TMI Blog2002 (2) TMI 1346X X X X Extracts X X X X X X X X Extracts X X X X ..... at BPL Centre, No.1045-1046, Avinashi Road, Coimbatore, to appoint Official Liquidator to act as Provisional Liquidator of the respondent company and for other consequential reliefs. 3. Both the company petitions were presented on 3.8.2001 and taken on file on 3.8.2001. This Court ordered notice regarding admission on 3.8.2001. 4. Pending the company petitions, interim applications were moved and they were taken up for consideration and disposed of. Other pending company applications are also taken up together with these company petitions and common order is passed. 5. On behalf of the petitioner in both the company petitions, Mr.Ariyama Sundaram, learned Senior Counsel, Ms.Nalini Chidambaram, learned Senior Counsel and Mr.P.Chidambaram, learned Senior Counsel appeared and made their submissions on different dates in continuation. On behalf of the respondent in both the company petitions, Mr.Aravind P.Datar, learned Senior Counsel made his submissions. With the consent of counsel for either side, the main company petitions were taken up and substantial arguments were advanced in the two winding up petitions. 6. It is admitted on either side that it would be sufficient t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon and the sum demanded by the creditor was unreasonable. See London and Paris Banking Corporation (1874) LR 1 9 Eq 444). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been properly was not allowed. See Re. Brighton Club and Horfold Hotel Co.Ltd., (1865) 35 Beav 204. 21. Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt, see Re.A Company (94 SJ 369) Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantify the debt precisely see Re. Tweeds Garages Ltd., (1962 Ch 406). The principles which the court acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. 22. Another rule which the court fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court feel satisfied -- that the existing and probable assets would be insufficient to meet the existing liabilities . (In European Life Assurance Society, Re; V.V.Krishna Iyer Sons Vs. New Era Mfg. Co. Ltd.). 28. While dealing with the scope of Section 433 (e), this Court had occasion to hold the following (at page 131 in Madhusudan Gordhandas (the case relied on by the learned Solicitor General)): (SCC pp. 638-39, paras 20-22). Two rules are well settled. First, if the debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company. The court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable. See London and Paris Banking Corporation (1874) LR 19 Eq 444). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been properly was not allowed. See Re. Brighton Club and Horfold Hotel Co.Ltd., (1865) 35 Beav 204. 21. Where the debt is undisputed the court will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raders (P) Ltd. Vs. A.C.K. Krishnaswami this Court quoted with approval the following passage from Buckley on the Companies Acts, (13th Edn., p. 45 1) : 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 the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the court . 11. PRADESHIYA INDUSTRIAL INVESTMENT CORPORATION OF U.P. VS. NORTH INDIA PETROCHEMICALS LTD. ANOTHER reported in 1994 (3) SCC 348, the Apex Court, while assigning reasons to set aside the orders passed by the Division Bench of the High Court also held as follows : a) Every aspect of the dispute has to be noticed and no aspect shall be overlooked ; b) Where there is a debt and the company has neglected or is unable to pay; c) Where the claim is the subject matter of any other proceeding such as Arbitration or adjudication before any other forum ; d) Where there is a prima facie dispute or not as to the debt ; e) Where the defence raised is substantial one and not mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by Dec. 1999 and ₹ 7 Crores by end of January 2000. The respondent committed itself to discharge the liability in various instalments. Once again on 2.9.99, while acknowledging the liability, the respondent forwarded a fresh proposal, while stating that it had to divert the funds to pay the licence fee and assured payment to the petitioner. After acknowledging the liability, the respondent raised false and frivolous claims alleging delays in supplies, delay and deficiency in the supplies. 16. After making allegations of delays and deficiencies and putting forward counter claims, the respondent, by letter dated 25.5.20 00 unconditionally withdrew all the claims made by it by its letters dated 19.3.1999, 20.3.1999, 25.3.1999 and 7.9.1999. Despite such assurances, the respondent not only neglected, but also failed to clear the outstanding dues to the petitioner. On 15.3.2001, a statement of outstanding dues was drawn up and as per the statement, the respondent is liable to pay ₹ 231,201,763/= and all assurances made by the respondent was not kept up. The Managing Director of the respondent-company in a telephonic discussion with Mr.Pramod Saxena, General Manager and E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otorola Inc., an USA based company has filed the company petition on the ground that the respondent is unable to pay its debts. According to this petitioner, the petitioner supplied diverse quantities of equipments for cellular operations between 1998 and March 2001 of substantial quantities as detailed in the invoice. As of January 1999, the respondent is due USD $54,9 5,436.08 towards GSM Project Phase-II supplies. The respondent requested time to make payment. At the request of the respondent, the petitioner agreed to reschedule the payments. By letter dated 22.1.1999, the respondent intimated the petitioner that it had applied to RBI in respect of payments for supplies made in Phase-II. 22. Since the petitioner insisted for payment, the respondent raised disputes, which are frivolous and false by its letters dated 19.3.1 999, 20.3.1999 and 25.3.1999. After further demand, the respondent by letter dated 25.6.1999, while acknowledging the huge outstanding amounts, forwarded a payment schedule, whereby the respondent agreed to pay the outstanding amount in instalments. Again on 2.9.1999 the respondent acknowledged the liability and stated that it had intended to pay a minimum s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defective and sub-standard resulting in huge losses to the respondent. It is further stated by the respondent that several defective items were not rectified or replaced by the petitioner apart from there being delay, which is inordinate, resulting in huge losses and damages to the respondent. The respondent has relied upon number of documents to establish the contemporaneous complaint made by the respondent regarding such delays and they are incorrect and defective supplies. 26. The petitioner had been repeatedly promising to remit the same, but miserably failed to fulfill its requirements resulting in severe losses and damage to the respondent. The respondent highlighted the details of losses and damages in the notice dated 23.6.2 001 and 19.7.2001 sent through its counsel. The plea that the dispute is not bona fide or frivolous or sham or a moonshine is not correct. The respondent also made a counter claim for losses, which will far exceed the amount claimed by the petitioner in both the company petitions. 27. It is further stated that the contract between the parties provide for arbitration, which is binding on either side and the respondent had already invoked Article 34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawal of maintenance support coupled with the assurance of prompt action to set right the deficiencies in the equipments, the petitioner compelled the respondent to pass on the letter dated 25.5.2000 withdrawing its claims detailed in letters dated 19.3.99, 20.3.99, 25.3.99 and 7.9.99. Such withdrawal is conditional upon the petitioner taking immediate remedial action in respect of the deficiencies in the equipments, but the petitioner miserably failed. The petitioner had not come before this Court with clean hands and the dispute raised by the respondent is bona fide and it is neither a sham nor a moonshine dispute. 30. The respondent has invested a sum exceeding ₹ 2000 Crores in this business of which ₹ 900 Crores has been raised as a share holding contribution and a sum of ₹ 1100 Crores as loans from Banks and Financial Institutions. The respondent's project was appraised and only thereafter the financial institutions have advanced substantial money for the respondent's project cost since the experts have opined that the project is viable and it has the profit earning capacity. 31. It is further stated that the respondent is poised to achieve s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards damages or loss after having given up the same and plea of counter claim is a valid defence to the claim of the petitioner ? iv) Whether the petitioner in each of the company petition has made out a prima facie case to proceed further by admitting the company petition and ordering publication ? v) Whether the respondent could be put on terms after admission and before ordering publication ? vi) To what relief, if any? 35.Detailed arguments were advanced on either side and in the considered view of this Court, for the present company petitions, it is not necessary to set out all those contentions or arguments, which were hair splitting and hair tilting and the points raised in these two company petitions could be decided on broad facts for the limited purpose of these company petitions. 36. Under various acknowledgements, confirmation letters written from time to time and in the counter, the respondent in both the company petitions admitted its liabilities towards the value of supplies of equipments and services rendered practically there is no quarrel with respect to the amount claimed by the petitioner, which liability is admitted by the respondent in both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous other incidental points have been raised, the respondent has been harping upon this plea or defence to contend that it is not liable to pay any amount and it is the petitioner in both the company petition, who are liable to pay substantial amount towards loss sustained and damages suffered by the respondent. 41. The counsel on either side took the Court through the correspondence exchanged between the parties. According to respondents, a perusal of the correspondence relied upon by it would show that there has been admitted delay in the supplies of equipment by the petitioner and so also in the service. Apart from the delay, as pointed out by the respondent, the very petitioner company, through their letters, not only admitted the delay, but also the defect or deficiency in the equipment, etc., supplied by them, so also in the service and the petitioner had assured to rectify the same, which defect or shortage or delay, the petitioner in both the company petitions have miserably failed to rectify or set right and as a result of which the respondent has to engage the service of other companies like Nortel Networks and Nokia Networks OY paying huge amounts and it sustained los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lea was admittedly written by the respondent addressed to the petitioner, which reads thus :- 25th May, 2000 Mr.Sunil Kulkarni Area Operations Manager Motorola India Limited Cellular Infrastructure Division 33 A, Ulsoor Road Bangalore. Dear Sunil Subject : WITHDRAWAL OF ALL CLAIMS MADE ON MOTOROLA. Reference : Our letters dated Sept.7, 1999, March 19, 20 25th, 1999. We hereby inform you that we are withdrawing all the claims we made on you as per these letters. Thank you very much for your support and co-operation. Thanking you, Sincerely, for BPL Cellular Limited S.Balagopal Head - Commercial Logistics. 48. In the reconciliation statement forwarded by the respondent to the petitioner, Motorola Inc., dated 31.3.2001, the respondent had admitted the outstanding of USD $10,99,656.43. Again on 17.5.2 001, the respondent had admitted the liability and the letter reads thus : Motorola Inc. 1501 W, Shure Drive Arlington Heights Illinois IL 600 04 United States. We refer to our statement of reconciliation wherein we have shown the amount $14,54,030.34 towards interest invoices raised by Motorola Inc. and yet to be accounted by us. This is due pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the liability and assured it that it will release payments towards supplies. The said letter reads thus: September 2, 1999 Motorola India Limited The Senate No.33A, Ulsoor Road Bangalore 560 042. Dear Sirs, We realise that there have been certain delays in settling the current outstanding of around US$ 17 million and outstanding in respect of services and local supplies. We had intended to pay a minimum of ₹ 30 lakhs and upto ₹ 1 Crore in August 1999 for which the necessary fund were mobilised. Unfortunately due to unexpected turn of events we had to divert money to payment of licence fees of ₹ 15 Crores which had to be paid by August 15, 1999, failing which our licence would have been revoked. While we are making efforts to pay the local technical services outstanding in monthly instalments from our monthly revenue, it may not be possible to do so for the US$ outstanding till we obtain financial closure which is expected by Jan. 2000. We would release payments in instalments of ₹ 309 lakhs per month minimum starting from 30th September 99 towards outstanding in respect of Services, local supplies, supervisory charges and interest on delayed pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflector configurations allow a significant reduction in shipping volume and transportation costs, but require slightly more time for Antenna assembly and installation. Installation is straightforward, but approximately 20-40 minutes extra time should be allowed to assemble a 2 piece reflector. Each reflector is serialised at the factory to ensure only machine halves are supplied together. The two reflector halves fit exactly to each other using alignment shoulder bolts, precision drilled at the factory. Each reflector pair are also assembled in the factory and the surface tolerance measured to ensure no deformation of the reflector surface has occurred during the splitting operation. If assembly is carried out to the attached instructions, there will be no degradation of the antenna performance when compared with an equivalent 1 piece reflector, this applies to all antenna types including high cross polar HSX types at 7 GHz. Andrew supply many hundreds of two piece reflectors every year. I hope this assures you of the suitability of two piece reflectors, however should you require further information do not hesitate to call. Yours sincerely, Sandy Fraser Market Devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that the respondent's counter claim or defence or objections to the present company petitions is definitely not bona fide, but it is a clear moonshine, trotted out to delay the proceedings. 61. Merely because the respondent had initiated action for arbitration by sending a reference and nominating an Arbitrator, liability does not cease nor get extinguished. The company petition is not for recovery of any substantiated amount and the arbitration proceedings is definitely not for winding up and in this respect we shall not lose sight of the pronouncement of the Apex Court in HARYANA TELECOM LTD. VS. STERLITE INDUSTRIES LTD., reported in 1999 (5 ) SCC 688. 62. As regards the financial condition of the respondent-company, voluminous materials have been placed by the petitioner to show that the respondent has suffered a substantial loss and it is highly indebted heavily not only both to the petitioner, but also various banks and financing institutions. Substantial amounts are admittedly due. A perusal of the typed set of papers would show that number of bills of exchange remains unpaid and the respondent sought for time and requested the payees to represent the bills of ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o pay its debts and that is the reason, which had prompted the respondent to raise all untenable claims or pleas after having withdrawn its claims. Such a conduct on the part of the respondent, a business house, cannot be appreciated. The inability has been established and the petitioner in both the company petitions has made out not only a prima facie case, but also sustained its case and the plea of respondent is not bona fide and it is a clear moonshine. 67. The next point that should engage the attention of this Court is whether still this Court should proceed further and order publication, which may result in serious consequences and may even throw out respondent company out of gear from its current functioning resulting in grinding halt. 68. Though Mr.Murari pointed out that the present company petitions are an attempt to armtwist the respondent and also defeat the respondent's move to amalgamate with other leading companies in India, this Court is unable to appreciate the same and it cannot be countenanced. It could even be stated that it is out of frustration. 69. Yet it is to be pointed out concedingly too, the respondent is carrying on the project and renderi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... privation of cellular facilities to lakhs and lakhs of customers in the three States. The respondent has also paid substantial sum as licence fees to the Government of India for getting licence and the investment on the part of the respondent on various base stations, clusters or transmitters, etc., which are substantial will also be rendered a total loss or waste. By proceeding further or publishing the company petitions also, the petitioner may not be in a position to recover the amounts due to the petitioner. But at the same time the respondent will not be justified in using the petitioners' equipment without making payment of its value and allowing the respondent to enrich itself by day-to-day earnings by utilising the petitioners' supply of modern machinery and equipments. 72. In the circumstances, taking into consideration of the totality of the circumstances, investment so far made, public services rendered and improved business, this Court is of the considered view that it will not be justified in ordering publication without reference to consequences. Instead this Court would be justified in giving sufficient opportunity to the respondent to enable itself to com ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
