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TMI Blog2018 (1) TMI 1181X X X X Extracts X X X X X X X X Extracts X X X X ..... in this Court. The Company Court cannot be oblivious to all these factors which go into the exercise of discretion. The Apex Court in the case of IBA Health (India) Private Limited [2010 (9) TMI 229 - SUPREME COURT OF INDIA] has held that the primary test that to be applied by the Company Court is see that the Respondent Company has "no good reason" to withhold the debt. It appears to me that the Petitioner is taking advantage of dominant position to engage in an arm-twisting tactic to try to recover a disputed amount. It cannot be said that the Respondent Company has no legitimate claim against the Petitioner. If this petition is admitted, it will have devastating effect on the Respondent Company, and will trigger various consequences and push the Respondent Company towards bankruptcy, which as of today is far from it. Considering the totality of the circumstances, Iit is of opinion that no case is made out for admission of the Company Petition. - COMPANY PETITION NO.11 OF 2015 - - - Dated:- 21-12-2017 - Mr. N. M. Jamdar, J. For The Petitioner : Mr. Kevic Setalvad, Senior Advocate i/b Mr. Jonathan Costa and Ms. Aneesa Cheema, Advocates For The Respondent : Mr. N. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts and restart of power. Thus, as per the Petitioner, the Respondent Company was still liable to pay an amount of ₹ 99022459/- . The Petitioner sent a letter in respect of some amount to the Respondent on 14 February 2014 which was replied by the Respondent Company on 31 March 2014. The Petitioner wrote another letter on 14 July 2014 calling upon the Respondent Company to pay the amount. Since the amount was not paid as sought for, the Petitioner issued a statutory notice to the Respondent Company under Section 434 of the Company Act calling upon the Respondent Company to pay an amount of ₹ 100931282/- which according to the Petitioner was payable on 2 September 2014. On 13 September 2014, the Respondent Company sent an e-mail and sought to initiate discussion for settlement of the dispute. Thereafter, the Respondent Company replied to the statutory notice on 1 October 2014 and disputed the claim made by the Petitioner. The Respondent Company further a letter on 19 January 2015 disputing the claim of the Petitioner. 6. The Petitioner filed the present Company Petition on 30 March 2015 seeking winding up of the Respondent Company on the ground that it has failed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record the circumstances in which a shortfall of power occurred. Reliance was placed on the communication issued by the Executive Engineer, Hirakud Reservoir project on 10 June 2013. According to the Petitioner, this direction by the Executive Engineer triggered the operation of the force majeure clause. The Petitioner reiterated that in the meeting held on 18 December 2013, the Respondent had agreed to repay the dues, and there was no such settlement agreement arrived at on that date. The Petitioner, relying on the correspondence between the parties , reiterated their contention that the power supplied was admittedly consumed by the Respondent and on the ground of some irregularity for some period, for the power admittedly consumed, payment cannot be withheld. The Respondent filed an additional affidavit on 13 April 2016, to place the material indicating the financial position of the Respondent Company on record, to demonstrate that it is commercially very sound. A further affidavit was filed by the Respondent on 23 June 2016 to bring on record the communication entered between the parties in January 2016 and reconciliation efforts. It was stated that the Respondent was always rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of this position, the short fall occurred. The e-mail correspondences between the parties in a short span of time on 18 December 2013 clearly shows that the Respondent had agreed to pay the amount and only sought time for repayment. There is a clear admission of liability in the e-mail correspondence. The Respondent on their own have deposited ₹ 32500000/- in this Court ,and no party who was disputing the debt, would deposit such an amount unless there is a liability. The deposit during the hearing is only in continuance of the acknowledgment of debt shown during the correspondence. The suit filed by the Respondent is a complete afterthought as it is filed in the year 2016, after the Company Petition was heard on various dates. Even assuming the amount claimed by the Respondent Company in the civil suit is decreed, it still does not cover the claim of the Petitioner and as long as the debt is above the statutory limit, which is not paid and there is no defense to the same, then the case for admission of Company Petition is made out. The Suit is entirely frivolous at the most it is a suit for specific performance and even if the Suit is decreed for specific performance, it d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondence. The case of the Petitioner of force majeure is without merit. The Petitioner had a clear notice of the event and could easily make the alternate arrangement and inform the Respondent. The Suit is filed within the period of limitation, and it is not only for specific performance but for damages. It cannot be said that the Respondent has no case at all. The Respondent is commercially extremely sound, and the debt is seriously disputed, and Petitioner itself has breached the agreement and had no equities in its favor. Considering all these aspects, there is no case made out by the Petitioner. The consequences of even the admission of the Company Petition are serious, and Company Petition be dismissed. 13. Most of the facts are admitted. An agreement is executed between the parties as there is a letter of intent issued by the Petitioner. The agreement was executed under the LOI on 18 March 2013. Two clauses are relevant to this petition, which are reproduced. First is about force majeure which reads thus : Force Majeure: A Force Majeure Event shall mean any event or circumstances or combination of events or circumstances ( not otherwise constituting an Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied is 70% in any month of the total contracted period then the compensation will be applicable for 80%-70% =10% of shortage quantity. In case, Selling Utilities fails to initiate/apply for Open Access in stipulated time as per RLDC's guidelines in force, then compensation shall be levied at the rate mentioned in compensation clause and the contracted quantum shall be considered as deemed scheduled. 14. It is an admitted position that the invoices were raised by the Petitioner. The details have been enumerated in paragraph 6(e) of the Company Petition. It is further an admitted position that the invoices at serial No.24 to 27 for the period 2 August 2013 to 5 August 2013, 6 August 2013 to 8 August 2013, 9 August 2013 to 12 August 2013 and 13 August 2013 to 15 August 2013, the entire amount has not been paid by the Respondent. The correspondence that has entered between the parties such as statutory notice, replies and e-mail correspondence, is not in dispute. The letter issued by the Petitioner to the Respondent Company on 9 July 2013 regarding the force majeure due to non-availability of water level along with a letter of the Executive Engineer, Main Dam Divisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny is not moonshine and that there exist good reasons in favour of the company and that other equitable factors exist, the Company Court will leave the matter at that and relegate the parties to the competent forum to get their civil dispute resolved. Winding up of a solvent company cannot be explored as a first resort but as a last resort. The Apex Court in the case of IBA Health (India) Private Limited v Info- Drive System SDN. BHD (2010) 10 SCC 553 has observed that even the admission of Company Petition and consequent publication can have serious consequences for a company. The Apex Court has emphasized that a party to the dispute should not be allowed to use the threat of winding up petition as a means of enforcing a bona fide disputed debt. A Company Court cannot be reduced to a debt collecting agency. Apex Court noted that of late the jurisdiction of a Company Court is being abused to pressurize the companies to pay the debts which are substantially disputed. Issuing notices and ordering publication in the newspapers attract adverse publicity for the company. Publication in the newspapers of the filing of winding up petition may damage the creditworthiness or financial stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in supply of power. Thus the Petitioner itself did not supply the power as agreed between the parties. The grievance of the Respondent of impact on the business when it suddenly received a short supply, can be easily understood. The main business of the Respondent is to channelize transmission of electricity released by the Petitioner through CTU of the Respondent, to its consumers. Reliability and regularity of power supply are the selling points for this business. If the Petitioner breached the contract and that such breach had serious repercussion on the Respondent and when the Petitioner has brought a petition for winding up, the Company Court is entitled to examine the entire conspectus including this conduct of Petitioner. It cannot be urged by the Petitioner that , even if it may have breached the terms of the agreement and caused damage, the Company Court shall not look into any other aspect except the fact non-payment for a particular period. Wearing such blinders is not contemplated when the Company Court is exercising its equity jurisdiction. Therefore, I am not inclined to accept the absolute proposition that, even though the Petitioner may have supplied the power at le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... water level will reach the permissible limit. This was a direction for the future event and not on that day. Furthermore, the letter seems to have been signed on 10 June 2013, much prior to that shortfall. That prior to monsoon ,water levels in the dams in India fall, is not an unforeseen eventuality. A power generation company such as the Petitioner has to make alternate arrangement in this season. The least Petitioner could have done is the inform the Respondent in advance when it received a letter from the Engineer. All this was admittedly not done by the Petitioner. The Petitioner suddenly sent short supply of power and much later informed the Respondent, when damage was already done to the Respondent. This conduct is not as per the spirit of the agreement between the parties. 21. Mr. Setalvad relied upon a decision firstly of the House of Lords in the case of C. Czarnikow Ltd v Centrala Handlu Zagranicznego Rolimpex to contend that the direction of the Government can be also an important factor. In this decision, the question of force majeure in respect of a contract of delivery of sugar led to a dispute which ultimately had to be resolved by the House of Lords. The party t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by Mr.Sardessai that in view it's heavy dependence on the supply of power, the Respondent did not intent to risk its entire future business on this one dispute. 24. On 18 December 2013, a meeting was held between the parties. Surprisingly, from the end of contract period in August 2013 till December 2013, there are no written communications exchanged between the parties. It is inconceivable that the parties will simply forget about their respective dues, to suddenly hold a meeting on 18 December 2013 and that nothing happened in the meanwhile. Thus, there is merit in the contention of Mr. Sardessai that this meeting took place in view of the oral discussions between the parties in the intervening period. It is in the context of the position of the parties in the business that the correspondences will have to be considered. 25. After the meeting took place on 18 December 2013, the Respondent sent an email on the same day summarizing, what according to it was mutually agreed, as under : 1. GEPL is remitting ₹ 1 Cr. on a/c payment against our current out standing to Sterlite today itself. 2. Sterlite will sell upto 150 MW to GEPL for sale to HT and oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts need quick reconciliation. 26. It is from this correspondence; the Petitioner has attempted to cull out from the admission of the debt itself. Mr. Sardessai has sought to explain the circumstance in which these statements were made. He pointed out that the Respondent was committed to its consumers and after taking necessary permissions was keen to restart the distribution of power immediately. Mr. Sardessai pointed out that throughout in the correspondence the Respondent has emphasized the need for immediate starting of power. If one goes through the e-mail correspondence, it cannot be said that this contention is without merit. The Respondent has time again emphasized for immediate issuance of LOI, showing its eagerness to restart the business with the Petitioner. The Respondent has even deposited the amount of ₹ 1 crore. Mr. Sardessai contended that since the magnitude of business with Petitioner and its importance to the business of the Respondent was immense, the Petitioner did not want its larger business to be jeopardized in this dispute and therefore, in a reconciliatory note, with an intention to restart the business, and being led by the promise of restarting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 1968 and this absolute proposition laid down therein has lost much of its force in view of the decision of the Apex Court in the case of IBA Health (India) Private Limited. On the other hand, Mr. Sardessai relied upon the decision of the Company Judge of this court in Dalmia Cement ( Bharat ) Ltd. v Indian Seamless Steels Alloys Ltd. (2002) 112 Comp Cas 314 wherein the learned Judge observed that winding up petition cannot be used force payment when there is a bonafide dispute. The learned counsel also relied upon a decision of the Division Bench of Gujarat High Court in the case of Tata Iron and Steel Co. v Micro Forge ( India ) Ltd. (2001) 104 CompCas 533. wherein the Division Bench summarized various aspects that the Company Court needs to keep in mind while dealing with winding up petition. 28. During the pendency of the Company Petition, the Respondent filed a suit for specific performance and for damage. It is the contention of Mr. Setalvad that this suit cannot be an answer to the Company Petition as it is a complete after thought and if such tactics are allowed by the Court, it will defeat every winding up petition. It is correct to contend that a company which all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidiary companies such as Belgundi Cements Pvt. Ltd., India Electron Exchange Limited, Indianeye Security Private Limited, Sukhashanti Estates Pvt. Ltd. It is informed that Respondent Company employed large work force. Though the solvency of the company is not a standalone defense in the winding up proceedings, it is still a relevant criterion to be considered along with other factors which are in favor of the company. It is not the case that the Respondent Company has lost substratum or has become commercially insolvent. 30. The Respondent had alleged breach of the agreement on the part of the Petitioner and raised its own claim. The Respondent had sought for restoration of the supply of power and is ready to comply with the conditions and deposited necessary amount. The Petitioner has sought to segregate the dispute and is calling upon the Court not to look into any other aspect of the matter, but only to focus only on one aspect , that is for some period there was supply for which there is no payment. The request of the Respondent for reconciliation of accounts has gone unheeded. The request of the Respondent to restart the power has not been acceded to, in spite of receiving ..... X X X X Extracts X X X X X X X X Extracts X X X X
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