Karnataka High Court
M/S Ramgad Minerals And Mining Pvt Ltd vs M/S Vectra Advanced Engineering ... on 4 December, 2018
Author: G.Narendar
Bench: G.Narendar
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 04TH DAY OF DECEMBER, 2018
BEFORE
THE HON'BLE MR.JUSTICE G.NARENDAR
COMPANY PETITION NO.82/2011
c/w
COMPANY PETITION NO.83/2011
COMPANY PETITION NO.246/2010
IN COP.NO.82/2011
BETWEEN
M/S RAMGAD MINERALS AND
MINING PVT. LTD.,
A COMPANY INCORPORATED UNDER
THE PROVISIONS OF THE
COMPANIES ACT, 1956
HAVING ITS REGD., OFFICE AT
"BALDOTA BHAVAN"
NO.117, MAHARSHI KARVE ROAD,
MUMBAI-400 020
HAVING ITS
CORPORATE OFFICE AT
BALDOTA ENCLAVE,
ABHERAJ BALDOTA MARG,
NEAR SRI.SAI BABA TEMPLE,
HOSPET - 583201,
KARNATAKA, INDIA,
REPRESENTED IN THESE
PROCEEDINGS BY
SRI. P.V.UMESH KUMAR. ... PETITIONER
(BY SRI. SRINIVASAMURTHY S, ADV.)
2
AND
M/S VECTRA ADVANCED
ENGINEERING PRIVATE LIMITED
A COMPANY INCORPORATED
UNDER THE PROVISIONS OF THE
COMPANIES ACT, 1956
HAVING ITS REGD., OFFICE AT
VECTRA ADVANCED
ENGINEERING (P) LTD.,
VECTRA HOUSE,
NO.15, 1ST MAIN ROAD,
6TH CROSS, GANDHINAGAR,
BANGALORE-560009 AND
HAVING ITS BRANCH OFFICE AT:
#26, KIADB, INDUSTRIAL AREA,
HOSUR MAIN ROAD,
ATTIBELE, BANGALORE-562107,
REPTD. IN THESE PROCEEDINGS
BY ITS DIRECTOR. ... RESPONDENT
(BY SRI. S SRIRANGA, ADV.)
THIS COMPANY PETITION FILED UNDER SECTION 433(e)
READ WITH SECTION 434(1)(a) AND SECTION 433(f) OF THE
COMPANIES ACT, 1956 PRAYING TO WIND UP THE
RESPONDENT COMPANY NAMELY M/S. VECTRA ADVANCED
ENGINEERING PRIVATE LIMITED, UNDER THE RELEVANT
PROVISIONS OF THE COMPANIES ACT, 1956 AND ETC.,
3
IN COP.NO.83/2011
BETWEEN
M/S P VENGANNA SETTY & BROS.,
A PARTNERSHIP FIRM
HAVING ITS OFFICE AT
NEHRU CO-OPERATIVE COLONY,
HOSPET, BELLARY,
IT IS REP. IN THESE
PROCEEDINGS BY THE
AUTHORIZED SIGNATORY,
SRI. MEDA VENKATAIAH. ... PETITIONER
(BY SRI. SRINIVASAMURTHY S, ADV.)
AND
M/S VECTRA ADVANCED
ENGINEERING PRIVATE LIMITED
A COMPANY INCORPORATED
UNDER THE PROVISIONS OF THE
COMPANIES ACT, 1956,
HAVING ITS REGD., OFFICE AT
VECTRA ADVANCED
ENGINEERING (P) LTD.,
VECTRA HOUSE,
NO.15, 1ST MAIN ROAD,
6TH CROSS, GANDHINAGAR,
BANGALORE-560009 AND
HAVING ITS BRANCH OFFICE AT:
#26, KIADB, INDUSTRIAL AREA,
HOSUR MAIN ROAD,
ATTIBELE, BANGALORE-562107,
REPTD. IN THESE PROCEEDINGS
BY ITS DIRECTOR. ... RESPONDENT
(BY SRI. SRIRANGA S, ADV.)
4
THIS COMPANY PETITION FILED UNDER SECTION 433(e)
READ WITH SECTION 434(1)(a) AND SECTION 433(f) OF THE
COMPANIES ACT, 1956 PRAYING TO WIND UP THE
RESPONDENT COMPANY NAMELY M/S. VECTRA ADVANCED
ENGINEERING PRIVATE LIMITED, UNDER THE RELEVANT
PROVISIONS OF THE COMPANIES ACT, 1956 AND GRANT SUCH
OTHER AND FURTHER RELIEFS AS ARE JUST AND EQUITABLE,
INCLUDING THE COSTS OF THIS PETITION, AND ETC.
IN COP.NO.246/2010
BETWEEN
M/S MSPL LIMITED
A COMPANY INCORPORATED UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956,
HAVING ITS REGD. OFFICE AT
"BALDOTA BHAVAN",
117, MAHARSHI KARVE ROAD,
MUMBAI 400020
AND HAVING ITS
CORPORATE OFFICE AT:
BALDOTA ENCLAVE,
ABHERAJ BALDOTA ROAD,
HOSPET-583 203
KARNATAKA, INDIA
REPRESENTED IN THESE
PROCEEDINGS BY
V.G.SUBHARAMANIAN,
VICE PRESIDENT LEGAL. ... PETITIONER
(BY SRI. SRINIVASAMURTHY S, ADV.)
5
AND
M/S VECTRA ADVANCED
ENGINEERING PRIVATE LIMITED
A COMPANY INCORPORATED
UNDER THE PROVISIONS OF THE
COMPANIES ACT, 1956,
HAVING ITS REGD., OFFICE AT
VECTRA ADVANCED
ENGINEERING (P) LTD.,
VECTRA HOUSE,
NO.15, 1ST MAIN ROAD,
6TH CROSS, GANDHINAGAR,
BANGALORE-560009 AND
HAVING ITS BRANCH OFFICE AT:
#26, KIADB, INDUSTRIAL AREA,
HOSUR MAIN ROAD,
ATTIBELE, BANGALORE-562107,
REPTD. IN THESE PROCEEDINGS
BY ITS DIRECTOR. ... RESPONDENT
(BY SRI. SRIRANGA S, ADV.)
THIS COMPANY PETITION FILED UNDER SECTION 433(e)
READ WITH SECTION 434(1)(a) AND SECTION 433(f) OF THE
COMPANIES ACT, 1956 PRAYING TO WIND UP THE
RESPONDENT COMPANY NAMELY M/S. VECTRA ADVANCED
ENGINEERING PRIVATE LIMITED, UNDER THE RELEVANT
PROVISIONS OF THE COMPANIES ACT, 1956 ETC.
THESE COMPANY PETITIONS COMING ON FOR 'ORDERS'
THIS DAY, THE COURT MADE THE FOLLOWING:
6
ORDER
All the petitions are taken up together for consideration with the consent of the counsels as the materials relied upon are common and the terms of contract and facts are also similar and involves a similar legal issues.
Arguments are advanced in the first petition and the counsel submits that same set of material are relied upon in the connected cases also. He adopts the arguments in respect of the remaining two cases also.
2. The petitioners are before this Court under the provisions of Section 433(e) and (f) of the Companies Act, 1956. The case of the petitioners is that, they are carrying on business in iron ore mining and processing and is a leading exporter of iron ore. The petitioners are part of the group companies of the Baldota Group of Companies which is owned by Baldota Family. Sri Meda Venkataiah is the Executive Director (Mines) of M/s.MSPL Ltd.
3. The respondent viz., M/s.Vectra Advanced Engineering Private Ltd., is a company incorporated under the provisions of the Companies Act, 1956 having its registered 7 office at Gandhinagar, Bangalore. The authorized share capital of the respondent Company is Rs.3,00,00,000 shares and nominal value is Rs.10 each. The issued share capital is 19507360 shares and nominal value is Rs.10 each. The subscribed share capital is 19507360 shares and nominal value is Rs.10/- each. The paid up share capital is 19507360 shares and nominal value is Rs.10/- each as per Annual Report 2004- 05 of the Respondent Company.
4. M/s.Tatra Udyog Ltd., (TATRA in short) the predecessor-in-interest of the respondent Company, a company incorporated under the Companies Act, 1956 was carrying on business at Hosur, Tamil Nadu.
5. In the course of business, the petitioner and respondent-Company entered into and executed the contract for purchase and sale of Tatra Hemang Dump Trucks. That the name of the Company was changed and came to be known as 'Tatra Udyog Limited' and the same has been changed to 'Tatra Trucks India Ltd.' and then to 'Tatra Vectra Motors Ltd.', and now presently known as 'Vectra Advanced Engineering Private Limited'.
8
6. That the petitioner has been purchasing Dumpers/Trucks from time to time from the respondent- Company under various purchase orders and the petitioner has also entered into Annual Maintenance Contract (AMC) with the respondent.
7. It is contended that the respondent has committed a breach of the terms of the AMC contract and failed to provide the fleets of Trucks as agreed, to supplement those that have broken down. That, it was bound to provide the same under the AMC contract. That the respondent had failed to adhere to the guarantee clause to compensate the loss in terms of hours of availability of the trucks. That the guarantee was in terms of providing a substitute vehicle till the vehicle purchased from the respondent and under repair was restored to a working condition. That on account of break down of the vehicles and as a consequence of the respondent failing to provide alternate substitute vehicles, the same resulted in 9 serious disruption and dislocation of work and has caused huge loss to the petitioner.
8. The statement detailing the vehicles number, date of purchase order, AMC contract and the conditions of Labour Maintenance Contract (LMC) is setout in Annexure-A and that the petitioner-Company was deprived of working hours to the tune of 84,124.58 hours and the same was within the knowledge of the respondent-Company. That the Bank guarantee furnished by the petitioner was not invoked on account of an assertion by the respondent that it would adequately compensate the loss of working hours.
9. That on account of the disputes that had arisen, a Meeting came to be held on 01.10.2006 to resolve the issue and the respondent agreed to compensate @ 66 hours for every 100 hours actually run at the site and the respondent agreed to reconcile and finalise the calculations. That the joint report was prepared and the respondent has appended his signature in the joint report.
10
10. The petitions are stoutly resisted by the respondent.
11. It is the case of the respondent that the instant petitions are not maintainable as the respondent is not liable to discharge any debt and the sum claimed by way of compensation is not a debt as defined under law but, the same are damages and hence, the Company petitions are not maintainable.
12. The maintainability of the petitions is also contested on the ground of availability of alternate remedy as per Clause 8 of the AMC Contract and hence, it is contended that on the ground of maintainability alone the petitioners are liable to be unseated.
13. The fact of execution of the AMC Contract is not disputed. On the other hand, the liability of the Company to indemnify the sum claimed as damages is vehemently denied. The respondent further does not dispute the fact that under 11 the AMC contract, the Company is required to supply or rather replace Trucks such of those which have been purchased from the respondent and which have suffered repairs or have broken down in order to ensure that the maintenance work or repair of the vehicles does not affect the continuity of the mining operations and thus, preventing disruption of mining work.
14. It is further asserted that in lieu of the contract and the said Clause, the respondent has indeed supplied the replacement vehicles and even as on today, the petitioner Company continues to hold three Trucks belonging to the respondent even after the expiry of the contract period.
15. It is contended by the learned counsel for the petitioner that the respondent had agreed to compensate the number of hours which was lost on account of respondent's failure to replace the Trucks in time and that the respondent had also agreed to compensate the loss caused by calculating the damages at the rate of Rs.100/- per hour and later, the 12 offer was increased to Rs.120/- per hour and hence, in view of the admitted compensation with regard to the man hours lost and the admission of the respondent to indemnify at the rate of Rs.120/- per hour, the same is a matter of mere quantification and hence, it is to be construed as a debt as defined under law.
16. If that be the case, then the petitions are to be held as maintainable and the orders be issued for winding up of the respondent-Company as the respondent has not only failed to pay the dues but has further proved that it is incapable of being continued as a viable Commercial Establishment or Entity.
17. Learned counsel for the petitioner would invite the attention of this Court to Annexure-G to the petitions. It is a copy of the Minutes of Meeting. Reliance is placed in order to demonstrate the fact that the parties are suffering loss of man hours and also to demonstrate the fact that all what remains is a, mere quantification which it is contended is permissible 13 in cases of instant nature. He would further draw the attention of this Court to Annexure-E wherein, in the column at Sl.No.1, the respondent has agreed to provide eight Trucks to compensate for the loss incurred. He would then invite the attention of the Court to Annexure-F to buttress his contention that the loss of man hours had been quantified along with the total sum and hence, the same has to be construed as a debt in terms of the Act and the petitions are liable to be allowed.
18. Per contra, learned counsel for the respondent would invite the attention to the very same Annexure-F to demonstrate that though there was Meeting, the respondent was not agreeable to assess the value of loss hours at Rs.600/- and points out that the respondent has clearly stated that the petitioner himself is due to the respondent.
19. Learned counsel would further take this Court to the legal notice dated 18.08.2010. Perusal of the same reveals that the petitioner is claiming compensation for the damages 14 suffered. Hence, it is contended that the question of awarding damages or quantifying the same based on the provisions of the Companies Act without there being a quantification by any Court or Authority does not arise, and is impermissible.
20. He further takes this Court through Annexure-M being the reply effected by the respondent and draws the attention to paragraph No.6, where the respondent has categorically asserted that the offer to pay compensation at Rs.120/- per hour has not been accepted by the petitioner. Further it is seen that all the assertions on behalf of the petitioner have been denied in categorical terms and in fact the respondent has raised a counter claim and the petitioner was called upon to pay a sum of Rs.1,64,53,526/-. It is also stated that the offer of settlement/proposal at the rate of Rs.120/- per hour proposed by the respondent stood withdrawn. That the offer was made as a goodwill gesture with an intention of continuing the good business relationship with the petitioner and in the light of the fact that they have been 15 carrying on business over the past several years and was a good will gesture without prejudice to their legal rights. As the petitioners were not wiling to appreciate the same, the offer stood withdrawn.
21. On perusal of the material on record produced along with the petitions and the statement of objections, it is apparent that the assertion on behalf of the petitioner has been specifically denied.
22. In that view of the matter, the points that falls for consideration in the present petitions are:
1. Whether the petitions are maintainable? and
2. Whether the amount claimed by the petitioner constitutes 'a debt' and thereby enabling the petitioner to maintain the instant Company petitions?
23. The petitioner has placed reliance on a number of rulings and citations both of the Hon'ble Apex Court and this Court. He would place reliance on the ruling rendered by the Hon'ble Apex Court in the case of Harinagar Sugar Mills Co. 16 Ltd., Bombay vs. M.V.Pradhan (Now G.V.Dalvi) Court Receiver, High Court, Bombay reported in AIR 1966 SC 1707. Learned counsel for the petitioner invite the attention of the Court to the observations of the Hon'ble Apex Court as set out in paragraph No.5 wherein it has held that the winding up petition is a proper remedy for enforcing payment of a just debt. That it is virtually a mode of execution at the hands of the creditors against the Company which is liable to pay the debts. A point of interest to be noted is that the Apex Court has construed the Company Petition as a proceedings equivalent to an Execution Petition. But what is to be noted is that the parties are not enabled to invoke the jurisdiction of the Company Court where there is no legally enforceable debt. There could be no quarrel with the proposition as laid down by the Hon'ble Apex Court in the reported ruling. But the fact that remains for determination is whether the amounts claimed are in the form of a debt? Hence, the said ruling is of no assistance to advance the case of the petitioner that the sum claimed is a debt.
17
24. Nextly, learned counsel for the petitioner places reliance on the ruling rendered in the case of M/s. Madhusudan Gordhandas & Co. v. Madhu Woolen Industries Pvt. Ltd., reported in 1971 (3) SCC 632 and would take this Court through paragraph No.21, wherein the Hon'ble Apex Court has observed that even refusal to pay the debt is ground enough to pass orders for winding up of the Company. In the opinion of the Court, the said ruling is of no assistance and does not advance the case of the petitioner in any manner.
25. Nextly, learned counsel for the petitioner has placed reliance on the ruling of the Division Bench of this Court in the case of Kudremukh Iron Ore Co. Ltd. vs. Kooky Roadways Private Ltd. reported in ILR 1990 KAR 230 to advance his arguments that even though no exact amount is claimed, the same could be ascertained. The said ruling is distinguishable on the short ground that the facts involved in the said case related to the respondent-Company failing to 18 deliver and indemnify the quantity of goods which it had agreed to transport. Furthermore, the value of the goods could easily be asserted from invoices accompanying the goods. There was no confusion with regard to the quantity or the price. Unlike in the referred case, in the case on hand there is a serious dispute with regard to the number of hours lost or if any hours are actually lost and the rate at which the compensation is to be awarded?
26. Furthermore, the Division Bench was pleased to rely on the Carriers Act under which a Statutory Liability is cast on the carrier to make good the loss, be it either for short delivery or for non-delivery. In the instant case, the rate of liquidated damages is not stated in the contract. Hence, the said judgment is distinguishable and is inapplicable to the facts of the case.
27. The petitioner has also placed reliance on one more ruling rendered by the High court of Madras in O.S. Appeals 19 No.18, 37 and 70 of 1962 decided on 19.11.1963 wherein the Court has observed as below:
"10. Section 433 of the Indian Companies Act declares the circumstances in which a company may be wound up by the Court. That section provides that a company may be wound up by the court if it is unable to pay its debts. Section 434 defines when a company must be deemed to be unable to pay its debts. Sub-clause (a) of Section 434 states that if a creditor who is entitled to receive a sum of more than Rs.500 from the company, has made a demand, in the manner prescribed by the section, on the company, and the company has, for three weeks thereafter, neglected to pay his dues, it shall be deemed to be unable to pay its debts. Sub-clause (c) to Section 434(1) says:
"If it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company."20
It will thus be seen that clauses (a) and (c) of Section 434(1) relate to two distinct matters. The first is a neglect to pay the dues of a creditor who has made a statutory demand; the second is a case where the company is commercially insolvent, in the case of non-payment of a creditor in spite of the notice issued by him as prescribed by Section 434(1)(a), the position, in the words of George Rankin, C. J., in Japan Cotton Trading Company Limited v. Jajodia Cotton Mills Limited, :
AIR1927Cal625 , will be:
"The effect of the statutory notice is that unless the debt is paid within three weeks or some arrangement is made with the creditors, the Company is in the position of being conclusively estopped from denying that it is unable to pay its debts."
The object of Section 434 is to create a fiction as to when a company can be deemed to be unable to pay its debts. If the case comes within the scope of that fiction, it will not be open to the company to say that on reality it is in a position to pay its debts. It would follow that in such a case it will 21 really be unnecessary to enquire whether the company is in fact solvent or not. Suite recently in Public Prosecutor v. Abdul Wahab, Cri.A.Mo.432 of 1961: AIR1954Mad367, a Full Bench of this court had to consider the true scope of a statutory fiction; and it was held that within the area of its operation such a fiction must be regarded as the reality. It will not be open to the party or the court to contradict the fiction in regard to those cases where the statute intended it to apply. But at the same time a fiction cannot be extended to operate beyond the purpose for which it is intended."
and contends that the discretion is vested with the Company Court, trying the petition, to admit quantification. Whether the defence is an unsubstantial one or in the alternative if the defence is a substantial one, then to direct the parties to establish their claim by way of an independent action. In the considered opinion of this Court, the said ruling is of no assistance to the petitioner as the dispute pertains to unascertained loss which is sought to be compensated at an unasserted rate. Neither the quantum of hours lost nor the 22 rate at which it is to be compensated are agreed upon nor is it forthcoming from any of the material on record.
28. Alternatively, the petitioner would also place reliance on the ruling rendered by this Court in the case of Anand Steels vs. Bharath Earth Movers Limited rendered in COP No.51/1986 decided on 18.06.1987 to contend that quantification be made by calculating the debt at the rate of Rs.120/- per hours and with regard to the balance sum of Rs.480/- i.e. Rs.600 - Rs.120, the parties may be relegated to the trial Court. He would contend that the sum of Rs.120/- offered by the respondent to compensate the loss may be considered as the admitted sum and with regard to the unasserted sum, the parties may be directed to approach the appropriate forum for reliefs. The case canvassed by the petitioner does not find support from the instant ruling nor do the materials relied upon disclose any admitted debt.
29. In the instant case as stated supra, it is not just a case of mere denial but there is also a counter claim. Hence, 23 the contention that the sum offered by way of a goodwill gesture, has to be construed as an admitted debt is baseless and requires to be rejected. More so, in the light of the fact that the respondent has categorically stated in the correspondence that the offer stands withdrawn.
30. As aforestated, the respondent has categorically asserted in the legal notice that as the petitioner failed to accept the proposal in full and final settlement, the proposal has been withdrawn. Further, the respondent has also relied on several judgments of the Hon'ble Apex Court and this Court and learned counsel would more particularly place reliance on the ruling rendered by the Division Bench of this Court in the case of M/s.Greenhills Export (P) Ltd., & ors v. Coffee Board reported in ILR 2001 KAR 2950.
31. In the opinion of this Court, the said ruling squarely covers the instant case wherein the Division Bench of this Court has held that the "Damages" is money claimed by, or ordered to be paid to, a person as compensation for loss or 24 injury. That it remains a mere claim, till adjudication by a Court and thereafter becomes a 'debt' when a Court awards it.
32. The undisputed fact is that the claim of the petitioner is in respect of loss of man hours and the demand is to pay compensation in terms of the contract executed between the parties.
33. A detailed scrutiny of the terms and conditions incorporated therein would reveal that no liquidated damages is agreed upon. The nature of compensation is also by way of replacement of Trucks. There is no agreement entitling the parties to seek any liquidated or unliquidated damages.
34. In that view of the matter, the claim of the petitioner that the sum claimed under the legal notice by way of compensation for damages suffered constitute a debt cannot be accepted. Further the Apex Court in the case of Union of India vs. Raman Iron Foundry reported in (1974) 25 2 SCC 231 while interpreting clause 18 has observed and held in paragraph No.11 as under:
"11. Having discussed the proper interpretation of Clause.18, we may now turn to consider what is the real nature of the claim for recovery of which the appellant is seeking to appropriate the sums due to the respondent under other contracts. The claim is admittedly one for damages for breach of the contract between the parties. Now, it is true that the damages which are claimed are liquidated damages under Clause. 14, but so far as the law in India is concerned, there is no qualitative difference in the nature of the claim whether it be for liquidated damages or for unliquidated damages. Sec.74 of the Indian Contract Act eliminates the somewhat elaborate refinements made under the English common law in distinguishing between stipulations providing for payment of liquidated damages and stipulations in the nature of penalty. Under the common law a genuine pre-estimate of damages by mutual agreement is regarded as a stipulation naming liquidated damages and binding between the parties: a stipulation in a contract in terrorem is a 26 penalty and the Court refuses to enforce it, awarding to aggrieved party only reasonable compensation. The Indian Legislature has sought to cut across the web of rules and presumptions under the English common law, by enacting a uniform principle applicable to all stipulations naming amounts to be paid in case of breach, and stipulations by way of penalty, and according to this principle, even if there is a stipulation by way of liquidated damages, a party complaining of breach of contract can recover only reasonable compensation for the injury sustained by him, the stipulated amount being merely the outside limit. It, therefore makes no difference in the present case that the claim of the appellant is for liquidated damages. It stands on the same footing as a claim for unliquidated damages. Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach becomes entitled to a 27 debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in S.6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. This has always been the law in England and as far back as 1858 we find it stated by Wightman, J., in Jones v. Thompson, "Exparte Charles and several other cases decide that the amount of a verdict in an action for unliquidated damages is not a debt till judgment has been signed". It was held in this case that a claim for damages does not become a debt even after the jury has returned a verdict in favour of the plaintiff till the judgment is actually delivered. So also in O' Driscoll v. Manchester Insurance Committee, Swinfen Eady, L. J., said in reference to cases where the claim was for unliquidated damages: "......in such cases there is no debt at all until the verdict of the jury is pronounced assessing the damages and judgment is given". The same view has also been taken consistently by different High Courts in India. We may mention only a few of the decisions, namely, Jabed Sheikh 28 v. Taher Mallik, S. Milkha Singh v. M/s N. K. Gopala Krishna Mudaliar and Iron & Hardware (India) Co. v. Firm Shamlal & Bros.Chagla, C. J. in the last mentioned case, stated the law in these terms:
In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party.
As already stated, the only right which he has is the right to go to a Court of law and recover damages. Now, damages are the compensation which a Court of law gives to a party for the injury which he has sustained. But, and this is most important to note, he does not get damages or compensation by reason of any existing obligation on the part of the person who has committed the breach. He gets compensation as a result of the fiat of the Court. Therefore, no pecuniary liability arises till the Court has determined that the party complaining of the breach is entitled to damages. Therefore, when damages are assessed, it would 29 not be true to say that what the Court is doing is ascertaining a pecuniary liability which already existed. The Court in the first place must decide that the defendant is liable and then it proceeds to assess what that liability is. But till that determination there is no liability at all upon the defendant.
This statement in our view represents the correct legal position and has our full concurrence. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under Clause.18, to recover the amount of such claim by appropriating other sums due to the contractor. On this view, it is not necessary for us to consider the other contention raised on behalf of the respondent, namely, that on a proper construction of Clause.18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contractor, or in case of dispute, adjudicated upon by a court or other adjudicatory authority. We must, therefore, hold that the appellant had no right 30 or authority under Clause.18 to appropriate the amounts of other pending bills of the respondent in or towards satisfaction of its claim for damages against the respondent and the learned Judge was justified in issuing an interim Injunction restraining the appellant from doing so."
35. As held by the Hon'ble Apex Court, where the claim is admittedly one for damages for the alleged breach of terms of the contract executed between the parties a petition for winding up does not lie. It has held that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority.
36. In the instant case also, the claim is one for compensation for damages suffered on account of the alleged non-supply of vehicles which fact is disputed by the respondent and it is stated that the Trucks have been supplied and three Trucks continues to remain with the petitioner even after completion of the contract. The fact of the 31 three Trucks being in the possession of the petitioner, is also admitted by the petitioner.
37. In that view of the matter, the facts are seriously disputed and is one which needs to be adjudicated after a proper and full fledged trial.
38. That apart, the petitioners have also failed to demonstrate the case with regard to the inability of the respondent to meet the claims or to pay a debt. There is no material placed to demonstrate the financial inability of the respondent and hence, the petitions are liable to be dismissed.
Accordingly, the Company Petitions stand dismissed.
Sd/-
JUDGE Sk/-/VM CT-HR