Delhi High Court

M/S Adharshila vs M/S Spa Lifestyle Pvt. Ltd. on 13 January, 2011

Author: Manmohan

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+      CO.PET. 161/2009 & CO.APPL. Nos. 486-487/2009 and 1238/2009


       M/S ADHARSHILA                               ..... Petitioner
                    Through: Mr. Prabhjit Jauhar, Advocate.

                       versus


       M/S SPA LIFESTYLE PVT. LTD.                ..... Respondent
                      Through: Mr. Thomas P. Kuruvilla, Advocate with
                               Mr. Himanshu Bhagdwal, Advocate.


%                                                  Date of Decision: 13th January, 2011


       CORAM:
       HON'BLE MR. JUSTICE MANMOHAN

       1. Whether the Reporters of local papers may be allowed to see the judgment?
       2. To be referred to the Reporter or not?                                      Yes
       3. Whether the judgment should be reported in the Digest?                      Yes.


                                JUDGMENT

MANMOHAN, J (ORAL)

Co.Appl. No.487/2009 in Co.Pet. 161/2009

1. Mr. Thomas P. Kuruvilla, learned counsel for the respondent

requests for an adjournment on the ground that he has recently been

instructed by the respondent to enter appearance. He states that even

a vakalatnama has not been executed in his favour.

2. Mr. Prabhjit Jauhar, learned counsel for the petitioner has

vehemently opposed the request for adjournment.

3. Upon perusal of the order sheets, I find that in a short span of

about a year and a half, respondent has already changed its counsel.

Mr. Thomas P. Kuruvilla, is the third counsel to enter appearance on

behalf of the respondent.

4. I am of the view that the respondent is repeatedly changing its

counsel to get further time from this Court as it knows fully well that

the dockets of this Court are clogged and no short adjournment can be

granted. I may mention that this Court on 15th February, 2010, had

observed after hearing the matter at some length that prima facie there

does not appear to be any serious defence in the matter.

Subsequently, even the mediation efforts had failed.

5. Consequently, I decline to grant an adjournment.

6. Briefly stated the relevant facts of the present winding up

petition are that respondent executed a work order dated 09 th August,

2007, in favour of the petitioner for the purposes of carrying out fit

out works in respondent's upcoming office at 21st Floor, Jacaranda

Marg, DLF Square, Gurgaon.

7. Clause 4 of the payment term of the said work order states as

under:-

―4. Payment Terms:

- 25% advance shall be released on submission of a promissory note to be submitted by Vendor.

- 30% after 30 days from the start of work.

- 30% after 60 days from the start of work.

- 10% on handing over/Testing and commissioning of the facility to the Client and Submission of As built drawing, handing over documents and removal of all snags to the satisfaction of project Management Consultants and obtaining final completion certificate from the Project Management Consultants appointed by M/s SPA Lifestyle Pvt. Ltd.

- Balance 5% of the value would be retained as Retention Money for 6 months from the date of completion of handing over. The retention money will be released only when the Vendor gives a Bank Guarantee for release of retention money will be released only when the Vendor gives a Bank Guarantee for release of retention money in favour of the owner valid for 30 days after completion of Defect Liability period‖

(emphasis supplied)

8. On 05th May, 2008, the final bill was certified by Project

Management Consultant of the respondent company for a sum of

Rs.22,63,173.70/-. The said certificate is at page 47 of the paper

book.

9. On 11th April, 2008, a final bill certification meeting was held

amongst petitioner, respondent as well as the respondent's Project

Management Consultant. The relevant portion of the minutes of the

said meeting read as under:-

―C&W presented the final bill for Fit-out of SPA Office to M/s SPA Lifestyle.

xxx xxx xxx

- M/s SPA Lifestyle accepted the bill and the amount stating that they have faith in the final worked out quantities and amount. SPA assured that this amount would be treated as final. The final amount of the bill is Rs.74,87,706/-.

xxx xxx xxx

- Providing the solution to the problem M/s SPA Lifestyle told C&W to prepare the remaining snags/pending works and split them into stages with a completion timeframe for each stage. The payments shall be released accordingly to M/s Aadarshila, based on the satisfactory completion of each stage of desnagging.

- M/s. SPA Lifestyle assured that they will leave the cheques with C&W in the name of M/s. Aadharshila and with satisfactory completion of

the each stage the cheque may be handed over to M/s. Aadharshila accordingly by C&W.‖

(emphasis supplied)

10. As no cheques were issued by the respondent, the petitioner

issued a legal notice for winding up of the respondent company under

Sections 433 and 434 of the Companies Act, 1956.

11. In reply to the legal notice, the defence taken up by the

respondent company was that there were number of snags/defects in

the work executed by the petitioner and further despite the respondent

having been paid Rs.5 lacs for starting the de-snagging process, the

petitioner had not removed the snags.

12. Having heard the learned counsel for the petitioner and having

perused the paper book, I am of the view that on 05th May, 2008, the

final bill had been certified by the Project Management Consultant of

the respondent company. In my opinion, once the bill had been

certified, then the amount becomes payable as the said final bill was a

written document not only prepared by the petitioner but also certified

by an agent of the respondent and it would have the same character as

if the said bill had been signed by both the parties namely, the

petitioner and the respondent. In reaching this conclusion, I am

fortified by a judgment of this Court in Pact India vs. Sanjiv Bhasin,

(2001) 5AD (Delhi) 667 wherein it has been held as under:-

―9. As already mentioned, the defendant himself agrees that once the bill is certified by the Architect amount there under becomes payable. Final bill, which is a written document, prepared by the plaintiff on being certified by the Architect i.e. the agent of the defendant will have the character as if the said bill is signed by both the parties, namely by plaintiff and by the defendant

though his authorised agent, the Architect and it would be a written contract acknowledging the debt or liquidated demand in money payable by the defendant to the plaintiff. The suit therefore would be clearly covered by Order XXXVII. In Mrs. Sushila Mehta Vs. Shri Bansi Lal Arora, ILR 1982 Delhi 320, this court has held that the receipt executed by defendant acknowledge in receipt of certain amount from the plaintiff for the purpose of allotment of shares as application money clearly amounts to contract. {Also see Food Corporation of India Vs . Bal Krishan Garg reported as 21(1982)DLT167}. Therefore, I am of the view that no triable issue is raised by the defendant and he is not entitled to any leave to defend the suit. The plaintiff is entitled to a decree.‖

13. I also find that the work order executed between the petitioner

and the respondent has a liquidated damages clause namely, 6.3, but

the same has till date not been invoked by the respondent company.

There are also no documents/bills on record to show that the

respondent had got any alleged snags/defects rectified from any third

party.

14. Moreover, upon perusal of the paper book, I do not find any

receipt or any documents showing payment of Rs.5 lacs by the

respondent company to the petitioner after the final bill had been

certified.

15. A Division Bench of this Court in German Homeopathic

Distributors Pvt. Ltd. vs. Deutsche Homeopathic-Union DHU-

Arznemittel Gmbh, (2009) 161 DLT 703 has held that in a winding up

proceeding, the following principles need to be kept in perspective:

―12. In winding up proceedings it is necessary to keep the following principles in perspective--

(i) If there is a bona fide dispute and the defence is a substantial one, the court will not wind-up the company;

(ii) Where the debt is undisputed the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay it;

(iii) Where the defence of the company is in good faith and one of substance, and the defence is likely to succeed in point of law, and the company adduces prima facie proof of the facts on which the defence depends, the petition should be rejected;

(iv) The Court may consider the wishes of creditors so long as these appear to be justified;

(v) The machinery of winding up should not be allowed to be utilised merely as a means of realizing its debts. [For the above propositions see Pradeshiya Industrial and Investment Corporation of Uttar Pradesh vs. North India Petro-Chemical Ltd., (1994) 2 Comp LJ 50 (SC) in which the observation in Amalgamated Commercial Traders (P) Ltd. vs. Krishnaswami, [1965] 35 Comp. Cas 456 (SC) and Madhusudan Gordhandas vs. Madhu Woollen Industries (P) Ltd. [1972] 42 Comp. Cas 125 (SC) have been paraphrased];

(vi) If the stance of the adversaries hangs in balance it is always open to the Company Court to order the Respondent Company to deposit the disputed amount. This amount may be retained by the Court and be held to the credit of the suit, if any.[see Ambala Bus Syndicate Pvt. Ltd. vs. Bala Finance Pvt. Ltd. 1983 (2) SCC 322 and Civil Appeal No.720 of 1999 arising out of SLP(C) No.14096 of 1998 - M/s. Nishal Enterprises vs. Apte Amalgamations Ltd., decided on Febraury,5, 1999];

(vii) Generally speaking, an admission of debt should be available and/or the defence that has been adopted should appear to the Court not to be dishonest and/or a moonshine, for proceedings to continue. If there is insufficient material in favour of the petitioners, such disputes can be properly adjudicated in a regular civil suit. It is extremely helpful to draw upon the analogy of a summary suit under Order XXXVII of the Code of Civil Procedure. If the Company Court reaches the conclusion that, had it been exercising ordinary original civil jurisdiction it would have granted unconditional leave to defend, it must dismiss the winding up petition.‖

(emphasis supplied)

16. Keeping in view the aforesaid facts, I am of the view that in the

present case, the debt mentioned by the petitioner in its legal notice is

an admitted debt and the defence adopted by the respondent in the

reply to its legal notice as well as in its reply affidavit is a moonshine.

17. However, keeping in view the fact that the respondent company

is a running company, I grant four weeks' time to the respondent to

deposit a sum of Rs.22,63,174/- with the Registry of this Court. In

case, the aforesaid amount is not deposited within the stipulated

period, the Official Liquidator attached to this Court shall stand

appointed as a Provisional Liquidator with regard to the respondent

company. It is clarified that in the event, the amount is not deposited

within the stipulated period, the Official Liquidator would take over