M/S Praja Mechanicals Pvt. Ltd. vs M/S. Vardaan Agrotech Pvt. Ltd.
2012 Latest Caselaw 38 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+      CO.PET. 296/2007 & CO. APPL. 1290/2007

M/S PRAJA MECHANICALS PVT. LTD.          ..... Petitioner
                  Through: Mr. Jeevesh Nagrath, Advocate
                       versus

M/S. VARDAAN AGROTECH PVT. LTD.       ..... Respondent
                 Through: Mr. Rajiv Bahl, Advocate.

%                                 Reserved on: 14th December, 2011
                                  Date of Decision: 3rd January, 2012

CORAM:
HON'BLE MR. JUSTICE MANMOHAN

                                JUDGMENT

1. Present winding up petition has been filed under Section 433(e)

read with Sections 434 and 439 of the Companies Act, 1956 (for short

'Act') for winding up of the respondent company. The application

being CA 1290/2007 has been filed seeking appointment of a

Provisional Liquidator.

2. The facts as borne out from the petition are that the respondent

company on 31st December, 2003 had placed a purchase order on the

petitioner for conveyor system 4x4x6 along with accessories, source

raising mechanism, pressure plate for its irradiation plant at Sonepat

for a consideration of ` 1,26,00,000/-. Thereafter, a number of

revisions were made in the purchase order from time to time and

finally the respondent company was to pay to the petitioner a sum of

` 1,90,83,443/- inclusive of statutory charges. According to petitioner,

it had fulfilled all its obligations under the purchase order but the

respondent company paid only a sum of ` 1,67,19,053/- to the

petitioner leaving a balance of ` 23,64,390/- as outstanding.

3. Thereafter, on 27th July, 2006 an agreement was executed

between the parties whereby it was agreed that the respondent

company would pay the balance amount to petitioner and the petitioner

as a goodwill gesture would help the respondent company in

identifying and solving the problems in running the conveyor system.

4. In pursuance to the said agreement, respondent company issued

two posted dated cheques dated 10th August, 2006 and 20th August,

2006 for a sum of ` 3 lacs and ` 4 lacs respectively to the petitioner.

On presentation the cheque dated 10th August, 2006 got dishonoured

for the reason „insufficient funds‟. The respondent company requested

the petitioner not to take action against it and replaced it by Demand

Draft for a sum of ` 3 lacs, which was honoured. Thereafter, the

cheque dated 20th August, 2006 was also dishonoured on presentation

for the reason "payment stopped by drawer". Once again the

respondent company requested the petitioner not to take any action and

informed the petitioner that it had already got a demand draft made in

favour of the petitioner for a sum of ` 2 lacs and that the balance

payment would be made shortly. The respondent company also faxed

to the petitioner a copy of a demand draft bearing no. 000230 dated

21st August, 2006. However, this draft was also got cancelled by it and

the payment was never made to the petitioner. Hence this petition was

filed.

5. Mr. Rajiv Bahl, learned counsel for the respondent company

raised a preliminary objection that resolution passed by the Board of

Directors of the petitioner company on 8th December, 2007 was for

recovery of outstanding dues of respondent company and not for filing

the winding up petition against the respondent company. He pointed

out that the petitioner company had filed a civil suit for recovery which

is pending before Original Side of this Court. He submitted that the

petition was liable to be dismissed on this ground alone.

6. Mr. Bahl next submitted that there was no privity of contract

between respondent company and petitioner company and the

transactions in question were between respondent company and

another company, i.e., Praja Technologies Ltd.

7. Mr. Bahl stated that, in fact, the respondent company had made

payment to the tune of ` 1,74,99,460/- as against due amount of

` 1,71,75,100/-, thus making an excess payment of ` 3,24,360/-. He

further submitted that the original contract was on turnkey basis and

the petitioner was responsible for completion and normal running of

the complete system and that time was the essence of the contract. He

submitted that there was a considerable delay in installation of the

system and there were defects in the working of the conveyor system

from the very beginning. He further submitted that respondent

company wrote a number of letters requesting the petitioner to rectify

the said defects and to finish the installation in a time bound manner.

In this context, he referred to numerous letters written by respondent

company during the period 2004 to 2006.

8. Mr. Bahl lastly submitted that the payments that were to be

made as per agreement dated 27th July, 2006, were contingent on the

petitioner identifying and solving the problems affecting the conveyor

system. Mr. Bahl submitted that since no work was done at all,

therefore, the petitioner company was not entitled to receive or recover

any amount.

9. In rejoinder, Mr. Jeevesh Nagrath, learned counsel for the

petitioner submitted that the petition has been filed by duly authorised

person and the Board Resolution dated 8th November, 2007 had been

filed with the petition. He further submitted that on account of the

objection raised by the respondent company in this regard, the

petitioner had filed another Board Resolution dated 12th November,

2010 ratifying and admitting that the petition was filed by a duly

authorised person. He further submitted that in any event, the petition

had been filed by a Director of the petitioner company who is fully

authorised to represent and act on its behalf.

10. Having heard the learned counsel for the parties and on a perusal

of the paper book, this Court is of the view that the preliminary

objections raised by the respondent company are untenable in law.

The objection with regard to the defective Board Resolution dated 8th

November, 2007 is not maintainable as the said Board Resolution was

later ratified by a new Board Resolution 12th November, 2010. In the

opinion of this Court, it is within this Court's power to take the ratified

Board Resolution on record. This view is supported by a judgment of

Supreme Court in United Bank of India vs. Naresh Kumar & Ors.,

(1996) 6 SCC 660 wherein it has been held as under:-

"10. It cannot be disputed that a company like the appellant can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 Rule 1 of the Code of Civil Procedure, therefore, provides that in a suit by or against a corporation the Secretary or any Director or other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation. In addition thereto and dehors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure. A person may be expressly authorised to sign the pleadings on behalf of the company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In

absence thereof and in cases where pleadings have been signed by one of its officers a corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The court can, on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer."

11. Further, in view of the order dated 30th August, 2007 passed by

this Court in Co. Pet. 125/2007 approving the Scheme of

Amalgamation whereby Praja Technologies Ltd. was merged with

Praja Mechanicals Private Limited, the second preliminary objection

raised by respondent company is also untenable in law.

12. Coming to the merits of the case, this Court is of the considered

view that the respondent's reliance on the correspondence prior to

Agreement dated 27th July, 2006 is misplaced. The agreement dated

27th July, 2006 supersedes all the correspondence prior to it and the

respondent 'cannot just wish away' the said agreement. This Court

also finds that till date no action has been taken by the respondent

company to have the said agreement set aside. The respondent

company is bound by the said Agreement and mere allegation by the

respondent company that the same is not binding cannot be sustained.

The Supreme Court in Subodh Kumar Gupta Vs Shrikant Gupta &

Ors., (1993) 4 SCC 1 has held as under:-

"3. ........Now this agreement was executed outside the territorial jurisdiction of the Chandigarh Court. Unless this agreement is set aside there is no question of the Chandigarh Court entertaining a suit for dissolution of the partnership and rendition of accounts. The plaintiff cannot wish away the agreement by merely stating that it is a void document. He cannot rest content by alleging that the document has no efficacy in law and must, therefore, be ignored. If it is the case of the plaintiff that this document was obtained by fraud or misrepresentation by suppression of material facts or for any other like reason he must have the agreement set aside through court and unless he does that he cannot go behind the agreement, ignore it as a void document and proceed to sue for dissolution of the partnership and rendition of accounts. It is not a matter of the volition of the plaintiff to disregard the document as void and proceed to ignore it altogether without having it declared void by a competent court....."

(emphasis supplied)

13. Further, the contention of the respondent company that the

payment of the amount as mentioned in the agreement dated 27 th July,

2006 was contingent on the petitioner fulfilling its promise to support

the respondent in making the conveyor system run smoothly belies the

contents of the Agreement. In fact, this Court finds that nowhere in the

said agreement it is mentioned the payments were to be made only

when the petitioner would complete the work and make the conveyor

system functional. The agreement dated 27th July, 2006 is reproduced

hereinbelow for ready reference:-

"AGREEMENT

This constitutes an agreement between Praja Technologies Limited (hereinafter called Praja) having their Registered Office at A-80, New Friends Colony, New Delhi-110 065 represented by their Director - Shri J.N. Rungta and Vardaan Agro Tech Pvt. Ltd. (hereinafter called Vardaan)having their working site at Dwarka Vihar, 43.2 Km. Stone, N.H.-1, G.T. Road, Bahalgarh - 131 021, Distt. Sonepat, Haryana represented by their Chairman & Managing Director - Shri Dwarkanath.

The following points have been discussed and agreed between the two parties named above on 27th July, 2006:

1) The conveyor as supplied and commissioned by Praja is presently being used for commercial production by Vardaan Agro Tech Pvt. Ltd. (Vardaan) and as reported is not functioning smoothly at rotators and guiding rails and at times reported stuck.

2) It was reported by Vardaan that due to some mishap the conveyor has got struck resulting in malfunctioning in the System.

3) Vardaan requested Praja to attend to the system to rectify the problem which could be due to any reason not determined as yet and could be unrelated to Praja.

4) Praja as a a good-will gesture investigated the system in order to help Vardaan to identify and solve the problem provided Vardaan honour following past commitments not met so far:

a) Total amount due to Praja Technologies Limited from Vardaan Agro Tech Pvt. Ltd. stands at Rs.23,64,390/- (Rupees twenty three lacs sixty four thousand three hundred ninety only) as on date.

b) Vardaan agrees to clear this amount not withstanding any previous terms and conditions or agreement or minutes of meeting or understanding in the following manner:

Rs. 7,00,000/- (Rupees seven lacs only) to be paid immediately

Rs.5,00,000/- (Rupees five lacs only) payable on 30.10.2006

Rs.6,64,390/- (Rupees six lacs sixty four thousand three hundred ninety only) payable on 30.12.2006

c) Vardaan to issue necessary Form „D1‟ for Sales Tax purpose against the contract immediately.

5) A clear condition is stipulated that Praja is not responsible for the current functioning or non- functioning of the system which has been

attended to by outside agencies in the past on Vardaan instruction.

6) Vardaan will release the above payments as mentioned under 4(a) & (b) above. Praja will have the right to cash the cheque and Vardaan cannot hold back the due payment by retorting to stop payment or by cheque bouncing or any other recourse to any action - legal or otherwise.

7) Praja agrees that if all above conditions are met satisfactorily then Praja will continue supporting the system for a period of one year and thereafter in the normal course of business.

8) It is clearly understood that any further action from Praja is dependent on Vardaan fulfilling condition 4(a), 4(b) & 4(c) immediately."

(emphasis supplied)

14. In the opinion of this Court, there is a clear admission that an

amount of ` 23,64,390/- was due and payable as on that date and

respondent was to make payment without demur.

15. Further, to show the unreliable conduct of the Director of the

respondent company, learned counsel for the petitioner has drawn this

Court's attention to the order dated 17th August, 2010 passed by High

Court of Punjab and Haryana in a contempt petition bearing COCP

1802/2009 titled as Jugal Kishore Arora Vs. Ajit Balaji Joshi & Anr.

wherein strictures have been passed against the said Director of the

respondent company.

16. It is an admitted position that the plant and machinery of the

respondent company has been dismantled and taken over/attached by

the receiver under the orders of High Court of Punjab and Haryana and

the respondent company is not a running company and not carrying out

any business with no chances of being revived.

17. In view of the aforesaid, the defence set out by respondent

company is a sham and moonshine. Accordingly, the present petition

is admitted and the Official Liquidator attached to this Court is

appointed as Provisional Liquidator with regard to respondent-

company. The Official Liquidator is directed to forthwith take over

the assets and records of the respondent company. For this purpose,

Official Liquidator would be entitled to obtain police aid and the local

police is directed to render all assistance to the Official Liquidator. In

the meantime, respondent company, its directors, officers, employers,

authorised representatives are restrained from selling, transferring,

alienating, encumbering and parting with the possession of any

movable and immovable assets and funds of the respondent company.

They are also restrained from withdrawing any money from the

accounts of the respondent company. The directors of the respondent

company are directed to forthwith hand over all the records of the

respondent company to the Official Liquidator including its books of

account. The directors of the respondent company are also directed to

provide the statement of affairs and file their statements under Rule

130 within a period of twenty one days as provided for in the Act. The

Official Liquidator is directed to publish citations in the newspapers,

namely, 'Statesman' (English edition) and 'Veer Arjun' (Hindi edition)

as well as in 'Delhi Gazette' for the next date of hearing. To meet the

aforesaid expenses, petitioner is directed to deposit a sum of

` 50,000/- with the Official Liquidator within two weeks. With the

aforesaid observations, application being CA 1290/2007 stands

disposed of.

18. List the petition on 8th May, 2012. Let a status report be filed by

the Official Liquidator before the next date of hearing.

MANMOHAN,J JANUARY 03, 2012 js/rn/ms