TaxTMI 
TaxTMI 
TaxTMI 
2013 (8) TMI 578
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.... LOE set out the fees and expenses payable. The fees payable by JIL to E&Y was structured as 'Engagement fees' and 'Success fees'. Clause 3.3.1 and 3.3.2 of the LOE which set out the details read as under: "3.3.1 Engagement Fees Engagement fee is designed to compensate E&Y for a portion of the time and efforts expended from the Start Date to Transaction Closing Date for raising both debt and equity funds required for the proposed acquisition on the rigs. The amount of engagement fees for the debt/mezzanine debt/equity raise would be as follows: Rs. 5,00,000 payable upon signing of this letter. Rs. 10,00,000 payable upon finalisation of the appropriate structure for undertaking the funding exercise. Rs. 10,00,000 payable upon acceptance of a non-binding term sheet from a potential debt/mezzanine debt/equity investor (for clarification this would be payable for each term sheet that is finally accepted by the Company, subject to a cap of INR30,00,000/- in aggregate towards the aforesaid fees payable upon acceptance) &n....
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....3.6 of the LOE sets out the payment schedule. The entire fees was payable as per different milestones defined in clause 3.3.1. Success fees was to be paid on the day of transaction closure co-terminus with the transactions at closing between JIL, its subsidiaries and the lenders/investors, as applicable. An extension letter was issued on 2nd November 2009. 6. On 11th June 2008 E&Y raised an invoice regarding fees for professional services rendered in the sum of Rs.5 lakhs together with service tax and educational cess totalling Rs.5,61,800. Another invoice was raised for professional services rendered in Phase-II in the sum of Rs.11,23,600. On 22nd June 2009 an invoice for a sum of Rs.17,81,681.48 for milestone fee, out of pocket expenses etc. was raised. An invoice for Rs.3,23,667.91 for out of pocket expenses was raised on 18th March 2010. On 18th March 2010 itself another invoice for Success fee including service tax and education cess totalling Rs.2,30,52,700 was raised. 7. On 22nd April 2010 E&Y addressed a letter to JIL setting out the key milestones achieved by it since the LOE was executed. In the letter, addressed to the Chairman of JIL with a copy marked to Mr. Pradeep ....
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....me would be cleared subject to approval with Mr. J.P. Gupta, Chairman, Jagson Group." 10. With no payment coming forth, a legal notice was issued on 31st August 2011 by E&Y to JIL under Sections 433(e), 434 and 439 of the Act. JIL was called upon to make payment of the admitted debt of Rs.7,94,65,462 together with the interest @ 12% per annum from the due date till payment. 11. A reply was sent to the aforementioned notice by JIL through its counsel on 24th November 2011 where, inter alia, it was stated as under: "2. That my client has instructed me to say that it is not in a position to comprehend the said notice in the absence of the availability of the correspondence mentioned therein. According to it, its officers spent a lot of time in making arduous efforts to trace the said correspondence but in vain and that is the reason this reply is being submitted thereafter. 3. That I have the instructions from my client to call upon you to make available to it the full correspondence mentioned in the said notice so that the contents thereof may be comprehended in order to submit an effective reply thereto." 12. The present petitio....
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....f the debt as Success fees apart from service tax. Accordingly, JIL paid E&Y Rs.76,55,902 plus Rs.7,88,558 for of service tax totalling Rs.84,44,460 by 11th October 2010. JIL contends that with the said payment nothing further remains to be paid to E&Y. JIL has claimed that there was an "oral" understanding between the parties that JIL would on successful arrangement of the reduced debt pay E&Y 0.32% of the debt as Success fee. JIL asserts that it is a financially sound company having an annual turnover of Rs.220 crores during the financial year 2011-12 and has 250 employees. 14. E&Y has in its rejoinder denied that there was any "oral" understanding between the parties as claimed by JIL. Reference is made to JIL's letter dated 27th January 2011 which constituted an admission of liability. It is pointed out that till it filed a reply to the present petition, JIL never denied its liability. It cited financial problems and asked for time till February 2013 to make payment. Reference is made to the letter dated 22nd April 2010 whereby E&Y had sought enhancement of the success fee rated from 0.9% to 1.15%. Reference is made to para 3.3.2 of the LOE in terms of which if JIL was not suc....
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....nances. According to Mr. Sakal Bhushan no Success fee could be claimed by E&Y for merely 'assisting' JIL in obtaining finance as compared to 'arranging' for such finance. He pointed out the variance in figures of the amount due as claimed by E&Y in different paras of the petition and that this itself was a good reason for not entertaining the petition. In support of his plea that a winding up petition for a vague and unascertained sum ought not to be entertained Mr. Bhushan relied on the decision in Madison Communications (P.) Ltd. v. Som Distilleries and Breweries Ltd. [2004] 56 SCL 443 (Delhi). He further submitted that so-called admission of liability made by Mr. Pradeep Gupta was without any authorisation of JIL or its Chairperson and, was, therefore, not binding on JIL. Reliance was placed on the decision in Patel Investments v. Credential Finance Ltd. [2001] 105 Comp Cas 13 (Bom.). Thirdly, it was submitted that the admission, if any, by JIL was at best ambiguous and it was for E&Y to show that there was an unequivocal admission of liability by JIL. Reliance is placed on the decision in Tata Iron and Steel Co. Ltd. v. Omega Cables Ltd. [2008] 142 Comp Cas 468 (Mad.). 17. By ....
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....by JIL in its letter dated 27th January 2011 while acknowledging receipt of the invoice in the sum of Rs.4,90,04,429 from E&Y. In his e-mail of 9th October 2011 sent to the Petitioner, Mr. Pradeep Gupta makes a reference to the meeting held with the Chairman of JIL even when he requests for "patience for little more time". The e-mail dated 26th May 2011 from JIL also seeks some more time to make payment. Therefore, the decisions in Patel Investments (supra) and Tata Iron and Steel Co. Ltd. (supra) are distinguishable on facts and do not assist JIL. In the circumstances, the defence of JIL to the petition does not appear to the Court to be bona fide. The Court finds that there is an admitted liability of JIL towards E&Y which it has been unable to pay. 21. As regards the issue of 'unascertained' debt, the discrepancy in the figures is possibly due to the fluctuating foreign exchange currency rates. As far as the present petition is concerned, the legal notice dated 31st August 2011 sent by E&Y to JIL mentions an admitted debt of Rs.7,94,65,462 together with the interest @ 12% per annum from the due date till payment. 22. The plea that JIL is commercially solvent and ought not to b....
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....f this petition be served on the Official Liquidator ('OL') attached to this Court. The OL is appointed as the Provisional Liquidator ('PL') of the JIL. The OL is directed to take over all the assets, books of accounts and records of the JIL immediately upon this order becoming effective as indicated hereafter. The OL shall in that event also prepare a complete inventory of all the assets of the JIL before sealing the premises in which they are kept. He may also seek the assistance of a valuer to value the assets. He is permitted to take the assistance of the local police authorities, if required. 25. Publication of the citation of the petition be effected in the Official Gazette, 'The Statesman' (English) and 'Veer Arjun' (Hindi) in terms of Rule 24 of the Companies (Court) Rules, 1959 ('Rules'). The cost of publication shall be borne by E&Y. 26. The Directors of the JIL are directed to strictly comply with the requirements of Section 454 of the Act and Rule 130 of the Rules and furnish to the OL a statement of affairs in the prescribed form verified by an affidavit within a period of 21 days from the date that this order become operative as indicated in para 34 below. They will....