2012 (8) TMI 174 - HC - Companies Law

Court rules in favor of creditor in non-payment case, orders company to pay Rs. 52,28,095/- + penalties.

The court found in favor of the petitioning creditor in a case involving non-payment of dues by the company, breach of contract terms, delay in project ... Application by creditor for winding up - outstanding dues and interest thereon - Held that:- As per the terms and conditions of the contract the Project Management Consultants has the authority to issue certificate once the work has been virtually completed and the company is obliged to pay the contractor in accordance with the certificate issued by the said management consultants specifying the sum of money in accordance with the final certificate issued in writing at the expiration of the period referred to as the 'defect liability period' It appears from the certificate of Project Management Consultants that a final certificate was issued after the defect liability period of 12 months is over. A certificate was issued on 7th December, 2007 wherein Project Management Consultants asked the company to make payment to the contractor the petitioner herein, a sum of Rs. 52,28,095/- towards the work done by the petitioner. It also appears from the TDS certificate that the company has accepted that the petitioner is entitled to get an amount of Rs. 37,45,821 after deduction of tax amounting to Rs. 4,84,312. This amount of Rs. 37,45,821 was admittedly not paid to the petitioner. Thus it appears that there is no dispute about the debt and the company has failed and neglected to pay the aforesaid debt - the winding up petition is admitted,. Issues Involved:1. Non-payment of dues by the company.2. Breach of contract terms and conditions.3. Delay in project completion.4. Dispute over tax deductions and final payment.5. Validity and enforceability of the winding-up petition.6. Bona fide dispute of debt by the company.7. Role and authority of Project Management Consultants.Detailed Analysis:1. Non-payment of dues by the company:The petitioning creditor filed a winding-up application against the company for failing to pay dues amounting to Rs. 52,28,095/- along with interest from 15th November 2009, and additional service tax and penalty. The petitioner entered into an engineering contract for constructing a multiplex-city mall project. Despite completing the project, the company failed to pay the certified amount due to the petitioner.2. Breach of contract terms and conditions:The company issued a letter of intent on 4th February 2006, with specific terms, including mobilization advance, cash retention, and performance guarantees. The petitioner mobilized resources per the contract but faced delays due to frequent revisions in project drawings. The company breached the contract by not adhering to the agreed payment terms, despite the petitioner fulfilling its obligations.3. Delay in project completion:The project faced delays due to constant revisions in drawings, leading to an extension beyond the initial 15-month period. The petitioner completed the work, and the Project Management Consultants issued a completion certificate on 7th December 2007. The defect liability period of 12 months expired, and the petitioner raised bills accordingly, which the company failed to settle.4. Dispute over tax deductions and final payment:The company deducted Rs. 4,84,312 as tax and issued a certificate crediting Rs. 37,45,821 to the petitioner. However, the company did not pay the credited amount. The petitioner issued a statutory notice on 15th November 2009, which the company did not respond to, indicating no valid defense against the claim.5. Validity and enforceability of the winding-up petition:The petitioner argued that the existence of an arbitration clause does not oust the jurisdiction of the company court under sections 433 and 434 of the Companies Act, 1956. The petitioner moved for winding up for the admitted sum while referring the disputed amount to arbitration. The court agreed, stating that the winding-up petition is valid for the undisputed debt.6. Bona fide dispute of debt by the company:The company argued that the debt is disputed and that the petitioner failed to complete the work within the stipulated time, did not provide a bank guarantee, and included non-contractual claims like service tax. The company cited precedents indicating that a bona fide dispute should prevent winding up. However, the court found no substantial dispute regarding the certified amount due to the petitioner.7. Role and authority of Project Management Consultants:The Project Management Consultants, 'Shilp Shree,' were authorized to certify the completion of work and the amount payable. They issued a final certificate on 7th December 2007, confirming the amount due to the petitioner. The court held that the company is obliged to pay the certified amount as per the consultants' certificate.Conclusion:The court concluded that the company failed to pay the certified amount of Rs. 52,28,095/- and interest at 10% from 15th November 2009. The winding-up petition was admitted, and the court ordered publication of the notice. The company's request for a stay was denied. The court emphasized that there was no bona fide dispute regarding the debt, and the petitioner is entitled to the claimed amount and interest.