TaxTMI 
TaxTMI 
2013 (3) TMI 887
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....d Company, entered into 4 separate contracts, all on the same date viz., 10.5.2006 with the petitioner herein; (ii) that all the 4 contracts were towards the project of setting up a coal based power plant of 3,600 MW Capacity; (iii) that the total contract price of all the 4 contracts dated 10.5.2006 was fixed at USD 943,978,215.00 and INR 15,602,886,878.00; (iv) that as per the terms and conditions of the contracts, the petitioner not only started executing works, but also issued Performance Bank Guarantees to the total tune of USD 123,599,998.10, all of which are valid and subsisting till 31.10.2013; (v) that the petitioner completed all its obligations under all the 4 contracts and all the 4 Units (4 x 600 MW), were set up except that the Reliability Run and Performance Guarantee Test for Unit No.4 was pending; (vi) that all the 4 Units are complete in all respects and are already operating commercially and generating revenue, with the respondent selling power from all the 4 Units to various Government and Non-Governmental Agencies; (vii) that despite the petitioner fulfilling and performing all their obligations, the respond....
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.... the respondent agreed to a schedule of payment, under which the respondent was to pay a sum of Rs. 175 crores on or before 15.7.2012, a sum of Rs. 50 crores on or before 15.8.2012, a sum of Rs. 125 crores on or before 15.9.2012 and a sum of Rs. 125 crores on or before 15.10.2012; (xxi) that after making payment of only a sum of Rs. 100 crores, out of the total payment agreed to be made viz., Rs. 475 crores, the respondent failed to make any further payment; (xxii) that the respondent thus defaulted in making payment of even the amount admitted and acknowledged under the Minutes of the meeting dated 10.7.2012; (xxiii) that when the petitioner issued a letter dated 6.8.2012, demanding payment, the respondent started making all kinds of objections; (xxiv) that in the meantime, it came to be known that the respondent initiated a process of merger and amalgamation with Sesa Goa Limited; (xxv) that upon coming to know of the petition of the respondent for approving a Scheme of Amalgamation pending in this Court in C.P.No.166 of 2012, the petitioner filed objections on 24.9.2012, on the ground that the petitioner is one of the largest unsecure....
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....payment was fixed contingent upon the petitioner following a schedule of work set out in Clause 2(b) to Clause 2(g); (ix) that under Clause 2(f) of the MOM, the petitioner was to hand over Unit No.3 by 11.7.2012 after resuming normal operations on 9.7.2012; (x) that on the undertaking given by the petitioner to rectify the breach, the respondent agreed to give up the claim for liquidated damages; (xi) that in accordance with the MOM dated 10.7.2012, the respondent paid Rs. 100/- crores to the petitioner, but the petitioner failed to fulfil their reciprocal obligations under the said MOM; (xii) that the petitioner failed to hand over Unit No.3 by 11.7.2012 and also failed to provide solution to generic defects affecting the plant performance; (xiii) that the petitioner failed to act upon 56 items agreed to between them; (xiv) that the petitioner failed to replace the Generator Transformer of Unit No.4 and also to resolve various other issues; (xv) that the question whether the respondent is liable to pay any amount to the petitioner, has become a disputed question; (xvi) that since the liability is disputed, a p....
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....e cropped up after 10.7.2012. 6. At the first stage, the petitioner admittedly issued a notice dated 18.4.2012, suspending the work in relation to all the 4 contracts. This led to the respondent invoking the Performance Bank Guarantee vide a letter dated 20.4.2012. The invocation of Bank Guarantee became the subject matter of a proceeding initiated by the petitioner under Section 9 of the Arbitration and Conciliation Act. Since the learned single Judge who heard that application refused to grant an ex parte interim order, the petitioner moved the Division Bench. Before the Division Bench, it was reported that the respondent withdrew the Letter of Invocation of Bank Guarantee and also undertook not to invoke the Performance Bank Guarantee till 11.6.2012. The petitioner agreed not to discontinue the work till 11.6.2012. Thereafter the parties nominated their respective Arbitrators to the Arbitral Tribunal on 19.5.2012 and 16.6.2012. But thereafter the parties had a meeting on 10.7.2012 and arrived at some understanding. Consequently, the Arbitral Tribunal was dissolved. Therefore, it is clear that what transpired upto 10.7.2012 is only a matter of academic importance and whatever ....
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....inted out to SEPCOIII that SEL has been suffering heavy losses due to non-availability of Unit 3 which is under mechanical breakdown since a long time for the tube leakages and other generic problems. It was decided that two nominated Engineers from each side shall identify and analyse the defects/deficiencies and recommend action plan for liquidation of such deficiencies. It was further decided that SEL shall make a shutdown schedule for unit 1, 2 & 3 in consultation with SEPCO III during which all these deficiencies shall be set right so as to evolve a long term solution. SEPCOIII stated that they would take a fair view in analyzing the defects and shall bear all costs except where it is clearly established that the defects are attributable to SEL or its O&M agency. SEPCOIII reiterated its commitment to provide a long term solution for the generic defects which have been seriously affecting the plant availability. A list of 10 major items affecting the plant performance was handed over to SEPCO III for study and action. This is in addition to a list of 56 items on which agreement was reached earlier and which will form part of this MOM along with the list of 10 major items referr....
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....as agreed that unless further demand is made by GoO before 15th October 2012 or final decision is made by the Hon'ble Supreme Court in the meanwhile, SEL shall defer the deduction of entry tax from SEPCO-III's dues till the instalment payment, referred to in 2a(iv). However, an amount of Rs. 15 Cr. already paid to GoO shall be adjusted against the payments to be made and as referred in 2a(ii) above. It was further agreed that, if the stated amount of 15 crore is refunded to SEL at a later date under an order from a competent authority, SEL shall refund the same to SEPCO-III within 15 days of receiving of such refund by SEL. SEPCO III requested that in the event that there is no decision on the entry tax matter by the Supreme Court by 15th October 2012, SEL and SEPCO III would sit together to find out a suitable mechanism reasonably acceptable to SEL, so that the potential entry tax liability on SEL is secured." 8. After the meeting held on 10.7.2012, the respondent had made payment of a sum of Rs. 100/- crores. This includes a sum of Rs. 30/- crores paid on 7.7.2012, as indicated in paragraph 2(a)(i) of the Minutes of the meeting. 9. The balance amount of Rs. 275/- cr....
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....ne. The test to be applied by the Court are:- (i) Whether the defence of the Company is in good faith and one of substance; (ii) Whether the defence is likely to succeed in point of law; and (iii) Whether the Company adduces prima facie proof of the facts on which the defence depends. It was made clear by the Supreme Court in that case that when the debt is undisputed, the Court will not reject the petition merely because the Company has the ability, but not the willingness to pay the debt. 15. Therefore, in the light of the fact that the respondent is denying its liability to pay unless and until the petitioner performs their obligations under the Minutes of the meeting, I have to see whether such a defence on the part of the respondent (i) is in good faith and (ii) is one of substance. If the defence set up by the respondent is only moonshine, fabricated for the purpose of depriving the lawful dues of the petitioner, then such a defence should be rejected as not in good faith and not one of substance. This question as to whether the dispute is bona fide and one of substance, has to be seen only in the light of the documents produced before me. ....
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....of substance. I do not think that there is any prohibition for the respondent to refuse to make even the admitted liability, if they have a serious and bona fide dispute with regard to the execution of the contract. Paragraph 1 of the Minutes of the meeting dated 10.7.2012 would show that the parties actually met on three different dates viz., 28.6.2012, 4.7.2012 and 10.7.2012 to resolve at least about five named issues, namely, (i) delay in commissioning (ii) delay in payments (iii) under performance of equipment (iv) compensation claims and (v) claims due to generation losses. 20. The obligations indicated in Clauses (b) to (f) of paragraph 2 of the MOM do not, technically speaking, have a correlation to the payment liable to be made under paragraph 2(a). But it does not mean that the respondent can never take advantage of the non-fulfilment of the obligations by the respondent. 21. If the petitioner had actually filed a civil suit for recovery of money in terms of paragraph 2(a) of the MOM dated 10.7.2012, it would have been open to the respondent to lodge a counter claim, due to the non-fulfilment of the obligations on the part of the petitioner, even without denying the ....
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....t, unfortunately for the petitioner, this Court as a Company Court, cannot go into Minute details and find out whether the monetary value of the dispute is grossly disproportionate to the admitted liability. In a Motor Car, valued at about Rs. 20 lakhs, a small nut or bolt may be of insignificant value. But its absence or disorder may threaten the very utility of the vehicle. Therefore, if there are actually disputes with regard to the working condition of certain items of work, the fact that their monetary value is very insignificant when compared to the total liability, cannot be a reason to belittle the disputes raised. 26. It is true that the work schedule now agreed to between the parties, provides time to the petitioner to complete the works by March or April 2013. It is also true that the respondent has Performance Bank Guarantees furnished by the petitioner. Therefore, the refusal of the respondent to make payment of the amount agreed in the Minutes of the meeting, appears to be, on the face of it, unfair. But, unfortunately for the petitioner, I am not dealing with a civil suit. I am dealing with a company petition for winding up. The question whether the refusal of the....