ought not be entertained as the issues of facts involved in the matter wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that:- "31.Where the company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the company for the purposes of winding up. "Bona fide dispute" implies the existence of a substantial ground for the dispute raised. Where the Company Court is satisfied that a debt upon which a petition is founded is a hotly contested debt and also doubtful, the Company Court should not entertain such a petition. The Company Court is expected to go into the causes of refusal by the company to pay before coming to that conclusion. The Company Court is expected to ascertain that the company's refusal is supported by a reasonable cause or a bona fide dispute in which the dispute can only be adjudicated by a trial in a civil court." (Emphasis supplied) 14.2 Thus, the Court is required to decide whether the grounds of defence are substantial or not and they do not "consist of some ingenious mask invented to deprive a creditor and is not a mere wrangle". 14.3 The company Court is also expected to go into the causes of refusal by the company and to also ascertain that the refusal is supported by a reasonable cause or a bonafide dispute. 15. When the question of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and for payment of the invoices amount. 5 04.05.2010 The respondent forwarded its first reply to the petitioner. 6 15.07.2010 The respondent issued statutory notice. 16.3 Besides the above mentioned dates other two dates are also relevant to note viz. 26.09.2009 and 20.10.2009. On 26.09.2009 a company named Hebankraft submitted its revised quotation to the respondent and on 20.10.2009 the respondent issued work order in favour of the said company i.e. Hebankraft. 16.4 In light of the abovementioned chronology the test of contemporaneously raised disputed is required to be applied to ascertain as to whether the defence and dispute raised by the respondent for resisting present petition can be considered to be bonafide dispute or not. 16.5 If we look at the dates and events then it emerges that the petitioner raised invoices on 26th and 27th February 2008. Since the amounts were not paid, the petitioner addressed letters dated 20.03.2009 and 30.08.2009. 16.6 It is pertinent to note that until the said period i.e. 30.08.2009 any grievance with regard to the petitioner's performance of contract work does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued any notice or intimation to the petitioner company. 16.9 It was only on 4th May 2010 that the respondent company, for the first time forwarded its response/reply to the petitioner stating, inter alia, that the said reply dated 4th May 2010 was in response to the petitioner's letter dated 27th February 2010. 16.10 When the said communication dated 4th May 2010 from the respondent company is examined, it emerges that in para (c) of the said letter the respondent company has alleged that " there was no work progress at your end on the subject cranes ". However, as mentioned hereinabove, prior to the said letter dated 4th May 2010 the respondent company does not appear to have ever raised any grievance about alleged "no work progress or about the pace of work" alleging that there was very slow or negligible progress. Any material, much less any written communication raising such grievance, at the relevant time, against the petitioner's conduct is not placed on record. 16.11 Then in para (e) of the same letter the respondent has also alleged that, ".......However, in spite of repeated follow-up no service engineers were deputed by you...." With reference to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incomplete. 16.17 In this context it is relevant to mention that according to the petitioner it had given quotation to carry out the work specified by it at Sr. No. 1.0 to 1.12 and 2.0 to 2.6 mentioned in its quotation (Annexure "P1" page 16) and according to the respondent the petitioner was obliged to execute the work as enlisted at serial nos. 1 to 7 shown at Annexure -01 (page 21 and 22) to its Letter of Intent dated 03.12.2007. 16.18 The respondent company has nowhere mentioned that out of the said items how much work or which work was completed and which work (except the work related to erection and commissioning) was not executed by the petitioner. It is also pertinent to note that as per the details mentioned in its LOI (page 19), the consideration which was to be paid by the respondent company was to be paid in two parts viz. (i) Rs. 14,24,000/- for repair of Gantry Cranes 2 Nos. and Rs. 1,12,640/- as central excise components for the first part and Rs. 1,08,026/- towards labour cost of erection and commissioning. The aforesaid amount of Rs. 14,24,000/- was further bifurcated by unit-wise rates mentioned against the said 7 items enlisted in Annexure-01 (page 21). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case the petitioner) of its bonafide claim." 17.1 The aforesaid aspect is also evident from the fact that though the petitioner issued three invoices in month of February 2008, until May 2010, the respondent company never raised any grievance with reference to the said grievance and never objected the said invoices until (the petitioner's third intimation - demand served after the service of 3 invoices) 4th May 2010 and it is only on 4th May 2010 the petitioner company came out with the aforesaid reply. The fact that the respondent has come out with an afterthought dispute is also evident from the fact that the respondent has availed CENVAT VAT credit. 18. In this context it is relevant to recall at this stage the observations by the Apex Court in para 20 of the decision in the case between IBA Health (India) (P.) Ltd. ( supra ) extracted hereinabove in para 14 and 14.1. 19. When the facts of present case, and in particular the defence taken or the dispute sought to be raised by the respondent company are examined in light of the observations by the Apex Court, clarifying as to what can be considered as bonafide dispute, then it emerges that the grounds of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent for payment of its claim amount. The relief and order prayed for are for admission of petition and order of winding-up. 21.2 Therefore the submission and presentation of a suit in the civil Court by the petitioner for recovery of debt would not act as a bar against present petition. 21.3 Likewise, the arbitration clause in the LOI also would not act as a restriction or obstacle or prohibition in maintaining a winding up petition. 21.4 Accordingly, the respondent company's contention resisting the petition on the ground that the Letter of Intent/contract contains "Arbitration Clause" and that the petitioner has already instituted a civil suit for enforcing recovery of the dues, would not help the respondent in opposing the petition on the said ground. 21.5 In this context reference needs to be made to a recent decision by the Apex Court in the case between Boozallen and Hamilton Inc. v. SBI Home Finance Limited Ors. [2011] 5 SCC 532 the Apex Court has observed that:- "........Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilable or that the claim is disputed. 22. With reference to respondent's contention - objection on the ground that it is a going concern, it is relevant to note that if the claim - debt is undisputed or the dispute sought to be raised is on spurious grounds and the dispute is not genuine, bonafide and substantial then the Court may not admit and entertain a situation or submission where the opponent chooses not to pay the debt though it has, according to its claim, sufficient funds to pay the claim - debt. 22.1 In this context it is relevant to note that if the claim - debt are not bonafide disputed then the said defence i.e. the defence on the ground that the respondent is financially solvent and able company would be available as a supplementary ground and not as the principal or substantive and solitary ground or defence. So as to put it differently, if, in the first instance, the debt is bonafide disputed and there is genuine and substantive defence (in contradistinction to spurious, speculative illusory dispute) then the ground or contention or defence that the respondent is a going concern would become available in aid of the defence that there is bonafide dispute abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount. 28. As mentioned above, when the court reaches a conclusion that the respondent's defence lacks bonafides or that it consists of some ingenious mask invented to frustrate the claim then the court may not frustrate the petition by throwing out the petition and denying the order of admission of the petition on the grounds raising objections against maintainability of the petition. 29. Having regard to the decision in case of Ficom Organics Ltd. ( supra ), this Court is of the view that the petition, in view of the foregoing discussion, does not deserve to be rejected or dismissed. The petitioner has made out a case for admission of the petition and the respondent company could not disprove by showing that its defence is genuine and bonafide and also substantive and the court, as observed above, is satisfied that the defence taken by the respondent are afterthoughts and lack bonafides and it has neglected to discharge its financial obligation. 30. Therefore, the court is inclined to accept and admit this petition. However, the Court considers it appropriate that before making order admitting the petition and permitting publication of advertisement it would be in f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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