TMI Blog2006 (6) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorised share capital of Rs. 60,00,00,000 divided into 6,00,00,000 equity shares of Rs. 10 each, and the issued, subscribed and paid up share capital of the respondent-company is Rs. 38,83,75,000 divided into 3,88,37,500 equity shares of Rs. 10 each. The respondent company was incorporated with the main objects of establishing an Industrial Unit to carry on the process of spinning cotton viscose synthetics and blended yarn and hank yarn, apart from other activities, which are specified in Para-3 of the petition. 3. It is further stated that the respondent-company floated tenders for supply of electrical materials like H.T/L.T cable termination kits, capacitors, batteries and battery charger and LDBS, USDBs, Lighting fixtures, Cable trays etc., and for installation of the same by a tender notice dated December, 1994 for its 100 per cent Export Oriented Cotton and Synthetic Mill. The petitioner-Company submitted its quotation on 6-2-1995. Thereafter, after mutual discussions, the petitioner-Company revised its quotation on 21-2-1995, which was accepted by the respondent-Company and the respondent-Company placed a letter of intent dated 25-2-1995 on the petitioner-Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the work fronts and project sites for the completion of the work, but also defaulted in making payments in respect of the running bills raised by the petitioner for the work executed. The reasonable oral requests of the petitioner having fallen on deaf ears, the petitioner addressed a fax message to the respondent dated 2-2-1996, requesting the respondent to make payment in respect of the running bills to the tune of about Rs. 48,00,000. Again on 10-2-1996 the petitioner renewed its request to the respondent to clear the outstanding bills to the tune of Rs. 48,00,000. As there was no response from the respondent, the petitioner again sent another letter dated 14-2-1996, detailing the various payments due and the fact that the investment as on that date in respect of the installation was Rs. 1,00,00,000. The said letter was followed by another fax message dated 23-2-1996 with the similar request. The petitioner thereafter addressed another letter dated 29-3-1996 to the respondent calling upon him to settle the outstanding sum due to the petitioner as on that date. Finally the respondent, while confirming the receipt of the said letter dated 29-3-1996, by letter dated 6-4-1996, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent that a sum of Rs. 2.12 crores was due to the petitioner as on that date, together with interest from July, 1996. In response to the said letter, the respondent sent letter to the petitioner dated 9-10-1997, stating that it would be receiving a sum of Rs. 40 crores and the entire amount outstanding to the petitioner would be cleared within a period of one month from that date. But contrary to the assurance, the respondent paid only a sum of Rs. 1,00,000 by a cheque dated 25-8-1998. Therefore, a notice dated 28-3-2000 was issued under section 434 of the Act. Though the period of three weeks have elapsed for effecting the payment of the outstanding amount, the respondent did not pay any payment, but issued a reply dated 15-5-2000, taking various untenable stands, raising issues which were never raised by the respondent at any point of time earlier. It is stated that the respondent failed to pay the outstanding amount of Rs. 3,51,86,792.89 ps. with interest at 24 per cent per annum as on 15-9-2000, the same has clearly demonstrated the fact that it is unable to clear its admitted dues. The respondent has become commercially insolvent. It is further stated that the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re governed by the Arbitration clause and the petitioner, if at all aggrieved, can only invoke the Arbitration clause and cannot invoke the jurisdiction of the Company Court. It is stated that the petitioner failed in deputing experienced senior professionals to monitor the project, which was also a reason for the delay in implementation of the project. This was brought to the notice of the petitioner by letter dated 26-6-1996. 10. It is stated that due to poor performance of the petitioner, the respondent suffered losses on various counts. This fact was brought to the notice of the petitioner through various letters. The respondent by letter dated 19-11-1996 informed about the failure of Tap changer of 132/11 KV, 25 MVA Transformer, Sl. No. T-8493.2 due to wrong connection of oil surge relay and the same has caused loss of Rs. 5,00,000 for repairing. Similarly the petitioner was again informed on 20-4-1995 that the peti- tioner has to comply with various quality and quantity stipulations laid down by the respondent and also co-operate and co-ordinate with various suppliers of the equipments, besides it is essential for the petitioner to co-ordinate with A.P.S.E.B., C.F.I.G to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to sub-contract any part of the job work and the entire work has to be carried out by the petitioner with its own personnel, including civil, cable laying etc. However, the petitioner violated the said clause of the contract by appointing various sub-contractors, such as M/s. Power Pioneers, Secunderabad etc., to carry out the work. The respondent stated that as per clause 16.0 of the letter of intent, any dispute arising out of the contract, shall be referred to the arbitration of two Arbitrators, one to be nominated by the petitioner and one by the respondent. The Arbitrators shall nominate the umpire, before the commencement of the arbitration proceedings. In case the Arbitrators failed to arrive at a decision, the dispute will be referred to the umpire. The decision of the umpire shall be final, conclusive, and binding on the parties. The arbitration shall be proceeded as per the provisions of the Indian Arbitration Act, 1940. Therefore, the present company petition is not maintainable in view of the specific procedure provided by the terms of the contract. The respondent also disputed and denied the claim of the petitioner that the respondent is indebted to various others ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for initiation of arbitration proceedings for the adjudication of disputes raising between the parties. 16. An additional reply is filed, disputing the averments made in the additional counter, pointing out that at no point of time, prior to the issuance of the legal notice by the petitioner, the respondent raised any claim, pointing out any defaults and making any claim against the petitioner. 17. From the above rival contentions, the issues to be considered in this company petition are : 1.Whether the company petition is maintainable as the petitioner company was not represented by the person having authority to institute the company petition ? 2.Whether there is an admitted liability by the respondent to the petitioner ? and 3.Whether the respondent-company is liable to be ordered for winding-up ? 18. The petitioner had entered into two agreements, one for the supply and erection of electrical items for electrification of the respondent s spinning mill, and the second one is for the supply and installation of 132 KV/11KV sub-station. In respect of both these works the respondent had issued letters of intent in February and April 1995. The work was to be execute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itially, PW-1 deposed that he did not remember whether he has filed the said authorization into the Court, but, later confirmed that he has not filed any authorization to depose before this Court on behalf of the petitioner-Company. He, however, denied the suggestion that he had no authority to give evidence on behalf of the petitioner-Company. He admitted that he was not employed in the petitioner-Company during the tenure of the work-contract i.e ., in the year 1995. He admitted that he has been deposing on behalf of the company based on the records. Though he was not involved in the execution of the work, however, involved in the correspondence between the petitioner and the respondent-Company. He admitted that the work orders were signed by the petitioner as well as the respondent on 7-7-1995 and on 11-7-1995. Exhibits A-3 and A-4 are the work orders. He also admitted that as per clause (2)(1) of the work orders, the work has to be completed within a period of 12 months from the date of the letter of intent i.e ., 25-2-1995. He also admitted that Clause (4) refers to the price of the work; as per Clause (6), there shall not be any escalation or any extra amount with regard to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the respondent-Company has never admitted the liability in various letters. He also admitted the suggestion that Ex. A-26, though notarized, has not been signed by any person, much less a responsible person. He also admitted that there is no confirmation to the amount specifically, but according to him it was impliedly confirmed by saying that they will pay the amount as claimed. It is stated that according to the balance sheet of the petitioner-Company, the petitioner was not publishing the list of debtors. It is stated that he will produce the books of account if directed by the Court to substantiate the contention. It is stated that the petitioner had raised invoices for the work done. But, none of the invoices raised in respect of the work order are filed, but, however, the witness volunteers to file if so directed. He also stated that the petitioner has got the documents certified by the site engineers of the respondent-Company, and if so directed, he will produce the same. It is stated that after giving intimation to the respondent-Company, the petitioner has abandoned the work under Ex. A-21, the letter showing the petitioner s inability to execute the work till the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking in the respondent-Company. This witness admits that he was overseeing the implementation of the works. He stated that for execution of the works, fronts have to be provided by the respondent-Company, and fronts should be made available based on the material supplied by the contractor and the persons involved in the execution of the contract work. He stated that the fronts were made available in February 1996, which is evident by Ex. B.1. The minutes of the meeting between two companies along with the consultants were recorded. This witness admitted that no steps have been taken for the imposition of liquidated damages for the delay against the petitioner-Company. But, however, he stated that a letter dated 28-2-2001 was sent for other claims. For a suggestion, he admitted that it is true that normally an employer will not make payment or promise payment to a contractor, where the contractor has committed breach of contract on account of delay. However, he stated that he was not aware about the letter, Ex. P.13, dated 6-4-1996 addressed by the respondent to the petitioner. He also admits that Ex. P. 13 was signed by Mr. R. Srinivasan, his superior. He admitted that if there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of workers mentioned in the counter are not correct. 25. One Mr. Y. Sanjeeva Reddy , working as General Manager (Materials), is examined as R.W. 3. In the chief-examination he stated that he has been working in the respondent-Company for the last 15 years. There are eight sister concerns to the respondent-Company. There are 1,000 employees working in the respondent-Company. The respondent is paying about Rs. 35 lakhs per month towards salaries and wages of the staff and the workers. The gross annual turnover of the respondent-Company is at Rs. 145 crores. The product of the respondent-Company is 100 per cent export oriented product. But, however, the respondent-Company can sell up to 20 per cent in the local market. The respondent-Company earns about Rs. 135 crores in terms of Indian currency of foreign exchange. Every month the company is paying Rs. 50 lakhs towards excise duty, Rs. 8 lakhs towards the sales tax, and thus incurring a total expenditure of Rs. 3 crores per month towards taxes payable, electricity consumption, and other charges. The claim of the petitioner is disputed as regards the quantum. There is one more Company petition pending against the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd proposing to initiate arbitration proceedings. Ex. B-18 is the reply received from the petitioner appointing Sri Justice D.H. Nasir, as its Arbitrator. Ex. B-19 is another letter dated 28-6-2001, where the respondent-Company claimed that it had incurred an additional expenditure of Rs. 15 lakhs for completion of the work through other agencies and also the loss suffered on account of the defaults committed by the petitioner to the extent of Rs. 3 crores. Ex. B.20 is the resolution passed by the respondent-Company authorizing Sri M.M. Rao , Senior Manager (Commercial) of the Company to represent the respondent-Company in all the matters that are instituted by or on behalf of the respondent-Company. 27. Basing on the above, the learned Counsel for the petitioner contended that admittedly, the respondent-Company was due and payable certain amounts in respect of which bills were raised for the execution of the work. But the respondent-Company failed to pay the said amount, in spite of repeated reminders. Since the respondent-company has committed default in payment of the amounts due as against the running bills in terms of the work order, the petitioner was constrained to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are provided in the terms of the contract. If there is any dispute either as to the non-payment or any other dispute arising out of the contract, it has to be referred to arbitration, as such a provision has been made in the terms of the contract. The learned Counsel contended that though as per the work order, the works have to be executed within a period of 12 months, the petitioner had delayed, and the progress of the work has been reminded under various letters of communication issued by the respondent to the petitioner. In spite of it, with reference to the bills, the respondent has been co-operating and paying the amounts as and when payable and in fact the communications clearly show that the payment agreed upon is always subject to the verification of the works that are claimed by the petitioner. Therefore, the payments are subject to the work executed and not otherwise. The learned Counsel also contended that merely because the respondent did not invoke the clause for imposing penalty that does not absolve the petitioner from complying the clauses of the contract. It is stated that in fact the petitioner not only suspended the work but also finally abandoned the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter. The learned Counsel also contended that the company petition is filed under sub-sections ( e ) and ( f ) of section 433 of the Act i.e ., on just and equitable grounds, and in order to decide the said ground, the overall performance of the respondent-Company has to be taken into account. It is also stated that the petitioner-Company has suspended the works that were entrusted to it in November 1996 and thereafter abandoned the work in July 1997 and the present company petition is filed in October 2000. Therefore, the company petition is barred by limitation. The learned Counsel also contended that the petitioner has got an effective and alternative remedy either seeking reference to the arbitration or even to institute recovery proceedings. Therefore, the present company petition is not maintainable and liable to be dismissed. Therefore, the learned Counsel sought to dismiss the company petition. 31. Issue No. 1 : It is claim of the respondents that the company petition is not maintainable, as the person who represented the petitioner-Company was not authorized to represent the company for filing the company petition as well as to give evidence. The Company Secret ..... X X X X Extracts X X X X X X X X Extracts X X X X
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