Digital Data Systems vs Adhunik Power Systems P. Ltd.

Hemant Gupta, J.—This is a petition for winding up of the respondent-company for its inability to pay alleged admitted amount due to the petitioner. The petitioner is a sole proprietorship firm engaged in the business of importing and reselling uninterrupted power supply units. The respondent is incorporated as a limited company having its registered office within the jurisdiction of this court. The petitioner alleges that the respondent placed an order for purchase of 4 Nos. of 10 KVA, 415 V, 50 HZ ALP Series UPS without batteries for Rs. 3,95,000 per unit and 2 Nos. of 5 KVA, 240 V, 50 Hz HC Series without batteries at the rate of Rs. 1,30,000 per unit. The total price of the goods is Rs. 18,40,000. As per the purchase order, 85 per cent. of the amount is to be paid after 60 days from the date of dispatch of goods and the balance 15 per cent. after the successful commissioning at site and acceptance by the Power Grid Corporation of India. It may be stated at this stage that the Power Grid Corporation of India has given a letter of intent to M/s. ITI Ltd., for Auxiliary Power Supply Packing for Delhi Mumbai Link Project. Under the said project, M/s. ITI Ltd. has chosen the respondents as its vendor and the respondent has placed purchase order for supply of the said units to the petitioner.

The goods mentioned in the purchase order were dispatched on March 22, 2003 and sent through road transport. On July 27, 2004, the respondent enclosed copy of C form to enable the petitioner to pay the Central sales tax at the rate of 1 per cent. It is alleged by the petitioner that such C form was issued to the petitioner after the respondent-company was satisfied with the quality of goods delivered. On receipt of the goods, the respondent sold part of the goods to M/s. ITI Ltd., vide challans Nos. 5042 and 5043 dated March 31, 2003. M/s. ITI Ltd., has issued form C to the respondent. The petitioner was called upon by the respondent to send Form E1 to avoid double taxation. However, the petitioner was not paid the amount of the goods supplied although a sum of Rs. 3 lakhs was paid on September 6, 2003.

The grievance of the petitioner is that as against the goods of Rs. 18,40,000 supplied and received by the nominee of the respondent, still a sum of Rs. 15,40,000 has not been paid to the petitioner. It is thus alleged that the respondent has failed and neglected to make the payment of the balance amount. A statutory notice u/s 434 of the Companies Act, 1956, was served upon the respondent but the respondent in its reply dated April 22, 2005, took up an evasive and invalid defence such as the goods not having been tested and the goods not meeting the specification, etc.

In reply to the petition for winding up, the respondent has given the background before the purchase order was issued to the petitioner for supply of UPS units, it was pointed out that on May 19, 2003, vide annexure R8, the petitioner was informed of the problems observed during site acceptance test conducted in the presence of the engineer of the petitioner. Vide annexure R9 dated September 9, 2003, the petitioner was informed that the Power Grid Corporation has raised objection in respect of the UPS supplied by the petitioner.

Since the quality of the supplies made by the petitioner were not up to the mark, a meeting was held on October 31, 2003, wherein the representative of the petitioner promised to take action in solving the problems as soon as possible and wherever required so that the UPS is accepted by the Power Grid Corporation. It was also agreed that the Power Grid Corporation shall release payment for the UPS after the same are accepted and taken over satisfactorily by it. After final payment for the UPS is released to the respondent, the petitioner will be eligible for their payments. It was agreed to the following:

(4) APS agreed that whenever the UPS will be accepted and taken over satisfactorily by PGGIL and final payments for the UPS will be accepted and taken over satisfactorily by PGGIL and final payments for the UPS is released to APS, DDS will be eligible for their payments.

The respondent also relied upon the communication dated March 23, 2006, annexure R10 by the Power Grid Corporation addressed to the petitioner wherein the defect in the working of the UPS was pointed out. It was to the following effect:

This is in reference to the UPS installed at Lucknow POP supplied by M/s. Adhunik Power System. This UPS has problem since commissioning. Also it was not working from last eight months. It was repaired in January, 2006 by M/s. Adhunik Power System. Now after repair, this UPS is working satisfactory.

Learned counsel for the petitioner has vehemently argued that the respondent accepted the quality of the material supplied by the petitioner which is evident from the issuance of the aforementioned C Form. On issuance of such Form, the transaction is complete and the respondent is liable to release the payment. The petitioner became entitled to the payment for the goods supplied. Failure to make payment for the goods received by the respondent shows its inability to meet the contractual obligations and to discharge the admitted liabilities. Consequently, the respondent has made itself liable for winding up. Reference is made to a judgment of this court reported as Ram Kumar and Others Vs. The Haryana Cotton Mills,

On the other hand, learned counsel for the respondent has argued that the UPS supplied by the petitioner were defective. The Power Grid Corporation has not accepted the UPS unit supplied by the petitioner and as early as in September, 2003, the petitioner was informed of the deficiencies of the defects in the UPS systems. Such defects were not rectified. From the communication dated March 23, 2006, it is sought to be argued that the UPS supplied by the petitioner has problems since commissioning and it became functional only in January, 2006, therefore, for supply of defective UPS units, the petitioner is not entitled to the payments claimed. It is contended that the dispute regarding defective supply of the UPS is a bona fide dispute which is evident from the documents on record and, therefore, it is not a case of non-payment of admitted liability but a bona fide dispute which is required to be adjudicated upon by the competent court of jurisdiction.

Learned counsel for the petitioner has vehemently relied upon the supply of form C and the term of the purchase order that 85 per cent. of the invoice value shall be paid after 60 days from the date of dispatch but since such payment has not been made, the respondent has failed to discharge contractual obligations but I do not find any merit in such argument. In Ram Kumar and Others Vs. The Haryana Cotton Mills, , the company has not filed a counter affidavit in spite of numerous opportunities granted controverting the supply and receipt of the goods. Such receipt of the goods by the respondents were found corroborated by the issuance of Form ST 15. Whereas in the present case, the respondent has admitted issuance of form C to enable the petitioner to avail of the concessional rate of sales tax but the respondent has also alleged that the UPS unit supplied by the petitioner were defective and came to be rectified only in January, 2006. The said stand of the respondent is corroborated by the communication annexure R10 as reproduced above. The petitioner has also agreed in the meeting held on October 31, 2003, that the petitioner would be eligible for payment only after final payment for the UPS is released to the respondent by the Power Grid Corporation. In view of the said fact, it is apparent that the defence of the respondent cannot be said to be untenable only for the purpose of defeating the claim of the petitioner. There exist serious disputes between the parties in respect of quality of the goods and the time when such defects were rectified. It cannot be said that it is a case of non-payment of admitted liability. Consequently, I do not find that it is a case for admission of the petition. Therefore, the petition is dismissed. However, it shall be open to the petitioner to establish its right in proper forum in accordance with law.