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2019 DIGILAW 1354 (GAU)

Eastwest Projects v. Calcom Cement India Limited

2019-12-11

SUMAN SHYAM

body2019
JUDGMENT : Suman Shyam, J. Heard Dr. A. K. Saraf, learned senior counsel assisted by Mr. P. Baruah, learned counsel appearing for the petitioner. I have also heard Mr. R. Gogoi assisted by Mr. K. Singh, learned counsel representing the respondent. 2. The petitioner herein, is a partnership firm having its office at Chatribari Road, Guwahati in the State of Assam and is represented by its partner Sri Ashish Khejriwal. This petition has been filed under Section 433, 434 and 439 of the Companies Act, 1956, praying for an order from this Court for winding up of the respondent company due to its inability to pay the admitted debts. 3. The facts leading to the filing of this company petition, briefly stated, are these :- (a) The respondent is a company within the meaning of Companies Act, 1956. The petitioner is a turn- key contractor of civil construction, fabrication and erection works. In view of the expertise of the petitioner firm in executing civil construction, fabrication and erection works, the respondent company had entered into two agreements with the petitioner firm viz, (i) agreement dated 01/01/2009 for execution of certain civil construction work in connection with the proposed 1.4 MTPA Cement Grinding Unit at Lanka and (ii) agreement dated 25/11/2009 for execution of the work of fabrication and erection of the proposed 1.4 MPTA Cement Grinding Unit. Pursuant to the signing of the aforementioned agreements, the respondent company had issued work order dated 13.10.2009 for civil works at Lanka valued at Rs 31,03,69,697/-, work order dated 15.03.2010 for execution of mechanical works at Lanka valued at Rs 9,46,51,187.50 p and work order dated 13.10.2009 for executing civil works at Umrangsho valued at Rs 22,29,15,340/-. In terms of the aforesaid work orders issued by the respondent company under the aforementioned two agreements, the petitioner firm had undertaken civil works of the proposed 2500 TTP Clinkerisation Unit at Umrangsho. (b) Upon completion of the work, the respondent company, being satisfied with the quality of work, had issued work completion certificate dated 22/12/2011. The petitioner had raised bill amounting to Rs. 41,31,65,006/- for the works executed under the aforementioned contract agreement and out of the said amount, the respondent company had also paid Rs. 36,83,93,686/- to the petitioner firm leaving a balance of Rs. 4,47,71,320/-. The petitioner had raised bill amounting to Rs. 41,31,65,006/- for the works executed under the aforementioned contract agreement and out of the said amount, the respondent company had also paid Rs. 36,83,93,686/- to the petitioner firm leaving a balance of Rs. 4,47,71,320/-. When the work orders were issued to the petitioner, the respondent company was under the management and control of Bawri Group (BW group) but on 16/01/2012, the Dalmia Group of Companies had entered into a Share Purchase Agreement with the BW Group for purchase of majority of the shares in the respondent company. Although the work entrusted to the petitioner was suspended for a brief period while the Share Purchase Agreement was being executed, after the agreement was signed, the construction work had resumed but the Dalmia Group had finished the balance portion of the work by engaging another contractor. Even thereafter, the respondent company had made part payment against the invoices and bills raised by the petitioner but a sum of Rs. 3,16,04,550.68 remained due and payable to the petitioner. On 27/05/2012, the respondent company had issued a letter acknowledging the fact that a sum of Rs. 3,16,04,550.68 was due and payable to the petitioner but stated that the payment would be delayed due to insufficiency of funds. (c) On 19/12/2013, the representative of the respondent company had sent an email to the petitioner intimating that the amount could not be paid due to paucity of fund. However, out of the outstanding dues of Rs. 3,16,04550.68,, the respondent company had paid a sum of Rs. 71,90,010/- during the year 2012-13 and thereafter, an amount of Rs. 67,11,000/- during the year 2013-14, thereby partially discharging its contractual obligation towards the petitioner thus leaving an amount of Rs. 1,77,03,540.68 as the outstanding dues. (d) On 12/06/2014, the respondent company had issued a letter proposing to settle the aforementioned outstanding dues of the petitioner by paying a lumpsum amount of Rs. 25 lacs but the aforesaid amount being less than the actual outstanding dues of the petitioner, the offer was turn down by the petitioner firm by the e-mail dated 12/06/2014. (d) On 12/06/2014, the respondent company had issued a letter proposing to settle the aforementioned outstanding dues of the petitioner by paying a lumpsum amount of Rs. 25 lacs but the aforesaid amount being less than the actual outstanding dues of the petitioner, the offer was turn down by the petitioner firm by the e-mail dated 12/06/2014. Since then, respondent company has failed to respond to the request of the petitioner for payment of the outstanding dues, as a result of which, the petitioner had served a statutory notice under Section 434 of the Companies Act, 1956 dated 26/08/2015 upon the respondent, demanding payment of the outstanding dues. When the aforesaid notice was not responded to by the respondent company despite receipt of the same, the petitioner was compelled to approach this Court by filing the present petition for winding up the respondent company. 4. The claim of the petitioner, as projected in the pleadings, is for payment of an amount of Rs. 1,77,03,540.68 being the principal amount due and payable under the contract agreements. Besides that, a further amount of Rs. 1,69,19,853.54, being the interest component @ 24% per annum, has also been claimed by the petitioner firm with effect from 01/04/2012 till 31/07/2015. 5. The prayer made in this petition has been opposed by the respondent company, inter-alia contending that the management of the respondent company was taken over by the Dalmia Cement (Bharat) Limited (for short 'DCBL') pursuant to the signing of share holders agreement dated 16/01/2012. Since the works allegedly executed by the petitioner firm was during the period when BW group was in control of the company, hence, the present management does not have any liability towards the petitioner. It is also the case of the respondent that in view of clause 14.5.1 of the share holders' agreement, the respondent company did not have any liability to liquidate the dues of the petitioner firm, if any, and the entire liability was upon the BW group. 6. In the affidavit-in-opposition filed by the respondent, it has also been mentioned that in reply to the e-mail dated 19/12/2013 issued to the petitioner firm, the respondent has informed that there is some gap in the balance claimed by the petitioner and, therefore, it is a clear case where there was discrepancy in the accounts, as a result of which, there is no acknowledgement of debt in this case. The respondent has also stated that the letter dated 27/05/2012 relied upon by the petitioner firm is doubtful and has been procured by the petitioner by dubious means. On such ground, the respondent has prayed for dismissal of the petition. 7. By referring to the various e-mails exchanged by and between the petitioner and the respondent company from time to time, more particularly, the mail dated 27/05/2012 (Annexure-9), Dr. Saraf has argued that the Manager (Finance) of the respondent company has confirmed, after examination of the Books of Accounts, that there is a credit balance of Rs. 3,16,04,550.68 on the account of the petitioner. Out of the aforesaid amount, the respondent company, while it was under the management of DCBL Group, had also made part payment on two occasions for a sum of Rs. 71,90,010/- and thereafter, a sum of Rs. 67,11,000/-. Not only that, the amount due and payable to the petitioner firm has also been duly reflected in the amended share holders agreement entered by and between the DCBL and the BW Group on 30/11/2012, wherein also, the amount payable to the petitioner firm has been reflected as 386 lacs. Under the circumstances, submits Dr. Saraf, the stand taken by the respondent in the counter affidavit is wholly untenable in the eye of law. 8. Dr. Saraf has also invited the attention of this Court to the TDS deducted against the amount to contend that the stand taken by the respondent company in refusing to pay the balance amount to the petitioner does not give rise to a bonafide dispute but such stand has been deliberately adopted to tide over the financial crisis faced by the respondent company. Therefore, submits Mr. Saraf, it is established on the face of the record that the respondent company is unable to pay its admitted debts. 9. Mr. Gogoi, learned counsel for the respondent, on the other hand, has argued that the petitioner firm is controlled by a relative of the erstwhile management group, viz. BW family and, therefore, the reflection made in the petition is nothing but projection of some sham transaction only to fasten undue liability upon his client (DCBL). By referring to clause 14.15.1 of the agreement dated 16/01/2012, Mr. Gogoi submits that the DCBL group would not have any liability to pay the amount of Rs. BW family and, therefore, the reflection made in the petition is nothing but projection of some sham transaction only to fasten undue liability upon his client (DCBL). By referring to clause 14.15.1 of the agreement dated 16/01/2012, Mr. Gogoi submits that the DCBL group would not have any liability to pay the amount of Rs. 688.19 lacs as reflected in Annexure-6 since the aforesaid amount was to be indemnified by the BW group. Mr. Gogoi submits that after the change of management of the company, the company petition has become untenable in the eye of law and therefore, the remedy for the petitioner lies in approaching the Civil Court. 10. By referring to the e-mails brought on record by the petitioner, Mr. Gogoi submits that the letters were procured by the petitioner by employing dubious means, inasmuch as the employee who had written the e-mails had resigned from the company immediately thereafter and joined another company owned by the BW group. In so far as the claim made by the petitioner's counsel based on TDS deduction is concerned, Mr. Gogoi has argued that deduction of TDS cannot be viewed as an acknowledgement of debt but is a document only to indicate acknowledgement of deduction of tax at source. In support of his aforesaid argument, Mr. Gogoi has placed reliance on a decision of the Bombay High Court rendered in the case of S.P. Brothers, a partnership firm vs. Biren Ramesh Kadakia. 11. The law regarding scope and ambit of the Company Court whhile exercising jurisdiction under Section 433(e)(f), 434 and 439 of the Companies Act has been summed up by the Hon'ble Supreme Court of India in the case of I.B.A. Health (I) Pvt. Ltd. Vs. Info Drive System Sdn. Bhd., (2010) 10 SCC 553, wherein it has been held that where there is a substantial dispute as to the liability and obligation, petition for winding up should not be entertained. It was observed that, a dispute to be substantial and genuine, has to be bona fide and not spurious. The observations made in para 17 of the said decision are relevant and, therefore, is reproduced herein below :- "17. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding up for discharge of that liability? The observations made in para 17 of the said decision are relevant and, therefore, is reproduced herein below :- "17. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine 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.”. 12. In the present case, as noted above, the claim of the petitioner is for payment of outstanding dues arising out of execution of contractual work based on work order issued by the respondent company. As mentioned above, the management of the respondent company had changed hands from the BW group to DCBL group upon execution of share holders agreement dated 16/01/2012. Therefore, it is the admitted position of the fact that three contracts executed between the respondent and the petitioner and the work orders issued to it for execution of the aforementioned works were during the period when the "BW group" was in control of the respondent company. However, what would be significant to note herein is that the respondent had not denied or disputed the fact that the petitioner firm has, in fact, executed the work of civil construction, fabrication and erection in the cement plant at Lanka and Umrangsho. However, what would be significant to note herein is that the respondent had not denied or disputed the fact that the petitioner firm has, in fact, executed the work of civil construction, fabrication and erection in the cement plant at Lanka and Umrangsho. Not only that, the amended share holders agreement executed between the “DCBL” and "BW group" on 13/11/2012 also contains annexure-6 wherein it has been it has been categorically mentioned that an amount of Rs. 386 lacs is payable to East West i.e. the petitioner. In the aforesaid annexure signed by and between the BW group and DCBL Group, it has also been mentioned that the amount claimed by the petitioner is Rs. 767 lakhs whereas the same had been assessed to be Rs. 386 lakhs. The projection made in Annexure6 which forms part of an agreement signed by DCBL group and Bawri Group, leaves no room for doubt that although the petitioner had claimed a higher amount, after due verification of the claim, the petitioner was found to be entitled to receive an amount of Rs. 386 lacs only from the respondent company. The reflection made in the amended share holders agreement is consistent with the claim made in the company petition and there is no reason for this Court to hold the dispute raised by DCBL group as regards entitlement of the petitioner firm to receive the amount claimed by it, is not a bonafide dispute. 13. Since the respondent had placed heavy reliance on clause 14.15.1 of the share holders agreement, I deem it appropriate to reproduce the said clause herein below for ready reference:- "14.15.1 The past liabilities of the Company (for the period prior to 16 January 2012), as identified by the Parties on the date of this Agreement, shall be dealt within the following manner : (i) The liabilities amounting to 688.19 lakhs, the breakup whereof is set out at Annexure 6, shall be indemnified by the BW Group. In the event the BW Group requires the Company to contest any of these liabilities pursuant to which the Company is liable to pay any expenses, interest and/or penalty thereon, the BW Group shall be liable to pay such liability together with the expenses, interest and/or penalty thereon.” 14. In the event the BW Group requires the Company to contest any of these liabilities pursuant to which the Company is liable to pay any expenses, interest and/or penalty thereon, the BW Group shall be liable to pay such liability together with the expenses, interest and/or penalty thereon.” 14. It is also seen from the record that under the share holders agreement executed on 16/01/2012, the outstanding liability of the company has been shown to be Rs. 688.49 lacs which amount also includes Rs. 386 lacs due and payable to the petitioner company. Therefore, clause 14.15.1 cannot be a ground for the respondent company to deny its liability towards the petitioner. Moreover, clause 14.15.1 merely seeks to indemnify the DCBL group against the past liabilities of the company to the extent indicated above and, therefore, the same must be held to be an internal arrangement of share transfer between the DCBL and the BW Group. 15. The issue raised in this petition pertains to the liability of the respondent company and not the inter se liability of the two groups over their right on the shares of the respondent company. The respondent company is a legal entity and an existing company within the meaning of Companies Act, 1956. The claim in this petition is against the respondent company and not the DCBL group or the BW group, as the case could be. Therefore, I am of the considered opinion that the respondent company cannot deny its liability to pay the dues of the petitioner firm by seeking refuge under clause 14.15.1 of the agreement dated 16/01/2012. 16. In so far as the validity of the claim made by the petitioner is concerned, I find from the records that by the communication dated 27/05/2012, the Manager (Finance) of the petitioner company has informed the petitioner as follows :- “Dear Sir With reference to the work orders as above we confirm that as per our books of accounts as on 31.3.2012 there is a credit balance of Rs. 3,16,04,550.68 (Rupees three crores sixteen lacs four thousand five hundred and fifty and paise sixty eight only). Yours faithfully For Calcom Cements India limited” 17. The letter dated 27/05/2012 refers to the three work orders dated 13/10/2009, 13/10/2009 and 15/03/2010, which are the basis of the claim of the petitioner. 3,16,04,550.68 (Rupees three crores sixteen lacs four thousand five hundred and fifty and paise sixty eight only). Yours faithfully For Calcom Cements India limited” 17. The letter dated 27/05/2012 refers to the three work orders dated 13/10/2009, 13/10/2009 and 15/03/2010, which are the basis of the claim of the petitioner. The respondent had no point of time denied issuance of the work orders or the letter by the Manager (Finance) of the Company. The execution of the work by the petitioner firm is also not in dispute. By the e-mail dated 19/12/2013, the petitioner company was informed by the representative of the respondent company that there are not enough funds in hand to clear the outstanding dues but attempts are being made to release some fund in that month only. Although the mail dated 19/03/2013 does mention about "some gap" in the balance sheet, yet, the respondent had at no point of time disputed the entitlement of the petitioner to receive the said amount. Therefore, merely because there is a mention of "some gap" in the balance, it would not be sufficient for this Court to presume that there was any serious discrepancy in the account maintained by the respondent company. 18. Again, on 21/01/2014, the representative of the respondent company had issued an e-mail categorically stating that the amount will be paid to the petitioner in the month of February and the petitioner has been asked to bear out for some time. On 06/02/2014, the representative of the respondent company had again issued an e-mail to the petitioner firm stating that the fund position is a bit tight and further communication is to be awaited. Issuance of those emails have not been denied by the respondent company. 19. All these communications, it must be noted, were issued during the period when the DCBL Group was in control of the respondent company. The respondent has also not denied or disputed the correctness of the contents of these mails. A careful examination of the emails go to show two things. Firstly, that the claim of the petitioner for payment of the amount, as indicated above, was never disputed by the respondent at any point of time. Secondly, the only reason cited for non-payment of the dues was paucity of funds. A careful examination of the emails go to show two things. Firstly, that the claim of the petitioner for payment of the amount, as indicated above, was never disputed by the respondent at any point of time. Secondly, the only reason cited for non-payment of the dues was paucity of funds. The aforesaid communications, viewed in the context of the entries made in the Annexure-6 of the share holders agreement, leaves no room for doubt that the amount claimed by the petitioner was an acknowledged debt of the respondent company but the same has not been paid only because there was paucity of funds. 20. Mr. Gogoi, learned counsel for the respondent has strenuously argued that the financial health of the DCBL company is sound and it has turn over exceeding Rs. 1000 crores per annum. Therefore, even if the amount is found to be due and payable to the writ petitioner, it is not a fit case for ordering winding up of the company. The aforesaid argument of Mr. Gogoi cannot be accepted by this Court simply on account of the fact that the question involved herein pertains to the financial health of the respondent company and not the DCBL group of companies in general. The series of communications annexed to the company petition unequivocally goes to show that the company was facing financial crunch not only when it was under the control of the previous management but even after the control of the company was taken over by the DCBL. 21. Coming to the plea of fraud taken by the respondent's counsel, it is to be noted herein that the plea is based on the premise that a letter dated 27/05/2012 has been procured by the petitioner and that the executive of the company, who had issued the said letter, had subsequently resigned to join a company under the control of the BW group. I am afraid, mere assertion of this nature, without substantiating the same, cannot be a ground for this Court to reject the claim of the petitioner. Merely because an earlier employee of the company had resigned after the issuance of the said letters the petitioner cannot be held guilty of committing fraud. I am afraid, mere assertion of this nature, without substantiating the same, cannot be a ground for this Court to reject the claim of the petitioner. Merely because an earlier employee of the company had resigned after the issuance of the said letters the petitioner cannot be held guilty of committing fraud. The materials on record categorically establishes the debt towards the petitioner through a series of communication issued by the authorized representative of the respondent company and such communications are consistent with the other materials available on record including the entries made in Annexure-6 to the share holders agreement. Under the circumstances, I am of unhesitant opinion that this is a clear case where the petitioner has succeeded in establishing that there is a bona fide debt of the respondent company towards the petitioner for a sum of Rs 1,77,03,540.68 p and the respondent company has failed to discharge its admitted debt due to paucity of funds. 22. However, in so far as the claim for payment of interest is concerned, the petitioner has failed to invite the attention of this Court to any clause in the contract agreement which permits payment of such interest on the outstanding dues at a mutually agreed rate. The question of payment of interest on delayed payment, in the absence of any binding contract between the parties, would depend on the facts and circumstances of each case and the claimant would be obliged to establish his right on such count by leading cogent evidence. Such a claim, based on contentious issues, cannot be adjudicated in a company petition. Such being the position, this Court is of the opinion that the claim for payment of interest component for a sum of Rs 1,69,19,853.54p , as made by the petitioner, cannot be entertained in the present proceeding. However, the claim for payment of interest is left open to be agitated by the petitioner in an appropriate proceeding, if so advised. 23. This company petition, therefore, stands admitted. 24. However, having regard to the peculiar facts and circumstances of the case, more particularly the fact that there is an ongoing dispute between the DCBL and the BW Group pertaining to the implementation of share holders agreement, the respondent company is granted 60 (sixty) days' time, with effect from the date of this order, to discharge its admitted debt by paying the amount of Rs. 1,77,03,540.68 to the writ petitioner. 25. It is made clear that in the event of failure on the part of the respondent company to make full and final payment of Rs. 1,77,03,540.68 to the writ petitioner within the time frame provided by this Court, necessary order as per law shall be issued for advertising the petition. 26. A certified copy of this order be served upon the respondent company within a week from today for doing the needful. 27. Let this petition be listed again, after 60(sixty) days, for necessary orders.