TMI Blog2017 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... s a result of a bonafide dispute as to the liability or whether it reflects an inability to pay. The Supreme Court further observed that if there is no dispute as to the companys liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid and if the company refuses to pay without genuine and substantial grounds, it should not be able to avoid the statutory demand. We therefore find no grounds to interfere with the order of admission of the company petition. However, we are of the opinion that another opportunity should be afforded to the APIIC to make good the payment due to the company petitioner in terms of the order under appeal, as the real fault in this regard lies, not with it, but elsewhere. We therefore grant two months time from today to the APIIC to deposit the sum of ₹ 8,18,36,584/- to the credit of Company Petition before the Registrar (Judicial) of this Court. In the event the APIIC does so, the company petition itself would stand dismissed as ordained by the learned Company Judge. The company petitioner would be ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r conditions permitted participation of joint ventures, the company petitioner joint venture was formed under agreement dated 28.07.2008 and it submitted its bid which was found to be the lowest and the APIIC accordingly awarded the contract in its favour. The company petitioner entered into an agreement with the APIIC on 24.09.2008. Under this agreement, the company petitioner was to undertake manufacturing, supplying, lowering, laying, jointing, testing and commissioning of 2200 millimetre dia MS pumping main with cement mortar factory in-lining and out-coating and other appurtenance from the proposed intake well near old Madhavaram on the foreshore of Somasila Reservoir to the proposed sump at Kanumalonipally on Kadapa- Rajampet Highway, including maintenance and operation for a period of 24 months (defect liability period) under Package-I. The approximate value of the work to be done was ₹ 267,38,71,778/-. The stipulated period for completing the project was 12 months. The company petitioner furnished five bank guarantees equivalent to 2% of the contract value valid till completion of the original defect liability period. The company petitioner also submitted bank guarant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for winding up of the APIIC. The APIIC filed a counter before the learned Company Judge denying its liability to pay the amount claimed by the company petitioner. It asserted that there were seriously disputed questions of fact involved in the case and therefore, summary proceedings under Section 434 of the Act of 1956 could not be resorted to. Reliance was placed upon the arbitration clause in Clause 73 of the agreement to contend that the said dispute resolution mechanism should be taken recourse to in the first instance. The APIIC further alleged that the company petitioner had abandoned the work in December, 2009, leaving the work incomplete and had failed to discharge its contractual obligations. The APIIC pointed out that under Clause 60 of the agreement, it was entitled to forfeit the earnest money deposit and other amounts of the company petitioner owing to its failure and that Clause 61 thereof empowered it to recover losses arising therefrom from the company petitioner. The APIIC denied having admitted liability and sought to explain the letters relied upon by the company petitioner in this regard. As to the statutory notice which was left unanswered, the APIIC stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advertisement as to admission of the company petition to enable it to make efforts to discharge the sums due to the company petitioner within the time frame stipulated. However, despite this indulgence shown by the learned Judge and notwithstanding the many adjournments granted during the pendency of this appeal, no settlement materialized between the parties. The learned Advocate General for the State of Andhra Pradesh appearing for the APIIC would reiterate before us that the debt of the company petitioner was not admitted and that there are several disputes with regard thereto. Learned Advocate General would contend that the case on hand was not a fit and proper one to be entertained under Sections 433 and 434 of the Act of 1956. In this regard, he would place reliance upon the fact that there is no clarity as to whether the company petitioner stopped work in December, 2009 owing to the instructions of the APIIC or on its own accord. He would also contend that the terms of the contract under Clauses 60 and 61 authorized the APIIC to take penal action against the company petitioner for its failure to complete the project and that no steps were initiated in this regard only be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished by the company petitioner expired thereafter. Learned senior counsel also placed reliance on Clause 68 of the contract which provided for payment being made to the company petitioner under the certificates issued at frequent intervals by the Zonal Manager of the APIIC. The clause posited that within 14 days from the date of each certificate, intermediate payment would be made by the Zonal Manager of a sum equal to 92% of the value of the work so certified and the balance 7% would be withheld and retained as security for the due fulfillment of the contract. Learned senior counsel would state that two RA bills duly certified by the Zonal Manager, APIIC, Kadapa, were submitted for release of payment in terms of this clause but only part-payment was made in relation thereto. Reference was also made by him to the correspondence addressed to the APIIC during November and December, 2008 and between January and May, 2009, informing it of the steps taken by the company petitioner towards implementing the Water Supply Scheme and detailing the steps required to be taken by the APIIC to facilitate expeditious completion thereof. Specific reference was made to the letter dated 29.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereto, the Chief Engineer of the APIIC at Hyderabad addressed letter dated 18.01.2012, wherein he stated that the APIIC was addressing the Government of Andhra Pradesh constantly for release of funds for clearing the outstanding bills pertaining to the Somasila Drinking Water Supply Scheme but no funds had been received after April, 2009. The Chief Engineer further stated that the subject work was stopped by the company petitioner duly withdrawing men and machinery from the work site as no payment was made for the work already done and as the APIIC was not able to persuade it to resume the work in the absence of funds from the Government of Andhra Pradesh. He concluded by stating that the APIIC had taken up the said Water Supply Scheme at the instance of the Government of Andhra Pradesh and the bills could be paid only after receipt of funds from the Government and informed the company petitioner that after receipt of funds from the Government, the outstanding bills would be cleared and a decision would be taken on the subject scheme. Prior thereto, the Zonal Manager, APIIC, Kadapa, addressed a letter signed on 25.07.2011 to the company petitioner informing it that he had requested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igures were as per the measurement records of the APIIC though the agencies were claiming more than the stated sums. About ₹ 20.00 crore were stated to have been released against the value of the work done to the tune of ₹ 50.00 crore by both the agencies under Packages I II. He also stated that in the absence of funds from the Government as assured, further work was held up since October, 2009. He further stated that the Chief Minister had reviewed the status of the Water Supply Scheme on 23.04.2010 and it was decided in the meeting to find out a feasible financial model to take up the scheme without changing the original scope of the scheme but without relying on Government budget. He further stated that it had been decided to identify an alternative water source to supply water to Kadapa. He then stated that as directed by the Chief Minister, a study was conducted to explore the feasibility of an alternative source to supply 1 TMC water to Kadapa and it was found that it was neither feasible nor viable to draw water from Penna River, as it was not a perennial flow and in the alternative, if efforts were made to tap water from Penna during the monsoon, large storage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny petitioner and would point out that Clause 71 of the contract entitled the APIIC to retain or deduct the amounts due to the contractor towards recoveries provided for in the contract. He would assert that the APIIC therefore had the right to raise a counter-claim against the company petitioner, which right it could not raise in a winding up petition under Sections 433 and 434 of the Act of 1956, as the learned Company Judge would have no jurisdiction to settle such a counter-claim. He would therefore reiterate that this is not a fit and deserving case to be entertained under Sections 433 and 434 of the Act of 1956. The admitted factual position is that the company petitioner was awarded the work of laying the pipeline in relation to Somasila Drinking Water Supply Scheme up to a length of 28 kilometres. This work was to be completed within 12 months, i.e., by September, 2009. It is also an admitted fact that no mobilization advance was released in favour of the company petitioner despite the contract envisaging the same, subject to conditions. It is also not in dispute that the RA bills of the company petitioner were not released in their entirety within the stipulated period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom that this project was envisaged by the then Chief Minister of the State, who also gave an assurance to the APIIC that the entire project would be funded by the Government. However, after change of the political leadership in the State, it appears that this project was sidelined by the successor Chief Minister. Various alternative measures seem to have been contemplated so as to do away with the Governments responsibility in financing this project or dropping it altogether. The Chief Minister seems to have had a meeting in this regard in April, 2010, but it was found that there was no other alternative for providing drinking water to Kadapa except by drawal of water from Somasila Reservoir. The APIIC, having undertaken this project upon the Governments assurance that it would fund the scheme, seems to have then been left to fend for itself. It therefore asked the Government to bail it out from the crisis. It is fairly conceded by the learned Advocate General that this project was left incomplete thereafter and no steps were taken to get it completed through another agency after stoppage of the work by the company petitioner in December, 2009. To the extent the work was comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sses upon the political role of the Government expanding substantially in ensuring availability of public goods, such as roads and water, and asserts that this would have to be implemented by the permanent executive, balancing the diverse and rival needs of different parts of the State, by taking suitable steps to advise the political executive of the day so as to minimize subjectivity in decisions relating to supply of such public goods. Significantly, he states as under in his epilogue: New governments are entitled to change macroeconomic and other policies initiated by a previous government, but not without adequate reason and debate. In the long term interests of the country, policies should be determined on merits and not on the basis of ministerial whims or personal ideological preferences. The case on hand presents a deplorable example of how public monies are squandered away by the transient political executive to suit its own vested interests. This project, which was left half-way, involves expenditure of ₹ 50.00 crore of the tax-payers monies. Having incurred this expenditure with a seemingly lofty objective, the State conveniently turned its back not only on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USTRIES PRIVATE LTD. relied upon by the learned Advocate General does not further his case as the said decision would have application only when there is a bonafide dispute raised by the company. Presently, there is no bonafide dispute discernible on facts. We therefore find no grounds to interfere with the order of admission of the company petition. However, we are of the opinion that another opportunity should be afforded to the APIIC to make good the payment due to the company petitioner in terms of the order under appeal, as the real fault in this regard lies, not with it, but elsewhere. We therefore grant two months time from today to the APIIC to deposit the sum of ₹ 8,18,36,584/- to the credit of Company Petition No.235 of 2012 before the Registrar (Judicial) of this Court. In the event the APIIC does so, the company petition itself would stand dismissed as ordained by the learned Company Judge. The company petitioner would be entitled to withdraw the amount so deposited by approaching the Registrar (Judicial). However, if the APIIC fails to comply with this direction as stated above, the company petitioner is given liberty to cause advertisement of the admission of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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