Indo Alusys Industries Ltd. vs M/S Assotech Contracts (India) ...
2009 Latest Caselaw 1388 Del

               IN THE HIGH COURT OF DELHI

            Company Petition No. 10/2008

                Judgment reserved on : 20th March, 2009
                     Date of decision: 15th April, 2009

     Indo Alusys Industries Ltd.            ... Petitioner
           through: Mr. Rajesh Banati and Mr. Tarun Walia,
                         Advocates

                         VERSUS

     M/s Assotech Contracts (India) Ltd.   ....Respondents

through: Mr. Rakesh Sinha, Advocate

CORAM:

HON'BLE MS. JUSTICE GITA MITTAL

1.Whether reporters of local papers may be allowed to see the Judgment? Yes

2.To be referred to the Reporter or not? Yes

3.Whether the judgment should be reported in the Digest? Yes

GITA MITTAL, J

1. By this petition under section 433 of the Companies

Act, the petitioner seeks winding up of the respondent

company for the reason that it is unable to pay its admitted

debts.

2. The petitioner was awarded two contracts by the

respondent for providing and fixing of powder coated

aluminium work for doors and windows ventilators and

partitions with extruded built up sections. The contract

dated 15th of November, 2004 in respect of Windsor Greens,

Sector 50 was for a total consideration of Rs.142 lakhs while

the contract dated 20th of May, 2004 in respect of the work

to be undertaken at the Golf Vista Apartments, Plot No. GH-

01, Sector-Alpha II, Greater Noida was for a total

consideration of Rs.54 lakhs.

Inasmuch as clauses 7 & 8 of the agreement are

relevant for the present consideration, the same deserve to

be considered in extenso and reads thus:-

"7. Retention Percentage Security Deposit - 10% on every Bill (subject to maximum of Rs.5.00 lacs).

8. Release of Retention Money - 50% to be released after six months after virtual completion and balance 50% after expiry of 12 months of defect liability period but it can be replaced by Bank Guarantee."

3. In terms of the contract, the petitioner commenced

work and raised several bills from time to time with regard to

the work undertaken. It is pointed out that so far as the

work at the Golf Vista was concerned, the same was

satisfactorily completed on 31st May, 2005 while the work at

the Windsor Greens was duly completed on 29th September,

2005. In terms of clause 7 and 8 noted above, the

respondent was entitled to retain 10% of the bill amount

subject to a maximum of Rs.5.00 lakhs. So far as the defect

liability period is concerned, as per clause 7 of the

agreement, in respect of the work at Golf Vista, the period

got over on 31st May, 2006 while with regard to the Windsor

Greens project, the defect liability period got over on 29th

September, 2006.

4. The petitioner has claimed that a total amount of

Rs.13,63,435/- had been retained by the respondent towards

the retention amount in both the contracts. The submission

is that upon expiry of the defect liability period, this amount

became due and payable to the petitioner.

5. The petitioner has contended that after receipt of three

part payments in 2007, an amount of Rs.10,40,326/- remains

due and payable which has not been paid to the petitioner

despite requests. A statutory notice under section 434 of

the Companies Act, 1956 dated 1st October, 2007 was,

therefore, sent on behalf of the petitioner requiring the

respondent to make payment of the amount of Rs. 10,40,326

with interest at the rate of 21% in respect of both the

contracts. As the petitioner failed to comply with the notice

demand, the petitioner filed the present petition under

Section 433 of the Companies Act, 1956.

6. Before this court, the respondent has contended that

the petitioner has failed to prove that the respondent was

unable to pay its debts. It is further contended that the

petitioner delayed execution of the work beyond the

contractual stipulation. The submission is that the

respondent sent two letters to the petitioner, one being a

letter dated 25th June, 2007 and a second being the letter

dated 6th August, 2007 pointing out defects and deficiencies

in the work. Despite the deficiencies having been pointed to

the petitioner, the petitioner failed to remove the defects.

Learned counsel for the respondent has submitted that the

respondent is willing to pay the petitioner in case defects are

removed.

It has also been urged that the petitioner has filed a

suit for recovery of the amount claimed against the

respondent and that such suit being pending, the present

petition seeking winding up of the respondent company for

non-payment of the same debt is not maintainable.

Reliance has been placed by the respondent on the

pronouncement reported at AIR 2005 SC 4175 Mediqup

Systems pvt. Ltd. vs. Proxima Medical System

G.M.B.H. and (1994) 2 Com.LJ 50 (SC) Pradeshiya

Industrial and Investment Corpn. Of Uttar Pradesh v.

North India petro-Chemical Ltd. & Anr. in support of

these contentions.

7. I have heard learned counsel for the parties at length.

So far as the liability and responsibility of the petitioner is

concerned, the same is governed strictly by the terms of the

contract. There is no dispute that Clauses 7 & 8 governs the

defect liability period and clause 8 is restricted to a period of

12 months after expiry of the contract. No dispute has been

raised that the petitioner completed the work in respect of

Golf Vista on 31st May, 2005 and the defect liability period of

twelve months in respect of this contract would have come

to an end on or around 31st May, 2006. Similarly, so far as

the Windsor Greens contract was concerned, it was

completed on 29th September, 2005 and in terms of clause 9

of the contract, the defect liability period came to an end on

30th September, 2006. Not a single deficiency or complaint

within a period upto end of May, 2006 or September, 2006

has been pointed out to this court. No letters in this behalf

have also been placed on record.

8. Before this court, it is an admitted position that after

the expiry of the defect liability period, out of the

aforenoticed amount, the respondent made part payments of

Rs.1,50,000/- on 20th March, 2007; Rs.73,109/- on 18th May,

2007 and Rs.100000/- on 2nd July, 2007. It is also an

admitted fact that no dispute of any kind with regard to the

work which had been undertaken by the petitioner and

discharge of its liability under the contracts was ever raised

by the respondent.

9. In order to buttress its case, the respondents have

placed on record a copy of a purported notice dated 27th

June, 2007 issued by Dr.Y.P. Singh, Joint Secretary of the

purportedly the residents' association in the Golf Vista

Apartments calling upon residents for the first time to

indicate defects or problems, if any, in the aluminium doors

and window works installed in the flats. This notice clearly

stated that the respondent would be notified accordingly so

that the problems could be corrected. The language used in

this notice clearly indicates that no problem has been faced

or communicated prior thereto by the residents.

10. Such position is also manifested from the tabulation of

complaints placed on record by the respondent which were

purportedly received by the respondents. Interestingly the

first complaint in this tabulation filed by the respondent is

dated 15th of December, 2007. In any case, merely because

the petitioner was required to effect some repairs would not

by itself render the entire work undertaken by the

respondent as being of poor quality. In any case, the same

is not corroborated by any contemporaneous complaint or

any communication by the respondents within the contract

period which could justify retention of the petitioner's

amount.

11. The respondent has also placed copies of the two

letters dated 2nd June, 2007 and 6th August, 2007 on record

purporting to raise an issue with regard to quality of work

done by the petitioner. These letters have to be examined

in this background. On a bare perusal thereof, it is evident

that the same are bald, unsupported allegations without any

details at all. A vague reference has been made to

complaints from members without referring to any previous

communication or any detail with regard to failure of the

petitioner to discharge its responsibility. Even otherwise,

this letter has been issued almost one year after the defect

liability period was over. Blanket and bald allegations

without any particulars deserve no credence.

Both communications have been replied by the

petitioner on 23rd August, 2007 wherein it is pointed out that

the flats were handed over to the flat owners against receipt

and acknowledgment by them and that they were in

satisfactory condition. The petitioner has complained at

length in this letter that the plea of defective workmanship is

being raised as a bogey to avoid making payment of a

lawfully due amount to the petitioner. The respondent was

clearly notified that even though the petitioner had no

liability to do so under the contract, it was willing to rectify

deficiency, if any, in the interest of the project and further

business relations and had requested the respondents to

provide details of the defects. It has been reiterated that it

is only after the expiry of the same when the petitioner

started asking for its balance security amount that the

respondents started making these kinds of assertions.

These communications from the respondents do not

further its case at all.

12. So far as the objection that the petitioner has filed a

suit disentitling it to maintain the present petition is

concerned, it is well settled that the right to bring a winding

up action is statutorily conferred under Section 433 of the

Companies Act, 1956. However, no person has a statutory

right to winding up of a company incorporated under the

Companies Act, 1956. Action to recover amounts and to

winding up of the company are two wholly distinct and

independent remedies. It is not necessary that every

petition under Section 433 of the Companies Act, 1956 ends

up in an order of winding up. Several essential factors as

public interest, justice and convenience enter into the

consideration before the prayed for order results. The

nature of the defence and extent of dispute raised by the

respondent also impact adjudication in winding up action. At

the same time, limitation for seeking the remedy of recovery

against the company continues to run. The two remedies

are not alternative remedies. More often than not, as a

matter of abundant caution, parties do not wait for final

decision in one remedy before invoking the other.

13. I find that a similar issue was raised and decided by

this court in a judgment reported at 1998 (45) DRJ 522

Rishi Pal Gupta Vs. S.J. Knitting and Finishing Mills

Private Limited. A similar objection taken by the

respondent debtor of the company, was decided thus:-

"It is now well settled law that the remedy of recovery of money through a civil suit is distinct from that of the remedy provided for

winding up of a company for non-payment of its debt under Section 434 of the Companies Act. In the winding up proceedings the final order passed is to wind up the company which is not only beneficial for the petitioner but is also beneficial to all the shareholders, creditors or contributories of the companies. The purpose of filing a recovery suit and a winding up petition are separate and distinct and therefore, even when a civil suit for recovery of a debt is filed, there is no bar for the creditors to file a petition in the Company Court for winding up of the defaulting company. Therefore, in my considered opinion the company petition filed by the petitioner is maintainable."

14. In view of the above, mere filing of the suit by the

petitioner in order to protect its right and by way of

abundant caution certainly would not prohibit filing of the

winding up petition or preclude the petitioner from

maintaining the same.

15. I find that there is not a word of explanation as to why

the respondent made the three payments on 20th March,

2007, 18th March, 2007 and 2nd July, 2007 if the work

undertaken by the petitioner was so defective so as to entitle

the respondent to withhold payment of the balance amount.

There is also not a word of explanation as to why the

respondents did not write a single letter after the agreement

dated 20th May, 2004 came into effect and made payment of

all amount as were billed by the petitioner without any

grievance or complaint.

16. So far as the defence of deficiency in the work of the

petitioner is concerned, the case set up by the respondent

does not inspire any confidence. The respondent admits

receipt of the statutory notice. It raised no dispute to the

contents thereof. No reply was admittedly sent to the

notice. The respondent also failed to make payment of the

amounts claimed by the petitioner resulting in the filing of

the present petition.

The respondent company has made bald and vague

allegations in the counter affidavit which are unsupported by

any material which would enable this court to hold that the

amount was not due or payable to the petitioner.

On taking a comprehsensive view of the entire facts, it

has to be held that the dispute sought to be raised in answer

to the present petition is totally bogus and sham and has

been raised only in order to create a semblance of a defence

to the present winding up proceedings.

17. So far as the debt and extent of liability is concerned, I

find that there is no dispute to the quantification of the

amount. The respondent has admitted part payment out of

the amount which was retained in terms of Clauses 7 & 8 of

the contract as noticed hereinabove. No dispute was raised

even in answer to the legal notice dated 1st October, 2007.

In this background, it has to be held that prima facie an

amount of Rs.10,40,326/- is due and payable to the

petitioner and the respondent company has neglected to pay

its debt to this extent despite statutory notice. The view I

have taken is supported by the principles laid down by the

court in 2005 IV AD (Del.) 410 Image Meditech. (P) Ltd.

Vs. Jay Rapid Rollers Limited and 1994 II AD Delhi 471

Shri N.K. Verma Vs. Pushpa Builders Limited.

18. An issue has been lastly raised that even if the

petitioner owed a debt to the respondent, the petitioner has

to satisfy that the respondent was not in a position to pay

the same. It has been urged that the respondent is ready

and willing to pay if defects are removed.

So far as this submission is concerned, the same is

completely devoid of legal merit. There is no dispute with

regard to relationship as a creditor and a debtor between the

petitioner and the respondent.

19. It is well settled that a bogus or a sham dispute,

contrived or concocted as a defence for a genuine and bona

fide claim by a creditor, is not permitted to be utilised as a

defence to a winding up action. It has been held above that

there is no substantial defence to the petition. I have also

found that a debt is prima facie due and payable by the

respondent to the creditor. In this background, the binding

principles laid down by the Apex Court in AIR 2005 SC

4175 Mediqup Systems Private Limited Vs. Promixa

Medical System G.M.B.H. and (1994) 2 Comp. LJ 50

(SC) Pradeshiya Industrial & Investment Corporation

of Uttar Pradesh Vs. North India Petro-Chemical

Limited & Arn. relied upon by the respondent, have no

application to the present case.

20. In view of the above, the petition is admitted.

Citation be published in the "Statesman" (English

edition) and "Jansatta" (Hindi edition) in accordance with

Company (Court) Rules, 1959.

However, publication of the citation and appointment

of the provisional liquidator is deferred and one opportunity

is given to the respondent company to pay the amount found

already due and payable to the petitioner with interest at the

rate of 8% per annum with effect from 1st October, 2007

when the legal notice was served on the respondent

company. The amount be paid within one month failing

which the petitioner shall be entitled to publish the citation

and apply for appointment of the provisional liquidator.

List for further directions on 20th May, 2009.

(GITA MITTAL) JUDGE April 15, 2009 aa