9911796707
TMI Blog2013 (3) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... ver of US $ 500 million. 3. The Petitioner states that it had a long standing business relationship with the Respondent dating back to the year 2005 when the Respondent started to purchase cables and accessories from the Petitioner. In February 2009, the Respondent conveyed to the Petitioner its urgent requirement for about 1500 km of 7/8" superflex cables used in the telecom industry. A Memorandum of Understanding ('MOU') was entered into between the parties on 18th February 2009 whereby the Respondent agreed to purchase and the Petitioner agreed to supply 1300-1500 km of 7/8" superflex cables. 4. The terms and conditions of the MOU were that the shipment of the above goods was expected to take place between 1st March and 5th April 2009. Upon receipt of the original standby letter of credit ('L/C') or bank guarantee ('BG'), the Petitioner would immediately arrange for production. The MOU noted that an L/C or BG for a cable length of 100 km had already been provided to the Petitioner. The Respondent was to establish a separate L/C or BG for an additional 150-200 km by 25th February 2009. The material was to be shipped from Zhuhai. The Petitioner was to email to the Respondent the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the remaining quantity of the product, with the last of the shipments being made on 24th May 2009. However, the Respondent failed to establish the L/C in terms of the said schedule and undertaking. It also did not get the goods released from the Indian Customs with whom the goods had been lying since March-May 2009. 8. In para 13 of the petition the Petitioner has given the details of the invoices for the period from 26th March 2009 till 21st May 2009 for a total sum of US $ 1,891,556.70 towards several invoices which remained unpaid by the Respondent till 31st August 2009. According to the Petitioner, the Respondent wrote to it on 3rd September 2009 citing its weak financial condition as the sole reason for not being able to open the L/C for the goods despatched by the Petitioner and its inability to collect the goods from the customers. It is stated that the Respondent suggested an alternate mode of payment for paying the dues of the Petitioner and in order to support the Respondent "in its moment of financial crisis", the Petitioner agreed to the said proposal. A reference is also made to an email dated 4th September 2009 from the Respondent asking the Petitioner to present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Tughlakabad, New Delhi. 10. According to the Petitioner, after taking delivery of the last two shipments, the Respondent realized that the detention and demurrage charges in respect of the balance amount had escalated well over the value of the goods which therefore, became economically unviable for the Respondent. According to the Petitioner, in order to avoid making payment the Respondent started raising issues as regards the condition/quality of goods by email dated 24th May 2010 for the first time. This was replied to by the Petitioner on 26th May 2010 stating that long time storage of the goods and humidity at the port was responsible for the condition of the goods but the same would have no impact on the quality of the goods. It was further pointed out that the Respondent had never rejected any of the shipments on the ground of quality of the goods. The Respondent inquired from the Petitioner by email dated 23rd July 2010 as to how to clear the shipments with minimum loss and this was replied to on 23rd July 2010 itself. 11. On 4th November 2010 the Petitioner sent to the Respondent a notice calling upon the Respondent to make the following payments of the outstanding a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d between the parties. Submissions of counsel for the Petitioner 14. It is submitted by Mr. Amit Bansal, learned counsel for the Petitioner, that the two reasons given by the Respondent for not making the payments, viz., (a) delayed delivery of goods by the Petitioner and (b) defective quality of goods supplied by the Petitioner, were untenable and an afterthought. These were raised by the Respondent only after the receipt of the legal notice. It is stated that at no point of time did the Respondent ask the Petitioner to stop the shipment on account of delay in delivery and reject any shipment on that basis. The contention that the goods supplied were also defective is also termed as 'baseless and false'. It is reiterated that the goods supplied by the Petitioner were of the highest standard and quality. The Respondent had never raised the issue about defective products for not making payment. The Respondent failed to clear the goods on account of its financial problems. It was inter alia stated that the Petitioner cannot be held responsible for the Respondent's failure to get the goods released from the customs since March-May 2009. While the Petitioner had complied with its obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detention charges that were mounting. Since the original B/L was with the Petitioner, only the Petitioner could carry out the necessary amendments. This was followed by another email dated 29th March 2009 sent by the Respondent asking the Petitioner to explain the reasons for the delay in deliveries. The Respondent also reminded the Petitioner that "accessories scheduled to be dispatched on 27th March by sea is pending." It was also asserted that any further delay in delivery would have to be compensated by the Petitioner. According to Mr. Sibal, although the delivery period in all the three PO's was before 31st March 2009, not even a single shipment was delivered except two shipments of accessories lifted by air. By an email dated 1st April 2009 the Respondent made it clear that all demurrage and detention charges would be to the account of the Petitioner. Reference was made to an email dated 3rd April 2009 whereby the Respondent complained that even the first container of Jumpers, Surge Arrestors and accessories had not left till then. It is submitted that without Surge Arrestors, Connectors and Jumpers the mere despatch of cables would not serve the purpose of the Respondent. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent to pay its debts that the Court would order winding up. No admission of liability 20. Arising out of the above submissions, the first issue to be decided by the Court is whether there is any admission of liability by the Respondent and if there is no such admission, whether the denial by the Respondent of its liability constitutes a sham defence? As explained by this Court in NEPC India Limited v. Indian Airlines Limited the defence adopted should appear to the Court not to be dishonest and/or a moonshine. The Court in that case drew upon the analogy of a summary suit under Order XXXVII of the Code of Civil Procedure, 1908 ('CPC'). 21. For the purposes of Section 433(e) of the Act it has to be demonstrated by a Petitioner seeking the winding up of the Respondent company that there is an undisputed debt and that the Respondent company is unable to pay the debt. Section 434 of the Act gives instances where the company is deemed to be unable to pay its debts. Even if it is "proved to the satisfaction" of the Court that the Respondent company is unable to pay its debts, the Petitioner would also have to show that the company "neglected to pay the sum or to secure or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery of the consignments. It is difficult, in the circumstances, and at this stage, to conclude that the defence of the Respondent is a sham one. Incomplete documentation 25. The second issue concerns the documents that had to accompany the shipment. In terms of the MOU, L/C had to be opened by the Respondent. The L/C was opened in its favour by its banker, i.e., SBI. For some reason, despite IOB no longer being the banker of the Respondent, the B/L was made to the order of IOB. The Respondent requested the Petitioner to have the B/L amended so that the payments could be released. Even for DP mode the documents had to be amended by making it 'To Order' without mentioning any banker's name on it. The Petitioner did not manage to do this. 26. Section 25 of the Sale of Goods Act, 1930 ('SGA') underlines the importance of the terms and conditions of delivery of goods having to be fulfilled but clearly states that property in the goods does not pass to the buyer "until the conditions imposed by the seller are fulfilled." In the present case the seller had itself imposed the conditions of opening of L/C. Further, the AS maintained by ICAI also requires the fulfillment of the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted them; or (b) when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or (c) when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them. 29. Mr. Bansal sought to demonstrate that the conditionality of Section 42 stood attracted since the Respondent had never intimated to the Petitioner that it had rejected the goods. The above submission is unacceptable for the reason that on the facts of the present case the five shipments were never in fact delivered to the Respondent. Mr. Bansal himself stated that the five shipments were sold off by way of auction by the port authorities to recover the detention and demurrage charges. The question of the Respondent in the present case having retained the five shipments without intimating the Petitioner of its rejection does not arise. 30. For the purposes of Sections 55 and 56 SGA, the Petitioner would have to show that the neglect or refusal by the Respondent to pay for the goods was wrongful. This would require the examination of evidence to find out whether the buyer was justified in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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