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Karnataka High Court

Softcell Technologies Limited vs Leeboy India Construction Equipment on 12 January, 2017

Author: Vineet Kothari

Bench: Vineet Kothari

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

   DATED THIS THE 12th DAY OF JANUARY, 2017

                      BEFORE

      THE HON'BLE Dr.JUSTICE VINEET KOTHARI

          COMPANY PETITION No.196/2015
               a/w CA No.120/2016

BETWEEN
SOFTCELL TECHNOLOGIES LIMITED
(A PUBLIC COMPANY LIMITED BY SHARES
INCORPORATED UNDER THE PROVISIONS OF
THE COMPANIES ACT, 1956)
HAVING ITS REGISTERED OFFICES AT:
303-304, 3RD FLOOR, KOHINOOR CITY
COMMERCIAL COMPLEX
I, B WING, KIRO ROAD, OFF L.B.S.MARG
KURLA (W), MUMBAI, MAHARASTRA
AND HAVING ITS REGIONAL OFFICE AT:
1ST FLOOR, 16 HAUDIN ROAD
ULSOOR, BENGALURU-560 042
KARNATAKA
THROUGH ITS DULY AUTHORISED SIGNATORY
MR.NAGASHETTY BIRADAR

                                       ...PETITIONER
                          (Common in Co.P.No.196/2015
                                    & CA No.120/2016)
(BY SRI ARGUN SRI KUMAR, ADVOCATE)

AND

LEEBOY INDIA CONSTRUCTION EQUIPMENT
PRIVATE LIMITED
(A PRIVATE COMPANY LIMITED BY SHARES
INCORPORATION UNDER THE PROVISIONS OF
THE COMPANIES ACT, 1956)
HAVING ITS REGISTERED OFFICES AT:
                                Date of order:12.01.2017 in CO.P.No.196/2015
                                                          a/w C.A.No.120/2016
                                                  Softcell Technologies Limited
                      vs. Leeboy India Construction Equipment Private Limited.

.
                              2/12


#289-292, BOMMASANDRA JIGANI LINK ROAD
KIADV INDUSTRIAL AREA, JIGANI HOBLI
ANEKAL TALUK, BENGALURU-560 015
KARNATAKA
REP BY ITS DIRECTOR MR.CHEE JHUEN SEW

                                     ...RESPONDENT
                         (Common in Co.P.No.196/2015
                                   & CA No.120/2016)
(BY SRI DHYAN CHINNAPA, SR.ADVOCATE FOR
SRILKASHYAP N.NAIK, ADVOCATE)

      THIS COMPANY PETITION IS FILED UNDER SECTIONS
433 AND 434 OF THE COMPANIES ACT, 1956, PRAYING TO
PASS AN ORDER DIRECTING THAT THE RESPONDENT
COMPANY-LEEBOY INDIA CONSTRUCTION EQUIPMENT PRIVATE
LIMITED - BE WOUND UP BY THIS HON'BLE COURT UNDER THE
PROVISIONS OF THE COMPANIES ACT, 1956, ALONG WITH ALL
CONSEQUENTIAL RELIEFS THERETO AND ETC.,

      THIS PETITION COMING ON FOR ADMISSION along with
C.A.No.120/2016, THIS DAY THE COURT MADE THE
FOLLOWING:

                            ORDER

Mr. Arun Sri Kumar, Adv. for Petitioner. Mr. Dhyan Chinnappa, Sr. Adv. for Mr. Kashyap N. Naik, Adv. for Respondent.

1. The petitioner-Company M/s.Softcell Technologies Limited has filed this winding-up petition under Sections 433 and 434 of the Companies Act, 1956 ('Act' for short), against the respondent-Company M/s.Leeboy India Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited. .

Construction Equipment Private Limited, seeking the winding-up of the respondent-Company on the ground that the respondent-Company has failed to discharge its debts to the petitioner-Company to the extent of Rs.85,25,816.32/- (Rupees Eighty-Five Lakh, Twenty-Five Thousand, Eight Hundred and Sixteen and Paise Thirty- Two only) vide their statutory legal notice under Section 433 and 434 of the Act issued to the respondent-Company at Annexure-L dated 07.04.2015.

2. The respondent-Company replied to the said statutory notice vide their reply at Annexure-N dated 25.04.2015. Paragraphs B(iii) to (viii) of the said reply are extracted below for ready reference;

" B. xxx xxx xxx iii. Based on the representations made by your Client, our Client placed a purchase order bearing No.LBI-PROC-PO-2011-322D dated 27.09.2011 on your Client for purchase of "Wind Chill Software' (the "Software") and PDM link for Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited.

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implementation of the Software. The Software had to be implemented in four stages. As per the purchase order, your Client supplied the Software and corresponding payment was made by our Client to your Client. The implementation process was categorized into 4 (four) milestones and payments had to be made by our Client after completion of each milestone. Moreover, your Client had to complete all the milestones within a period of one year from the date of delivery of the Software for its effective implementation.

iv. However, for the reasons best known to your Client, your Client completed only the first two milestones during the first year and our Client promptly made payments for the said milestones to your Client. Your Client informed our Client that the last two milestones could not be implemented as software updates provided by PTC for the Software had expired. Your Client informed that the software updates from PTC was free only for the first one year from the date of delivery of the Software and our Client has to purchase software updates from your Client for further implementation of the last two milestones.

Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited.

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v. As per the earlier arrangement, your Client ought to have completed all the milestones during the first year. During the first year of purchase, the software updates were also freely available for effective implementation of the Software. However, your Client purposely delayed the implementation of the milestones prescribed beyond the first year only for malafide reasons.

vi. Your Client also suggested that our Client should take annual maintenance (the "AMC") of the Software which comes with various other updates. Your Client informed that they will complete the remaining two milestones at the earliest and suggested our Client that AMC will help our Client for effective usage of the Software in the future.

vii. Based on the representations made by your Client, our Client raised a purchase order dated 18.03.2014 with your Client for AMC for three years. However, your Client did not come forward for completing the remaining two milestones for effective implementation of the Software as promised and due to non implementation of the Software our Client also suffered losses.

Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited.

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Therefore, our Client did not proceed further with the purchase order dated 18.03.2014.

viii. Your Client's responsibility to complete the milestones as agreed between the parties for effective implementation of the Software was independent to our Client agreeing to take the AMC. Since your Client failed to fulfill its obligations by not implementing the last two milestones as was agreed between the parties, our Client did not proceed further with the purchase order pertaining to the AMC."

3. Mr.Arun Sri Kumar, learned counsel for the petitioner-Company urged before the Court that the contractual obligation of the petitioner supplier, which is an Indian Distribution Company for the American Company- Paramateric Technology Corporation (PTC), had supplied the License Keys vide Purchase Order viz., PO No.4200000110 vide Annexure-P e-mail dated 31.03.2014 to the respondent-Company. Thus, the software ordered by the respondent-Company under their Purchase Order vide Annexure-D dated 18.03.2014 Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited. .

stood satisfied and the respondent-Company without any valid reason has failed to pay the contractual price to the petitioner-Company for the supply of the said software and its inability to pay the admitted debts, has given a cause of action to the petitioner-Company to file the present winding-up petition.

4. On the other hand, Mr.Dhyan Chinnappa, learned Senior Advocate appearing for the respondent-Company has submitted that the petitioner-Company had earlier supplied a Software known as 'Wind Chill Software' to the respondent-Company under its Purchase Order dated 27.09.2011 as pointed out in paragraphs B(iii) to (viii) of its reply to the statutory notice, which are quoted-above and before complete execution of that contract in 4 (four) milestones over a period of one year, the main American Supplier Company-PTC changed its Software technology and said that the said Software updates are not available and, therefore, the respondent-Company can take a fresh Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited. .

Contract of Annual Maintenance and on such representation being made by the said PTC-Company, the respondent-Company gave a Purchase Order dated 18.03.2014 for a period of three years. Even under the new Annual Maintenance Contract (AMC), the petitioner- Company failed to install the said new Software, for which they were to charge the Installation Charges of Rs.8,37,383.94/- as per the Purchase Order at Annexure- D dated 18.03.2014, which amount they are also claiming under the statutory notice served on the respondent-Company even now, though which Software was never installed by the petitioner-Company.

5. Learned counsel for the respondent-Company also submitted before the Court that mere supply of the Code Keys vide Annexure-P e-mail dated 31.03.2014 was not sufficient, as the respondent-Company never actually downloaded the said Software without the same being installed at its business place for which the respondent-

Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited. .

Company had agreed to pay the Installation Charges to the extent of sum indicated above. Thus, on account of non- execution of the contract in question by the petitioner- Company, the respondent-Company is not obliged to pay the said sum to the petitioner-Company and the liability to pay the same is bona fidely disputed by the respondent- Company.

6. Having heard the learned counsel for the parties, this Court is of the opinion that the dispute raised by the respondent-Company in the present case appears to be bona fide and it cannot be said to be an undisputed and admitted liability of the respondent-Company to pay the sum as demanded by the petitioner-Company in the present case. It appears that the initial contract for supply of 'Wind Chill Software' was also not completely implemented by the petitioner-Company and in the present case unilaterally the parent Company-PTC changed its software technology and insisted upon the respondent-

Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited. .

Company to take-up fresh contract of AMC under which the parent Company-PTC was to supply the new Software to the respondent-Company including the responsibility of installing the same in the hardware of the respondent- Company at its business place.

The supply of Code Keys by the petitioner-Company to the respondent-Company under Annexure-P e-mail dated 31.03.2014 may be a fact, but that does not amount to a complete execution of the said contract. The petitioner-Company cannot be allowed to wriggle out of its contractual obligation to install the said Software in the hardware of the respondent-Company under the said contract to the satisfaction of the respondent-Company. Mere supply of the Code Keys with liberty to the respondent-Company to download the same, which fact itself is disputed by the respondent-Company, and in the absence of evidence being produced on record by the petitioner-Company of the said Software actually being Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited. .

downloaded by the respondent-Company in pursuance of the License Keys supplied to the respondent-Company, no clear finding can be arrived at this stage because the contract was required to be executed and implemented by the petitioner-Company or its parent Company-PTC to the satisfaction of the respondent-Company.

7. In the view of the settled legal position, these kind of disputes about the complete execution and implementation of the contract, cannot be gone into in the winding-up jurisdiction of this Court and it cannot be said that the liability of the respondent-Company in the present case is admitted or undisputed and in such cases, the only appropriate civil remedy is by way of filing a civil suit for recovery of money or any other appropriate remedy like Arbitration etc., and the winding-up petition cannot be converted into a money recovery suit as is sought to be done in the present case.

Date of order:12.01.2017 in CO.P.No.196/2015 a/w C.A.No.120/2016 Softcell Technologies Limited vs. Leeboy India Construction Equipment Private Limited. .

8. This Court is, therefore, not inclined to invoke its winding-up jurisdiction in the present case. Thus, the winding-up petition against the respondent-Company is liable to be dismissed and the same is accordingly dismissed.

No costs.

In view of dismissal of the present winding-up petition, the C.A.No.120/2016 for appointment of Provisional Liquidator does not survive and hence, the same is also dismissed.

Sd/-

JUDGE mv