Gujarat High Court
Oswal Machinery Ltd vs Pipavav Shipyard Ltd on 23 June, 2014
Author: S.R.Brahmbhatt
Bench: S.R.Brahmbhatt
O/OJMCA/54/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
MISC. CIVIL APPLICATION NO. 54 of 2014
In
COMPANY PETITION NO. 170 of 2010
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OSWAL MACHINERY LTD....Applicant
Versus
PIPAVAV SHIPYARD LTD....Respondent
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Appearance:
MR ASHWIN L SHAH, ADVOCATE for the Applicant
NANAVATI ASSOCIATES, ADVOCATE for the Respondent
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CORAM: HONOURABLE MR.JUSTICE S.R.BRAHMBHATT
Date : 23/06/2014
ORAL ORDER
1. Heard learned advocate for the parties. The applicant in this application happens to be petitioner in Company Petition no.170 of 2010 and has prayed for windingup of the opponent company. On 9 th March, 2012 learned single Judge of this Court passed an order in Company Petition No.170 of 2010, wherein in the operative part it was observed that the respondent company was granted four weeks' time from the receipt of the order or until 25th April, 2012 whichever was earlier for depositing the invoice amount covered by three invoices raised by the petitioner. Thus, while passing the said order, this Court deferred on advertisement. This order of learned single Judge dated 9 th March, 2012 passed in Company Petition No.170 of 2010 was carried into appeal being O.J. Appeal No.26 of 2012 and in initial stage of the appeal, the order of learned single Judge was stayed. However, as per the record, the company deposited the invoice amount on 9 th October, 2012 and recording these facts on 12 th March, 2014 the O.J. Appeal was Page 1 of 16 O/OJMCA/54/2014 ORDER requested to be disposed of as having become infructuous and accordingly the said appeal came to be disposed of as become infructuous under order dated 12th March, 2014. The present application is takenout by the original petitioner for withdrawal of the said amount, which came to be deposited by the company respondent hereinabove, on furnishing appropriate security as the petitioner happened to be in need of funds and on account of its poor financial problem.
2. Learned counsel appearing for the applicant, relying upon the order of the learned single Judge, contended that the amount deposited under the order of learned single Judge may be permitted to be withdrawn by the applicant on appropriate terms and conditions, as the amount would otherwise be lying idle and would be of no help to anyone. Learned counsel relied upon the facts and the discussion narrated under the order of the learned single Judge and contended that the filing of the suit by the present applicant was for the purpose of recovery of their dues and the same is pending, but this fact cannot be said to be a valid ground for denying disbursement of the said amount in favour of the applicant. Learned counsel for the applicant, therefore, submitted that the petition is pending and is also for seeking appropriate relief including windingup of the company and Court may therefore, pass appropriate order atleast so far as the withdrawal is concerned in this application.
3. Learned advocate appearing for the opponent original respondent company submitted that the windingup petition and proceedings thereunder cannot be said to be proceedings so as to permit the applicant to receive the amount deposited by the company.
4. Learned advocate appearing for the opponent, contended Page 2 of 16 O/OJMCA/54/2014 ORDER that the windingup petition is still pending and the company has taken up appropriate pleadings qua existence of dispute, which was a result for not releasing the amount in favour of the applicant.
5. Learned advocate appearing for the opponent, invited this Court's attention to the observation of the learned single Judge made in para no.17.1 of the order of the learned single judge dated 9 th March, 2012 and submitted that the order of the learned single Judge was based upon the record and proceedings available at that stage and therefore, learned single Judge has observed in para no.17.1 that "The aforesaid aspect is also evident from the fact that though the petitioner issued three invoices in month of February 2008, until May 2010, the respondent company never raised any grievance with reference to the said grievance and never objected the said invoices until (the petitioner's third intimation demand served after the service of three invoices) 4th May, 2010 and it is only on 4th May, 2010 the petitioner company came out with aforesaid reply. (It should be respondent) The fact that the respondent has comeout with an afterthought, dispute is also evident from the fact that the respondent has availed CENVAT & VAT credit."
6. Learned counsel appearing for the opponent, relying upon this observation submitted that after the said order was passed, the company could locate email exchanges between the company and original petitioner applicant hereinabove and the same would show that infact the company did raise objections and grievances qua non fulfillment of contractual obligation on the part of the applicant, therefore, now when this Court is examining the issue and prayers for disbursement, these exchanges may be taken into consideration.
7. Learned advocate appearing for the opponent company invited this Court's attention to page no.155, which happened to be the Page 3 of 16 O/OJMCA/54/2014 ORDER first page of additional affidavit on behalf of respondent and submitted that on page no.156, the email exchanges, as many as five, which have been produced as AnnexedA collectively to their affidavit, would clearly indicate that the dispute qua nonfulfillment of contractual obligation was very much existing and on that ground alone, there was no tenability in the prayer for windingup of the company.
8. Learned counsel for the applicant, extensively read the e mail exchanges from page no.158 to 167 and submitted that the contract on which the invoices were raised, did not leaveout the erection and commissioning of pay in question. Infact, as per the work order and the subsequent contract and email exchanges between the parties, would clearly indicate that there was consistent reminder to the petitioner for completing the contractual obligation and handover the fully commissioned cranes after its repair. This commissioning work was required to be assigned to some other agency, as the petitioner did not do it and hence, the dispute, which was raised qua nonfulfillment of contract may weigh with this Court in not permitting the disbursement of the amount, which is deposited in this Court under the order dated 9 th March, 2012.
9. Learned counsel appearing for the opponent company, contended that the aforesaid facts, as could be seen from page no.158 to 167 of the main petition and the fact that the summary suit is already filed and it is awaiting its final disposal, this Court may not dispose of the amount or may transfer the amount to the Court, wherein summary suit is pending and the disbursement of the amount be made subject to final outcome of the summary suit and the windingup petition itself be dismissed as it is not tenable on account of the genuine dispute pending.
10. This Court is of the view that the application is required to Page 4 of 16 O/OJMCA/54/2014 ORDER be disposed of and the prayer for disbursement of the amount deposited in the Court pursuant to order dated 9 th March, 2012 is required to be allowed, on applicant furnishing appropriate security for refunding the said amount in case of any adverse outcome in the windingup proceedings, for the following reasons i.e.
(i) The order dated 9th March, 2012 passed by learned single Judge contains very vital observations and findings, which are based upon the pleadings and proceedings before the Court. Those observations are required to be setout hereunder.
4. In response to the notice issued under the order passed by the Court after hearing the petitioner the respondent company entered appearance and resisted the petition by filing reply affidavit. In its reply affidavit the respondent company has, while dealing with the assertions and allegations of the petitioner company, stated, inter alia, that:
12. ........the respondent was desirous of getting repair, erection and commissioning of Gantry cranes - 2 nos., which were lying unused at its factory premises. The prime concern of the respondent was to bring to use the said cranes for its manufacturing activities. On the other hand, the petitioner was desirous of starting business relations with the respondent, as the respondent company enjoys good name and fame in the market of shipbuilding.
Accordingly, after discussions, the respondent company placed a LOI envisaging the exact details of work to be undertaken by the petitioner, which was agreed and accepted by the petitioner without any dispute or demur. The LOI clearly envisaged the job description which was "repair and erection and commissioning" of the cranes. It is empathetically submitted that the prime object of the respondent was to put the cranes in use, and therefore, the work of erection and commissioning of the cranes was as important and integral part of LOI as that of the work of repairs. The petitioner had agreed to undertake the job which was clearly described in the LOI. It is submitted that as per LOI, the petitioner was supposed to complete the work of first crane within 6 weeks from the date of start of Page 5 of 16 O/OJMCA/54/2014 ORDER the work and thereafter, the second crane in 2 weeks. Therefore, time was the essence of the contract, as the functioning of the cranes had direct nexus with the manufacturing activities of the respondent Company.
14. It is further submitted that in its letter dated 4.5.2010, the respondent had stated that though after carrying out the repairs, it was incumbent upon the petitioner to depute service engineers at the site of the respondent company to complete the remaining work and to make the cranes commissioned and operational but the petitioner miserably failed in doing so. It was also informed that power supply was never restricted and/or refused or not made available to the petitioner. As a manner of fact, since the petitioner did not carry out proper repairs of the cranes and did not bring the same to operational state, the respondent company had to get the incomplete work completed by appointing other agency named Hebenkraft, to which, the respondent company had to pay an amount of approximately Rs.23,00,000/ excluding taxes for the work, which otherwise was to be completed by the petitioner."
5. Subsequently the respondent company filed additional affidavit, particularly to place on record certain documents and details in support of the factual aspects mentioned in its earlier affidavit. In para 2 of the said additional affidavit the respondent company mentioned that:
"2. I state that I am filing the present affidavit only for the limited purpose of placing on record of the petition the documents related to the entrustment of work of repair and erection of two Gantry cranes to a third party viz. M/s. Hebankraft, Thane, Maharashtra. The said work was required to be entrusted to the said agency, as the petitioner, who was entrusted the said work, did not complete the work of repairs, erection and commissioning of the cranes successfully and to the satisfaction of the respondent."
7. ......The learned counsel for the petitioner relied on following judgments:
(1) The decision of the Calcutta High Court in the case of Hind Hosiery Mills Pvt. Ltd. v. Anand Chemicals Co.
[(2003) 115 Company Cases 739].
Page 6 of 16 O/OJMCA/54/2014 ORDER
(2) The decision of the Patna High Court in the case
of Central Bank of India v.Sukhani Mining and
Engineering Industries Pvt. Ltd. [(1977) 47 Company Cases 1].
(3) The decision by the Madras High Court in case of Hoe Leong Corporation Ltd. v. Vaishnovi Infrastructure Engineering P. Ltd. [(2011) 167 Company Cases 324.
(4) The decision of the Apex Court in the case of Madhusudan Gordhandas and Co. v. Madhu Woollen Industries Pvt. Ltd. [(1972) 42 Company Cases 125].
(5) The decision by the High Court of Delhi in case of Hotline Teletubes and Components Ltd. v. A.S.Impex Ltd. [(2004) 1 Company Law Journal 412].
(6) The decision by the High Court of Delhi in the case of Karam Chand Thapar & Bros. (Coal) Sales Ltd. v. Acme Paper Limited [(1994) 1 Company Law Journal 274.
(7) The decision by the Apex Court in the case of Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd. [(1999) 97 Company Cases 683.
(8) The decision by the Andhra Pradesh High Court in the case between Fibex Inc. v. A.B.K. Publications Ltd. [(1999) 97 Company Cases 947].
(9) The decision by the High Court of Delhi in the case of V.K.Jain v. Richa Laboratories (P.) Ltd. [(1993) 78 Company Cases 283 Delhi.
8. .....The learned counsel for the respondent company relied on the below mentioned decisions in support of his contention:
(1) The decision in case of IBA Health (India) Pvt.
Ltd. v. Info - Drive Systems Sdn.Bhd. [(2010) 10 SCC 553] (2) The decision in case of Pradeshiya Industrial & Investment Corp. of U.P. v. North India Petro Chemicals Ltd. [1994 (79) Company Cases 835] (3) The decision in case of Amalgamated Commercial Traders P. Ltd. v. ACK Krishnaswami [1965 (35) Company Cases 456] (4) The decision in case of Tata Iron and Steel Co. v. Micro Forge (India) Ltd. [2001 (104) Company Cases 533] Page 7 of 16 O/OJMCA/54/2014 ORDER (5) The decision in case of Rishi Enterprises, in Re. [1992 (73) Company Cases 271].
(6) The decision in case of Shadi Lal Ent. Ltd. v. Co operative Ltd. [2001(103) Company Cases 863].
(7) The decision in case of Juneja Chemical Ind. Pvt. Ltd. v. Alam Tannery Pvt. Ltd. [2007 (140) Company Cases 833].
(8) The decision in case of ICICI Bank Ltd. v. Saurav Chemicals Ltd. [2010 (153) Company Cases 429].
(9) The decision in case of Gautam Electric Motors v. Firm Shantilal & Bros. [MANU/DE/0086/1969].
(10) The decision in case of Madhusudan Gordhandas & Co. v. Madhu Woollen Ind. Pvt. Ltd. [1972(42) Company Cases 125].
10. In its rejoinder affidavit dated 9th June 2011, the petitioner company has also claimed that the respondent company has already availed benefit of CENVAT and VAT credits to the tune of Rs.2,30,438/ on the basis of the work carried out by the petitioner company. It is claimed that by taking CENVAT and VAT credit, the respondent has admitted and approved the said transaction and admitted its liability to pay the amounts.
12. It emerges from the above referred record that the petitioner has claimed that the work of erection and commissioning was beyond the scope of its contract which was restricted to the work of repairs and overhauling of the cranes which included the task of dismantling, identifying and removing the parts and assembling etc. for repairing and fabricating and overhauling and transporting the parts and assemblies i.e. the 12 operational aspects of repairs, overhauls, supply and transport of the equipments.
13. The respondent company has resisted the petition on the ground that since the petition involves and raises disputed Page 8 of 16 O/OJMCA/54/2014 ORDER question of facts the petition ought not be entertained as the issues of facts involved in the matter would require regular trial.
13.1. ......The learned counsel for the petitioner relied on the decision in the case of Hotline Teletubes And Components Ltd.(supra) so as to claim that if the dispute is not bonafide or is an afterthought then petition may not be rejected. .......
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".
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".
16.2 In present case so as to address the said aspect it is necessary to recall certain relevant dates. It s noticed from the record that:
1 24.11.2007 The petitioner submitted its quotation to the respondent.
2 03.12.2007 The respondent issued Letter of Intent 3 26.02.2008 & The petitioner raised three invoices in the sum of Rs.
27.02.2008 4 March, August The petitioner forwarded letters/reminders raising & October, demand for payment of the invoices amount.
2009 & Feb & April, 2010 5 04.05.2010 The respondent forwarded its first reply to the petitioner.
6 15.07.2010 The respondent issued statutory notice.
Page 9 of 16O/OJMCA/54/2014 ORDER 16.3. Besides the above mentioned dates other two dates are also relevant to note viz. 26.09.2009 and 20.10.2009. On 26.09.2009 a company named Hebankraft submitted its revised quotation to the respondent and on 20.10.2009 the respondent issued work order in favour of the said company i.e. Hebankraft.
16.6. It is pertinent to note that until the said period i.e. 30.08.2009 any grievance with regard to the petitioner's performance of contract work does not appear to have been raised by the respondent company. The respondent company has not placed any material, not even a single letter, making any remark or grievance about any alleged delay in executing the work or unsatisfactory performance of work or of any nature whatsoever.
17. The overall effect of conjoint consideration and the reading of the aforesaid aspects lead the Court to believe that the disputes raised by the respondent company have been raised as afterthought and that the disputes were not raised contemporaneously but have been raised only subsequently and from conjoint reading of all facts and circumstances of the present case, which are illustratively mentioned above, it comes out that the grounds of defence raised by the respondent are afterthoughts and consist of and amount to, as expressed by the Apex Court, "some ingenious mask invented to deprive a creditor (in present case the petitioner) of its bonafide claim."
17.1. The aforesaid aspect is also evident from the fact that though the petitioner issued three invoices in month of February 2008, until May 2010, the respondent company never raised any grievance with reference to the said grievance and never objected the said invoices until (the petitioner's third intimation - demand served after Page 10 of 16 O/OJMCA/54/2014 ORDER the service of 3 invoices) 4 th May 2010 and it is only on 4 th May 2010 the petitioner company came out with the aforesaid reply. The fact that the respondent has come out with an afterthought dispute is also evident from the fact that the respondent has availed CENVAT & VAT credit.
18. In this context it is relevant to recall at this stage the observations by the Apex Court in para 20 of the decision in the case between IBA Health (India) Private Limited (2010 [10] SCC 553) extracted hereinabove in para 14 and 14.1.
21.2 Therefore the submission and presentation of a suit in the civil Court by the petitioner for recovery of debt would not act as a bar against present petition.
21.3. Likewise, the arbitration clause in the LOI also would not act as a restriction or obstacle or prohibition in maintaining a winding up petition.
21.4. Accordingly, the respondent company's contention resisting the petition on the ground that the Letter of Intent / contract contains "Arbitration Clause" and that the petitioner has already instituted a civil suit for enforcing recovery of the dues, would not help the respondent in opposing the petition on the said ground.
21.5 In this context reference needs to be made to a recent decision by the Apex Court in the case between Boozallen and Hamilton Inc. v. SBI Home Finance Limited & Ors. [(2011) 5 SCC 532] the Apex Court has observed that: "........Adjudication of certain categories of proceedings are reserved by the legislature exclusively for public fora as a Page 11 of 16 O/OJMCA/54/2014 ORDER matter of public policy. Certain other categories of cases though not expressly reserved for adjudication by public fora (Courts and Tribunals), may by necessary implication stand excluded from the purview of private fora......"
21.9. In present case, the foregoing discussion demonstrates that the petitioner has made out case that the eventuality contemplated under Section 433(e) and/or under Section 433(f) read with Section 434(1)(a) exists and the dispute sought to be raised by the respondent is an afterthought and lacks bonafides. In this view of the matter this Court is not convinced and inclined to reject and dismiss the petition at threshold on the ground that civil remedy and/or remedy of arbitration is available or that the claim is disputed.
23. In present case the Court has noticed that the dispute sought to be raised by the respondent is in nature of afterthought and lack bonafides and that therefore in the facts of present case the said objection and contention cannot be sustained.
26. On this count is is relevant to note that this Court has in the case between Ficom Organics Ltd. v. Laffans Petrochemicals Ltd. [(2000) 99 Company Cases 471] after reaching the conclusion that the dispute raised by the respondent company against the petitioner's claim was not bonafide, granted time to the respondent company to pay the petitioner the claim amount.
27. On over all consideration of the aforesaid and other factual aspects recapitulated hereinabove earlier, this Court has found, and the Court is satisfied, that the dispute or defence raised by the petitioner is an afterthought and the Page 12 of 16 O/OJMCA/54/2014 ORDER afterthought dispute or defence of the respondent company is raised with a view to resisting the petition and delaying the liability to make the payment of due and payable amount.
28. As mentioned above, when the court reaches a conclusion that the respondent's defence lacks bonafides or that it consists of some ingenious mask invented to frustrate the claim then the court may not frustrate the petition by throwing out the petition and denying the order of admission of the petition on the grounds raising objections against maintainability of the petition.
30. Therefore, the court is inclined to accept and 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 (having regard to the other aspects urged by the respondent e.g. pending execution of contracts and such other details) to grant an opportunity to the respondent company to deposit the invoice amounts in this Court. Hence, below mentioned order is passed.
31. The respondent company is granted time of 4 weeks from the receipt / service of a copy of this order or until 25 th April 2012 whichever is earlier to deposit the invoice amount covered by the 3 invoices raised by the petitioner.
(ii) The aforesaid observations, clearly indicate that the entire issue with regard to existence of dispute so as to debar the petitioner from maintaining main petition, is now open to be raised again and again, as the challenge to the order dated 9 th March, 2012 has resulted into disposal of the O.J. Appeal no.26 of 2012 as having become infructuous. The respondent company preferred O.J. Appeal no.26 of Page 13 of 16 O/OJMCA/54/2014 ORDER 2012 and in the memo of the O.J.Appeal, the following averments were made, which are required to be taken into consideration.
"10. It is submitted that the said emails are admittedly exchanged between the above parties during the aforesaid period. It is submitted that in the first email dated 3.5.2008 itself, the appellant had raised serious disputes and issues with regard to the conduct of the respondent and have brought the deficiencies in the work to the notice of the respondent. However, the said emails could not be traced during filing of the Affidavits in the proceedings of Company Petition No.170 of 2010 in spite of due and diligent efforts made by the company, since the emails were in the account which was password protected account. It is only now that the company has been able to trace out those emails. Hence, in view of the said eventuality, the appellant has filed the Review Application before the Ld.Company Judge. However, since by way of the impugned order, the appellant is required to deposit the amount, as directed, on or before 25.4.2012, and the present appeal is preferred. A copy of the said review application together with the annexures thereto is annexed hereto and marked as AnnexureII."
Thus, the correspondence, which are now sought to be pressed into service were available before the O.J. Appeal Bench and the grounds were also pressed into service, now when those grounds though pressed into service at one point of time were not relied upon for seeking further orders and the company respondent chose to invite an order after depositing the amount, a question arises as to whether is the respondent company now entitled to reagitate the same issue time and again. The answer is emphatic "'No". As the permission to the company to reagitate those issues would be barred by constructive res judicata. This Court cannot permit the respondent company to reagitate the Page 14 of 16 O/OJMCA/54/2014 ORDER issue, which company had takenup before the O.J. Appeal Bench and when it did not chose to invite any order there, and when it did not seek appropriate liberty to reagitate them or an observation of the Court and did not seek any liberty to press into service those grounds, then the same cannot be resurrected for resisting the prayer for disbursement. Even otherwise also, assuming for the sake of examining without conceding that the O.J. Appellate Bench, did permit the opponent original petitioner to seek relief of disbursement from the learned single Judge and in that way, the Appellate Bench did not opine upon the correspondence clearly indicate that there was a team of ten persons sent by the present petitioner for helping the erection work and on account of lack of cooperation from the respondent company, the team had to go back to the petitioner. These are the correspondences exchanged, which persuade this Court to hold that there exists no ground for taking different view from the one taken by the learned single Judge and expressed it in the order dated 9 th March, 2012. Therefore, on this ground also, the Court is of the considered view that the company failed in establishing that the disbursement is not to be made.
The Company did not have any entitlement to seek re agitation on the basis of the email exchanges and correspondence forming part from page no.158 to 167, as the review application being O.J. M.C.A. No.74 of 2012 in Company Petition No.170 of 2010 seeking review of the order dated 9th March, 2012 came to be withdrawn on 22nd June, 2012 and the following order came to be passed.
"1. Heard Mr.Chudgar, learned advocate for the applicant.
2. Mr.Chudgar, learned advocate for the applicant has submitted that he has received instructions from his client to withdraw this application.
3. The permission as requested for is granted. The Page 15 of 16 O/OJMCA/54/2014 ORDER application is disposed of as withdrawn.
Thus, from any angle, it can be said that the respondent company did not have any entitlement to reagitate the issue, which could said to be now any longer permitted to be agitated.
(iii) The Court is also not impressed by the submission canvassed on behalf of the respondent company that there exists a bonafide dispute, as now, this Court at this stage, cannot go beyond the observations recorded by the learned single Judge in his order dated 9 th March, 2012 challenge where to has failed or not pressed, having raised all the grounds which have been raised before this Court. Moreover, the detailed order dated 9th March, 2012 contain reasons, which this Court is of the view cannot be said to have been whittled down in any manner on account of the correspondence placed on record, which was also conforming part of the O.J. Appeal proceedings.
11. In the result, the application is allowed. Office is directed to disburse the amount deposited under order of this Court dated 9 th March, 2012 to the applicant on his furnishing appropriate undertaking before this Court, that in the eventuality and as per the final order in the main appeal, if he is called upon to refund the said amount, he will refund it with appropriate interest that may determine at the relevant time and appropriate security for refunding the same.
(S.R.BRAHMBHATT, J.) Rathod...
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