IN THE HIGH COURT OF DELHI 

MUKUL ROHTAGI, Senior Advocate, with SANDEEP SETHI, Advocate, for the petitioners. 

B. R. ZAIWALLA, Senior Advocate, with KAILASH VASDEV, U. R. TIMBLE, R. RAHIM and MS. VANITA SAHNI, Advocates, for the respondent. 

JUDGMENT 

DALVEER BHANDARI, J. - The petitioners, Trafalgar House Construction India Limited, filed a company petition in September, 1996, against the respondents, Western India Shipyard Limited. In the petition, it is mentioned that the respondent company is indebted to the petitioners in a sum of Rs. 357.94 lakhs as per particulars of claim, Exh. 'A' alongwith interest at the rate of 18% from the date thereof till payment. 

2. It is incorporated in the petition that the petitioners submitted a tender of civil work pertaining to strengthening of the existing quay wall to the respondent company. The said tender was accepted by the company vide its letter, dated 6 October, 1993, and the contract was awarded to the petitioner. The said work was duly completed in all respects to the satisfaction of the respondent company. The respondent company accepted the said work without raising any dispute as to the quality or as to the time taken by the petitioners in completing the work. The respondent company has certified that the value of the work actually executed by the petitioners is Rs. 577.23 lakhs. 

3. After adjustment of some payments, the petitioner company submitted that Rs. 357.94 lakhs is due and payable by the respondent company to the petitioners. A number of letters were sent by the petitioners to the respondent company. The respondent company unequivocally and unconditionally admitted its liability and assured the petitioners that the payments would be released soon. Despite a number of assurances in various letters, the respondent company defaulted on every occasion resulting in financial hardship and substantial costs to the petitioners. It is also incorporated that no dispute of any nature whatsoever was raised/set up by the respondent company at any time. 

4. It is also incorporated in the petition that the respondent company has failed to meet its financial obligations. It was submitted that the respondent company is in serious financial difficulties and is not in a position to meet its current liabilities. The petitioners sent a statutory notice, dated 9.7.1996. The company by its letter, dated 16.7.1996 responded to the statutory notice wherein it is admitted that the company had gone through a critical phase due to its cost overrun and other matters in the last few months and had started recovering. The respondent company offered to settle the dues in three instalments. But in fact, no amount has been paid by the respondent company to the petitioners. 

5. The learned counsel appearing for the petitioners has drawn my attention to various letters sent by the respondent company to the petitioners to demonstrate that the respondent company admitted its liability and they were always satisfied with the quality of work done by the petitioners. The respondent company was also satisfied that the work was also done within the prescribed time. A reference has been made to the telefax, dated 13.1.1996 sent by the respondent company to the petitioners. The telefax reads as under : 

"Dear Sir, 

With due respect, may I bring to your kind notice that all efforts are 'ON' at this end to settle your outstandings at our earliest. I think by this month end, you will have no reason to complaint. 

This delay is basically on account of non-release of our funds (through the proceeds of public issue as well as Khoka Buy Back money) by our financial institutions. I was in Bombay to meet them personally, and they have assured that they would release (almost Rs. 12 crores) the funds soon. 

I understand your position and I am sorry for causing concern. Kindly ask your Board to bear with me for a few days more and I will ensure payment of outstanding before the month end. 

This is very unfortunate that this payment to THCIL got delayed, but be sure it is due to the reason that almost payment of Rs.30 crore from institutions got delayed due to over-all money market crunch. Now that I have been assured that the funds will be released soon. 

As an alternate means to clear our outstandings with THCIL, I have been asked by bankers to open the LC for Graving Dock and that would not only settle the present outstanding amount but future payment also. 

I am aware of that Mr. Chatterjee, the Director Operations is visiting me on Monday to discuss the outstandings. He is most welcome to see the yard as he missed the inauguration. 

My full time occupation now to ensure your payment and kindly bear with me for a few days. 

Best regards 

Yours
sincerely, 

Sd. ... (Dr. S. Shekhar Singh)." 

6. Thereafter, another fax message, dated 20.3.1996 was sent by the managing director of the respondent company to the petitioners. The message reads as under : 

"Dear Sir, 

Sub : Outstanding Payments. 
 
This has reference to your letter No. MD/BB/6, dated 13 March, 1996, on the above subject. At the outset, I must apologise for taking unduly prolonged period to settle your account. I could have settled your amount by mid March, 1996. However, I got preoccupied and was away from office for almost 15 days due to the sudden demise of my mother who expired on 24 February, 1996. 

I have taken adequate measures to see that the total amount is paid by lumpsum. I myself am in a hurry for an early payment for the works carried out on the Graving dry dock. Kindly resume the works as we are losing considerable time and non-completion of the Graving dock will hereby effect the cash flow of the company for the year 1996-97. This is also for your kind information that the company has approached financial institutions for project cost overrun of Rs. 28 crores and they are being analysed by our financial institutions on priority basis to ensure additional funding of the project. Notwithstanding this, I am independently processing to ensure payment of almost two and a half crores to THCIL. My proposal is resting with the agency and they have assured that they would provide additional funding before 31 March, 1996. I am also hopeful that by this time I will be able to resolve the issue. I could not reply your letter earliest as I was away and rejoined by office today. 

You have awaited for a good time and would only request you to wait for some more time. Kindly bear with us until then. 

Thanking you, 

Regards, 


Yours
sincerely, 

Sd. .... (Dr. S. Shekhar Singh, Managing Director." 

7. On 16.4.1996, yet another fax message was sent by the respondent company to the petitioners in which the respondent company promised to remit one crore to the petitioners within a week. 

8. On 6.5.1996, a letter was sent by the respondent to the petitioners promising to clear 60% of the outstanding amount in May, 1996, and the balance in June, 1996. In reply to the statutory notice on 9.7.1996, the respondent did not dispute the amount demanded by the petitioners and, in its reply, dated 16.7.1996, promised to settle the payment in three instalments. It may be pertinent to mention that another reply to the notice was sent through Mr. U. R. Timble, Advocate. In this notice of course, the respondent has taken a complete somersault and made an endeavour to find fault with the quality of work done by the petitioners and accused the petitioners for abandoning the work and causing loss to the respondent company. 

9. A reply to this notice was sent by the advocates of the petitioners on 4 September, 1996, repudiating the averments mentioned in the reply to the notice sent by the respondent. Thereafter, the petitioners filed a company petition before this court in September, 1996, and the notice of the company petition was issued on 17.10.1996. It may be pertinent to mention that during the pendency of this petition before this court, a telefax was sent on 27.12.1996 by the respondent company to Essar Sisco Ship Management Company Limited asking Essar to pay Rs. 22.87 lakhs payable by Essar to the respondent company directly to the petitioners. 

10. On 10.2.1997, the managing director of the respondent company had sent letter to the petitioners. The same is quoted as under : 

"I am very hopeful that all your debts will get settled before the end of financial year 1996-97." 

11. During the pendency of this petition, on 12.12.1996, the managing director of the respondent company had sent a letter to the petitioners in which it is mentioned that the respondent company proposed to pay the running bill amounting to Rs. 280 lakhs in six equal instalments, commencing from January, 1996. 

12. The learned counsel for the petitioner has drawn my attention to the letter, dated 13.1.1998 sent by the respondent company to the petitioners. The same reads as under : 


"To Dated 13.1.1998 Trafalgar House Construction India Ltd. 5, Chowringhee Approach, Calcutta-700072 

Dear Sir, 

As per our books of accounts, your accounts shows a credit balance of Rs. 2,68,51,079.76 payable to you as on 31.12.1997. Kindly confirm the same to us, in our office address, within 15 days from the date of receipt of this letter, otherwise, our balance will be treated as final. In case of any difference in the balances, kindly send your statement of account for reconciliation. 

Thanking you, 


Yours
sincerely, For Western India Shipyard Limited 

Sd. .... Gagan Sahoo  Manager (Accounts)." 


13. The learned counsel for the petitioners submitted that from 1996 to 1998, the respondent company on several occasions admitted the liability, but despite a number of promises and undertakings, the respondent company did not pay the amount to the petitioners. 

14. The learned counsel for the petitioners has drawn my attention to the letter, dated 18.10.1995 sent by the General Manager of the respondent company to the petitioners congratulating them and their staff for carrying out the entire work by the petitioners successfully within a scheduled period agreed upon and that the work done by petitioners was of high standard. Another certificate was issued by the managing director of the respondent company. The relevant portion of the certificate reads as under : 

"They (petitioners) have carried out all the works within the time schedule of completion of time with excellent site set up, proper equipments and maintaining high quality of work with their experience in specialised civil construction." 

15. It may be pertinent to mention that during the pendency of this petition on various occasions, a number of judges of this court have made serious efforts to see that the matter is settled between the parties and the outstanding amount is paid by the respondent to the petitioners. On 20.8.1999, the arguments were heard at length and after arguing for some time, learned counsel for the petitioners took one week's time to advise the respondent company. The learned counsel appearing for the respondent company could not offer reasonable terms of repayment to the satisfaction of the petitioners and opted to argue the matter again. The arguments were concluded on 30.8.1999. It was submitted that the respondent company has raised a counter claim and in view of the respondent's counter claim, this petition is devoid of any merit and should not be entertained by this court. 

16. The counsel for the respondent company also circulated synopsis incorporating counter claim of the respondent company. It is not necessary to recapitulate the details of the counter claim of the respondent company. Mr. Zaiwalla, learned counsel also placed reliance on some of the decided cases of the Supreme Court and of other courts. He has particularly, relied on J. N. Roy Chaudhary (Traders) (P) Ltd. v. Jainti Enterprise reported in (1987) 2 Comp LJ 82 : (1987) 61 Comp Cas 504 (Cal) and on Madhusudan Gordhandas & Company v. Madhu Woollen Industries (P) Ltd. AIR 1971 SC 2600. 

17. I am in respectful agreement with the propositions of law as laid down in these cases that the court could rightly refuse a petition for winding up of the company when the claim of the petitioners is bona fide disputed by the respondent company or it can refuse and relieve the petitioners in case the respondent company has raised defence in good faith and is one of substance. 

18. In the instant case, only on the basis of unequivocal admissions of the petition, from 1996 till 1998, the claim of the petitioners is abundantly established. This is one of those unusual cases, where even during the pendency of winding up petition in this court, the respondent company admitted the liability of the petitioners in categoric terms. The defence as set up by the respondent is totally devoid of any merit and has not been taken in good faith. 

19. Despite clear acknowledgement of the liability of the petitioners and undertaking to the respondent company to pay the amount, the respondent company is unable to clear the outstanding debts of the petitioners. A number of opportunities were given by this court to the respondent company to pay the outstanding amount in reasonable instalments, but the respondent company has failed to clear the outstanding liability. The court is of the considered opinion that the respondent company is not in a position to pay the debts of the petitioners. This is also corroborated from the fact that even in the balance sheet filed before this court, ending 31.3.1998, the net loss of Rs. 2,002.36 lakhs have been shown. 

20. On consideration of the totality of facts and circumstances of this case, this court is left with no option but to admit this petition for hearing. Let the citation be published in The Hindustan Times (English Edition), Nav Bharat Times (Hindi Edition) and Delhi Gazette for 25 October, 1999. 

21. In case the respondent company pays the outstanding debts of the petitioners within three weeks, citation as directed shall not be published.