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TMI Blog2016 (8) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... mbiguous, unequivocal and unconditional which is not the fact situation obtaining in the instant case. A company may deliberate on a number of issues and unless and until some decision is taken and thereafter conveyed to the opposite party (respondent herein), these would only remain and can only be considered as proposals or at best the internal matters of the company and can by no legitimate or even legal standards be termed to be admissions or acknowledgments of debt. It is more than settled that the presumptions are always rebuttable and, therefore, the question is whether the appellant company has been able to rebut the presumption. It would be evident from a perusal of the aforesaid letter that nowhere is it the case of the respondent that the appellant had acknowledged or even admitted any specific amount due, rather, the respondent itself asked the appellant to treat the letter as a notice of arbitration under Clause 67 of the GCC and initiate the process of constituting Arbitral Tribunal in accordance with the provisions of the contract. Not only this, the request was thereafter again reiterated by the respondent in its letter dated 31.08.2012. In such circumstances, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000, whereas, the original value of Contract No. 2.1 was ₹ 517,98,00,000 which was revised from time to time and completed at ₹ 506,45,00,000. 4. The work in respect of Contract No. 1.0 was completed and handed over by the respondent to the appellant on 20.06.2004 and work of Contract No. 2.1 was completed and handed over to the appellant on 09.06.2003. 5 . However, in both the contracts, dispute arose between the appellant and the respondent regarding Extension of Time (EOT) under Clause 44 of the General Conditions of Contract (GCC) and the respondent invoked the arbitration clause of the agreement and Arbitration Tribunal was constituted on 16.11.2005 under Clause 67 of the GCC. 6 . After due deliberations, the learned Tribunal gave its awards for both the contracts. Insofar as the Contract No. 1.0 is concerned, the extension of time for 37 months out of 75 months was allowed with cost to be paid at the rate of ₹ 1,28,11,971/- per month and in addition thereto the interest at the rate of 10% from the date of dispute to the date of award and thereafter 14% from the date of award till the date of payment was also awarded. 7. As regards, Contract No. 2.1, ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.12.2010 and 11.01.2011 provided item wise break up of the undisputed outstanding amount alongwith calculations, back up proofs and other details. 13. It was averred that the respondent was given to understand that the appellant in its Board meeting No. 201 dated 02.02.2011 had deliberated and agreed for further action to resolve the matter of settlement of the dues of the respondent. Thereafter, the appellant again vide its letter dated 01.03.2011 sought confirmation from the respondent that only an amount of ₹ 25.72/- crores was pending in respect of the aforesaid contracts and this confirmation was duly supplied to the appellant vide letter dated 03.03.2011. The Committee of the Board of Directors met the officials of respondent on 11.04.2011 and confirmed to pay the interest amount due to the respondent by way of "one time settlement" and as per the internal decision of the appellant an amount of ₹ 14.50/- crores was proposed to be paid by the appellant towards this "one time settlement". 14. It was then averred that since time was the essence of the settlement arrived at between the parties and the amount having not been paid within the sti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid by the appellant to the respondent within the time as stipulated under the said agreements. Thus, by entering into these agreements, the parties had put final lid with regard to any dispute which had surfaced from the above said contracts. 19. It was further averred that the matter with regard to above said contracts having come to a final end was reopened by the respondent only after it had received the complete agreed amount in question dehors Clause 60 of the GCC which expressly provided without any ambivalence that no interest will be payable to the contractor on account of delayed payment against the claim/head of Contractor's Draft Final Account (CDFA). The respondent company after having a golden handshake with the appellant company and in the face of apposite Clause guiding the terms and conditions inter se the parties, with a view to extract extra money had resolved to institute the instant proceedings ostensibly with a view to pressurize and arm twist the appellant company to shell out extra amount which is an abuse of process of law. 20. It was averred that in case there was any other dispute with regard to further payment, then it was incumbent upon the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that since the respondent had been raising the issue of their outstanding due payments in parts from time to time that too despite having arrived at a settlement, the respondent was only called upon to "confirm/certify as to the facts that the present details of the pending issues/amounts provided as per details shall signify the end of outstanding issues and to be treated complete in all respect of their all pending claims/dispute, other dues, unpaid bills etc. and shall not in-future raise any old, new or further disputes/issues/omissions/errors in whatsoever manner". But, the aforesaid contents could not be construed to be an acknowledgement of outstanding amount of ₹ 25.72/- crores, as alleged. 26. As regards letters dated 01.03.2011 and 03.03.2011, it was averred that these were issued in the background that the respondent was not providing the information as sought regarding its claim. As such, a final letter was written by the appellant on 01.03.2011 asking for their confirmation of the alleged outstanding payments, otherwise, it would be considered that the information as provided by the respondent vide letter dated 29.11.2010 would be treated as complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the main petition and in this application. 2. Since the petitioner has prayed for immediate appointment of Provisional Liquidator, the Court deems it fit and proper to appoint Mr. Neeraj Gupta, Advocate, as Provisional Liquidator, who will be assisted by Ms. Seema Guleria, Advocate by dispensing with notice under sub-section (2) of section 450 of the Companies Act, 1956. The fee of Mr. Neeraj Gupta is assessed at Rs. four lakhs and Ms. Seema Guleria at Rs. Two lakhs provisionally to be paid by the petitioner-company within a period of two weeks from today to the Provisional Liquidator and assisting provisional liquidator. The Provisional Liquidator shall exercise all the powers under section 457 of the Companies Act, 1956. Co. Petition No. 4/2015 List on 16.6.2015." 31. The aforesaid order was assailed by the appellant by filing Company Appeal No. 3 of 2015 and when the same came up for consideration before a Division Bench on 15.06.2015, one of the members of the Bench recused himself and the appeal was then ordered to be listed on 8th July, 2015. 32. However, in the meanwhile, the company petition came up for consideration before the Learned Company Judge on 16.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e dispute resolution procedure as required by the contract under modified Clause 67 of the General Conditions of the respective contract agreements. This stand of the appellant was reiterated in its letter dated 14.12.2011 and in response to this, the respondent itself had clearly mentioned that in case of non release of due payments within 30 days, from the date of letter, the letter dated 25.05.2012 by the respondent be treated as notice under Clause 67 of the GCC. Not only this, the respondent in this letter had requested the appellant to initiate the process of constituting Arbitral Tribunal in accordance with the terms of the contract and the appellant was asked to appoint an Arbitrator within 60 days of its letter in accordance with Clause 67. Still further, the respondent even thereafter vide letter dated 31.08.2012 again reiterated its aforesaid stand. 36. It is further argued that as the respondent had been persistently raising claim of certain amount due towards it, therefore, the matter was placed before the Board of Directors in its 205th meeting held on 14.07.2011, but no decision thereupon was taken therein and the matter came up for consideration before the Board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Even if the debt is proved and even if the inability to pay the debt is also shown, it is not a launching pad, in all cases, for a successful winding up order. Inability may arise for a variety of reasons and the court is obliged to consider whether the inability is the outcome of any deliberate or designed action or mere temporary shock and effect of economy and market. In a given case, it may happen that a party may become unable to pay its debts for a while, but that by itself is not a criterion for exercise of the power to wind up, ipso facto. (4) It is necessary for the company court to consider the financialstatus, strength and substratum of the company, in the overall context. It is possible, at times, that there may be a cash crunch. It may be also, possible, at times, that there is temporary cash crisis despite high sales and heavy turnover and, therefore, in such a situation, mere disability or only on the ground of inability to pay would not constitute a ground empowering the court to wind up the company. (5) If the company is an ongoing concern having regular businessand employment of employees, the court cannot remain oblivious to this aspect. The effect of win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is undisputed, the court does not pass an order for winding up where it is satisfied that it would not be in the larger interest of justice to wind up the company. (13) It is also well settled that a winding up order shall not be madeon a creditor's petition, if it would not benefit him or the company's creditors in general. (14) The court is also obliged to consider that it would be in theinterest of justice to give the company some time to come out of the momentary financial crisis or any other temporary difficulty as winding up is a measure of last resort. (15) Winding up course cannot be adopted as a recourse to recoveryof the debt. (16) The court must bear in mind one more celebrated principle andconsider whether the company has reached a stage where it is obviously and plainly and commercially insolvent, that is to say, that its assets are such and its existing liabilities are such as to make the court feel clearly satisfied that current assets would be insufficient to meet the current liabilities, along with other principles. (17) It is also necessary to consider whether the respondentcompany has become defunct or has closed its business, for quite some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na fide disputed debts and it is nothing but misuse and abuse of the process of the court. (23) A winding up petition is not an alternative form for resolvingthe debt dispute. In certain cases disputes are such that they are fit for resolving through the civil court rather than through the company court. (24) What is bona fide and what is not is a question of fact. Theexpression "bona fide" would mean genuine, in good faith and when a dispute is based on substantial grounds or when a defence is probable and with some substance, it is a bona fide dispute. It must be strictly noted that a winding up petition is not an alternative to a civil suit." 39. In Soni Gulati & Co. vs. JHS Svendgaard Laboratories Limited, Company Petition No. 8 of 2009, decided on 07.05.2015, one of us (Justice Tarlok Singh Chauhan, Judge), after taking into consideration the comprehensive law laid down by the Hon'ble Supreme Court in (i) Amalgamated Commercial Traders (P) Ltd. vs. A.C.K. Krishnaswami reported in 1965 (35) Company Cases 456, (ii) Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries (P) Ltd. reported in 1971 (3) SCC 632, (iii) Pradeshiya Industrial and Investment Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S OF CONTRACT No. 1.0 AND 2.1 OF NJHEP AWARDED TO M/S. CONTINENTAL FOUNDATION JOINT VENTURE Recalling the earlier discussions on the proposal, the Board was informed that there were 10 claims for an aggregate amount of ₹ 25.72 crore under both the contracts, pending for settlement and these claims were not referred to any dispute resolution body. On noticing these claims require settlement, the Board constituted a Committee consisting of Director (Civil), Director (F) and two Independent Directors, namely, Shri K.S. Sarma and Shri S.M. Lodha. The Recommendations of the Functional Directors of the Committee and correspondence of the Independent Directors were placed before the Board. According to the Independent Directors, the aggregate claim of ₹ 25.72 crore could be settled up to ₹ 15 crore and whereas the Functional Directors are of the view that the aggregate claim of ₹ 25.72 crore could be settled at ₹ 14.50 crore. In the absence of the written response from the contractor during the meetings for the settlement, the matter remained pending. Thereafter, M/s. CFJV vide their letter dated 25th May 2011 confirmed acceptance of ₹ 14.50 crore as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , may be secured." 42. In the 207th meeting, the views of the CVO had not been received and consequently the settlement was deferred to the next meeting and the matter was ordered to be placed before the Board in its next meeting. 43. In the Board meeting held on 30.11.2011, no decision could be arrived at as the matter was under investigation with the CVO. 44. The 209th meeting of the Board was held on 27.12.2011 wherein again no decision could be arrived at as no response was received from the CVO. 45. It appears that the matter was finally put up in the 240th meeting of the Board of Directors held on 30th July, 2015 wherein it was decided as under:-- "The Board after due deliberations, decided and directed that in supersession of its earlier decision in the 205th Meeting held on 14-07-2011 and in accordance with the opinion of CVO, the claims made by the Contractor may be examined and processed strictly in line with the relevant contract provisions, keeping in view the interests of the SJVN uppermost." 46. It is evidently clear from the aforesaid that earlier decision of the appellant in the 205th meeting held on 14.07.2011 was never approved in any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crore as compared to ₹ 26.86 crore during the previous fiscal. Other Current Liabilities Other Current Liabilities mainly includes Current Maturities of Long Term Debts payable within Twelve Months, Liabilities for Employees Remuneration and Benefits, Liabilities for Purchase/Construction of Fixed Assets and Deposits, Retention Money from Contractors and others. Other Current Liabilities has increased by 25.79% to ₹ 725.54 crore as compared to ₹ 576.77 crore during the previous fiscal. The increase is mainly due to commencement of repayment of World Bank Loan of Rampur Hydro Electric Project included in Current Maturities of Long Term Debts & increase in Deposits, Retention Money from contractors and others: Short Term Provisions Short Term Provisions includes Unfunded Employees Benefits payable within Twelve Months as per Actuarial Valuation, Dividend, Dividend Tax, Income Tax and Interest on Arbitration Awards etc. Short Term Provisions has increased marginally by 2.55% in Fiscal 2014 to ₹ 609.49 crore as compared to ₹ 594.31 crore during Fiscal 2013. Non-Current Assets (in Crores) As of March 31 2014 2013 Tangible Assets (Note 2.10) 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has been able to rebut the presumption. For that purpose, we will have to fall back to the decision of the Hon'ble Supreme Court in Madhusudan Gordhandas case (supra) wherein it was observed that two rules are well settled:-- "i) In order to see the bona fide, we will have to see if the debt is bonafidely disputed and the defence is a substantial one, then this Court will not order winding up; ii) However, if the debt is undisputed the Court will not act upon a defence of the company that it has the ability to pay the debt, but chooses not to pay that particular debt." 54. The discussion so far clearly goes to indicate that the entire case of the respondent only hinges around the so-called admission/acknowledgment of the debt by the appellant. Reliance has been placed by the respondent upon the Audited Financial Statements dated 30.09.2008 and 31.03.2010 and also the Board of Directors meeting No. 205 dated 14.07.2011 (supra) wherein the debt due, according to the respondent, stood admitted by the appellant company. If it was so, then why the debt was not enforced straightaway, is not forthcoming. On the contrary, it is established on record that in response to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the date of receipt of this letter, kindly treat this letter as notice of arbitration under clause No. 67 of the General Conditions of the Contract and initiate the process of constituting Arbitral Tribunal in accordance with the provisions of the contract. Thanking you, Yours faithfully, For Continental Foundation Joint Venture, Sd/- M. Verma-DPM cc: Shri R.N. Misra, D(C), SJVNL Shri A.S. Bindra, D(F), SJVNL EIC, Contracts # 1.0& 2.1, SJVNL CONTINENTAL HOUSE, 28, NEHRU PLACE, NEW DELHI-110019 (INDIA) TEL: 011-47660900 FAX: (011)-47660920." 55. It would be evident from a perusal of the aforesaid letter that nowhere is it the case of the respondent that the appellant had acknowledged or even admitted any specific amount due, rather, the respondent itself asked the appellant to treat the letter as a notice of arbitration under Clause 67 of the GCC and initiate the process of constituting Arbitral Tribunal in accordance with the provisions of the contract. Not only this, the request was thereafter again reiterated by the respondent in its letter dated 31.08.2012. In such circumstances, it is not only difficult but impossible to hold that the appellant had infa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the respondent could not have used the machinery of winding up as a means of realizing the so-called debt due from the appellant company as it is not a legitimate means of seeking enforcement of payment of debt which has bonafidely been disputed by the appellant. The petition presented by the respondent is though ostensibly for a winding up order, but in reality, it appears to have been filed in order to exercise pressure and the same is, therefore, liable to be dismissed. 63. As observed earlier, the defence raised by the appellant company is a substantial and bona fide one and not mere moonshine and has to be finally adjudicated upon merits before the appropriate forum. Even the so-called 'duesRs.have not been admitted by the appellant. The appellant company is not only a commercially solvent company, but is a government company as defined under the Act. It is a 'Mini RatnaRs.company of the Government of India. The respondent cannot gain any advantage on the basis of Board meeting No. 205 dated 14.07.2011 which as observed earlier was only a proposal and final decision thereupon was taken by the appellant in its 240th meeting held on 30.07.2015 wherein the minutes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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