Delhi High Court
Pacific Convergence Cororation Ltd. vs Data Access (India) Ltd. on 12 March, 2013
Author: S. Muralidhar
Bench: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
CO.PET. No. 292 of 2004
Reserved on: February 25, 2013
Decision on: March 12, 2013
PACIFIC CONVERGENCE CORPORATION LTD.
.... Petitioner
Through: Mr. Arjun Pall, Advocate.
versus
DATA ACCESS (INDIA) LTD. ..... Respondent
Through: Mr. Y.P. Narula, Senior Advocate with
Mr. Aniruddh Chaudhary, Advocate for Canara
Bank.
Mr. Anuj Aggarwal and Mr. Gaurav Khanna,
Advocates for DAVP.
Ms. Manini Brar, Advocate for Blue Bird
Advertising (P) Ltd.
Ms. Padma Priya with Mr. Mukesh Kamal and
Ms. Meenakshi Sood, Advocates for Infinity
Advertising Services (P) Ltd.
Mr. Kanwal Chaudhary, Advocate for the Official
Liquidator.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
12.03.2013 Co. Appl. Nos. 908 of 2007, 480 of 2008, 1702 of 2009, & 151 of 2011
1. These applications arise out of orders passed by the Court in Company Petition No. 292 of 2004 seeking the winding up of the Respondent Data Access (India) Limited ('DAIL'). The subject matter of the present order C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 1 of 15 concerns the payments due to two advertising agencies, Infinity Advertising Services Private Limited and Blue Bird Advertising (P) Limited.
2. DAIL was involved in the business of international long distance network services using high grade technical equipments. It was operating its business from various places in India, i.e., Delhi, Bangalore, Chennai, Mumbai and Kolkata. The assets of DAIL lying at the aforesaid places were inventorised and valued under the orders of this Court. By a judgment dated 18th November 2005, DAIL was directed to be wound up by the Court.
3. Canara Bank ('CB') is one of the secured creditors of DAIL. Pursuant to the orders dated 2nd February 2007 and 8th March 2007 passed by the Court, proclamations for the sale of the movable assets of DAIL were ordered to be issued. According to CB no bids were received in response to the notices issued. By an order dated 31st May 2007 the Court directed that a fresh advertisement be issued for the sale on 20th September 2007. This led to CB filing Co. Appl. No. 907 of 2007 stating that since it was in the process of negotiating with some private parties, the order dated 31st May 2007 should be kept in abeyance.
4. CB also filed Co. Appl. No. 908 of 2007 stating that pursuant to the orders dated 6th November 2006, 18th December 2006, 2nd February 2007 and 8th March 2007 the sale proclamations had been issued in various newspapers by the Official Liquidator ('OL'). Pursuant to the order dated 2nd February 2007 the advertisement was published by the OL on 16th February 2007 in various newspapers through an advertising agency, Infinity Advertising Services Private Limited ('Infinity'). The cost of the C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 2 of 15 advertisement had to be borne by CB. Infinity raised a bill of Rs. 42,69,844 on the OL, who in turn asked CB to pay the said sum. The OL also asked CB to pay the invoices raised by Blue Bird Advertising (P) Limited ('Blue Bird') for a sum of Rs. 27,80,347.50.
5. CB contended that the demand raised by Infinity was exorbitant and not payable for the following reasons:
"(a) The Official Liquidator is bound by the new Advertising Policy of the Government of India, which is effective from 1st June 2006.
(b) As per the said policy, all Central Governments advertisements are to be routed through the Directorate of Advertising and Visual Publicity ('DAVP'), which is the Nodal Advertising Agency of the Government of India.
(c) As per the DAVP Policy, all the Government, autonomous organizations and PSUs under the Ministries/Departments are also bound to route their advertisement through DAVP.
(d) As per the said policy, the advertisements are to be published in newspapers, which are in the panel of DAVP and the rates of advertisement fixed by the Rate Committee of the DAVP are applicable uniformly to all the newspapers."
6. CB further states that the bill raised by Infinity was not as per the DAVP rates and was, therefore, not payable by the OL to Infinity. It is pointed out that a sum of Rs. 17.54 lakhs had been spent by CB towards the inventorization charges and the valuation of the assets of DAIL. It is further pointed out that CB was being subjected to unreasonable expenditure on account of different charges as well as security charges. It was prayed that C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 3 of 15 the OL should ensure that the public money was not wasted by accepting exorbitant and wrong demands of the advertising agency who was obliged to ensure that the DAVP rates would be charged by the newspapers for advertisements in question. In Co. Appl. No. 908 of 2007 CB prayed that (a) the OL should be directed to deposit the amount received so far in the account of DAIL with CB; (b) the OL should be directed to submit advertising bills as per the DAVP rates; (c) the ex-Directors of DAIL should be directed to pay the advertisement charges and (d) the OL should be directed to make security arrangements through security agencies at reasonable rates.
7. Annexed with Co. Appl. No. 908 of 2007 are the relevant documents including correspondence exchanged between the parties. A letter dated 27th June 2007 was written by the OL addressed to CB asking it to make the payment directly to Infinity "after deducting 8% discount on DAVP rates." By letter dated 30th July 2007 the OL referred to a meeting held on 20th July and 26th July 2007 with the officers of CB and requested that payment of the advertisement bills of both Infinity and Blue Bird be made after deducting 10% discount as charged by the OL in other cases. On its part, Infinity wrote to the OL on 1st May 2007 pointing out that both Eenadu and Times of India declined to offer DAVP rates for the advertisement issued by the OL. Their letters were enclosed with the application.
8. The applications first listed before the Court on 3rd September 2007 were directed to be listed on the administrative side. A reply dated 17th September 2007 was filed by Blue Bird stating that the newspapers had not offered DAVP rates to the OL, Debts Recovery Tribunal ('DRT'), Mahanagar C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 4 of 15 Telephone Nigam Limited ('MTNL'), Bharat Sanchar Nigam Ltd. ('BSNL') and other public sector undertakings ('PSUs'). It was contended that the OL was fully aware of the above fact. It was stated that on 12th May 2007 the OL wrote to Blue Bird placing an order requiring it to publish one advertisement specifying the rates and cost, as under:
"A. Times of India + All editions = Rs. 33,60,000 + ST.
Economic Times
B. Hindustan Times Delhi = Rs. 11,76,000 + ST.
(English & Hindi)
C. Prajavani Bangalore = Rs. 5,04,000 + ST.
D. Thanthi Chennai = Rs. 2,94,000 + ST."
9. Thereafter, Blue Bird raised a bill as per the newspapers' card rate for a sum of Rs. 54,31,932. On 12th July 2007 the Court passed an order requiring the OL to pay the advertising charges to Blue Bird and recover it from CB. On 31st July 2007 the OL issued a cheque in the sum of Rs. 22,88,894 to Blue Bird as part payment after deducting 10% discount, which was, according to it, never offered to the OL. Blue Bird submitted that all newspapers and advertising agencies registered with the Indian Newspaper Society ('INS') were bound by its policy circulars/orders dated 1st July 2004 and 28th August 2006. Copies of the said circulars enclosed with Blue Bird's reply showed that the Standing Committee of Information Technology and the Committee of Secretaries had made a representation to INS to reconsider its decision. The Executive Committee of INS had in a meeting held on 22nd June 2006 considered the request but, "reiterated the stand taken earlier that the advertisements of Public Sector Undertakings (PSUs) C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 5 of 15 and autonomous bodies and Prasar Bharati/Doordarshan would only be accepted on commercial card rates of newspapers and not on DAVP rates."
Newspapers in which the advertisements were issued were demanding 18% interest on delayed payments. Accordingly, on 7th September 2007 Blue Bird submitted to the OL a bill for Rs. 1,42,132 towards 18% interest for three months.
10. Infinity filed a reply on 25th September 2007 referring to the order dated 17th May 2007 passed by the Court on Report No. 148 of 2007 filed by the OL directing that the advertisement expenses as detailed in the report should be released in accordance with rules after deducting 8% discount on the bill amount from the Common Pool Fund ('CPF') of the OL. On 5th June 2007 the OL cleared the bill of Infinity for a sum of Rs. 47,41,431 after deducting a 11% discount instead of 5% and 8%. The OL enclosed a letter addressed to CB to release the payment directly to Infinity and asked Infinity to collect payment directly from CB. However, CB refused to make payment except as per DAVP rates. Infinity accordingly prayed that Co. Appl. No. 908 of 2007 should be dismissed.
11. The OL at the relevant time, Mr. A.K. Chaturvedi, himself filed an affidavit in these proceedings on 29th September 2007. The OL stated that by letters dated 13th and 22nd February 2007 Infinity had been told that the rate charged should not be more than the cost claimed by DAVP or by the newspaper concerned. The OL acknowledged that both the Hindustan Times and The Times of India declined to extend the benefit of DAVP rates because according to them the OL was recovering the cost either from the party involved or from the auction money recovered by him. It was C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 6 of 15 mentioned therein that an official of the OL, Mr. Vinod Sharma, and an official of Infinity visited at the office of H.T. Media Limited on 27th April 2007. On 30th April 2007 the OL wrote a detailed letter explaining the functions of the OL and requested Hindustan Times to consider charging DAVP and non-commercial rates. In reply Hindustan Times by its letter dated 7th May 2007 informed the OL that the advertisements of the High Court would be entitled to DAVP rates whereas the advertisements of OL are accepted at their card rate. The OL enclosed the newspaper clipping of the advertisement dated 16th February 2007 published in The Hindu, Madurai by Infinity and the one dated 15th May 2007 in The Times of India New Delhi by Blue Bird along with photocopies of the relevant bills of the said advertising agencies.
12. The OL wrote to the DAVP on 25th September 2007 requesting for DAVP rates for the advertisements published by the OL in The Times of India, the Hindustan Times and Economic Times, Delhi, Mumbai and Bangalore editions. In reply, the DAVP stated that the aforementioned newspapers were not publishing advertisements relating to the office of the OL at DAVP rates.
13. In the reply filed by HT Media Limited it was categorically stated that the advertisement revenues were the principal source of income of any newspaper establishment accounting for almost 83% and that the said revenues would be severely affected if DAVP rates were to be offered to all PSUs and government institutions as well. It was pointed out that the OL had voluntarily and consistently for decades been publishing advertisements and public notices in the said newspaper by paying the card rates applicable C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 7 of 15 from time to time without protest or demur. The release orders and invoices relating to advertisements issued by the OL and proof of payment having been paid for the said advertisements at card rates were enclosed. It was stated that where the Court itself published notices etc. then out of deference for the judiciary the newspapers charged DAVP rates.
14. Prajavani, which is a Kannada daily newspaper, filed a reply pointing out inter alia that under the advertising policy, DAVP rates were applicable only to those advertisements that were routed through the DAVP. The relevant clauses of the policy referred to in the reply read as under:
"Clause 23 No newspaper will publish DAVP advertisement without receipt of the relevant Release Order. Request for a duplicate Release Order by publications will be entertained on merits and on case to case basis.
Clause 24 The newspaper will be obliged to strictly adhere to the date of publication of DAVP advertisements as given in the Release Order. Publication of advertisement on dates other than that given in the Release Order, unless intimated otherwise, will not be regularized with revalidation of Release Order and no payment will be made in such cases.
Release of Advertisements Clause 25 As soon as requisitions for release of advertisements are received from various Ministries and Departments as also from public sector undertakings and autonomous bodies, DAVP will prepare a suitable media list keeping in view the content, the target audience or the advertisement and C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 8 of 15 availability of funds after consideration of the recommendations of the client."
15. It is submitted that the advertisement dated 16th May 2007 was published pursuant to a release order placed by Blue Bird and the rate of Rs. 525 per sq. cm had already been approved by the OL before the release order was issued to Prajavani. Annexed to Prajavani's reply is a copy of a letter dated 12th May 2007 written by the OL to Blue Bird.
16. The DAVP filed a reply to Co. Appl. No. 908 of 2007 on 3rd September 2008 enclosing a copy of DAVP policy effective from 1st June 2006. There was also a new advertisement policy effective from 2nd October 2007 whereunder all Central Government ministries/departments were asked to have their advertisements issued through DAVP in order to avail of the DAVP rates.
17. It may be noticed that Blue Bird has filed Co. Appl. Nos. 480 of 2008, 1702 of 2009 and 151 of 2011 praying for release of the balance sum due to it.
18. Mr. Y.P. Narula, learned Senior counsel appearing for CB refers to the order dated 6th November 2006 passed by the Court on which date inter alia the Court was informed that the sale proclamation inviting bids for movable properties would be published by CB within three weeks in three local newspapers on the "usual terms and conditions in consultation with the OL." Mr. Narula also refers to the order dated 18th December 2006 under which CB was given "liberty to sell and dispose of the fixture, fittings, C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 9 of 15 partitions etc. (other than electronic, computer and expensive equipments) by taking out advertisements in the local newspapers" in consultation with the OL "on usual terms and conditions." In para 17 of the order, directions were issued to issue a joint sale proclamation in The Times of India, the Hindustan Times and the Hindustan (Hindi) in Delhi, Mumbai and Bangalore, and in The Hindu, Chennai and The Statesman, Kolkata in consultation with the OL "on usual terms and conditions." Mr. Narula refers to the order dated 2nd February 2007 which recorded that CB sought fifteen days' time for publishing the advertisements in the newspapers. CB and the OL were directed to coordinate with each other and ensure that the advertisements would be published and bids received would be produced in Court on the next date of hearing, i.e., 8th March 2007. Mr. Narula stressed that with the OL having clearly informed Infinity and Blue Bird that the advertisements should be issued only on DAVP rates, it was not open to either Blue Bird or Infinity to furnish bills on the basis of newspaper card rates.
19. Both Ms. Manini Brar, learned counsel for Blue Bird and Ms. Padma Priya, learned counsel for Infinity, submitted that the advertising agencies were bound by the INS policy and were obliged to pay the card rates for the advertisements issued by the OL. The newspapers in question were categorical that they would not offer the OL the DAVP rates and this was informed to the OL even at the beginning. Ms. Brar referred to the letter dated 12th May 2007 from the OL to Blue Bird specifying the names of the newspapers in which the advertisements had to be issued as well as the rates to be paid. Both counsel pointed out that the advertising agencies had C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 10 of 15 already paid the newspapers and could not be expected to subsidise the costs of CB in issuing the advertisements.
20. In response, Mr. Narula doubted the authenticity of the OL's letter dated 12th May 2007 and pointed out that the said letter did not contain any despatch number. Mr. Kanwal Chaudhary, learned counsel appearing for the OL, however, confirmed that the said letter definitely formed part of the record and was genuine. After the applications were heard at length, Mr. Narula sought time to take instructions from CB. Thereafter he sought time to file a further affidavit to show that CB was not in fact made aware that DAVP rates would not be available for the notices published by the OL. The Court did not agree to this request considering that the applications were pending for nearly six years and CB did not avail of several opportunities it had to file a rejoinder.
21. The narration of events shows that as far as Infinity is concerned, on 13th February 2007 the OL sent a letter to Infinity requesting publication of public notices inviting claims for the sale of assets. The list of companies for the sale of whose assets notices were to be published included DAIL. It was stated in the letter that "the rate charged by you should not be more than the cost claimed by DAVP or by the newspaper concerned. In case any difference is found at later stage, the Official Liquidator reserves the right to recover the difference of cost between DAVP and advertising agency charges. The Official Liquidator also reserves the right to verify the rates offered by you with DAVP and newspaper concerned."
C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 11 of 1522. However, soon thereafter on 15/16th February 2007, Infinity informed the OL as under:
"Further, we would like to inform you that some of publications are not accepting advertisement's on DAVP rates hence as per our telephonic conversation and confirmation with you and with Mr. Shankaran, Mr. Raghu and Mr. Malik of Canara Bank, we are releasing the advertisement on commercial rate applicable on Court/Tender Notice Advertisements.
Please also note that Hindu and Indian Express (Southern Editions) are publishing advertisements in all their editions on DAVP rates because they do not have any separate DAVP rates for single edition."
23. Mr. Narula tried to compare the letter dated 15th February 2007 with another letter dated 19th July 2007 addressed to the OL in which Infinity informed that it did meet Mr. V. Ragu, Senior Manager and Mr. S. Segaran, Chief Manager, CB whereas the names mentioned in the letter dated 15th February 2007 were different. As far as the above submission is concerned, the Court finds that the name of Mr. Raghu is common in both the letters. There may be a typographical error as regards the names of Mr. Segaran and Mr. Shankaran. However, clearly the letter dated 19th July 2007 refers to CB's letter dated 27th June 2007.
24. Mr. Narula then referred to the letter dated 13th February 2007 written by Mr. Sanjay Yadav, Assistant OL in which he requested the CB to make payment directly to the advertising agency after deducting 8% discount on the DAVP rates. He compared it with another communication dated 30th July 2007 addressed to the Senior Chief Manager, CB by Mr. R.K. Bakshi, C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 12 of 15 Assistant OL giving instructions to make payment to Infinity and Blue Bird towards the bills raised by them. Mr. Narula also referred to the affidavit dated 28th September 2007 filed by the OL himself in which the entire sequence of events had been set out explaining why the DAVP rates were not made available by the newspapers concerned to the OL. Mr. Narula submitted that a misleading picture was given to the Court by the Assistant OL that these rates by the advertising agencies were in terms of the DAVP rates and had to be paid accordingly.
25. Mr. Narula may be right in his submission that two Assistant OLs, i.e., Mr. Sanjay Yadav and Mr. R.K. Bakshi, appear to be taking contradictory positions on whether the advertisements issued should be charged at DAVP rates or card rates. This perhaps is what prompted the present application. However, the OL has in his affidavit dated 28th September 2007, after referring to the letters dated 13th February and 22nd February 2007 written to Infinity stating that rate charged should not be more than the cost claimed by DAVP or by the newspaper concerned, also mentioned the fact that Infinity had informed the OL that the newspapers had stated that the advertisement of the OL is "commercial in nature and not entitled to DAVP rate." The OL's affidavit does not deny that Infinity wrote the letter dated 15th February 2007, a copy of which was enclosed with the affidavit of Infinity.
26. Mr. Narula submitted that the letter dated 12th May 2007 from the OL to Blue Bird does not find mention in the OL's affidavit. It is not for this Court to speculate as to why the OL has not specifically mentioned the said letter in his affidavit. Nevertheless learned counsel for the OL has confirmed that C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 13 of 15 the aforementioned letter forms part of the OL's records and that is what is important. The OL has acknowledged being informed by Infinity that DAVP rates were not available for the OL's advertisements. In the absence of DAVP rates, it would not be fair to expect the advertising agencies to be subsidising the OL's (or even CB's) costs of publication.
27. Consequently, the Court rejects prayers (b) and (c) in Co. Appl. No. 908 of 2007 to the extent they relate to payment to be made to Infinity and Blue Bird. CB will now make payments to them in terms of the bills raised after adjusting the sums already released to them by the OL. By an order dated 19th December 2007 in Co. Appl. No. 908 of 2007 the Court had directed CB to deposit a sum of Rs.15 lakhs with the OL and had further directed the OL to release the said sum to Infinity and Blue Bird "in terms of DAVP rates." The Court clarified that "the decision with regard to the payment actually due to them shall be subject to what the newspapers have to say in response to the case set up by the secured creditor."
28. CB is hereby directed to pay Blue Bird and Infinity the amounts as per the bills raised by them respectively, after accounting for the sums already released to them by the OL pursuant to the order dated 19th December 2007, together with simple interest @ 9% per annum from the date of the bills till the date of payment, which should not be later than four weeks from today. CB will also pay both Infinity and Blue Bird costs of Rs. 20,000 each within four weeks.
29. The OL is directed to undertake an inquiry into the circumstances under which the contradictory statements/reports were made by Mr. Sanjay Yadav C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 14 of 15 and Mr. R.K. Bakshi, Assistant OLs, which led to CB filing the present application. The OL will complete the enquiry within six weeks and place a report before the Court for appropriate directions.
30. Co. Appl. Nos. 908 of 2007, 480 of 2008, 1702 of 2009, & 151 of 2011 are disposed of in the above terms.
Co. Appl. No. 907 of 200731. In view of the subsequent developments this application has been rendered infructuous and is dismissed as such.
Co. Application No. 989 of 2007
32. List for hearing on 15th March 2013 at 2.15 pm. S. MURALIDHAR, J.
MARCH 12, 2013 Rk C.A. No. 908 of 2007 etc. in Co. Pet. No. 292 of 2004 Page 15 of 15