2010 (12) TMI 1360 - HC - Indian Laws

Court Defers Liquidation Order for Six Weeks; Emphasizes Respondent's Personal Liability in Agreements.

M/s Welldone Estate Projects Pvt. Ltd., Sunil Kothari and Balwant Singh Versus M/s Today Homes & Infrastructure Pvt. Ltd.

M/s Welldone Estate Projects Pvt. Ltd., Sunil Kothari and Balwant Singh Versus M/s Today Homes & Infrastructure Pvt. Ltd. - 2010:DHC:6036 Issues Involved:1. Entertaining the petition filed by Welldone Estate Projects Private Limited.2. Existence and implications of a written agreement in the petition filed by Sunil Kothari.3. Commercial solvency and winding up of the respondent company.4. Refund of booking amount in the petition filed by Balwant Singh.5. Privity of contract and the role of the respondent as an agent.Detailed Analysis:1. Entertaining the Petition Filed by Welldone Estate Projects Private Limited:The court declined to entertain the petition filed by Welldone Estate Projects Private Limited despite the respondent company admitting receipt of Rs. 5,19,00,000/-. The respondent claimed that the transaction was part of a larger agreement involving Ludhiana Improvement Trust (LIT) and HDFC Limited, with disputes pending in litigation. The absence of a written contract between the petitioner and respondent made it impossible to ascertain the transaction's nature, leading to the dismissal of the petition. The court clarified that its observations would not influence the pending civil suit.2. Existence and Implications of a Written Agreement in the Petition Filed by Sunil Kothari:In the case of Sunil Kothari, a written agreement dated 26th August 2006 existed, detailing the terms of a property transaction. The respondent argued that they acted as an agent for LIT and were not liable for payments. However, this defense was rejected as it was not specifically pleaded earlier and the agreement did not indicate the respondent's role as an agent. The court emphasized that the agreement was a principal-to-principal contract, with the respondent accepting personal liability. The respondent's letter dated 27th September 2006 further confirmed the personal obligation to fulfill the agreement, leading the court to consider the petition for winding up.3. Commercial Solvency and Winding Up of the Respondent Company:The respondent argued against winding up, citing commercial solvency and potential adverse effects on third parties. However, the court referred to Supreme Court judgments, stating that commercial solvency is not a standalone ground to avoid statutory demands if the debt is undisputed. The court emphasized that a company must pay its creditors, and the respondent's investment in new projects cannot justify withholding payments due to creditors.4. Refund of Booking Amount in the Petition Filed by Balwant Singh:In Balwant Singh's case, the respondent issued receipts for payments made for booking office space, with an understanding for a refund. The respondent admitted the booking but claimed refunds were subject to their policy, which allowed for deductions. The court found that the petitioner was entitled to a refund due to the respondent's inability to complete the project, and there was no evidence of the respondent acting merely as an agent of LIT.5. Privity of Contract and the Role of the Respondent as an Agent:The court addressed the issue of privity of contract, emphasizing that the petitioners were not parties to the disputes between the respondent and LIT or the Government of Punjab. The doctrine of privity prevents imposing obligations on third parties, and the respondent was bound by the terms agreed with the petitioners. The respondent's role as an agent was not supported by the evidence, and the court held the respondent accountable to the petitioners.Conclusion:The court admitted the petitions filed by Sunil Kothari and Balwant Singh, deferring the order on admission, appointment of a provisional liquidator, and publication of citations for six weeks to allow for negotiations or deposit of principal amounts. The question of interest was left open, with the matter to be re-listed on 1st February 2011.