Delhi High Court
Bharat Bijlee Ltd. vs National Industrial Development ... on 1 August, 2002
Author: Vikramajit Sen
Bench: Vikramajit Sen
JUDGMENT Vikramajit Sen, J.
1. The case set out In this winding-up Petition under Section 433(e) and 434 of the Companies Act, 1956 is that the Petitioner Is engaged in the business of manufacture and installation of lifts. In response to a tender floated by the Respondent Company National Industrial Development Corporation Ltd. (hereinafter referred to as NIDC) had supplied, delivered, installed and commissioned four number passenger lifts in the office complex at Kanpur of the Respondent's client, namely, U.P. State Industrial Development Corporation (hereinafter referred to as UPSIDC). A formal contract dated 16.7.1991 was executed between the Petitioner and the NIDC. No fault with the lifts installed by the Petitioner had been found but the total price was not paid. It has been averred that the total value of the Bills was Rs. 45,22,704/ against which the payment released by NIDC was Rs. 32,77,980/- leaving a balance of Rs. 12,44,724/-, in addition to the security deposit, thus aggregating Rs. 15,53,372/-. A Legal Notice dated 6th March, 1999 demanding this amount has been duly dispatched.
2. Learned Counsel for the Petitioner has vehemently stressed NIDC Letter dated 3.11.1999 which reads thus:
"Sir This has reference to the legal petition No. 311 filed by Mr. Sanjay Grover, advocate on your behalf. You have claimed an amount of Rs. 12,44,724.00 payable to you against your final bill which is not correct. An amount payment to you in the final bill is Rs. 10,56,524 (after recovery of LD amounting to Rs. 1,88,200.00) only as against your claim of Rs. 12,44,724.00. Further, SD amounting to Rs. 3,08,648.00 is also payable to you. This is for your information.
Thanking you, Yours faithfully, Sd/- Ramesh Chandra Sr. Manager (C)"
3. According to Mr. Kher, this amounts to a clear admission of liability. He has also relied on the Respondent's Letter dated 22.6.1998 addressed to the UPSIDC in which it is stated thus "With reference to your letter......dated 30.5.98, the final bill for release of funds was being processed. The funds for the same was still awaited. M/s. Bharat Bijlee Ltd. is pressing hard for release of their final payment. You are requested once again to release the funds at an earliest."
4. Mr. Kher has emphasised that as per the contract, it was the NIDC which was legally obligated, in terms of the Agreement between the parties, to release payment to the Petitioner, and that it is of little consequence that these funds were to come from UPSIDC.
5. Mr. Kher as also Mr. Ravinder Kumar, Learned Counsel for the Respondent have relied on Clause 6 of the Agreement between the parties which reads thus:-
"6.0 Terms of payment A. Supply Part
a) 10% of the contract value as down payment within 4 (four) weeks of signing of the agreement against bank guarantee for an equal amount valid till the completion of work.
b) 5% (five percent) of the contract value on approval of all engineering drawings and specifications.
c) 75% (seventy percent) of the contract value on receipt and joint inspection of stores at site on pro-rata basis.
d) Balance 10% of the contract value of supply part shall released after completion of erection and commissioning of equipment and materials supplied.
B. Installation, testing and commissioning part
a) 10% of the contract value as down payment within 4 (four) weeks of signing of the agreement against bank guarantee for an equal amount value till, the completion of the work.
b) 80% (eighty percent) of the value of contract on execution and testing of the works on pro-rata basis.
c) Balance 10% (Ten percent) of the contract value shall be released on commissioning of entire installation.
C. However 10% of total contract value of both works (supply part & erection, testing and commissioning part) recovered from running bills toward security deposit shall be released after defect liability period of 12 months is over.
6. It is Mr. Kher's contention that a perusal of this Clause will make it abundantly clear that payments were to be made/received only from the Respondent. Likewise, the Petitioner is not a signatory to the Contract between the Respondent NIDC and UPSIDC. In this regard, it has been argued by Mr. Ravinder Kumar, Learned Counsel for the Petitioner, that in the contract between the parties hereto, it has been specifically recorded that the Petitioner had seen the contract between the Respondent and UPSIDC. In paragraph "C" of the affidavit in opposition to the Petition there is, an admission to the effect that the agreement between the NIDC and the UPSIDC envisages payment to contractors/suppliers on behalf of the UPSIDC. This admission is in fact predicated on the terms of the agreement between the NIDC and the UPSIDC. Mr. Kumar has also contended that the documentation available clearly negated that the owner of the lifts is UPSIDC and not NIDC.
He has further relied on the Petitioner's Letter dated 14.12.1998 in which the UPSIDC was requested "to send your clearance to NIDC for the release of security deposit amount of Rs. 3,76,400/-." He has also relied on another Letter of the Petitioner dated 12.9.1998 in which the Petitioner had earlier requested the UPSIDC to transfer funds to M/s. NIDC so that payment could be released by the Petitioner.
7. The defense to the Petition essentially is that the Respondent was connected as a consultant of the UPSIDC and it was, therefore, not liable to make any payment to the Petitioner. Mr. Kumar has clarified that final payments could not be made because UPSIDC did not release funds to the Respondent. Quite inexplicably, Mr. Kumar has argued that there was no privity of contract between the Petitioner and the Respondent and insist that it was between the Petitioner and UPSIDC. I fail to find any substance whatsoever in this argument. To the contrary, it is clear that there is no privity whatsoever between the Petitioner and the UPSIDC. Furthermore, in a building contract, the appointment of an architect or consultant is quite commonplace, but such person's role is not only to inspect the construction but also to certify payment. On a careful reading of the present contract between the parties, there is a substantial and significant variance to this normal practice. It ought to have been clarified in the agreement between the parties that the Respondent will merely certify the Petitioner's Bills, but that payments are made by the UPSIDC. The terms of the agreement are quite the opposite since, the payment had to be released by the Respondent to the Petitioner. Mr. Kumar's contention that the use of the word "released" can only indicate that payments were to be made by UPSIDC and only thereupon to be released to the Petitioner is not predicated on any evidence and is wholly without merit. The reason which compelled the Respondent to assume the responsibility of making payments to the Petitioner does not need to be answered in this Petition since the contract is quite clear. There Is also no weight in the argument that the Respondent should not make payment to the Petitioner unless these payments are received by it from UPSIDC. The consequences of the Respondent making payments to the Petitioner must be sorted out between the Respondent NIDC and Its associate UPSIDC. There is no reason why the Petitioner must suffer for the defaults of either or these parties.
8. It is then contended that there is no neglect in making payment and that there is a bona fide demand. Neither of these arguments are of substance. I have also failed to locate any Clause in the Agreement between the parties which stipulated that the Respondent's obligation to make payment to the Petitioner was contingent on funds being received by NIDC from UPSIDC. Reliance on Atul Drug House Ltd., 1971 (41) Company Cases 352 is of no avail to the Respondent. If it is to be accepted that availability of an alternative remedy in each and every case is sufficient reason to dismiss the winding-up petition, the jurisdiction under Section 433 and 444 would be rendered wholly nugatory and otiose.
9. By Order dated 4.2.2000 it had been indicated that the amount of Rs. 10,56,524/- against the Final Bill amounting to Rs. 12,44,724/-, together with the security deposit of Rs. 3,08,648/- should be made available. Despite the passage of several months and years no compliance or progress in this regard has been made. The conduct of the Respondent is mala fide.
10. The Petition is admitted.
11. Citation be published in the "Indian Express (English Edition) and "Nav Bharat Times (Hindi Edition) and Delhi Gazette.
12. Renotify on 7.1.2003.