Deltatec Solutions Ltd. vs Container Corporation Of India ...
2004 Latest Caselaw 956 Del

JUDGMENT

A.K. Sikri, J.

1. The case projected by the petitioner, in nutshell, is that there was a written contract entered into between the petitioner and the respondent on 7th October, 1998 as per which, the petitioner was supposed to develop computer modules for the respondent for a consideration of Rs.6,00,000/- which was to be paid in stages. The respondent paid a sum of Rs.4,80,000/- but has not paid the balance of Rs.1,20,000/-. The present petition is filed after serving statutory notice under Section 434 of the Companies Act (in short the 'Act') alleging that the respondent company is indebted to the petitioner in the aforesaid amount besides interest @ 24% per annum and is unable to pay the debts and, therefore, the respondent company should be wound up.

It may be noted at the outset that the respondent, Container Corporation of India Ltd. (hereinafter referred to as the 'CONCOR'), is a public sector undertaking which comes under the administrative control of the Ministry of Railways, Government of India

2. As per the averment made in the petition, the contract was for development of a comprehensive Container Terminal Information System of the respondent for its Inland Container Depot at Triuvottiuyr, Chennai. The contract was entered on 7th October, 1999. The petitioner was to design modules, as stated in the contract, which was to be specifically created to address the need of the respondent company. Payment of Rs.6,00,000/-, consideration of the aforesaid contract, was to be made in four stages which were termed as 'milestones'. The schedule of payment was fixed in the following manner:-

  ''After acceptance of functional specification by CONCOR                Rs.1,20,000/-
After acceptance of system design by CONCOR                             Rs.1,20,000/-
After final installation and acceptance test                            Rs.2,40,000/-
On completion of warranty period of six months                          Rs.1,20,000/-
_____________________________________________________________________________________
               Total                                                    Rs.6,00,000/-
_____________________________________________________________________________________

 

3. A total sum of Rs.4,80,000/- was paid in respect of first three milestones and thus, final installation and acceptance test was conducted. The balance payment of Rs.1,20,000/- was to be made on completion of warranty period of six months. It is the case of the petitioner that this period of six months was to commence from the date of third milestone, namely, on final installation and acceptance test. Joint inspection was done and joint project acceptance report was signed between the authorised representatives of both the parties on 28th April, 1999, which was annexed as Annexure P-2 to the petition. However, even after the expiry of six months period which ended on 27th October, 1999 payment of balance amount was not made, although invoice for this purpose was raised on 18th November, 1999. When this payment was not made for sufficiently long period, legal notice under Section 434 of the Act was sent on 13th July, 2002. According to the petitioner, in spite of due service of the statutory notice Then the respondent company failed to make the payment, it gave cause to file present petition under Section 433(e) of the Act.

4. The case of the respondent, in the counter affidavit, is that although inspection was carried out on 27th/28th April, 1999, at petitioner's premises, thereafter system was to be delivered and installed, which was done only in February, 2002. After the installation of the system, it turned out to be ineffective and could not put to use as there was various defect in the software programme. The petitioner was informed about the system and the petitioner even made repeated efforts to rectify the defects but could not succeed. Therefore, according to the respondent, no such amount is payable. It is stated that even the third milestone, as contemplated in the MOU, was not completed as the system was not installed in CONCOR, Triuvottiuyr, Chennai. However, payment of Rs.2,40,000/- was made at the request of the petitioner at the assurance that the system will be installed without any error and defect and final acceptance will be obtained and, therefore, the petitioner cannot take advantage of the joint inspection on 27th/28th April, 1999 and warranty period cannot be treated to have started from the said date. According to the respondent, six months' period would start only from February, 2001 when the system was delivered and installed and much before the expiry of six months there from the petitioner was informed about the defects and various letters were written right from February, 2000 itself.

5. Learned counsel for the petitioner submitted that for all intent and purposes the period of six months should start only from 28th April, 1999 when the joint inspection was done and the respondent was satisfied about the product of the petitioner in the said inspection. He disputed the fact that the system was delivered only in February, 2000 and submitted that the payment of Rs.2,40,000/- was released on achieving the third milestone, which was ''After final installation and acceptance test'' and without the installation the respondent could not have released this payment. Therefore, according to the petitioner, the amount became due on 28th April, 1999 which would be also clear from the fact that when invoice dated 18th November, 1999 was raised for Rs.1,20,000/- the respondent never came out with the alleged plea that the six months warranty period had not expired as the system itself had not been delivered and, therefore, according to the petitioner, it was an after-thought plea.

6. There may be some dispute about the date of delivery and installation of the system. However, it is clear that from the joint inspection report dated 28th April, 1999 that this inspection was done at the petition's premises, as in this project acceptance report place is specifically mentioned, which is the office of the petitioner and this fact was not denied. There is no evidence coming on record about the delivery and installation of this system, i.e. when it was installed at the premises of the respondent. It is mentioned in the project inspection report under the head ''Observations''. It is also recorded that the developed software was installed and tested. However, admittedly, such an installation could not be on that date as the inspection was done at the office of the petitioner and the date of installation has to be after 28th April, 1999. Be as it may, it cannot be disputed that the system supplied by the petitioner developed defects and errors and numerous letters were written by the respondent to the petitioner for rectification of these defects starting from fax message dated 7th/8th February, 2000. It also cannot be disputed that the petitioner accepted those defects and attended to the same. However, the petitioner could not rectify these defects, although attempts for this purpose were made between April, 2000 and November, 2000. The respondent has filed on record joint reports as Annexure R-3 (Colly.) prepared on 4th April, 2000, 2nd August, 2000, 3rd August, 2000, 4th August, 2000, 5th August, 2000, 7th August, 2000, 11th August, 2000, 29th August, 2000, 7th September, 2000, 20th September, 2000, 21st September, 2000, 22nd September, 2000, 9th October, 2000, 16th October, 2000, 18th October, 2000, 22nd October, 2000, 23rd October, 2000, 24th October, 2000, 8th November, 2000, 27th November, 2000 and 28th November, 2000. Even in the joint report dated 28th November, 2000 it was clearly stated that the software has to be checked again with complete cycle. However, the defects and errors noticed during the joint inspections could not be rectified by the petitioner till date. These reports would clearly show that the software could not be used by the respondent. The case of the respondent is that this software became unusable and useless. It is pertinent to mention that during all this period no payment was demanded by the petitioner and the statutory notice was sent only in the year 2002. In these circumstances, it cannot be stated that the defense of the respondent is not bona fide or it is a sham.

7. The amount involved is only Rs.1,20,000/-. The respondent has stated in detail in the reply about its solvency. It is mentioned in para 5 of the counter affidavit that CONCOR is a company registered under the Companies Act owned by the Government of India, Ministry of Railways. It was set up by the Government of India with the objective of developing Multi-Modal Logistics Support for international and domestic container cargo and trade. CONCOR stated in 1989 with 7 Inland Container Depots and has expanded in 49 international and domestic container depots across the country serving important business centres and port terminals all over the country. CONCOR owns its own fleet of domestic containers and is handling about 1 million international TEUs and over 3 lac domestic TEUs. The turn-over of CONCOR was Rs.1075 crores for the year 2000-2001 with a profit of Rs.217 crores. Its turn-over for the year 2001-2002 was Rs.1286 crores with a profit of Rs.249 crores. CONCOR is expanding its Multi Mudal Logistics activities from year to year and establishing more and more ICDs and other terminals, and it has become the most sought after Multi Modal Logistics provider in the country. The company is expanding from year to year, serving domestic as well as international trade.

8. The Company Court exercises discretionary jurisdiction under Section 433 of the Companies Act (See Pradeshiya Industrialand Investment Corporation of U.P. v. North India PetroChemicals Ltd. and Anr., . It is not a case where this Court should exercise its jurisdiction. The petitioner may raises civil dispute as there are bona fide disputes and friable issues raised by the respondent company.

9.The petition is accordingly dismissed.