2011 (1) TMI 1597 - HC - Companies Law

Summary

Issues:
1. Request for adjournment by respondent's counsel.
2. Payment dispute between petitioner and respondent.
3. Legal notice for winding up issued by petitioner.
4. Defense taken by respondent.
5. Interpretation of final bill certification.
6. Application of liquidated damages clause.
7. Principles to be considered in winding up proceedings.

1. Request for adjournment by respondent's counsel:
The respondent's counsel requested an adjournment citing recent instruction from the respondent and lack of a vakalatnama. The court, after noting the frequent change of counsel by the respondent, declined the adjournment, suspecting it as a tactic to delay proceedings.

2. Payment dispute between petitioner and respondent:
The petitioner had executed fit-out works for the respondent's office as per a work order. The final bill was certified by the respondent's Project Management Consultant, but payment was not made by the respondent. The petitioner issued a legal notice for winding up due to non-payment.

3. Legal notice for winding up issued by petitioner:
The petitioner issued a legal notice for winding up under Sections 433 and 434 of the Companies Act, 1956, after the respondent failed to make payment despite certification of the final bill by the Project Management Consultant.

4. Defense taken by respondent:
In response to the legal notice, the respondent claimed defects in the work executed by the petitioner and alleged non-removal of snags despite payment of Rs. 5 lakhs for the same. The court found the defense to be unsubstantiated.

5. Interpretation of final bill certification:
The court interpreted the final bill certification as binding once certified by the Project Management Consultant, equating it to a written contract acknowledging the debt payable by the respondent to the petitioner. Citing a previous judgment, the court held that the certification made the amount payable.

6. Application of liquidated damages clause:
The work order between the parties included a liquidated damages clause, which had not been invoked by the respondent. The court noted the absence of evidence showing rectification of alleged defects by a third party or payment of Rs. 5 lakhs after final bill certification.

7. Principles to be considered in winding up proceedings:
Referring to a Division Bench judgment, the court emphasized principles for winding up proceedings, including the importance of bona fide disputes, undisputed debts, good faith defenses, and the avoidance of winding up as a means of debt realization. The court granted time for the respondent to deposit the due amount, failing which a Provisional Liquidator would be appointed.

In conclusion, the court disposed of the Company Application, granting time for payment and setting a further consideration date.