Punjab-Haryana High Court
K.S.Techniks Pvt.Ltd vs New India Conduits Pvt.Ltd on 19 November, 2014
Author: Rajesh Bindal
Bench: Rajesh Bindal
Company Petition No. 229 of 1999 [1]
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
Company Petition No. 229 of 1999 (O&M)
Date of decision: November 19, 2014
K.S. Machine Techniks Pvt. Ltd.
.. Petitioner
v.
New India Conduits Pvt. Ltd.
.. Respondent
CORAM: HON'BLE MR. JUSTICE RAJESH BINDAL
Present: Mr. Anand Chhibber, Senior Advocate with
Mr. Vaibhav Sahni, Advocate for the petitioner.
Mr. J. K. Sibal, Senior Advocate with
Mr. Dhawal Bhandari, Advocate for the respondent.
...
Rajesh Bindal J.
The present petition has been filed under Sections 433 (e) and 434 (1) (a) and (b) of the Companies Act, 1956 (for short, 'the Act') for winding of the respondent-company.
Learned counsel for the petitioner submitted that the petitioner is a manufacturer of plant and machinery for manufacture of PVC conduit pipes. The respondent-company sought quotation from the petitioner for supply of PVC conduit pipes manufacturing plant. Vide letter dated 11.6.1996, the petitioner quoted the price thereof at ` 15,00,000/-. As per terms mentioned in the quotation, ` 2,00,000/- were to be paid in advance and balance was to be paid on delivery. On acceptance of the conditions mentioned in the quotation, the respondent-company sent a cheque of ` 2,00,000/- as advance payment on 13.6.1996 (Annexure P-2). In pursuance to the order placed by the respondent-company, the plant and machinery were supplied on 5.8.1996. Thereafter, the respondent-company made MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [2] payment of ` 5,00,000/- each on 17.8.1996 and 29.8.1996, however, the balance amount was not paid despite the fact that plant was supplied, erected and satisfactorily commissioned at the site. Vide communication dated 19.12.1996, the petitioner had written to the respondent-company intimating about successful commissioning of the plant and also requested for payment of the balance amount. Besides the balance, the respondent- company had even failed to issue statutory sales tax forms on account of which the petitioner had to incur higher tax liability. Even communications dated 24.1.1997 and 10.2.1997 requesting for payment of the balance amount and issue of statutory sales tax declaration did not yield any result. Legal notice dated 26.3.1997 was got served upon the respondent-company, however, instead of replying to the notice, the respondent-company vide letter dated 28.3.1997 pointed out that the plant was not production worthy, though no specific defect was pointed out. On account of non-issuance of statutory sales tax forms, the petitioner issued a debit note of ` 1,32,000/- on 12.12.1997. When despite repeated requests and reminders the payment was not made, the petitioner got a legal notice dated 24.2.1999 issued, which was replied to by the respondent-company by raising false and frivolous pleas. The same was followed by notice dated 26.7.1999 for winding up of the company, which was replied on 2.8.1999 reiterating the stand earlier taken in the reply to the legal notice, which was not tenable as the plant supplied by the petitioner was successfully installed and was operating to the satisfaction of the respondent-company. The company was earning substantial profit, as is evident from the balance sheet produced by it on record for the year 1999-2000. In that balance sheet, the respondent- company has shown that a sum of ` 2,94,900/- is due to the petitioner which also makes the debt as admitted, but despite repeated requests and reminders, the respondent-company is deliberately not paying the same. Even if it is functional, still it cannot avoid payment of due liability, hence, deserves to be wound up.
The defence raised by the respondent-company was not bonafide as the same had been raised only with a view to avoid payment. If the plant was not functional properly, the respondent would have raised MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [3] issue with the petitioner and claimed damages or other action but no such proceedings were initiated. It was further submitted that though stand is sought to be taken in the reply that the company suffered loss but there is no material produced on record in support thereof.
Learned counsel further, while referring to the earlier order passed by this court on 12.10.2006, submitted that entire issue was considered in detail when the petition was admitted. No doubt, the order was set aside in appeal, but the material facts still remain the same.
In support of the arguments, learned counsel relied upon Madhusudan Gordhandas & Co. v. Madhu Wollen Industries Pvt. Ltd., AIR 1971 SC 2600; Pradeshiya Industrieal & Investment Corporation of U. P. v. North India Petrochemical Ltd. and another, JT 1994 (1) SC 579; Canara Bank v. Arihant Industries Ltd., (2002)110 Comp. Cases 70 (P&H); Dolphin International Ltd. v. Gavs Laboratories (P) Ltd., JT 2002 (10) SC 142; Mediquip Systems Pvt. Ltd. v. Proxima Medical System GMBH, AIR 2005 SC 4175; Company Petition No. 156 of 2010-- M/s Lafarge Aggregates and Concrete India Private Limited v. M/s Ria Constructions Limited, decided on 4.7.2014.
On the other hand, learned counsel for the respondent-company submitted that while setting aside the order dated 12.10.2006 admitting the petition, the learned appellate court directed for examination of the matter afresh. As per the quotation given by the petitioner-company, the cost of plant included successful erection and commissioning at the site. In terms of the quotation, the plant was to be supplied within two months from the date of confirmed order. The order was placed by the respondent-company on 13.6.1996 along with a cheque of ` 2,00,000/-. The delivery in terms of the condition in the quotation was to be made on or before 14.8.1996. While referring to challan dated 5.8.1996, learned counsel for the respondent submitted that some parts of the plant were supplied believing the same to be complete plant, two cheques of ` 5,00,000/- each dated 17.8.1996 and 29.8.1996 were issued before even the machinery was erected and trial run was done. On 19.12.1996, i.e., more than four months after the last date for delivery of the machinery, even as per the admitted case of the petitioner, a MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [4] letter was sent by the petitioner that the plant has been installed and the job is "practically discharged". The claim was not that it has been discharged to the satisfaction of the respondent-company. Letter dated 24.1.1997 (Annexure P-5) was received from the petitioner, which was replied to by the respondent-company vide letter dated 11.2.1997 (Annexure P-7) stating therein that despite earlier communication the petitioner had not been able to sort out the problems being faced in successful running of the plant.
Learned counsel further referred to various delivery challans (Annexures R-3 to R-6) from 10.9.1996 to 30.12.1996 for sending various parts of the machinery, some of which had, in fact, been supplied vide invoice dated 5.8.1996. Once the parts of machinery were being supplied as late as till 30.12.1996, there was no question of successful commissioning of the plant and its trial run on 19.12.1996, as is sought to be claimed by the petitioner. In fact, many of the parts were old and the plant had to be substantially replaced. On account of all these factors, the respondent- company suffered huge loss as the plant, which was to be supplied on 14.8.1996 and was to be commissioned immediately thereafter was not commissioned even till the end of December, 1996. It is not that the respondent-company did not raise the issue regarding defective supply of machinery and the loss suffered by it. Vide communication dated 10.12.1996 (Annexure R-1), the respondent-company pointed out that the plant was not producing finished products to the required specification. To similar effect is the letter dated 20.12.1996 (Annexure R-2). The communication from the petitioner dated 24.1.1997 was duly replied to vide letter dated 28.1.1997 (Annexure R-7) pointing out that despite gap of considerable period, the petitioner had not attended to the complaints made by the respondent-company and made the plant operational to the satisfaction of the respondent-company for producing PVC pipes.
Learned counsel further submitted that at the time of admission of the petition at the earlier stage, the petitioner had referred to production details of the respondent-company, however, the same pertained to manufacture of steel pipes and not PVC pipes as the raw material was steel strips and not PVC granules. The respondent-company in the present case is MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [5] a functional company where number of employees are working and the same is contributing to the State exchequer as well. The bank guarantee furnished by it is alive for the last 15 years. Considering the genuine dispute raised by the respondent-company, it is not just and equitable to order for its winding up as the same will have adverse impact on the share-holders, employees and other creditors. The dispute is bonafide. Merely because the respondent-company had not initiated any legal action against the petitioner does not show that there is no dispute existing. The conduct of the petitioner itself shows that though as per its stand, the plant was supplied in August, 1996 and initially there was correspondence in early 1997, but the present petition was filed at the fag end when limitation for filing a suit was going to expire just to put a pressure on the respondent-company to toe to its terms, which is not in terms of the spirit of the Act.
Heard learned counsel for the parties and perused the relevant referred record.
The admitted facts on record are that the respondent-company invited quotation from the petitioner for supply of PVC conduit pipe manufacturing plant. The petitioner vide letter dated 11.6.1996 quoted the price thereof at ` 15,00,000/-. The erection and commissioning was to be done at site by the team of experts of the petitioner. In terms thereof, ` 2,00,000/- were to be paid in advance. The balance was to be paid at the time of delivery, which was to be made within two months of the confirmed order. All taxes were to be charged extra. As per the petitioner, the plant consisted of the following major parts:
"Parallel Co-rotating Twin Screws Extruder to manufacture PVC pipes 20mm.-50mm. consisting off:-
A) Extrusion Unit complete with Gear Box. Twin Screws & Barrel Set, D. C. Motor 10 H. P., Electric pannel, Die Head and Die Set of Single Pressure class of 20mm.-
32mm., 40mm.-50mm. capacity to produce kg. 40/Hr. on Pipe Dia 50mm.
B) Water Cooling Tank Vaccum Type.
C) Hall-Off.
MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [6] D) Hot Stamping Machine.
E) Auto Pvc Pipe Cutter.
F) Tilting Unit.
G) High Speed Mixer with 20 H.P.A.C. Motor.
H) Scrap Granulator
Cost includes.
Erection and Commissioning to be done at your site by our team of Experts."
The respondent-company placed the order vide communication dated 13.6.1996. The delivery was to be made by 14.8.1996, i.e., two months after the receipt of order.
Vide invoice dated 5.8.1996 (Annexure P-3), the petitioner supplied various parts of the plant to the respondent-company, as detailed hereunder, along with bill of ` 15,00,000/-:
"Twin Screws Extrusion Plant Complete with Gear Box, Motors, Screws and Barrel, Electricals and Electric Pannel, Water Cooling Tank, Die Head, Die Sets to make PVC pipe 20, 25, 32, 40 and 50 mm. Diameter, Hall off, Stamping Machine, Auto Pvc Pipe cutter, High speed Mixer with Ciranulator."
Thereafter, the respondent-company made two payments of ` 5,00,000/- each on 17.8.1996 and 29.8.1996.
The issue raised by the petitioner is that despite supply of plant and its successful commissioning, the respondent-company having failed to clear the balance and issue statutory sales tax declaration forms, the respondent-company deserves to be wound up, whereas the stand of the respondent-company is that the machinery was not supplied in time; the plant was not properly commissioned on account of which it suffered losses and no amount was payable as the liability was disputed.
The pleadings and contentions of learned counsel for the parties are to be considered in the aforesaid light.
The stand of the petitioner is that vide communication dated 19.12.1996 (Annexure P-4), while intimating the respondent-company that plant had been successfully installed and trial run has been conducted, MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [7] hence, the job is "practically discharged", a request was made to release the balance amount. Further, the contention is that despite communications by the petitioner thereafter, the respondent-company failed to pay the balance amount. The issue regarding non-functioning of the plant was never raised and plea raised regarding debt being disputed is only to avoid order of winding up, otherwise in the books of account of the respondent-company, the amount has been shown due. Whereas, in brief, the stand of the respondent-company is that many parts of the plant supplied by the petitioner were old. These had to be replaced. Supply of machinery continued till the end of December, 1996, hence, there was no question of supply and commissioning of the plant within the time agreed. The issue regarding proper functioning of the plant was raised in all the communications.
In addition to the details of the plant mentioned in the quotation furnished by the petitioner and further in the invoice dated 5.8.1996, there are certain other invoices produced by the respondent on record showing supply of different parts of the plant vide different invoices, which have been produced on record by the respondent-company as Annexures R-3 to R-6. The details of different parts supplied by the petitioner to the respondent-company vide aforesaid invoices are extracted below:
" Annexure Invoice No. Date Parts
R-3 031 10.9.1996 Extruder Plant with
complete pannel and
electricals, gear box,
motor, screws and barrel
R-4 034 17.10.1996 1. Sizer
2. Mandril
3. Die Head
4. Vaccum Pump with
Motor
5. Barrel Heater
6. Sizer Heater
7. Die Head Heater
8. Handle
R-5 035 7.11.1996 1. Printing Machine
2. Tripling Tool
MANOJ KUMAR
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Company Petition No. 229 of 1999 [8]
R-6 036 30.12.1996 Die for Pvc Pipe
80 Ckeling 20, 25, 32,
40 mm thickness 1 Set
(4 Nos.)"
A perusal of the aforesaid documents shows that vide aforesaid invoices, number of parts, which were claimed to have been supplied vide invoice dated 5.8.1996, were supplied again, meaning thereby there was some defect in the material supplied by the petitioner earlier. The delivery continued till 30.12.1996, as is the date of last invoice produced on record. In this situation, to claim that the plant was successfully installed and trial run was given before 19.12.1996, as is claimed in the communication (Annexure P-4) by the petitioner to the respondent-company cannot prima facie be believed.
Coming to the correspondence between the parties, the petitioner first wrote letter dated 19.12.1996 claiming that the plant has been successfully installed, which was followed by communication dated 24.1.1997 (Annexure P-5), claiming that a sum of ` 2,94,900/- was due, which was not paid despite request, as the payment was to be made at the time of delivery of the plant, i.e., 5.8.1996. The aforesaid communication was replied to by the respondent-company vide letter dated 28.1.1997 stating that despite repeated reminders, defects in the plant were not corrected. The petitioner was required to make the plant run successfully before asking for balance payment. The next communication by the petitioner is dated 10.2.1997 reiterating the request for payment of the balance amount. The aforesaid letter was replied to by the respondent- company vide communication dated 11.2.1997 (Annexure P-7) stating that the plant supplied by the petitioner had not been able to commence proper production till that date. The defects had not been rectified despite reminders. After the aforesaid communication from the respondent-company to the petitioner, the petitioner got a legal notice dated 26.3.1997 (Annexure P-9) issued to the respondent-company claiming that payment of the balance sale consideration was to be paid on delivery of the plant, which was delivered on 5.8.1996, hence, the respondent-company failed to make the MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [9] payment. The amount charged was only for cost of the plant. The words "erection and commissioning was to be done by the team of experts of the petitioner" was a free offer made by the petitioner, even though not requested in the purchase order. It was claimed that the plant was successfully running. On failure, the legal action was to be taken. Subsequent thereto, communication dated 28.3.1997 with reference to the letter of the petitioner dated 25.3.1997, has been placed on record as Annexure P-10, in which the respondent-company raised the issue that despite reminders the plant had not been made production worthy. Vide letter dated 12.12.1997 (Annexure P-11), the petitioner sent a debit note of ` 1,32,000/- on account of additional sales tax liability incurred by the petitioner on account of non-supply of statutory declaration forms. Thereafter, there is no correspondence produced on record by the parties and they remained silent for a period of about two years. It was thereafter that the petitioner got a legal notice dated 24.2.1999 (Annexure P-12) issued to the respondent-company reiterating its earlier stand and asking for payment of the amount due. The same was got replied to by the respondent-company vide letter of its counsel dated 8.4.1999 (Annexure P-13) raising, inter-alia, the issues that the plant supplied was technically defective, hence, there was no question of successful trial run. The main part of the plant (extruder) was old but was supplied as new one. It was further stated therein that some of the parts were supplied as late as in November/December, 1996. On account of non-commissioning of the plant, the respondent-company had to incur interest liability. It was further stated that the respondent-company is not interested in keeping the defective and re-conditioned plant supplied by the petitioner, which can be removed at any time subject to refund of the amount already paid by the respondent. The aforesaid letter was followed by a notice for winding up dated 26.7.1999 got issued by the petitioner reiterating the earlier pleas, which was again got replied by the respondent- company vide letter of its counsel dated 2.8.1999, in terms of the earlier stand taken by it and also pointing out that supply of some of major parts as late as in December, 1996 clearly established the fact that the parts earlier supplied or not were not upto the mark. Thereafter, the present petition was MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document Company Petition No. 229 of 1999 [10] filed in this court on 24.9.1999.
The aforesaid correspondence between the parties which continued initially upto 12.12.1997 and further that the petitioner remained quiet for a period of two years in between, prima facie, establishes the fact that there was some dispute about the liability and successful commissioning of the plant. The invoice for supply of plant is dated 5.8.1996. One of the stand taken by the petitioner in its communication is that setting up and commissioning of plant was complimentary and payment was to be made immediately on delivery of the plant, i.e., 5.8.1996, but the petition was filed in this court in the end of September, 1999. In the aforesaid circumstances, even if in the accounts book of the respondent- company certain amount has been shown in the credit of the petitioner's account, will not make it an admitted debt, as whatever has been shown in the account was in terms of the bill raised by the petitioner and the payment made against that. The correspondence between the parties and supply of various parts by the petitioner even after 5.8.1996 till end of December, 1996 clearly establish that there was some dispute, hence, it cannot be opined that liability was undisputed and the defence raised by the respondent-company was sham.
For the reasons mentioned above, I do not find that any ground is made out for admission of the petition. The same is accordingly dismissed.
(Rajesh Bindal) Judge November 19, 2014 mk (Refer to Reporter) MANOJ KUMAR 2014.12.03 13:37 I attest to the accuracy and authenticity of this document