Punjab-Haryana High Court
Praneet Enviroquips Private Limited, ... vs Vishal Papertech (India) Ltd. on 6 July, 1999
Author: V.S. Aggarwal
Bench: V.S. Aggarwal
JUDGMENT V.S. Aggarwal, J.
1. The present petition has been filed by M/s. Praneet Enviroquips Private Limited (for short 'the petitioner') under section 433(e) read with section 439 of the Companies Act, 1956 (for short 'the Act'), praying that the respondent company - M/s Vishal Papertech (India) Ltd. should be ordered to be wound up in accordance with the provisions of the Act and the official liquidator be appointed as provisional liquidator of the respondent company.
2. It is alleged that the petitioner company is a private limited company and carries on the business of effluent treatment plant/pollution control system. The respondent company carries on the business as manufacturers of and dealers in pulp, paper and straw boards of all kinds. The authorised capital of the respondent company is Rs. 8,50,00,000. The respondent company purchased material from the petitioner company, i.e., effluent treatment plant/pollution control system. The total price of the same was Rs. 8,97,750. The respondent company had given the purchase order. The petitioner supplied the effluent treatment plant/pollution control system for a total value of Rs. 8,97,750. Central sales tax at the rate of 1% is also liable to be paid. The material was supplied by the petitioner. The respondent received the same. On receipt of the goods, the respondent issued Declaration Form 'C', i.e., 1% of the total value of the goods supplied. Over and above the principal amount due, the respondent was stated to be further liable to pay interest at the rate of 24% per annum for the delayed payment. The petitioner had installed that material supplied as per specifications. However, from time to time as the pollution control system and effluent treatment plant was not working in a proper manner, the respondent company wrote various communications. The petitioner on his part duly rectified the defect. One such letter was written by the respondent on 20.10.1997 that clarifier and Krafta were not working in proper manner. The same were repaired and rectified. The petitioner claims that balance amount of Rs. 1,87,100 was due which has not been paid despite notice. The respondent is stated to be unnecessarily creating a dispute by asserting that the effluent treatment plant was not working in a proper manner. The respondent company is indebted to the petitioner for the abovesaid amount and accordingly, it was prayed that the respondent company should be wound up.
3. In the reply filed, the petition as such had been contested. It was asserted that the petition is nothing but a pressure tactics adopted by the petitioner. Winding up proceedings cannot be adopted or taken as a recourse for a suit for recovery. It is not disputed that the respondent company had placed an order for the purchase of the material. The petitioner was supposed to supply the material within 8-10 weeks. Punjab Pollution Control Board had been writing to the respondent regarding the effluent treatment plant to be set up. The petitioner failed to commission the plant in all respects and also proper material had not been supplied. When the same had not been supplied, the respondent is within its right to withhold 25% of the amount of invoice. It is not disputed that post-dated cheque was issued by the respondent in favour of the petitioner. There was a clear condition that the cheque should be presented only after functioning of the clarifier and that with the written confirmation of the respondent. The treatment plant was not functioning and, therefore, the cheque which was presented was contrary to the terms of the agreement.
4. On behalf of the petitioner, it has been vehemently urged that the treatment plant had been installed. The cheque had been handed over to the petitioner which shows that the plant was running. No performance guarantee was required to be given and consequently, according to the petitioner, the defence so raised is without any merit.
5. On behalf of the respondent, it had been contended that the terms and conditions had earlier been settled. As per terms and conditions, the plant was not working. The cheque had been encashed against the terms and conditions because there was no written confirmation that had been given. The plant was stated to be not working properly.
6. Under section 433(e) of the Act, a company can be wound up by the court, if it is unable to pay its debts. Section 434 of the Act explains as to when a company is unable to pay its debts. It is well settled that the mere fact that certain liabilities will accrue in future or have accrued by itself is not a ground to wind up a company. Where debt is bona fide disputed, it cannot be said that the company is to be wound up. What is a bona fide dispute have to be decided on the facts of each case. In other words, if the defence is real and substantial, the order for winding up will not be passed.
7. Reverting back to the facts of the present case, one can conveniently refer to the terms and conditions settled between the parties. With respect to the payment terms and performance guarantee, the agreement reads as under :
"Payment terms.
10% advance alongwith the order;
10% interim payment on submission of general arrangement drawings, load data details, flow sheet and bill of material, but not earlier than 4-5 weeks;
55% against delivery at site (Mubarakpur);
25% 45 days after successful commissioning of the equipments and you will furnish us bank guarantee of equivalent amount for performance warrantee.
Performance Guarantee.
The suggested combination of DAF 180, conventional clarifier 12 mt dia x 3. .5 mt (SWD) and 2 Nos. floating aerators of 15 hp each should meet the standards laid down by Pollution Control Board for the discharge of effluents. If the supplied equipment failed to meet the required performance, i.e., upto 30BOD and other norms of Punjab Pollution Board, the same shall be modified/replaced so as to meet the designed data and performance at no additional cost to us within 2 weeks from the date of 1st performance failing which bank guarantee will be revoked."
8. On the strength of the same, it has been alleged that the plant was not functioning properly and the petitioner had not even furnished the bank guarantee of equivalent amount for performance warrantee. It is true that on the invoice, dated 21.11.1997, a noting, dated 22.11.1997 had been made on behalf of the respondent that Krafta is running OK after charging the V belt. The attention of the court has been drawn by the learned counsel for the respondent to the fact that the plant was not running properly and the Punjab Pollution Board was still objecting to the defective running. The respondent had referred to a number of letters written in this regard that the plant installed is not running properly.
9. Annexure R-5 is a copy of the letter purported to have been written by the respondent on 2.9.1997. It reads as under :
"This is with reference to our earlier faxes and the visit of your Mr. Sakuja in our office regarding the commissioning of the 'Clarifier'. As desired by Mr. Sakuja, we are issuing a cheque of Rs. 50,000.00 which is to be presented in the bank only after the functioning of the Clarifier with our written confirmation.
As promised by you, this Clarifier will start working within one week, and if there be any part missing, that will be supplied by you. So we are issuing a cheque of Rs. 50,000.00 of No. 812416, dated 15.9.1997 of Punjab & Sind Bank, Chandigarh."
10. It shows clearly that the cheque of Rs. 50,000.00 could only be presented after the written confirmation of the respondent. These facts show that there is a bona fide dispute as to whether the amount as such can be claimed or not. It cannot be termed that the defence is liable to be rejected outright. The winding up proceedings are discretionary in nature. It cannot be claimed as a matter of right. Admittedly, the respondent company is a running concern, and it cannot be termed, therefore, that it is not in a position to pay its debts. Taking stock of totality of the facts, therefore, it must be held that the petition for winding up cannot be taken up and is liable to be dismissed. Accordingly, the petition fails and is dismissed.
11. Nothing said herein shall be taken as an expression of opinion on the merits of the matter in case the petitioner chooses to file a civil suit.