United Decoratives Pvt Ltd vs Dolphin Footwear Pvt Ltd
2014 Latest Caselaw 959 Del

           THE HIGH COURT OF DELHI AT NEW DELHI

%                                  Judgment delivered on: 21.02.2014

+                 CO.PET.173/2013

UNITED DECORATIVES PVT LTD                                 ..... Petitioner

                                      versus
DOLPHIN FOOTWEAR PVT LTD                                   .... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Mithilesh Kumar with Mr Sanjeev Goyal.
For the Respondent: Counsel (presence not given)
CORAM:-
HON'BLE MR JUSTICE VIBHU BAKHRU

                                  JUDGMENT

VIBHU BAKHRU, J (ORAL)

1. The petitioner has filed the present petition under Section 433 (e) of the Companies Act, 1956 (hereinafter referred to as the „Act‟) alleging that the respondent has been unable to pay its admitted dues to the petitioner. The respondent contends that no amount is payable to the petitioner and on the contrary certain amounts are recoverable from the petitioner on account of defective goods supplied by the petitioner.

2. The only controversy that needs to be addressed in the present case is whether the defence raised by the respondent is bonafide or a sham defence.

3. Briefly stated, the facts are as under:-

3.1 The petitioner is in the business of manufacturing, trading and distribution of synthetic leather (Rexine). The said material is used by the respondent in manufacturing shoes. The petitioner has been supplying the said goods to the respondent since over two years and the business relations amongst the parties are stated to have been cordial. The only complaint that the petitioner had was regarding minor delays in payment of the invoices. However, there is no dispute that the payments, for the goods delivered in the past, were effected.

3.2 The petitioner supplied certain goods in the month of November and December, 2012. The goods were supplied on credit and the invoices were due and payable after a specified period. The details of the invoices and the respective dates on which the same were due for payment are as under:-

 S.No.      Invoice No.    Date         Amount (`)      Due Date
 1          12873          09.11.2012   2,45,404.00     24.01.2013
 2          13187          05.12.2012   3,93,921.00     20.02.2013
 3          13156          20.12.2012   2,67,938.00     07.03.2013
                           Total        9,07,263.00


3.3     The aggregate amount payable by the respondent in respect of the

said goods adds upto `9,07,263/-. The last of the aforesaid invoices was required to be paid by the respondent on or before 07.03.2013.

3.4 The petitioner sent a reminder on 07.01.2013 to the respondent calling upon the respondent to ensure that the invoices are paid on or before the due dates. The letter dated 07.01.2013 was followed by a reminder

dated 12.01.2013. The petitioner also unequivocally put the respondent to notice that if the said invoices were not paid in time the petitioner would be constrained to take legal action. In response to the said letter the respondent sent a letter dated 22.01.2013. It is relevant to note that the payments due to the petitioner were not disputed in the said letter. However, the respondent alluded that the goods supplied by the petitioner had certain defects which required to be addressed. The said letter was immediately responded to by the petitioner by a letter dated 30.01.2013 and the allegation that there were any defects which had been pointed out earlier was stoutly disputed. The petitioner also exercised its right to curtail the credit period and called upon the respondent to immediately discharge the entire payment against the pending invoices. No further communication was issued by the respondent in this respect thereafter.

3.5 Given the fact that the payments due had not been effected by the respondent, the petitioner was constrained to issue a notice dated 16.02.2013, under Section 434 (1)(a) of the Act, calling upon the respondent to make the payment. This notice also elicited no response from the respondent.

3.6 In view of the fact that the payments against the invoices had not been made by the respondent despite the notice under Section 434 (1)(a) of the Act, the petitioner was constrained to file the present petition. The notice of this petition was served on the respondent on 01.05.2013.

4. It has been contended on behalf of the petitioner that the dispute raised by the respondent that there was any defect in the goods is ex-facie a

sham defence since the payments due to the petitioner were not disputed at any stage prior to filing of the present petition. Although the respondent in its letter dated 22.01.2013 had alluded to certain defects, the same was refuted at the material time. It is contended that apart from the said letter being mischievous it is also obvious that the said letter would have no relevance since the goods were supplied much earlier in November and December, 2012 and no specific complaint in regard to those goods had been received. The learned counsel for the petitioner has also pointed out the terms and conditions which are printed on the rear side of the invoices. The relevant clauses of the terms and conditions are as under:-

"6. The Manufacturers have supplied the goods as per specifications and tested in their laboratory before the dispatch of goods. But the Manufacturers advise buyers to test the material as per their satisfaction before usage because the Manufacturers do not undertake any kind of responsibility once the material is put to use OR after ten days from receipt of goods, whichever is earlier.

xxxx xxxx xxxx xxxx xxxx

9. In respect of any complaint of whatsoever nature, that may be lodged in respect of the goods, the Buyers agree to first make payments in full before any action or settlement is negotiated.

xxxx xxxx xxxx xxxx xxxx

11. The Buyer shall pay interest at the rate of 18% per annum for payments made beyond due date until date of realization of Cheques, Demand Draft without prejudice to any of the Manufacturers rights and remedies under these conditions. The manufacturers reserve the right to cancel any contract or part of the contract for non-payment of accrued outstanding.

xxxx xxxx xxxx xxxx xxxx

17. Manufacturers reserves the right to withdraw at any time credit facilities Concessions extended by it."

5. In terms of clause 6 of the terms and conditions, any complaint regarding the quality of the goods was required to be made within a period of 10 days. This, admittedly, had not been done by the respondent.

6. The learned counsel for the petitioner has also drawn the attention of this Court to the statement of account furnished by the respondent along with its reply. The said account indicates that the sums as claimed by the petitioner were duly reflected as payable to the petitioner as on 01.05.2013. The said date is relevant as the notice of the petition was served on the respondent on the said date.

7. The learned counsel of the respondent states that this is a case of a bonafide dispute, inasmuch as, the respondent had already communicated to the petitioner that the goods supplied were defective. He has also pointed out certain complaints that were received in the month of April, 2013 from certain customers which, according to him, indicated that the goods supplied by the petitioner were defective. The learned counsel for the respondent has also pointed out certain photographs which, according to the petitioner, indicate unused goods of the petitioner lying at the factory premises as well as the stock of defective shoes. It is submitted on behalf of the respondent that on account of the complaints received, credit notes were issued to its customers and their respective accounts duly reflect the same.

8. I have heard the learned counsel for the parties.

9. The only aspect that is required to be considered in the present proceedings is whether the defence raised by the respondent is a sham defence. It is trite law that winding up proceedings cannot be preferred in order to pressurize a party to make payments which are disputed. However, it is equally well accepted that a defence which is spurious and illusory and created only for the purposes of defeating a legitimate claim of the creditor would not be entertained. The defence raised by the respondent has to be tested on this anvil. In the present case, the facts clearly indicate that the invoices were due and payable on 24.01.2013, 20.02.2013 and 07.03.2013 respectively. There has been no specific complaint which has been produced on record prior to this period. The letter dated 22.01.2013 is only in response to the demands being made by the petitioner and even this letter does not specify that the amount claimed by the respondent is disputed or not payable. The complaints which have been adverted to by the respondent are also generic in nature and it is material to note that all the complaints are in the month of April, 2013 i.e. much after the payments of the invoices had become due and payable. It is also material to note that one of the customers who is alleged to have complained is also a party related to the respondent. The debit note on the basis of which the respondent claims that amounts are not payable to the petitioner is dated 08.05.2013 which is more than two months after the last invoice became due and payable and after the respondent had received the notice of the present petition. The learned counsel for the respondent has also not controverted the submission of the petitioner that in terms of clause 6 of terms and conditions of the contract any complaint with respect to the goods could only be made within 10 days of the receipt of goods.

10. Although, the respondent has filed photograph of goods supplied which is contended to be defective, there is no communication on record which indicates that the respondent ever attempted to return the said goods.

11. It is also material to note that the notice issued under Section 434 (1)

(a) of the Act had elicited no response and even at that stage, the respondent had not crystallized any issue.

12. In the given circumstances, I am in no doubt that the present defence raised by the respondent is spurious and created for the purposes of resisting the present petition.

13. In view of the above, the present petition is admitted. The petitioner is directed to publish the citation in "Statesman"(English) and "Jansatta"(Hindi). The citation be also published in Delhi Gazette for hearing to be held on 17.07.2014.

14. However, in order to enable the respondent company to settle the amounts payable to the petitioner, I deem it appropriate that the direction for publication be not given effect to before the expiry of two weeks from today. If in this period, the respondent and the petitioner are able to arrive at a settlement for discharge of the dues of the petitioner, the direction for publication of the citations shall not be implemented.

Renotify on 14.03.2014.

CA 609/2013

The interim order passed on 17.04.2013 shall continue till disposal of the present petition. The application stands disposed of.

CA 610/2013 Renotify for 14.03.2014.

VIBHU BAKHRU, J

FEBRUARY 21, 2014 pkv