Chemi Tech & Engineering Pvt. ... vs Geo Millers Company Limited
2003 Latest Caselaw 219 Del

JUDGMENT

Mukul Mudgal, J.

1. This petition has been filed under Sections 433 & 434 of the Companies Act for winding up the respondent company, inter alia on the following grounds:

(a) The petitioner undertook the project for various sewage projects for Government Departments inter-alia in U.P., Haryana and Delhi and the respondent was the environmental consultant and supplier of various equipments.

(b) The winding up petition arises from a proposed purchase by the petitioner from the respondent of a mechanical bar screen for the Sewage Pumping Station at UEED, Jammu. On 14th December, 1997, the purchase order was placed with the respondent which required Rs. 25,000/- to be paid in advance against the purchase order and Rs. 25,000/- after 30 days of the order. The balance amount along with taxes was to be paid through the letter of credit of 45 days with certain benefits for pre-payment. Rs. 50,000/- was paid to the respondent by the petitioner on 16th January, 1998. The respondent vide its letter dated 20th January, 1998, stated that the equipments will be supplied within March, 1998. Drawings were submitted by the respondent on 21st January, 1998.

(c) The petitioner got opened the inland letter of credit for Rs. 9,64,000/- on 13th May, 1998 in the respondent's favor but the equipment was not supplied. In December, 1998, the respondent informed the petitioner that the equipment was not ready and on account of accute financial constraints sought an additional advance of Rs. 5,00,000/-. This pressure was exerted on the petitioner by withholding of supply of another screen at the petitioner's project at Agra. Thereafter two cheques were given to the respondent for a sum of Rs. 4,50,000/- (14th December, 1998) and Rs. 50,000/- (22nd December, 1998).

(d) The petitioner had an understanding with the respondent that the screen was to be supplied as per the requirement of the petitioner, either at Jammu or at any other project of the petitioner. Since the contract at Jammu entered into between the parties did not materialize due to delay and financial problem with the Government of Jammu and Kashmir, the respondent was directed to make the supply of the screen at Delhi for its project with Delhi Jal Board at Rampura, Delhi. Upon the delay and eventual failure of the respondent to do so the petitioner was compelled to place an order with another supplier due to failure of the respondent to supply the equipments.

(e) On 29th November, 2000 notice under Section 433 and 434 was issued by the petitioner claiming back the advance of Rs. 5,50,000/- with interest which received unsatisfactory response from the respondent company which led to the filing of the winding up petition.

2. The respondent's case is is that the original contract dated 14th December, 1997 was for Jammu and U.P. Jal Nigam and the payment of Rs. 9,75,000/- was only for the supply at Jammu. The Screen which was originally deviced for Jammu had to be revised as per the drawings of the respondent and the respondent has always been ready and willing to perform its part of the contract and there was delay on account of the petitioner's own difficulties with the project at Jammu which contract was eventually cancelled by the Government of Jammu and Kashmir due to financial constraints. Since the petitioner was reluctant in performing its part of the contract, such as approval of drawings and variations made therein, on 16th October, 1998, the petitioner was requested to pay a sum of Rs. 3,00,000/- and open a letter of credit as per the negotiations on 7th October, 1998. Consequently on 14th December, 1998, due to the delay in the clearance of the drawings for the Jammu Project, the respondent demanded Rs. 5,00,000/- from the petitioner and upon release of Rs. 4,50,000/-, the equipment was ready for supply for both the Jammu and U.P. Project at Agra.

3. The respondent has further submitted that the Agra project screen was duly delivered to the petitioner and a guarantee certificate to the said effect was issued by the respondent. Since the petitioner did not inspect the bar screen for supply at Jammu, the respondent wrote on 7th January, 1999 to the petitioner . On 6th November, 2000 the respondent was informed that due to financial crisis of the government of Jammu & Kashmir, the screen at Jammu was not required. The said letter for the first time averred that there was an understanding between the parties for the supply of the screen instead for the project - Delhi Jal Board at Delhi. This letter was responded on 29th November, 2000 and the readiness of the screen was reiterated. It is also submitted that the petitioner has also filed a civil suit on 1.12.01 for the same subject matter as of the winding up petition.

4. The notice under Section 434 dated 29th November, 2000 was replied to promptly and the petitioner was asked to take delivery and to make further payment of Rs. 4,25,000/- as balance price and compensation and damages of Rs. 4,00,000/-. Thus according to the respondent there was a bonafide dispute between the parties.

5. In my view, the present case cannot be adjudicated under the winding up jurisdiction of this Court. The notice under Section 434 was promptly replied to by the respondent. It is the petitioner's own case that the original date of supply was March, 1998 as per the order dated 14th December, 1997 and the fact narrated above clearly shows that the said contract got novated and the supply period was extended. It is also the petitioner's own case that eventually the original order for Jammu was cancelled by the Government of Jammu & Kashmir and the petitioner thereafter wanted the original order to be executed at Rampura, Delhi for Delhi Jal Board.

6. It is clear from the exchange of correspondence and the other documents produced before this Court that apart from novation of the terms of the contract, there is a change of site from Jammu to Delhi of the screen to be installed. The petitioner has not able to demonstrate from any document showing the respondent's acknowledgement of the claim set up in the petitioner's letter dated 6th November, 2000 regarding the understanding of change of site from Jammu to Delhi. Furthermore, the reasons for the period of the extension of time to execute the contract are not undisputed. The petitioner sought to contend that change of site does not change the dimensions of the screen ordered as it was the same dimensions. This plea was refuted by the respondent. Consequently, these factual issues cannot be gone into in the winding up jurisdiction. It is thus clear that the debt is not an acknowledged one and on the contrary the dispute raised by the respondent does not prima facie lack bonafides. I am thus satisfied that the respondent has raised a bonafide dispute and the petitioner is not entitled to succeed in the winding up petition. The petitioner itself stated that the contract site was changed from Jammu to Delhi and the original delivery time was extended. This coupled with the prompt response to the notice under Section 434 giving a viable and reasonable cause makes it evident that the petitioner is not entitled to succeed. The disputes raised in the present proceedings are not amenable to adjudication in the winding up proceedings and if at all can be the subject matter of a civil suit. Accordingly the winding up petition is dismissed.