Delhi High Court
The Chief Administrative ... vs Hmt Machine Tools And Ors on 5 September, 2014
$~23
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: September 05, 2014
+ W.P.(C) 5796/2014
THE CHIEF ADMINISTRATIVE OFFICER, CENTRAL
ORGANISATION FOR MODERNIZATION OF WORKSHOP
(COFMOW)
..... Petitioner
Through Mr.A.S.Dateer, Advocate
versus
HMT MACHINE TOOLS AND ORS
..... Respondent
Through Mr.K.Venkatraman, Advocate for R-1
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J (ORAL)
Cav.752/2014
Since the counsel as above appears for the caveator/respondent No.1, the
caveat stands discharged.
C.M No.14265/2014
Exemption allowed, subject to all just exceptions.
Application stands disposed of.
W.P.(C) 5796/14 Page 1 of 6
C.M No.14266/2014
For the reasons stated in the application, the delay is condoned.
Application stands disposed of.
W.P.(C) 5796/2014
1. The petitioner herein is a Government of India Undertaking. The
respondent No.1, the contesting respondent is also a Government of India
undertaking -M/s HMT Machine Tools Ltd.
2. Certain supplies were made by respondent No.1 to the petitioner but an
amount of Rs.7.30 Crores approximately was deducted from the payment as
liquidated damages.
3. The respondent No.1 company, which was incorporated on 01.04.2000
filed an application and was declared to be a sick company under Section
3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 and an
Operating Agency was appointed to prepare a rehabilitation scheme. A Draft
Rehabilitation Scheme was circulated but it appears that the petitioner did not
receive a copy of the same.
4. Board of Industrial and Financial Reconstruction („BIFR‟ for short) by
order dated 12.06.08 accepted the Draft Rehabilitation Scheme SS-8. Clause
9.13 of the sanctioned scheme postulated that the petitioner herein would refund
Rs.7.30 Crores approximately which had been deducted as liquidated damages.
W.P.(C) 5796/14 Page 2 of 6
5. Subsequently, there was reconciliation of accounts and the respondent
No.1 company by letter dated 21.10.08 called upon the petitioner to release
Rs.6.02 Crores approximately in terms of the aforesaid paragraph in the
sanctioned scheme.
6. The petitioner thereupon decided to challenge the order passed by the
BIFR sanctioning in the scheme dated 12.06.08 and an appeal was preferred
before the Appellate Authority for Industrial and Financial Reconstruction
(„AAIFR‟ for short).
7. Controversy arose on the question of limitation which was resolved by
order dated 17.01.12 passed by a Division Bench of this Court in Writ Petition
No.7729/11. AAIFR was directed to consider and decide the appeal preferred
by the petitioner herein on merits.
8. The petitioner has placed before us copy of order dated 14.03.13 passed
by AAIFR which for the sake of convenience is reproduced below:-
"Parties are present as per their attendance. Learned Counsel
for the appellant submitted that they cannot refund the liquidated
damages to the respondent M/S HMT Machine Tools Ltd. for the
period prior to 01.04.2000 i.e. date the company was
incorporated. According to them, relief is admissible to the
Respondent M/s HMT Machine Tools Ltd. only after the cut off
date i.e. 31.3.2007. This submission is not acceptable.
Sanctioned scheme is meant to provide relief in respect of dues
of creditors as on the cutoff date and not dues for the future
perioid i.e. after the cutoff date. The contention of the appellant
that the respondent company cannot claim relief for the period
prior to their incorporation i.e. 01.04.2000 was accepted by the
W.P.(C) 5796/14 Page 3 of 6
Learned Counsel for the respondent on instructions. The
Learned Counsel for the appellant further submitted that in their
claim the respondent company has included certain claims which
do not pertain to COFMOW. The Learned Counsel for the
Respondent submitted that they are ready to delete any claim not
pertaining to COFMOW and rework the calculation, if so
required, in consultation with the appellant. The appellant as
well as the respondent were directed to sit together and mutually
workout the calculations based on the principle that the refund
of liquidated damages is to be claimed only for the period from
1.4.2000 to 31.3.2007. This order would apply only to the dues
covered under para 9.13 of the sanctioned scheme and not to any
other dues between the two parties. Matter be listed for further
hearing on 8.4.13."
9. A reading of the aforesaid paragraph would indicate that the order was in
the nature of a consent order. It records the stand of the petitioner that they
cannot refund liquidated damages to respondent No.1 for the period prior to
01.04.2000 i.e. before the date of incorporation of respondent No.1. This
contention of the petitioner was accepted.
10. Another submission raised by the petitioner was that relief should be
granted to the respondent No.1 only after the cut off date, i.e. 31.03.2007. This
submission was rejected by AAIFR recording that the sanctioned scheme was
meant to provide relief in respect of dues of creditors as on the cut off date and
not for the future period, i.e. the dues created after the cut off date. As recorded
above, the AAIFR accepted the plea of the petitioner that the respondent No.1
cannot claim relief for the period prior to their incorporation i.e. 01.04.2000.
W.P.(C) 5796/14 Page 4 of 6
11. Another dispute arose with regard to quantum of deduction as it was
submitted by the petitioner that the entire amount of Rs. 6.02 Crores did not
pertain to them. The parties were asked to sit and mutually work out and
calculate on the principle that the refund of liquidated damages was to be
claimed for the period from 01.04.2000 to 31.03.2007. It is apparent that
thereafter meetings were held and the order dated 30.01.2014 was passed
quantifying the amount payable as Rs.5.26 Crores approximately. The said
order records that in respect of 4 bills, there was a dispute, as purchase orders in
respect of these bills were issued prior to 01.04.2000 but the actual supplies
were made after 01.04.2000 and the bills were raised by respondent No.1
thereafter. The findings of AAIFR on the said aspects are reasonable, fair and
just.
12. Learned counsel for the petitioner relies upon Explanation to Section
3(1)(o) and submits that the claims prior to 31.03.2007 should not have been
accepted as the respondent No.1 company was incorporated only on 01.04.2000.
The said section defines a "sick industrial company" as an industrial company
which has at the end of financial year accumulated losses equal to or exceeding
its entire net worth. However, it also stipulates that the company should be
registered for not less than 5 years. The explanation pertains to companies
which were registered prior to enactment of the Sick Industrial Companies
(Special Provisions) Amendment Act, 1993. The explanation is not applicable
W.P.(C) 5796/14 Page 5 of 6
to the facts of the present case as the respondent No.1 company was registered
on 01.04.2000. We cannot appreciate the contention of the petitioner that in
view of Section 3(1)(o) claims or dues for 5 years cannot be taken into
consideration and therefore the liquidated damages claimed from 01.04.2000
and relating to next five years cannot and should not have been subject matter of
the rehabilitation scheme. The said contention has to be only noted to be
rejected as it has no force. The prescription of period of 5 years from the date of
registration is only for the purposes of ensuring that newly registered companies
or companies registered within 5 years do not move an application under
Section 3(1)(o). It has no reference to the claims etc. relating to this period.
13. The writ petition is dismissed. No costs.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
SEPTEMBER 05, 2014/km
