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TMI Blog2010 (12) TMI 1058X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also alleged that the petitioner has not approached the court with clean hands. 3. Both the parties have not disputed that they had entered into an Agreement dated 15-12-2002 ('the Agreement') and that an amount of Rs. 4.73 crores was paid by the RPGCL to the respondent-Company. 4. The Agreement, as per Schedule I required the respondent-Company to develop the equipment, including software, mentioned in it and transfer of rights to enable RPGCL to manufacture the said product. Schedule I reads as under :- "Specified product 1. Specifies Product shall include (switching functionality) CoT Broad Band Router meeting the clause 6.5.2.1 and all its sub-clauses (6.5.2.1.1 to 6.5.2.1.3 and 6.5.2.1.3.1 & 6.5.2.1.3.3) of the TEC, BSNL specification for Generic Requirements of Optical Multi Service Access Network Equipment on STM-1/4/16 SDH transport No. GR/OMSAN-01-01 MAR' 2003 or its latest amendment. It is hereby clarified that the same generic product specified under the framework of different specifications/amendments would be treated as same products. It is also clarified that the Product includes NMS (Network Management Software) that would be an integral part of the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n both the sides. There was delay on the part of RPGCL in making payments and payments were not made as fixed in Schedule-IV. The respondent-Company also did not adhere to the time schedule with regard to milestones mentioned in Schedule-II. Apparently, both the parties did not abide by the time schedule stipulated in the Agreement. The same was not regarded as binding and essence of the contract. Leverage was granted by both the parties and the delays were ignored and not taken seriously. Thus delay alone does not entitle the petitioner to claim refund with interest. Neither the petitioner nor the respondent had cancelled/terminated the agreement on the ground of delay by the other side. When there was delay in making the payments on the part of the petitioner itself and the schedule fixed in the agreement was not adhered to, it does appear that the petitioner cannot rely upon the time-limit fixed in the Schedule II of the Agreement to seek a winding up order. Whether or not delay in payments was responsible for the delay in "development" of the product, is a debatable issue, which cannot be decided in a summary manner without oral evidence. Defence raised by the respondent compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GCL has not mentioned or referred to their letter dated 26-7-2004 in the present petition. This fact was concealed. 13. Para 19 of the winding up petition reads : "19. The Petitioner was further surprised to find out that the Company had in fact, developed some of the products undertaken to be developed by the Company for the Petitioners and have been illegally trading the same in the market under its own brand name. It is therefore, clear that the Company diverted the funds invested by the Petitioner to their own use and falsely informed the Petitioner that the products could not be developed. Thereafter, the Company failed to repay the said amounts and made repeated false promises only to hoodwink and betray the Petitioner. The Company developed products at the cost of the Petitioner and reaped the benefits thereof by clandestinely selling the same in the market, which they were not authorized to. The Petitioner has also filed further proceedings in the competent criminal court against the Company and its directors praying for their prosecution for committing such criminal acts." 14. Thus there is admission in para 19 of the petition that the respondent-Company had developed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the e-mails, the respondent-company had to refund Rs. 1 crore out of the investment of Rs. 5 crores. Rs. 1 crore was payable after the respondent-company received soft loan from the Department of Scientific and Industrial Research (DSIR). The e-mails referred to, state that a legal agreement was to be drafted and that RPGCL and respondent-company would sign the same to concretely agree on the path forward. No such formal agreement was signed or even exchanged. RPGCL has not based its claim on the points of agreement mentioned in the e-mail. The claim of RPGCL is for refund of Rs. 4.73 crores with interest at the rate of 14 per cent per annum and not for Rs. 1 crore out of which payment of Rs. 20 lakhs has been received. RPGCL is not making any claim for investment in equity of the respondent-company. It is not the case of RPGCL that any binding contract in terms of the e-mails had come into existence, novating the agreement. E-mails, however, do show that attempts were made by the parties to amicably settle the matter. It is difficult to decipher and state conclusively merely on the basis of e-mails that the defence of the respondent company is make believe and a camouflage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucceed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends." 19. In Mediquip Systems (P.) Ltd. v. Proxima Medical System GMBH [2005] 7 SCC 421, the Supreme Court has observed :- "18. This Court in a catena of decisions has held that an order under section 433(e) of the Companies Act is discretionary. There must be a debt due and the company must be unable to pay the same. A debt under this section must be a determined or a definite sum of money payable immediately or at a future date and that the inability referred to in the expression "unable to pay its debts" in section 433(e) of the Companies Act should be taken in the commercial sense and that the machinery for winding up will not be allowed to be utilised merely as a means for realising debts due from a company. 19. to 22. ****** 23. The Bombay High Court has laid down the following principles in Softsule (P.) Ltd., Re : Firstly, it is well settled that a winding-up petition is not legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. If the debt is not disputed on some substantial ground, the court/Tribunal may decide i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt. 18. In this connection, reference may be made to the judgment of this Court in Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 CC 456 (SC), in which this Court held that "It is well-settled that a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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