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TMI Blog2013 (3) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... [See Pradeshiya Industrial & Investment Corporation of U.P. v. North India Petrochemicals Ltd. (1994 (2) TMI 267 - SUPREME COURT OF INDIA)]. The mere refusal to pay debts should not be understood as ‘inability’ of the Respondent to pay its debts. In the present case, there were undoubtedly three separate contracts entered into between the parties, i.e. supply of cables, supply of accessories like Jumpers, Connectors and Surge Arrestors. Both the parties have been dealing with each other for over seven years. The Petitioner itself being the manufacturer of cables and accessories knew that for the purpose of the business of the Respondent the mere supply of cables without the accessories could not be sufficient. The Respondent was in turn supplying cables and accessories to the telecom service providers including Tata Tele Services Limited (‘TTL’). The mere supply of cables to TTL would not have constituted a complete delivery of goods. The peak period in the telecom industry for the supply of cables was the first three months of the year. Therefore, the failure on the part of the Petitioner to supply the accessories would adversely affect the corresponding obligations of the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete picture will become clear only when the evidence that may be adduced by both parties is examined in detail in the civil suit stated to be pending. It is not possible for this Court to conclude at this stage that the refusal by the Respondent to make payment for the goods was deliberate or wrong. While the pendency of a suit will not per se preclude the exercise of the winding up jurisdiction of the Company Court, on the facts of the present case, the Court is not persuaded to hold that the Respondent is unable to pay its debts and is, therefore, required to be wound up under Sections 433(e) and 434 of the Act. Consequently, the petition is dismissed with costs of Rs. 20,000 which will be paid by the Petitioner to the Respondent within four weeks from today. - CO. PET. No. 333 of 2012 - - - Dated:- 19-3-2013 - S. Muralidhar,J. Mr. Amit Bansal with Ms. Manisha Singh and Ms. Ritika Nagpal, Advocates. Mr. Amit Sibal with Mr. Ajay Garg, Mr. Rajeev K. Goel and Mr. Gaurav Dudeja, Advocates. JUDGMENT 1. The Petitioner, Zhuhai Hansen Technology Co. Ltd., a company incorporated in People s Republic of China having its office in Guangdong, China, has filed this pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent on the Petitioner on 25th February 2009 for supply of 1500 km of 7/8 superflex RF feeder cable at the unit price of US $ 2.14 per metre for a total value of US $ 3,210,000. The payment terms indicated in the PO were that the L/C should be opened with usance credit at 180 days and interest to the account of the applicant . The delivery had to be completed before 31st March 2009. The goods had to be invoiced to the Respondent. 6. On 2nd March 2009 the Petitioner sent an email to the Respondent asking it to arrange the BG or standby L/C for at least 150 km and extend the validity of the last L/C for 200 km 7/8 . The Respondent was asked to speed up the process so that the delivery could be made within time. The Petitioner states that it had shipped a total quantity of 1301.015 km of 7/8 superflex cables to the Respondent between 25th March and 21st May 2009. However, the Respondent failed to establish the L/C. Some of the correspondence exchanged between the parties has been enclosed with the petition. One of them is an email dated 11th May 2009 from the Petitioner to the Respondent stating that around 950 km 7/8 of cables had been shipped without an L/C being furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also made to email dated 10th September 2009 whereby the Respondent requested the Petitioner not to present all the documents at one go and to present document of one bill of lading ( B/L ) on the third day as this would help the Respondent in honouring the payment on timely basis. This was followed by another email dated 1st October 2009 whereby the Respondent informed the Petitioner that its understanding with SBI could not be worked. It had accordingly decided to cancel the L/C and make upfront payment of the documents. The Petitioner was requested to present one document on document against payment ( DP ) basis to Karur Vysya Bank Limited ( KVBL ) for payment. The Respondent requested that the documents on DP basis be presented one by one and stated that it may take some time, but once the process is through, we will come out of this mess. 9. It is stated by the Petitioner that it agreed to the cancellation of the said L/C in lieu of payment on DP basis, in good faith and in order to help the Respondent, believing that the Respondent would make the balance payment against the goods already shipped to it. It is stated that subsequently, on the Respondent s instructions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pi 20,000.00 Total 1,501,327.40 Interest @ 18% p.a. till the receipt of the full payment as demanded herein above. 12. The Respondent had by a detailed reply dated 30th November 2010 denied its liability to pay the outstanding amount. Importantly it was stated that neither the MOU dated 18th February 2009 nor the PO dated 25th February 2009 had been acted upon and in any event the Petitioner had failed to adhere to the terms of the PO. Further since the Petitioner had failed to make delivery of the goods by 31st March 2009, the Respondent had extended time after 15th April 2009. Despite repeated reminders and requests the Petitioner had failed to offer the products by the extended deadline. The Respondent had air lifted certain deliveries in order to despatch the products to its customers. Consequently, the Respondent had suffered huge losses for which it had the right to recover such damages from the Petitioner. It was further noted that the Petitioner had supplied 7/8 superflex cables to the Respondent s competitor, Volex, at a price lesser than the price charged by the Petitioner from the Respondent. A para-wise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 which was received by the Petitioner on 21st May 2012. Subsequently, a further reply was given on 30th May 2012 reiterating the above grounds. It was pointed out inter alia that the MOU for purchase of goods was entered into between the Petitioner and M/s. Shilpi Manufacturing Company and not with the Respondent. Even in the counter claim proposed to be raised by the Respondent in the sum of approx. Rs. 6 crores there was no claim as regards the defective goods supplied by the Petitioner. It is further averred that the Respondent is not discharging its admitted liabilities and it has become commercially insolvent . It is added that the substratum of the Respondent company is lost and therefore, it is just, equitable and necessary in the interest of justice that the Respondent company be wound up under the provisions of Section 433 and 434 of the Companies Act, 1956. Submissions of counsel for the Respondent 16. Mr. Amit Sibal, learned counsel for the Respondent, submitted that the Petitioner has deliberately suppressed material facts and has not placed on record the complete documentation and emails exchanged between the parties. Importantly the fact that there were three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 2009 the Respondent suggested for DP mode of payment. It was agreed to by the Petitioner by its written email dated 4th September 2009. He also referred to the decision in Phulchand Exports Limited v. O.O.O. Patriot (2011) 10 SCC 300 to explain the most of the documents involved in cost, insurance and freight ( CIF ) contracts. Mr. Sibal also referred to Clause 11 of the Accounting Standards ( AS ) issued by the Institute of Chartered Accountants of India ( ICAI ) which laid down the conditions that had to be fulfilled in a transaction involving the sale of goods. He pointed out that of the nine consignments, the documents in respect of four were in order. The Respondent took delivery of two consignments and the Petitioner sold two other consignments. The delivery of five shipments could not be taken in the absence of proper documentation. Mr. Sibal referred to the minutes of the meeting held on 20th August 2009 to show that it was made clear to the Petitioner by the Respondent that the goods were defective. This was reiterated on 24th May 2010. Therefore, it was incorrect for the Petitioner to suggest that complaint about quality was an afterthought. Thus delivery was never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tingent and prospective liabilities of the company. The mere refusal to pay debts should not be understood as inability of the Respondent to pay its debts. In other words, the unwillingness of the Respondent to pay its debts does not automatically lead to the inference of inability to pay its debts. 23. In the present case, there were undoubtedly three separate contracts entered into between the parties. One was for the supply of cables and the other two for supply of accessories, i.e., Jumpers, Connectors and Surge Arrestors. Both the parties have been dealing with each other for over seven years. The Petitioner itself being the manufacturer of cables and accessories knew that for the purpose of the business of the Respondent the mere supply of cables without the accessories could not be sufficient. The Respondent was in turn supplying cables and accessories to the telecom service providers including Tata Tele Services Limited ( TTL ). The mere supply of cables to TTL would not have constituted a complete delivery of goods. The peak period in the telecom industry for the supply of cables was the first three months of the year. Therefore, the failure on the part of the Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no effective control of the goods transferred to a degree usually associated with ownership; and (ii) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods. 27. The B/L for the five shipments was made to the order of IOB which was no longer a banker of the Respondent. This was a CIF contract and as explained by the Supreme Court in Phulchand Exports Limited v. O.O.O. Patriot one of the requirements was that the shipping documents had to accompany the despatch of the consignments. These include the invoices, B/L and the policy of insurance. In other words, the essential feature of a CIF contract is that delivery is satisfied by delivery of documents and not by actual physical delivery of the goods. Shipping documents required under a CIF contract are bill of lading, policy of insurance and an invoice. With the documents accompanying the consignments not in order, they had to necessarily be amended as requested by the Respondent to facilitate the payment even on DP basis. For some reason this was not facilitated by the Petitioner. The contention of the Respondent that the above facts do not reflect any delib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to Hansen team and they have verified even container in which we have received the drums today found badly wet condition. 7/8 and 1 cable electrical rejection shown to Hansen team and they have agreed to check drums from both end and only cables with return loss more than 20 dB from 400MHz - 1000 MHz and 1700MHz - 2200MHz will be sent to Shilpi. Hansen agreed to send test reports of all the drums in soft copy to Shilpi for every lot. Informed intermodulation results are falling down in Jumpers in every lot. Hansen will improve from next lot onwards and as per them they are checking 40% of lot quantity for intermodulation test at present and may increase in further lots. 31. Subsequently on 24th May 2010 the Respondent raised the issue of defective quality of the cables and attached photographs of the damaged lengths of the cables with nail marks. Thus, it appears that it was not the first time that this objection was raised. Yet, the complete picture will become clear only when the evidence that may be adduced by both parties is examined in detail in the civil suit stated to be pending. It is not possible for this Court to conclude at this stage that the refusal b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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