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2018 (12) TMI 1717

..... debt and the sum claimed by way of compensation is not a debt as defined under law but, the same are damages and hence, the Company petitions are not maintainable - availability of alternative remedy of appeal - HELD THAT:- In the instant case as stated supra, it is not just a case of mere denial but there is also a counter claim. Hence, the contention that the sum offered by way of a goodwill gesture, has to be construed as an admitted debt is baseless and requires to be rejected. More so, in the light of the fact that the respondent has categorically stated in the correspondence that the offer stands withdrawn. The respondent has categorically asserted in the legal notice that as the petitioner failed to accept the proposal in full and final settlement, the proposal has been withdrawn. A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under Clause 18, to recover the amount of such claim by appropriating other sums due to the contractor - it is not necessary for us to consider the other contention raised on behalf of the respondent, namely, that on .....

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..... ore. The petitioners are part of the group companies of the Baldota Group of Companies which is owned by Baldota Family. Sri Meda Venkataiah is the Executive Director (Mines) of M/s. MSPL Ltd. 3. The respondent viz., M/s. Vectra Advanced Engineering Private Ltd., is a company incorporated under the provisions of the Companies Act, 1956 having its registered office at Gandhinagar, Bangalore. The authorized share capital of the respondent Company is ₹ 3,00,00,000 shares and nominal value is ₹ 10 each. The issued share capital is 19507360 shares and nominal value is ₹ 10 each. The subscribed share capital is 19507360 shares and nominal value is ₹ 10/- each. The paid up share capital is 19507360 shares and nominal value is ₹ 10/- each as per Annual Report 2004-05 of the Respondent Company. 4. M/s. Tatra Udyog Ltd., (TATRA in short) the predecessor-in-interest of the respondent Company, a company incorporated under the Companies Act, 1956 was carrying on business at Hosur, Tamil Nadu. 5. In the course of business, the petitioner and respondent-Company entered into and executed the contract for purchase and sale of Tatra Hemang Dump Trucks. That the name of .....

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..... imed by way of compensation is not a debt as defined under law but, the same are damages and hence, the Company petitions are not maintainable. 12. The maintainability of the petitions is also contested on the ground of availability of alternate remedy as per Clause 8 of the AMC Contract and hence, it is contended that on the ground of maintainability alone the petitioners are liable to be unseated. 13. The fact of execution of the AMC Contract is not disputed. On the other hand, the liability of the Company to indemnify the sum claimed as damages is vehemently denied. The respondent further does not dispute the fact that under the AMC contract, the Company is required to supply or rather replace Trucks such of those which have been purchased from the respondent and which have suffered repairs or have broken down in order to ensure that the maintenance work or repair of the vehicles does not affect the continuity of the mining operations and thus, preventing disruption of mining work. 14. It is further asserted that in lieu of the contract and the said Clause, the respondent has indeed supplied the replacement vehicles and even as on today, the petitioner Company continues to hold .....

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..... that the petitioner is claiming compensation for the damages suffered. Hence, it is contended that the question of awarding damages or quantifying the same based on the provisions of the Companies Act without there being a quantification by any Court or Authority does not arise, and is impermissible. 20. He further takes this Court through Annexure-M being the reply effected by the respondent and draws the attention to paragraph No. 6, where the respondent has categorically asserted that the offer to pay compensation at ₹ 120/- per hour has not been accepted by the petitioner. Further it is seen that all the assertions on behalf of the petitioner have been denied in categorical terms and in fact the respondent has raised a counter claim and the petitioner was called upon to pay a sum of ₹ 1,64,53,526/-. It is also stated that the offer of settlement/proposal at the rate of ₹ 120/- per hour proposed by the respondent stood withdrawn. That the offer was made as a goodwill gesture with an intention of continuing the good business relationship with the petitioner and in the light of the fact that they have been carrying on business over the past several years and was .....

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..... of the Company. In the opinion of the Court, the said ruling is of no assistance and does not advance the case of the petitioner in any manner. 25. Nextly, learned counsel for the petitioner has placed reliance on the ruling of the Division Bench of this Court in the case of Kudremukh Iron Ore Co. Ltd. vs. Kooky Roadways Private Ltd. reported in ILR 1990 KAR 230 to advance his arguments that even though no exact amount is claimed, the same could be ascertained. The said ruling is distinguishable on the short ground that the facts involved in the said case related to the respondent-Company failing to deliver and indemnify the quantity of goods which it had agreed to transport. Furthermore, the value of the goods could easily be asserted from invoices accompanying the goods. There was no confusion with regard to the quantity or the price. Unlike in the referred case, in the case on hand there is a serious dispute with regard to the number of hours lost or if any hours are actually lost and the rate at which the compensation is to be awarded? 26. Furthermore, the Division Bench was pleased to rely on the Carriers Act under which a Statutory Liability is cast on the carrier to make go .....

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..... ion to pay its debts. It would follow that in such a case it will really be unnecessary to enquire whether the company is in fact solvent or not. Suite recently in Public Prosecutor v. Abdul Wahab, Cri.A. Mo. 432 of 1961: AIR 1954 Mad 367, a Full Bench of this court had to consider the true scope of a statutory fiction; and it was held that within the area of its operation such a fiction must be regarded as the reality. It will not be open to the party or the court to contradict the fiction in regard to those cases where the statute intended it to apply. But at the same time a fiction cannot be extended to operate beyond the purpose for which it is intended." and contends that the discretion is vested with the Company Court, trying the petition, to admit quantification. Whether the defence is an unsubstantial one or in the alternative if the defence is a substantial one, then to direct the parties to establish their claim by way of an independent action. In the considered opinion of this Court, the said ruling is of no assistance to the petitioner as the dispute pertains to unascertained loss which is sought to be compensated at an unasserted rate. Neither the quantum of hours .....

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..... terms of the contract executed between the parties. 33. A detailed scrutiny of the terms and conditions incorporated therein would reveal that no liquidated damages is agreed upon. The nature of compensation is also by way of replacement of Trucks. There is no agreement entitling the parties to seek any liquidated or unliquidated damages. 34. In that view of the matter, the claim of the petitioner that the sum claimed under the legal notice by way of compensation for damages suffered constitute a debt cannot be accepted. Further the Apex Court in the case of Union of India vs. Raman Iron Foundry reported in (1974) 2 SCC 231 while interpreting clause 18 has observed and held in paragraph No. 11 as under: "11. Having discussed the proper interpretation of Clause. 18, we may now turn to consider what is the real nature of the claim for recovery of which the appellant is seeking to appropriate the sums due to the respondent under other contracts. The claim is admittedly one for damages for breach of the contract between the parties. Now, it is true that the damages which are claimed are liquidated damages under Clause. 14, but so far as the law in India is concerned, there is no .....

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..... ned". It was held in this case that a claim for damages does not become a debt even after the jury has returned a verdict in favour of the plaintiff till the judgment is actually delivered. So also in O' Driscoll v. Manchester Insurance Committee, Swinfen Eady, L.J., said in reference to cases where the claim was for unliquidated damages: "……in such cases there is no debt at all until the verdict of the jury is pronounced assessing the damages and judgment is given". The same view has also been taken consistently by different High Courts in India. We may mention only a few of the decisions, namely, Jabed Sheikh v. Taher Mallik, S. Milkha Singh v. M/s. N.K. Gopala Krishna Mudaliar and Iron & Hardware (India) Co. v. Firm Shamlal & Bros. Chagla, C.J. in the last mentioned case, stated the law in these terms: In my opinion it would not be true to say that a person who commits a breach of the contract incurs any pecuniary liability, nor would it be true to say that the other party to the contract who complains of the breach has any amount due to him from the other party. As already stated, the only right which he has is the right to go to a Court .....

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