Gujarat High Court
Bhavana Infra Projects Pvt Ltd vs Bagpet Paper Pvt Ltd on 14 November, 2019
Author: A.J.Desai
Bench: A.J.Desai
C/COMP/352/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/COMPANY PETITION NO. 352 of 2016
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BHAVANA INFRA PROJECTS PVT LTD
Versus
BAGPET PAPER PVT LTD
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Appearance:
MR JF MEHTA(461) for the Petitioner(s) No. 1
MS AISHWARIYA REDDY, LD.ADVOCATE FOR MR PARITOSH R
GUPTA(7583) for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE A.J.DESAI
Date : 14/11/2019
ORAL ORDER
1. By way of the present petition under Article 434 of the Company Act,1956, following prayers have been made by the petitioner:
"17(a) Your Lordships will be pleased to admit this petition.
(b) Your Lordships will be pleased to pass an order to wound up the respondent company and will also further pleased to appoint official liquidator to take the charge of assets of the respondent company.
(c) Your Lordships will be pleased to appoint provisional liquidator to take the charge of the assets of respondent company pending hearing and final disposal of the petition.Page 1 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER
(d) Your Lordships will be pleased to allow this petition.
(d) Your Lordships will be pleased to award the cost of this petition.
(e) Any other relief deem fit and proper in nature of justice may please be granted."
2. In response to the notice issued by this Court, the respondent has appeared through learned advocate Mr.Paritosh Gupta and has filed affidavit-in-reply dated 24/12/2016. The petitioner opposed the same by filing affidavit-in-rejoinder dated 26/04/2017. Additional affidavit on behalf of the respondent company subsequently came to be filed on 19/03/2018. Both the parties have produced several documents on record, which the court has examined during the hearing of admission of the present petition.
3. The case put forward by the petitioner is as under:
3.1 The petitioner is a company duly registered under the provisions of Companies Act,1956 and is carrying on business of construction.
3.2 The respondent is a company also registered under the provisions of the Companies Act and carrying out different type of manufacturing activities. Respondent company for the purpose of construction work at its factory at Plot No.436, Survey No.278, Kocharia village, Tal: Bavla, District:
Ahmedabad contacted the petitioner company and negotiated Page 2 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER the rates of various construction related items. The petitioner quoted/ offered different rates for the various types of construction activities on 22/05/2013 and thereafter, the respondent granted permission to the petitioner for construction on the aforesaid place.
The petitioner raised his first bill towards construction on 07/08/2013 to the tune of Rs.11,30,044.71 ps. including Service tax to the tune of Rs.89,841.54 ps.. Along with the said Bill, the details of construction work carried out by the petitioner was supplied. Similarly second bill/ invoice dated 14/12/2013 was raised to the tune of Rs.8,94,600/- including service tax of Rs.81,639/-. Third bill dated 19/02/2014 was raised to the tune of Rs.6,78,695/- including service tax of Rs.48,752/-. Fourth bill dated 20/02/2014 was raised to the tune of Rs.9,13,285/- including service tax of Rs.47,065/-. Fifth bill dated 26/03/2014 was raised to the tune of Rs.12,10,147/- including service tax of Rs.64,903/-. Lastly sixth bill dated 18/07/2014 was raised to the tune of Rs.15,41,156/- including service tax of Rs.83,662/-.
3.3 It is the case of the petitioner that when the construction was going on and above referred several bills were raised, in all the petitioner has received an amount of Rs.24,56,249/- against the total six bills of Rs.63,67,928/-. The construction was completed in the year 2014 and last bill was raised on 18/07/2014. The petitioner did not receive an amount of Rs.39,11,679/- and therefore sent an email after a period of one year i.e. on 29/12/2015 requesting the defendant company to pay the aforesaid remaining amount.
Since there was no response to the said email, a Notice came to be issued at the instance of the petitioner on 06/01/2016 asking the respondent company to pay the outstanding Page 3 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER amount stating all the details. In response to the notice, the respondent company sent reply stating that the construction was not up to the mark and denied to pay the outstanding amount. It is the case of the petitioner that no such issue was raised ever from August,2013 to January,2016. Since the defendant company refused to pay the outstanding amount with vague defence, the petitioner issued Notice under section 434 of the Companies Act,1956 dated 16/18-02-2016 calling the respondent company to pay an amount of Rs.39,11,679/- with running interest thereon at the rate of 9% per annum from 15/10/2014 and also asked for notice expenses to the tune of Rs.11,000/-. The aforesaid Notice was replied by the defendant on 02/03/2016 stating the respondent company may have to carry out repairing work of the construction made by the petitioner company since the same was of poor quality and deteriorated within short time. The said reply was denied by the petitioner company by sending written communication dated 16/03/2016. Since the respondent company did not pay the aforesaid debts and it is found that there is no intention on the part of the respondent company to pay the debts without any genuine and bonafide reason, the petitioner has filed the present petition.
3.4 It is the case of the defendant in his first affidavit- in-reply dated 24/12/2016 that company petition itself is not maintainable since the same is not covered under sections 433 and 434 of the Companies Act,1956 since the company is having sound financial health and not in danger of losing its financial substratum. It is further alleged that the Supervisor engaged by the respondent company complained about poor construction, however, no steps have been taken by the Page 4 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER petitioner and therefore, payment was not made. Certain photos of part of construction are produced along with affidavit in support of the contention about alleged poor workmanship. In additional affidavit filed by the respondent company, it is alleged that the respondent company may have to incur expenditure to the tune of Rs.23,04,963/- if repairing work is carried out through another agency. In support of this contention, quotation of third party dated 31/01/2013 been produced and therefore, requested to dismiss this petition.
4. Mr.J.F.Mehta, learned advocate appearing for the petitioner has vehemently submitted that pursuant to several meetings of office bearers of both the companies, construction deal was finalised and by written communication dated May 22, 2013, different rates were provided for different type of construction works including excavations, concrete work, shutting work, flooring work, etc. and accordingly construction came to be started at the instance of the plaintiff. By taking me through various bills, which have already been referred hereinabove, he would submit that in all the petitioner had carried out construction to the tune of Rs.63,67,928/- in all. However, the petitioner was paid only an amount of Rs.24,56,249/- including the TDS.
By taking me through the books of accounts submitted by the defendant company in the Income Tax Department, which has been produced on record, he would submit that the respondent availed all the benefits against the bills referred in the earlier paragraphs. Certificate of TDS, Form No.16A, Certificate has been issued under section 203 of the Income Tax Act, 1961, which has been produced for the Assessment Year 2014-15. He would submit that the amount Page 5 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER of invoices raised do matches with the amount of the respondent for which the respondent has availed all the benefits available under the Income Tax Act. He would submit that though the amount referred in the Forms are not paid to the petitioner, the respondent company has availed benefits as if the amount has been paid to the petitioner company. During the course of construction work, at no point of time by oral order or written communication, respondent company has made any complain about alleged poor construction or had asked the plaintiff to stop further construction, which continued for more than one year and therefore, it is ample clear that defendant company after having got construction work completed, wanted to pay only portion of the amount and no intention to pay the entire amount.
He would submit that though work was completed in the month of October,2014, the plaintiff awaited for one year and ultimately after a one year asked the respondent through email to make the payment of outstanding dues. However, having found no response from the respondent, the petitioner compelled to issue legal Notice supplying all the details to the respondent. He would submit that for the first time, respondent company tried to raise a dispute about workmanship of the construction by replying the notice dated 29/12/2015.
By taking me through the reply given by the respondent dated 02/03/2016, in which, it is stated that respondent company is likely to incur expenditure to the tune of Rs.23,04,963/- for repairing work to third party and therefore, it is not disputed that there is debts by the respondent company, which the company has refused to pay Page 6 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER without any genuine defence. He would submit that if there is no genuine defence, the Court can pass order of winding up. In support of his submission, he has relied upon unreported decision dated 09/03/2012 rendered in the case of Oswal Machinery Ltd. V/s. Pipavav Shipyard Ltd. He would submit that coordinate bench of this Court has dealt with several decisions of Hon'ble Apex Court and has held that the Court is required to decide whether the grounds of defence are substantial or not and they do not "consist of some ingenious mask invented to deprive a creditor and is not a mere wrangle." He would submit that facts of the aforesaid case are similar in nature to the facts of the present case and if the Court having found no substance in the defence, did pass order of winding up. He therefore would submit that appropriate order may be passed.
5. Ms.Aishwariya Reddy, learned advocate advocate appearing for the respondent company has vehemently opposed this petition and would submit that the petition may be dismissed.
By taking me through the provision of Section 433 of the Companies Act, she would submit that company is in good financial condition and therefore the petition, which has been filed under section 433(e) of the Companies Act may not be entertained. It is not the case of the petitioner that the respondent company is unable to pay its debts. When the dispute has been raised with regard to transaction, this Court may not admit this petition and may not pass order of winding up of the respondent company, which would have serious consequences, which may affect workmanship.
She would further submit that a Notice came to be Page 7 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER issued about so called non-payment of debts after a period of one year. She would further submit that an oral grievance was raised by the respondent about poor quality of work carried out at the instance of the petitioner company. She would submit that by not making any written complain, would not fatal the case. She would submit that on number of occasions, Supervisor of the respondent company orally informed the petitioner company about poor workmanship of the construction and therefore, it cannot be said that there was no objection about the workmanship of the plaintiff company, which is of lower quality. She would submit that within no time, cracks appear on the construction, which requires repairing, for which, detailed quotation is produced. If repairing work is carried out, the petitioner has to pay expenditure of more than 20 Lacs.
In support of her aforesaid submissions, she has relied upon the decision dated 02/03/2000 rendered in the case of Tata Iron and Steel Co. V/s. Micro Forge (India) Ltd.; a decision of the Hon'ble Apex Court dated 23/09/2010 in the case of IBA Health (I) Pvt. Ltd. V/s. Info-Drive Systems Sdn.Bhd.; another decision of the Hon'ble Apex Court rendered in the case of Mediquip Systems (P) Ltd. V/s. Proxima Medical System Gmbh reported in (2005)7 SCC 42 as well as unreported decision dated 6/11/2017 in the case of Vinayak Projects V/s. Manav Infrastructure Ltd. passed by Division Bench of this Court in O.J.Appeal No.9 of 2017. By relying upon the aforesaid decisions rendered by Hon'ble Apex Court as well as Division Bench of this Court, she would submit that this petition filed for the winding up of the respondent company may not be entertained and this petition may be dismissed.
Page 8 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER6. I have heard learned advocates appearing for the respective parties and perused the documents produced by both the parties, contents of Notices, reply to the same, etc. It is an undisputed fact that the petitioner company has quoted different rates for different type of construction works including excavations, concrete work, shutting work, flooring work, etc. and having negotiation from the respondent company, petitioner company started putting up construction referred in the beginning of the order. The first bill was raised by the plaintiff on 07/08/2013. Thereafter, other bills were raised on 14/12/2013, 19/02/2014, 20/2/2014, 26/03/2014 and lastly on 18/07/2014. All the bills are supported by details provided for different types of construction carried out at the instance of the plaintiff. A total dues of the bills cames to Rs.63,67,928/-. It is not in dispute that the defendant company has paid an amount of Rs.24,56,249/-. It appears that last amount was paid by the defendant before March,2014 since subsequent thereto there are no other books of accounts with regard to TDS produced on record. Though defence has been raised about poor quality and workmanship at the instance of the defendant, there is no single piece of evidence, which would support the case of defendant company. There is no iota of evidence in any way by writing email or any Notice about alleged poor work of construction of the petitioner company. It appears that the petitioner though had completed the work, waited for about one year and thereafter sent an email to pay remaining amount of Rs.39,11,679/-. Since there was no response to the said email, for the first time, petitioner company issued Notice on 06/01/2016 asking the respondent company to pay the outstanding amount stating all the details.
Page 9 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDERIn response to the notice, the respondent company has made allegation about poor construction and asked the petitioner to pay the amount of expenditures incurred for repairing by the third party. Prima facie, it appears that in absence of any immediate reaction about alleged poor workmanship, the defence has been raised with motive known to the defendant company. In response to the notice, no details has been supplied about carrying out any repairing work between year 2014 to 2016. So far as photos, which have been produced on record, do not find any authenticity of the same.
7. The quotation of third party dated 31/01/2013, which are produced by the defendant at the later point of time suggests that repairing work costs to Rs.23,04,963/-. However, this quotation was of the year 2013 and the work was carried out in the year 2014.
8. In view of this above facts, in my opinion, the judgement relied upon by learned advocate Mr.Mehta in the case of Oswal Machinery Ltd. (supra) would cover the present case. Relevant paragraphs of the said judgement, read as under:
"14. The position with reference to the disputed claim is considered by the Apex Court in case of IBA Health (India) Private Limited reported in (2010) 10 SCC 553. The Apex Court has, observed thus:
"20. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has Page 10 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt."
(emphasis supplied) 14.1. The Apex Court has, in the aforesaid case of IBA Health (India) Private Limited (supra) also observed that: "31.Where the company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the company for the purposes of winding up. "Bona fide dispute" implies the existence of a substantial ground for the dispute raised. Where the Company Court is satisfied that a debt upon which a petition is founded is a hotly contested debt and also doubtful, the Company Court should not entertain such a petition. The Company Court is expected to go into the causes of refusal by the company to pay before coming to that conclusion. The Company Court is expected to ascertain that the company's refusal is supported by a reasonable cause or a bona fide dispute in which the dispute can only be adjudicated by a trial in a civil court." (emphasis supplied) 14.2. Thus, the Court is required to decide whether the grounds of defence are substantial or not and they do not "consist of some ingenious mask invented to deprive a creditor and is not a mere wrangle".
Page 11 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER14.3. The company Court is also expected to go into the causes of refusal by the company and to also ascertain that the refusal is supported by a reasonable cause or a bonafide dispute.
15. When the question of examining the defence on the ground that the claim is disputed arises and it becomes necessary to determine whether the dispute is bonafide and substantial or not, then, in view of this Court, one of the tests is to find out as to whether the dispute was raised contemporaneously (i.e. immediately when the ground or cause of dispute allegedly arose)or not; or the dispute came to be raised only when the demand for payment came to be made or the statutory notice came to be served and whether it is in nature of afterthought?
15.1. If it emerges from the facts that the grounds on which the defence is raised and the claim is being disputed were never raised at the relevant point of time and/or until the demand came to be raised or statutory notice came to be served and then suddenly the dispute is raised for the first time upon claim being pressed and upon service of notice, then such belated dispute may, in the facts of the case and in light of the conduct of the parties, lead the Court to the belief that the dispute and defence which are raised for resisting the petition and Page 12 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER the order of admission are raised by way of afterthought.
15.2. The grounds of dispute should not, as observed by the Apex Court, "consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle".
9. So far as judgement rendered in the case of Tata Iron and Steel Company (supra) is concerned, Division Bench has examined the defence raised by the respondent company in that case, which suggests that several correspondences have taken place between the parties about change of nature of contract and came to the conclusion that there was valid defence and therefore, company petition was not entertained. The decision dated 06/11/2017 rendered by Division Bench of this Court in the case of Vinayak Projects (supra) would not be applicable to the present case as in that case, the company petition with regard to poor workmanship was filed. Facts of the case of Mediquip Systems (P) Ltd. would not be applicable since there were several suits between the parties and subsequently company petition was filed. Facts of the present case are different than the facts of aforesaid cases. Hence, this petition requires consideration. Therefore, this Court is inclined to admit this petition. However, the Court considers it appropriate that before making order admitting the petition and permitting publication of advertisement it would be in fitness of things and also appropriate to grant an opportunity to the respondent company to deposit the remaining amount with Page 13 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020 C/COMP/352/2016 ORDER regard to the invoices raised by the petitioner before this Court. Hence, following order is passed:
"Respondent company is granted time of four weeks from the receipt/ service of a copy of this order. The Court will consider the petitioner's request for order or admission and publication of advertisement on or before 18/12/2019."
[A.J.DESAI, J] DIPTI PATEL Page 14 of 14 Downloaded on : Sun Jun 14 09:26:52 IST 2020