TaxTMI 
TaxTMI 
TaxTMI 
2004 (10) TMI 351
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....ings. During the course of their such business dealings, petitioner, who is manufacturer of Polythene Insulated Jelly Filled cables (hereinafter referred to as 'PIJF cables') supplied these cables to the respondent. These in turn were supplied by the respondent to HFCL Infotel Limited. 3. At the time of hearing, it was not disputed between the parties that goods of the value of Rs. 7,14,15,554 were supplied by the petitioner to the respondent. Against those, payments have been made from time to time. Now the trouble starts. Petitioner claims a balance outstanding from the respondent in the sum of Rs. 98,37,982. Whereas, no amount is due and payable according to the respondent. Rather, as per the respondent, amount is payable by the petitioner to it because of the defective material supplied, as is evident from the letter dated 15-1-2003, received from its purchaser to whom the material purchased from the petitioner was being supplied by it (the respondent). 4. It is further case of the respondent that vide Annexure R-1, dated 27-2-2003, this position was highlighted to the petitioner with reference to the terms and conditions subject to which purchase orders were placed for purch....
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....e first time after having put in appearance and having paid sum of Rs. 25 lakhs in terms of the above order, plea of goods being defective was raised on 27-2-2003. As such, no benefit can be derived from it so- called stand that the material supplied was defective. Along with reply filed to the Company Petition by the respondent, an application under section 8 of the Arbitration and Conciliation Act, 1996, was also filed being Company Application No. 7 of 2003. According to the respondent, matter was referable for arbitration. After having been put to notice, reply has been filed and this application has been contested and resisted on behalf of the petitioner. 9. When matter came up before the Court on 27-3-2003, a sum of Rs. 72,10,855 was tendered in Court by means of Bank Draft favouring Registrar General of this Court. Following order was passed on this dated :- "When this matter came up for consideration today and before hearing could commence, a bank draft bearing No. 527585 dated 26-3-2003 issued by Corporation Bank, Delhi Caps in favour of its Shimla Branch in the sum of Rs. 72,10,855 favouring Registrar General of this Court has been tendered on behalf of the respondent-c....
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....r not. Similarly, whether because of not replying to the notice under section 433 of the Companies Act, respondent-company is liable to be wound up by raising presumption under section 434 thereof. 12. Supply of goods and payments being made from time to time, as noted hereinabove, is not disputed. Even Annexures P-2 to P-4 were not disputed at the time of hearing on behalf of the respondent. What is disputed, is that because of inferior quality of goods, amount is not payable to the petitioner as per terms and conditions of the supply orders, subject to which the goods were purchased by the respondent. Though these terms and conditions were not accepted by the petitioner, still in the alternative it was pointed out that even if those are treated as part and parcel of the purchase orders, still no benefit can be derived by the respondent. With a view to support the plea that the supply was subject to terms and conditions accompanying the purchase orders, reference needs to be made to Annexure R-7. In the purchase order, Note No. 4 reads as under :- "4. Terms and conditions are enclosed herewith." 13. Terms and conditions of the purchase order are :- "Terms and conditions.-(1) A....
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....tute cause of action as provided in the clause 2 above. 9. Tax will be deducted at source wherever applicable. ACCEPTANCE If we do not hear anything from you within 10 days from the dispatch of the order shall be deemed to have been accepted. PRICE Except as otherwise agreed in writing your price shall remain firm during the period of supply. PACKING Material should be securely packed for Rail/Road transit to reach final destination of the consignee in safe and sound condition. CANCELLATION We reserve the right to cancel the order in part or in full without liability in event of failure to deliver the goods within the time and/or according to the specifications and/or terms and conditions specified in the order. PAYMENT (1) Payment prior to inspection of material shall not constitute an acceptance thereof. (2) If the quantity received is in excess of the quantity ordered, payment will be made only for the accepted quantity. (3) Bill in quadruplicate along with the original receipted challan must be submitted for payment to the Accounts. REJECTED MATERIAL All rejected material will remain in our city Office at our risk and cost from period not exceeding 21 days from the dat....
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.... dated 9-1-2003 does not prevent this Court to see its effect and further come to the conclusion whether by tendering Rs. 25,00,000 it accepted the liability or admitted to be indebted to the respondent to call its winding up. 17. Deposit of the amount on 27-3-2003 by the respondent is indicative of the fact that it is commercially and financially on sound footing. As such, to say that the plea of bond fide dispute being there is merely a camouflage, is not correct. Similar was the stand of Shri Kanwar regarding respondent being as a going as well as a sound concern providing employment to numerous persons. Per Shri Kanwar, respondent's financial worth has nothing to do with its inability to liquidate its liabilities. Reference was made to a number of decisions to advance the plea that there is no bona fide dispute in the facts and circumstances of this case, and even if it be assumed for the sake of argument that the respondent is commercially solvent company, still in the background of admitted facts of this case, order of winding up needs to be passed. 18. Another fact that needs to be noted here is that vide Company Application No. 7 of 2003, a prayer was made by the responde....
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....e prayer made in Company Application No. 7 of 2003. Reply to notice under section 433 of the Companies Act, having not been sent by his client by itself cannot be made a ground for allowing this petition, as per learned Counsel for the respondent. 22. Petitioner claimed to have supplied material, i.e., PIJF cables to the satisfaction of the respondent. It is purely a question of fact. In view of the terms and conditions of the purchase order extracted hereinabove, materials supplied by the petitioner to the respondent were subject to final acceptance after physical inspection. And respondent was to give guarantee as regards performance of goods supplied and also guarantee against sub-standard quality of materials, manufacturing and other defects whether manufactured by it or not. Any of the defects as mentioned above being detected even after issue of material would make the supplier liable and constitute cause of action as provided in clause 2. 23. This is in the nature of performance guarantee on the part of the petitioner qua goods supplied by it to the respondent in terms of purchase order. In this context it may also be appropriate to notice that along with rejoinder only Ph....
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....the petitioner in any manner. 29. So far decision in the case of DLF Industries Ltd. (supra) is concerned, on the facts of that case after examining as to how the matter is to be dealt with, it was observed as under : "Where debt is undisputed, the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt; a winding up petition is a perfectly proper remedy for enforcing a just debt but it is not the normal alternative to the ordinary procedure. Propriety does not affect the power but its exercise; if however the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company; if a debt is bona fide disputed, there cannot be a neglect to pay within the meaning of section 434 of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into application; the petition presented ostensibly for a winding up order but really to exercise pressure will be dismissed. Held accordingly, on the facts, ( i) that there was a bona fide dispute with respect to the claim put up by the petitioner and the claim could not be said to be definite, ascertai....
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....nt was paid till this complaint. In case respondent was unable to pay debt, it would not have made any payment as admitted between the parties and noted hereinabove. 32. Respondent is not commercially viable, for this reliance was placed by Mr. Kanwar on Ranbaxy Laboratories Ltd. v. M.S. Shoes East (I) Ltd. [l998] 93 Comp. Cas. 296 (Delhi). In this case, it was held that it is only in case where the company has raised a bona fide dispute about its liability to pay that the Court may not entertain the petition for winding up. But in cases where liability is not disputed, nor proposed any scheme for consideration to the Court to show how it intends to pay its admitted debts, the company cannot be permitted to contend that the petition should not be admitted as the company has assets, which if sold will realize more money than due to the petitioner. On these facts it was further held that admittedly company was not able to meet its current demands, the assets which were allegedly owned by the company were in dispute, the creditors were not opposing the admission of the petition, the company had been given sufficient time to come out with a scheme of repayment and in spite of the unde....
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....bit note against the respondent in respect of the PIJF cables supplied by the petitioner. In these circumstances to say that there is no bona fide dispute between the parties, will not be correct. 37. Whether the goods, i.e., PIJF cables supplied were of specific standard, quality-wise as per the terms and conditions of the purchase orders, is a question of fact dependent on production of expert evidence by the parties. Such a question cannot in any event be gone into in summary proceedings in this winding up petition. This Court will not investigate into the facts and evidence in depth, as such this petition merits rejection. 38. Suffice it to say in this behalf that keeping in view the defence of the respondent regarding defective goods supplied found by the end user, i.e., purchaser from the respondent, and also keeping in view terms and conditions of the purchase orders as extracted hereinabove, it cannot be said that there does not exist any dispute. In fact this justifies the withholding of payment by the respondent. 39. Regarding commercial solvency as well as worth of the respondent-company, facts detailed in paragraph 8 of the preliminary submissions in its reply though....
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....uted the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt. [See In re A Company [1894] 94 S.J. 369; [1894] 2 Ch. 349 (Ch.D.)]. Where, however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the Court will make a winding up order without requiring the creditor to quantify the debt precisely. [See In re Tweeds Garages Ltd. [1962] Ch. 406; [1962] Comp. Cas. 795 (Ch.D.)]. The principles on which the Court acts are first that the defence of the company is in good faith and one of the substance, secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof the facts on which the defence depends. Another rule which the Court follows is that if there is opposition to the making of the winding-up order by the creditors the Court will consider their wishes and may decline to make the winding-up order. Under section 557 of the Companies Act, 1956, in all matters relating to the winding-up of the company the Court may ascertain the wishes of the creditors. The wi....
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....se of disputed debt or a disputed question of fact, the Company Court would stay its hands and it would be for the parties to get the dispute adjudicated in a competent Civil Court as it would require leading of evidence, documentary as well as oral and its appreciation, which is the domain of the original Civil Court. A bona fide dispute over a debt is a question depending upon the factual scenario of a given case. Where there is a bona fide dispute, company cannot be said to have neglected to pay on a statutory demand. Thus, the Division Bench allowed the appeal and quashed the order of company judge on winding up petition and the resultant directions being not warranted and justified. 43. In Praneet Enviroquips (P.) Ltd. v. Vishal Papertech (India) Ltd. [1999] 4 Comp. LJ 280 (Punj. & Har.), after examining the defence of the respondent as in the present case, it was held that there is a bona fide dispute whether the amount can be claimed or not. It was held that it cannot be termed that the defence is liable to be rejected outright. The winding up proceedings are discretionary in nature and it cannot be claimed as a matter of right. Admittedly, the respondent-company was a runn....
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....ent-company is liable to pay to the petitioner. In case there is a bona fide dispute about that debt, the question of applying the deeming provision would not arise because unless and until the Court has, prima facie, come to the conclusion that there exists a debt which the respondent is liable to pay to the petitioner the statutory presumption that the company has neglected to pay on receipt of the statutory notice would not come into force. In the present case, it is quite evident that there is a bona fide dispute raised with regard to the liability of the respondent-company." (p. 613) 48. Reliance placed on behalf of the petitioner to Max India Ltd. v. Unicoat Tapes (P.) Ltd. [1998] 94 Comp. Cas. 405 (Punj. & Har.), does not advance its case. Reason being that any debt on the basis of unpaid price of the goods supplied and in this case when defence of the respondent was that goods were defective, was held not bona fide, therefore, the petition was admitted. For the view that has been taken in this matter, this decision is wholly inapplicable to the present case. 49. So far petitioner is concerned, it is not remediless. Reason being that it can always have the recourse of reco....