Karnataka High Court
Space Infra Build (India) Pvt Ltd vs Perot Systems Tsi (India) Private ... on 26 June, 2012
Author: Ravi Malimath
Bench: Ravi Malimath
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
ON THE 26th DAY OF JUNE 2012
BEFORE
THE HON'BLE MR. JUSTICE RAVI MALIMATH
COMPANY PETITION NO. 135 OF 2011
ALONG WITH
COMPANY APPLICATION NO.884/2012
Between :
Space Infra Build (India) Pvt. Ltd.,
Having Its Regd Office at:
No. 56, New Timber Yard Layout,
Mysore Road,
Bangalore - 560 026,
Rep. By its director,
Mr. Manav Goel ... Petitioner
(By Ms. Nalina Mayegowda, Adv. COMMON
for M/s. Poovayya & Co )
And
Perot Systems TSI (India) Private Limited
Having Its Regd. Office at Plot No. 123,
Shivalaya Epip, Phase-2, Whitefield,
Industrial Area, Bangalore 66,
Rep. By Its Director:
Mr. S Neelakantan ... Respondent
(By Shri. Mahesh Arkalgud, Adv. COMMON
for M/s. ALMT Legal)
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This petition is filed under Section - 433(e) and
434 of the Companies Act, 1956, praying that for the
reasons stated therein this Hon'ble Court may be
pleased to : Wind up the Respondent Company, M/s.
Perot Systems TSI (India) Private Limited, having its
registered office at Plot No. 123, Shivalaya EPIP, Phase-
2, Whitefield Industrial Area, Bangalore-560 066 under
the provisions of the Companies Act, 1956 and etc.
The Company application is filed under Order VI,
Rule 17, of the CPC 1908, read with Section 433(e) of
the Companies Act, 1956, seeking amendment of the
company petition.
This COP a/w CA coming on for Hearing, the
Court delivered the following:
ORDER
This petition is filed under Sections - 433(e) and 434 of the Companies Act 1936, with a prayer to wind up the respondent-Company and consequential reliefs.
2. It is stated that the petitioner is a company in the business of construction and interior decorations for over a period of 35 years and has an enormous reputation in the market.
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3. The respondent-Company was incorporated in the month of May' 1996, as a private limited company limited by shares, having its registered office at No.123, Shivalaya EPIP, Phase - 2, Whitefield Industrial Area, Bangalore. The authorised share capital is Rs.20,00,00,000/- (Rupees Twenty Crore Only) divided into 10,00,00,000/- (Ten crore) equity shares of Rs.2/- (Rupees Two only) each. The amount of capital paid up is Rs.11,00,33,990/- (Rupees Eleven Crore Thirty Three Thousand Nine Hundred and Ninety Only). The object of the company was to design and develop technology enabled business transformation solutions, to provide business consultancy and systems integration services, etc.
4. The respondent was approved as a co-developer of an area measuring about 7.2 acres in the project site situate at CHIL SEZ Park, Saravanampatti Village, Coimbatore District (the "project site") by the 4 Department of Commerce, Ministry of Commerce and Industry, Government of India. The respondent was allotted the project site for the construction of a building for the purpose of utilization as part of CHIL SEZ Park (the "project").
5. Consequently, the petitioner and respondent entered into a construction agreement on 03.06.2009 for a total consideration of Rs.26,39,80,213.50/- (Rupees Twenty Six Crores Thirty Nine Lakhs Eighty Thousand Two Hundred and Thirteen and Fifty Paise). In terms of the construction agreement, the petitioner provided performance bank guarantee to the respondent, each for a sum of Rs.2,64,18,343/-, which was issued by the Karnataka Bank infavour of the respondent.
6. The petitioner thereafter commenced the construction of the project. However, the project was 5 delayed. The contention of the petitioner was that the project construction was delayed entirely due to the illegal and high handed behaviour of the respondent. In terms of the construction agreement, the project was to be completed within 2½ years, from the date of agreement i.e., or before 31.03.2010. Since there was a delay, various meetings and discussions were held.
7. By mutual consent, time was extended on more than one occasion, beyond the time as stipulated in the agreement.
8. Thereafter, by a letter dated 13.09.2010, the respondent terminated the said contract. It is the further case of the petitioner that, inspite of the termination of the contract, the respondent has continued to ask the petitioner to complete the project work.
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9. Further, in view of the issuance of the purported termination, the petitioner filed an Arbitration Application No.25085/2010 before the City Civil Court at Bangalore, which was dismissed by the order dated 27.11.2010. A Miscellaneous First Appeal was filed in MFA No.1443/2011, challenging the aforesaid order, which was dismissed.
10. The respondent failed to make the aforesaid payment inspite of repeated requests. Hence, a legal notice dated 10.12.2010, was issued to the respondent seeking for the payment and on failure sought for winding up of the company. The respondent replied to the same. A copy of the notice and the reply is produced at Annexure - X and Y, respectively. Since the amount demanded in terms of the legal notice was not paid, the present petition is filed.
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11. On notice being issued, the respondent has entered appearance and filed its objections.
12. It is the case of the respondent that it is a solvent company and is presently a growing concern. That it was approved as a co-developer by CHIL SEZ Park, Coimbatore District, by the Department of Commerce, Ministry of Commerce and Industry, Government of India. The petitioner has failed to complete the project work within the dead line. Notwithstanding the same, various extensions were granted. Hardly 25% of the work under the contract has been completed and there is no material to show as to what is the exact extent of work completed by the petitioner, in order to quantify the debt. That in view of the breach of the agreement by the petitioner, the respondent had terminated the contract. Therefore, it is not for the Company Court to go into the claims made by both sides or the interpretation of the terms and 8 conditions and hence the petition being devoid of merits requires to be dismissed. That the debt is not established, inasmuch as, the debt has not been quantified. Failure to do so leads to dismissal of the petition.
13. Heard the learned counsels and examined the material on record.
14. The case of the petitioner is that it has completed almost 25% of the work under the contract and the respondent has failed to make payments in respect of the work completed. In order to establish the same, reliance is placed on the valuation of the work completed. A copy of the report dated 08.11.2010, setting out the cost of construction undertaken by the petitioner has been filed. It is a report prepared by one M. Adaikkalavan, who is a Chartered Engineer and a Government Approved Valuer. The sum and substance 9 of the report is in terms of the certificate issued along with the report. He states that the building was physically inspected on 04.11.2010 and that the probable cost of the building is Rs.10,22,79,047/-.
15. In terms of the tender being accepted, a construction agreement dated 03.06.2009 was entered into between the petitioner and the respondent, on various terms and conditions. The petitioner was given the development rights over the site in question and in terms of the said agreement was expected to complete the entire structure as envisaged therein by the end of February'2010. However, that was not done. Inspite of granting various extensions, the project has still not been completed.
16. The report is seriously disputed by the respondent and it is contended that the report should not be accepted. That it is a private report not binding 10 on the respondent. That it cannot be looked into by this Court.
17. The quantification would have to be done in terms of the agreement, wherein it is the Project Manager who has the responsibility to do so. There is no clause in the agreement that the quantification could be done by an outside agency. The terms of the contract are specific. No outside agency can therefore, quantify the work done or not done. Hence, no reliance can be placed on the report produced by the petitioner.
18. The agreement stipulated a time bound completion. The time for completion of the project was the essence of the contract and the failure to adhere to the time schedule would enable the respondent to recover liquidated damages for delay or otherwise. Clause 8.1 of the agreement reads as follows:
"8.1 Time for Completion 11 xxxxx The time for completion of the Works as stipulated hereunder shall be deemed to be the essence of this Agreement. Payment of any liquidated damages by the Contractor shall not affect or prejudice in any way or manner Perot Systems rights and remedies under this Agreement or under applicable Law, including its right to terminate this Agreement, nor shall any termination of this Agreement prejudicially affect Perot Systems' right to recover any accrued liquidated damages for delay or release the Contractor from any obligation for payment thereof. xxxxx"
19. Therefore, the clause is very clear and unambiguous that the time is the essence of the contract and the right of the respondent to recover liquidated damages for delay, etc. The payment of liquidated damages is further clarified in Clause - 8.10, which reads as follows:
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"8.10 Liquidated Damages for Delay and payment of incentive.
xxxxx the Contractor shall pay to Perot Systems as liquidated damages and not as penalty, an amount equivalent to one percent (1%) of the Contract Value per week of delay and pro rata for part of a week, subject to a maximum of five percent (5%) of the Contract Value in respect of liquidated damages for delay. The Parties hereby acknowledge and agree that the terms, conditions and amounts fixed pursuant to this Section 8.10 for liquidated damages for delay are reasonable, considering the reduction in value of the Works of Perot Systems and the actual costs that Perot Systems will incur in the event of delay by the Contractor in performing the Works hereunder. xxxxx"
20. Therefore, it is not just a case of quantification for the work done but also the right of the respondent to 13 claim liquidated damages as agreed upon in terms of the agreement.
21. Vide the statutory notice dated 10.12.2010, the petitioner has stated that, he is due in a sum of Rs.10,00,00,000/- under the contractual obligations and inspite of various discussion and extension of time, the same is not paid. In effect, the petitioner seeks to rely on the construction agreement dated 03.06.2010. Clause-15.5 therein is in relation to payment on termination of contract, in the event of default, which reads as follows:
"15.5 Payment upon termination for Contractor Event of Default.
In the event this Agreement is terminated by Perot Systems under Section 15.2 on account of a Contractor Event of Default, Perot Systems may at its option, at the Contractor's cost and risk, complete the works in such manner and by such method as Perot Systems, in consultation with the Project Manager, shall 14 determine is prudent and reasonable under the circumstances.
Except as set forth in this Section - 15.5, the Contractor shall not be entitled to any further payment hereunder. The Contractor shall be entitled to unpaid amounts due for the Works properly performed by the Contractor prior to the effective date of termination, less an amount equal to the additional costs and expenses incurred by Perot Systems as a consequence of the Contractor Event of Default, including without limitation, any legal fees incurred, the additional expenses of engaging any other contractor(s) for the completion of the Works. The Contractor shall be entitled to payment only after the completion of the Works. Further, to the extent the costs of completing the Works substantially in accordance with the terms of this Agreement exceeds the balance of the Contract Value that would have been payable to the different to Perot Systems within [thirty (30)] days after receipt of an invoice therefor from Perot Systems / the Project Manager. The Contractor agrees and 15 acknowledges that any expenses incurred by Perot Systems for completing the works and in respect of damages and / or losses suffered by Perot Systems due to termination on grounds of a Contractor Event of Default, shall be certified by the Project Manager and its decision on this matter shall be final and binding on the contractor."
22. In Clause 15.5 it is narrated that on account of termination, the Contractor shall be entitled to the unpaid amounts due for the works properly performed prior to the effective date of termination. From this amount the amount equal to the additional costs and expenses incurred by the respondents as a consequence of the Contractors default which may include the legal fees incurred, the additional expenses of engaging another Contractor for completion of the work, shall be excluded and the Contractor shall be entitled to the payment only after the completion of the entire works. Further, to the extent the costs of completing the work 16 in accordance with the terms of the agreement exceeds the balance of the contract value that would have been payable to the Contractor. The Contractor would be liable to pay the difference to the respondent Company. Further the Contractor agrees and acknowledges that any expenses incurred by the respondent for completing the works and in respect of the damages or loss suffered shall be certified by the Project Manager of the respondent and its decision would be final and binding on the Contractor.
23. Therefore various amounts have to be arrived at in order to establish the debt. Nothing in that regard has happened. The extent of the works completed and the extent of the works to be completed is not identified. The additional costs and expenses incurred by the respondent Company as a consequence of the default is not quantified. The excess amounts incurred by the respondent to complete the project has also not been 17 quantified. It is only after all these quantifications takes place that a certification shall be made by the Project Manager for all such issues including the loss suffered. Therefore until and unless there is quantification of a debt has been determined, the petitioner would not be entitled to any claim. Merely by placing reliance on the valuation report which has been obtained by the petitioner cannot be conclusive proof to show that work has been completed by the petitioner to the said extent. The extent of work that has been completed as narrated by the valuer has not been admitted by the respondents. They dispute the valuation. Under these circumstances there is no acceptable material on record to show that any debt is liable to be paid by the respondents or an admitted debt by the respondent.
24. In the letter of termination of the Contract dated 30.09.2010, it is also narrated that due to the 18 default of the petitioner in completing the work in accordance with the schedule date of completion, the petitioner is liable to pay the respondent a sum of Rs.1,32,09,171.43, towards liquidated damages calculated @ 1% per week for the period between July 22, 2010 upto August 25, 2010. That also an amount of Rs.1,30,00,000/- is payable by the petitioner to the respondent towards extension of other consultants agreement due to the default of the petitioner. Hence, on the one hand is the unascertained debt and on the other hand, virtually cross-claim that is being made by the respondent in terms of the agreement. Hence, on this ground also, I do not find any reason to entertain this petition.
25. Under these circumstances, therefore it is only appropriate that the quantification of the said amounts is to be made. That the valuation has to be certified by the Project Manager. None of these issues 19 can be determined in a Company Court. The jurisdiction of the Company court is different. The petitioner would necessarily have to agitate these issues before the appropriate Forum.
The petition being devoid of merits is dismissed.
Sd/-
JUDGE JJ*