Madras High Court
Sales Service Company vs Akb Paper Mill Plant Suppliers (P.) Ltd. on 27 February, 2003
Equivalent citations: [2005]127COMPCAS447(MAD), [2006]69SCL300(MAD)
JUDGMENT A. Ramamurthi, J.
1. Company petition filed under Section 433(e) and (f) of the Companies Act to wind up the respondent-company.
2. The petitioner is the supplier of bearings and other allied items. The respondent approached the petitioner on November 9, 1995 and January 3, 1996 and gave quotation. The petitioner as per the quotation supplied various articles worth about Rs. 1,38,927.77. The respondent company made payments by means of cheques and the particulars are also given. After giving credit to the payments already made, the respondent is still liable to pay Rs. 18,929.27. The respondent also agreed to pay interest at 24 per cent per annum. The petitioner orally as well as in writing called upon the respondent to make the payment. The petitioner also issued a statutory notice dated November 23, 1996, and it was received by the respondent on December 6, 1996. The respondent sent a reply dated December 20, 1996, containing false allegations. Right from the date of delivery of goods till the receipt of the letter dated August 29, 1996, there was no whisper from the respondent about the defects in the goods supplied. The respondent had completed 90 per cent of the payment and only small amount is left over. The allegation about the defect in the goods is mala fide, calculated and motivated only to defeat the claim of the petitioner. Only for the first time on October 10, 1996, the respondent made some false allegations about the defects in the goods. The question of defect does not arise as the goods were supplied to the respondent only in accordance with their orders. The respondent is unable to clear the debts due to financial problem. Hence, the petition.
3. The respondent filed a counter affidavit and admitted that the petitioner is the supplier of bearings and other allied items and the respondent placed orders for the purchase of the bearings. They denied the liability to pay a sum of Rs. 18,929.27. The supplies were made by the petitioner, namely, the bearings to be installed on the machinery manufactured by the respondent with a guarantee period of one year and in case if there is any failure on the machinery supplied, the respondent has to replace the part free of cost. It was found that two of the bearings supplied by the petitioner were defective and it was duly intimated to the petitioner by letter dated September 4, 1996. In fact, the petitioner sent two representatives and reported that the bearings failed due to outer race chipping off due to manufacturing defect of bearings. The petitioner did not bother to replace the bearings, but on the other hand, sent an advocate notice claiming the aforesaid amount. The price of the two defective bearings is Rs. 29,890 and after adjusting the amount paid by the respondent towards various purchases, it is only the petitioner who has to pay a sum of Rs. 10,960.23. The respondent also sent a suitable reply to the notice sent by the petitioner. It is because of the defective supply and since the petitioner did not bother to replace the defective material, the respondent retained the balance amount payable in order to make the petitioner replace the machinery. The petition is liable to be dismissed.
4. Heard learned Counsel for the parties.
5. The points that arise for consideration are (1) Whether the petitioner has made out a case to admit the company petition ?
(2) Whether the objections raised by the respondent are sustainable under law ?
(3) To what relief ?
6. Points : It is admitted that the respondent placed orders with the petitioner and they have supplied bearings and other allied items worth about Rs. 1,38,929.77. Learned Counsel for the petitioner stated that after giving credit to the payments made by the respondent by means of cheques, the respondent is liable to pay Rs. 18,929.27. The respondent, in spite of demands made orally and writing, did not pay the amount, which necessitated the petitioner to send the statutory notice dated November 23, 1996, calling upon them to make the payment. The respondent after receipt of the notice, sent a reply containing false averments alleging that there is defect in some of the goods delivered. In fact, 90 per cent of the payment has been made by the respondent and the allegations now levelled by the respondent are mala fide, motivated and they have been invented only to defeat the claim of the petitioner.
7. Learned Counsel for the respondent, on the other hand, stated that admittedly the respondent had received the goods worth about Rs. 1,38,929.77 and admittedly the sum of Rs. 1,20,000 has been paid by them. The balance, according to the petitioner, is only Rs. 18,000 odd and this amount has not been paid by the respondent for valid reasons and they have also raised bona fide dispute that two of the bearings supplied by the petitioner were defective. In fact, the representatives of the petitioner company also visited the place and pointed out that there was manufacturing defect of bearing and assured to replace the same. It was duly communicated to the petitioner even before the statutory notice and since they were not replaced, the respondent had retained the balance amount. In short, it is a bona fide dispute raised by the respondent and the petitioner has not made out any prima facie case to admit the company petition.
8. Learned Counsel for the petitioner contended that the goods have been received by the respondent-company and they have also utilised the same. Under Section 42 of the Sale of Goods Act, a presumption can be drawn that buyer is deemed to have accepted the goods. In support of his contention, he relied upon the Bench decision of this Court in Food Corporation of India v. Bengal Trading Co. [1992] MLJ Reports 225. There is no dispute about this principle, but the applicability of the same depends upon the facts and circumstances in each case. Admittedly, the respondent had placed orders and no doubt, the petitioner had supplied the bearings and out of which, two bearings are defective in nature and the representatives of the petitioner-company had also visited the respondent-company and gave a certificate to the effect that it was due to manufacturing defect. When this being the state of affairs, the only course available to the petitioner is to replace the two bearings and instead of doing the same, they have chosen to claim the amount and also sent statutory notice. The respondent has sent a suitable reply to the statutory notice pointing out the earlier defect and called upon the petitioner to replace the bearings, failing which the amount could not be paid. A look at these correspondence between the parties would establish that there is a bona fide dispute between the parties. When the respondent-company had already paid Rs. 1.20 lakhs, it is not difficult for them to pay the sum of Rs. 18,000 odd. There is absolutely no material to come to a conclusion that the respondent is unable to pay any amount.
9. The respondent sent a letter to the petitioner dated May 3, 1996, wherein it is stated that they are not in a position to settle the outstanding amount since they have not received payment from Paper Mills. This cannot be relied upon by the petitioner to show that the respondent is not in a position to pay the amount. On the other hand, the typed set of documents filed by the respondent would clearly and clinchingly establish that there is no prima facie case for the petitioner. It is seen from the letter dated August 30, 1996, that two numbers of bearings supplied by the petitioner have been broken while running in the machine. At present, one number has been dismantled from the machine of the customer and the same has been kept at their work site, which can be inspected by them at any point of time. One more number is running in the machine with rattling noise which may give way unexpectedly. Even though the machine is running on normal load and the lubrication is excellent, they are unable to understand the break down of the bearings. By the communication dated September 4, 1996, the petitioner had sent a fax message deputing the assistant sales manager. Subsequently, on September 4, 1996, also, the respondent sent a communication to the petitioner pointing out the defect. The respondent sent the letter dated August 21, 1996, wherein it is stated that the bearing run way side chip removal metal is stored in the bearing housing and the cost of the bearing may be debited to the party's account. Debit advice was also sent by the respondent dated September 30, 1996, to the extent of Rs. 29,890. Even for the statutory notice, the respondent sent a reply pointing out the defects in the two bearings. They also called upon the petitioner for replacement of the two bearings and thereafter only, they can pay the balance amount of Rs. 18,929.77. If it is not replaced, they are not liable to pay the amount. This categorical reply sent by the respondent-company would go a long way to establish that the dispute raised by the respondent is a bona fide one and now, the non-payment of the amount cannot be made use of as a lever by the petitioner to invoke the provisions of the Companies Act, to wind up the company. I am of the view that the petitioner has not made out a prima facie case and the points are answered against the petitioner.
10. For the reasons stated above, the company petition is devoid of any merit and, accordingly, it is dismissed. No costs. It is open to the petitioner to move the appropriate civil court for recovery of the amount after proving the claim. Consequently, C. A. No. 2151 of 1997 is closed.