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TMI Blog2015 (7) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... g, laying, joining, testing, commissioning, etc., of BWSC, MS, PCCP and PSC and other types of pipes in execution of water supply schemes in various states including the State of Andhra Pradesh. That the petitioner has successfully executed several prestigious projects in the State of Andhra Pradesh and in other States for the Central Government, State Governments and Government Undertakings, Local Bodies, Co-operative Societies, Corporate and Private Sector. 3. That the respondent was incorporated on September 26, 1973, as a joint stock company under the provisions of the Act and has been a nodal agency to the Government of Andhra Pradesh. That the registered office of the respondent is situated at 5-9-58/B, 6th floor, Parisrama Bhavan, Fateh Maidan Road, Hyderabad. That the main objects to be pursued by the respondent, inter alia, are to formulate, promote, finance, aid, assist, establish, manage and control schemes, projects or programmes, to provide and develop infrastructure facilities, including factory sites, factory sheds, godowns, marketing facilities, warehouse facilities of communications, power, water, drainage, housing, hospitals and other medical and health and educa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k guarantees for a total mobilisation advance of Rs. 26,75,03,538 ; that as the respondent failed to pay the mobilisation advance, the same resulted in expiry of the bank guarantees ; and that on the assurance given by the respondent that prompt payment of bills will be made, the petitioner was persuaded to commence the work without mobilisation of advance and executed the work for a value of more than Rs. 15 crores against supply of pipes and of about Rs. 25 lakhs against execution of civil work. That as per clause 68 of the agreement, the running account (RA) bills raised by the petitioner for the work executed were to be paid within 14 days from the date from which the bills were raised ; that the petitioner submitted two RA bills against manufacturing and supply of MS pipes for an amount of Rs. 15,43,03,122 (including labour cess)-being LS I and Part bill for Rs. 13,71,58,330 and LS II and Part bill for Rs. 1,71,44,792 for a net amount of Rs. 13,39,04,368 on February 27, 2009 and May 22, 2009, respectively ; that the said RA payments were certified by the Zonal Manager, APIIC, Kadapa on February 27, 2009 and May 22, 2009, respectively ; and that after due efforts by the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt of funds from the Government of Andhra Pradesh, the outstanding bills will be cleared and a decision will be taken on the subject scheme. 6. That apart from the admitted outstanding amount of Rs. 8,18,36,584 under the duly certified RA bills as due and acknowledged as payable by the respondent to the petitioner, further sums are also payable by the respondent against the said project work. That as the subsequent meetings to resolve the impasse held between the officials concerned of the respondent and the petitioner's personnel failed to resolve the issue, a notice was issued on behalf of IHPCL to the respondent on June 11, 2012, which was replied to by the respondent on September 17, 2012, incorrectly denying its liability. That thereafter, the petitioner has caused statutory notice dated September 11, 2012, on the respondent under section 434 of the Act calling upon the latter to pay a sum of Rs. 8,18,36,584 within 21 days. That the respondent having received the said notice on September 14, 2012, has neither chosen to pay the outstanding amount nor has responded to the said notice. The petitioner has therefore filed this company petition. 7. On behalf of the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitments under the contract. Evidently, referring to the letter of the managing director of the respondent, the counter-affidavit stated that mere addressing of the Government for release of funds does not mean that the provisions of sections 433 and 434 of the Act would get attracted though the petitioner has abandoned the work in December 2009, as a result of which much detriment has been caused to the APIIC. The counter-affidavit has denied the allegation that the officials of the respondent asked the petitioner to arbitrarily stop the work in December 2009, as wholly baseless. Referring to the statutory notice, the respondent has taken the stand that notice dated June 11, 2012, was itself a statutory notice and that the same having been replied to by the respondents on September 17, 2012, there was no need for the petitioner to send another notice dated September 11, 2012. The counter-affidavit has prayed for dismissal of the company petition. 8. Sri R. Raghunandan, learned senior counsel appearing for Ms. Shireen Sethna Baria, learned counsel for the petitioner, submitted that the correspondence exchanged between the parties clearly shows that the debt is an undisputed one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in NCC-IVRCL-SMS (JV) v. APIIC, W.P. No. 31794 of 2010, dated December 19, 2011 and NCC-IVRCL-SMS, In re, W. A. No. 121 of 2012, dated August 13, 2012. 11. I have carefully considered the submissions of learned senior counsel for both the parties and perused the record. 12. The law relating to scope of winding up of a company for non-payment of debt under section 433(e) read with section 434(1)(a) of the Act is well crystallised. The main ingredients to be satisfied for ordering winding up of a company for inability to pay its debts are : (i) that the company is indebted in a sum exceeding Rs. 500 (the Companies Second (Amendment) Act, 2002, enhancing the amount from Rs. 500 to Rs. 1 lakh has not been notified); and that despite service of notice on it by a creditor, by assignment or otherwise, the company has neglected to pay the same for more than three weeks after such service, or to secure or compound for it to the reasonable satisfaction of the creditor ; and (ii) that if execution or other process issued on a decree or order of any court or Tribunal in favour of a creditor of the company is returned unsatisfied in whole or in part. 13. The scope of these provisions is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the settled legal principles referred to above, the following issues arise for consideration for the purpose of admission of the company petition : 1. Whether the debt is a bona fide disputed debt ? 2. Whether the respondent is not liable for the consequences under the Act for non-payment of the debt being a purported nodal agency of the State Government ? and 3. Whether the professed ground of public interest should deter this court from admitting the petition for winding up ? 15. Re Point No. 1 : Before undertaking discussion on this point, I would like to clarify that the reference proposed to be made to the various clauses of the agreement between the parties is for the limited purpose of knowing whether the debt claimed by the petitioner is a bona fide disputed debt and observations made and findings rendered in this order shall have no bearing on the future disputes between the parties arising in any form before any forum. 16. In order to know whether the debt is bona fide disputed, the contemporaneous correspondence present the true picture, for, majority of such correspondence ordinarily precedes the dispute and there are bound to be embellishments on both sides, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief Minister's office, Government of Andhra Pradesh, bringing to his notice that as against the completed work value of Rs. 15.30 crores, only a sum of Rs. 5.20 crores was received in April 2009 and that the balance payment of Rs. 10.10 crores is pending since May 2009 for want of funds with the respondent. Accordingly, the principal secretary was requested to arrange the funds for the subject works and release payment to improve cash flow to the project for achieving further progress of the work. Another request was made through letter dated November 12, 2010, addressed to the Chief Engineer-I wherein the authorised signatory of the petitioner has requested the Chief Engineer to release the balance payment of Rs. 8,18,34,678. 18. In another letter dated March 11, 2011, addressed to the managing director of the respondent while reiterating the request for releasing the balance due of Rs. 8,18,26,334 (net amount), the petitioner further informed the managing director as under : "We submit that when the work was in good progress, the officials of the APIIC Ltd., informed us verbally not to proceed with further work in the month of December 2009. Hence we have not proceeded wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of the overdue amount at an early date and communicate his decision regarding execution of the balance work. Reminders on similar lines were issued to the Zonal Manager (E) of the respondent by the petitioner's authorised signatory on August 22, 2011 and September 2, 2011. Separate letters dated December 20, 2011 and January 3, 2012, were also addressed to the managing director of the respondent with a copy marked to the Engineer-in-Chief. 22. While all the functionaries of the respondent, from the managing director to the Zonal Manager (E), were conspicuously silent to the maze of correspondence addressed by the petitioner, letter dated January 3, 2012, addressed to the managing director with a copy marked to the Engineer-in-Chief of the respondent, finally evoked response, by way of reply dated January 18, 2012, from the Chief Engineer (I/c), APIIC. This letter being crucial in deciding this point, it is necessary to reproduce the same : "With reference to the letter second cited, it is to inform that APIIC is being addressed the Government of Andhra Pradesh constantly for releasing the funds for clearing the outstanding bills pertaining to Somasila Drinking Water Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e measurement records maintained by the respondent and that the contractors are claiming more than the said amounts. He has further informed that as against the total work executed to the tune of Rs. 50 crores, the Government has so far released only Rs. 20 crores and that in the absence of funds from the Government as assured, the further work is held up since October 2009. The letter therefore requested the principal secretary to release Rs. 30 crores to clear the outstanding payments of both the agencies to avoid breach of contractual obligations. 25. One wonders, can there be a better case of admission of debt than the one on hand ? Any amount of pleadings cannot displace the evidentiary value of the correspondence exchanged between the parties before the action is initiated. When the chief of the respondent organisation has himself in categorical terms admitted in his letter dated April 2, 2012, that as against the total value of the work of Rs. 15,43,03,122 executed by the petitioner, only a sum of Rs. 6 crores was paid and that as per the measurements recorded by the respondent itself, a sum of Rs. 9,43,03,122 is due to the petitioner, the General Manager (Law) of the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 59 of the contract. The said clause reads as under : "Delays and extension of time : No claim for compensation on account of delays or hindrances to the work from any cause whatsoever shall lie, except, as hereinafter defined. Reasonable extension of time will be allowed by the Zonal Manager or by the officer competent to sanction the extension, for unavoidable delays, such as may result from causes, which, in the opinion of the Zonal Manager, are undoubtedly beyond the control of the contractor. The Zonal Manager shall assess the period of delay or hindrance caused by any written instructions issued by him, at twenty-five per cent. in excess of the actual working period so lost. In the event of the Zonal Manager failing to issue necessary instructions and thereby causing delay and hindrance to the contractor, the latter shall have the right to claim an assessment of such delay by the ENC of the Circle whose decision will be final and binding. The contractor shall lodge in writing with the Zonal Manager a statement of claim for any delay or hindrance referred to above, within fourteen days from its commencement, otherwise no extension of time will be allowed." 28. A careful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up of the company." 32. In Indo Swiss Jewels Ltd. (supra), the Karnataka High Court referred to and followed the view of the Madras High Court in Tube Investments of India Ltd. (supra). 33. On the analysis as above, this court has no hesitation to hold that the debt claimed by the petitioner is an undisputed debt and the denial of debt by the respondent can be characterised as a moonshine or a cloak, spurious, speculative, illusory or misconceived. This point is accordingly answered against the respondent. Re Point No. 2 : It is not in dispute that a concluded contract was entered into between the respondent-Corporation on the one side and the petitioner on the other side. In the first paragraph of the articles of agreement, it is stated : "Articles of agreement made this twenty fourth day of September 2008 between the Andhra Pradesh Industrial Infrastructure Corporation Ltd. (hereinafter called the Corporation on which expression shall where the context so admits include his successors in office and assignees)". 34. Though the background preceding the execution of the agreement between the parties shows that the execution of work was necessitated on account of a policy decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the courts, an order to wind up a company is discretionary and even in a case where a company's inability to pay the debt is proved, the order to wind up the company is not automatic and the court will consider the wishes of the shareholders and creditors and it may attach greater weight to the views of the creditors. All these aspects will be germane for consideration, after admission of the company petition. For the present, it will suffice if the court is prima facie satisfied that there is an undisputed debt, the denial of which is not bona fide and the debt is not being paid as envisaged under section 434(1)(a) of the Act. 37. Though learned senior counsel appearing for the respondent emphasised that the respondent is a solvent company, as held by the courts in the judgments referred to supra, solvency is not a stand alone ground and where the debt is undisputed and the company does not choose to pay a particular debt, its defence that it has the ability to pay the same will not be acted upon by the court. 38. Learned senior counsel appearing for the respondent has relied upon the judgments in NCC-IVRCL-SMS (JV) (supra) 2010, dated December 19, 2011 and NCC-IVRCL-S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This was obviously so as the court was exercising its extraordinary jurisdiction under article 226 of the Constitution of India which was purely discretionary. Furthermore, both the courts have taken the submission of the respondent on its face value that there is a serious dispute regarding the entitlement of the petitioner therein to receive payments as it has allegedly abandoned the work on its own volition and in violation of the contractual terms. Second, the more formidable reason for dismissing the writ petition and the writ appeal was that the dispute arose under a concluded non-statutory contract and that ordinarily a writ court will not entertain a dispute arising thereunder. 41. The jurisdiction under section 433 read with section 434 of the Act being special in nature, considerations which weigh with a writ court under article 226 of the Constitution of India need not necessarily weigh with this court as this court is governed by separate and distinct parameters from those governing the writ jurisdiction. 42. On a detailed analysis of the defence of the respondent, this court is thoroughly convinced that the so-called dispute relating to payment of money claimed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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