Skip to content


Agrob Anlagewbau Gmbh Vs. Orient Ceramics and Industries Ltd. - Court Judgment

LegalCrystal Citation
Subject Company
CourtDelhi High Court
Decided On
Case NumberCompany Petition No. 51 of 1983
Judge
Reported in[1986]60CompCas691(Delhi)
AppellantAgrob Anlagewbau Gmbh
RespondentOrient Ceramics and Industries Ltd.
Excerpt:
.....of a minor child. - , for short, the company',on the ground that the company is indebted to the german company to the extent of dm 441,075.32 together with interest on the amount at 18% per annum from july, 1982, on account of fees for know-how, technical services and assistance in terms of the collaboration agreement entered into between them, which the company has failed to pay notwithstanding the statutory notice claiming the amount from it. according to the minutes, it was claimed by daga that he has 'been able to rectify most of the multi-point defects but could not start production earlier than july 1, 1981, in spite of his best efforts'.daga further informed the board that 'saleable production was available on july 18, 1981',for which the board 'congratulated' daga. it is.....h.l. anand, j.1. agorb anlagewbau g.m.b.h, a west german company, for short, the german company, seeks to wind up orient ceramics and industries ltd., for short, 'the company', on the ground that the company is indebted to the german company to the extent of dm 441,075.32 together with interest on the amount at 18% per annum from july, 1982, on account of fees for know-how, technical services and assistance in terms of the collaboration agreement entered into between them, which the company has failed to pay notwithstanding the statutory notice claiming the amount from it. the collaboration agreement of the manufacture, etc., of ceramic tiles, glass and glassware and certain other items, with the technical know-how and services of the german company, was initially entered into between the.....
Judgment:

H.L. Anand, J.

1. Agorb Anlagewbau G.m.b.H, a West German Company, for short, the German company, seeks to wind up Orient Ceramics and Industries Ltd., for short, 'the company', on the ground that the company is indebted to the German company to the extent of DM 441,075.32 together with interest on the amount at 18% per annum from July, 1982, on account of fees for know-how, technical services and assistance in terms of the collaboration agreement entered into between them, which the company has failed to pay notwithstanding the statutory notice claiming the amount from it. The collaboration agreement of the manufacture, etc., of ceramic tiles, glass and glassware and certain other items, with the technical know-how and services of the German company, was initially entered into between the German company and one Kejriwal. The company was incorporated pursuant to this agreement and the rights of Kejriwal in the collaboration agreement were apparently transferred to the company. The total amount claimed by the German company was to be paid in three installments and part of the first installment was admittedly paid by the company. The company did not dispute its liability to pay the balance of the first installment, as also the second installment, but pleaded for time until the financial institutions had sanctioned further loans to the company. But that was when the company was under the management of Kejriwal. Kejriwal, however, eventually pulled out of the company and the company was taken over by Somany groups under an arrangement with Kejriwal. While the company was in the process of changing hands and a representative of Somany was present in the meeting of the board of the company held on August 26, 1981, the board admitted the liability to pay the balance of the first installment and the amount of the second installment but as regards the payment of the 'third installment', according to the minutes, 'Mr. Daga felt it has not fallen due as commercial production has not been achieved.' The minutes further record that 'regarding the third installment, it will be discussed between the new management and Agorb and a settlement be arrived at a later date'. The take-over was finalised some time in September, 1981, and according to the minutes of the meeting of the board held on September 25, 1981, there was general agreement that the balance of the first installment and the second installment 'can be made only after obtaining approval from the income-tax authorities'. According to the minutes, Somany and Daga 'gave am assurance to the board that the company will take necessary steps for payment to Agorb in lump sum or in suitable installments at the earliest possible'. The liability to pay the third installment does not find mention in the minutes of this meeting although there are references in the minutes that commercial production had not been achieved 'earlier' because of multifarious defects. According to the minutes, it was claimed by Daga that he has 'been able to rectify most of the multi-point defects but could not start production earlier than July 1, 1981, in spite of his best efforts'. Daga further informed the board that 'saleable production was available on July 18, 1981', for which the board 'congratulated' Daga. In September, 1981, Somany also write to the Industrial Finance Corporation of India and this communication records that payments to the German company had 'remained outstanding for long'.

2. Notice was issued to the company requiring it to show-cause why the petition be not admitted. The company opposes the admission of the petition on the ground that it is mala fide, filed in furtherance of a conspiracy between the German company, Kejriwal and one Dr. Turba, a nominee of the German company on its board. It is claimed that no payment was due from the company under the collaboration agreement as the German company failed to discharged its various obligations under the agreement which entitled the company to the refund of the payment already made and to compensation for loss caused to the company by breaches of the agreement by the German company. It is further contended that the claim of the German company is bona fide disputed. The German company reiterates its claim and has characterised the dispute raised by the company as 'mala fide', with a view to deprive the German company of its rightful dues.

3. I have heard learned counsel for the parties, on the question if, having regard to all the circumstances, the petition should be admitted, as also if, alternatively, it should be adjourned sine die with liberty to the German company to have it revived, and the company is directed, meanwhile, to give adequate security with regard to part or whole of the amount claimed as being due from it, and/or restrained from alienating any parts of its assets except in the ordinary course of business.

4. It is no doubt true that the German company filed the present petition through its constituted attorney one Kaul, who is none other than the personal assistant to Kejriwal. There may also be some substance in the contention that the petition may have been filed under the inspiration of Kejriwal, either because he may be a beneficiary out of the amount, said to be owing from the company to the German company, or because he may have other accounts to settle with the new management, in the transaction of take-over, or otherwise. There was a veiled suggestion that behind the anxiety of Kejriwal for payment to the German company by the company is a motivation to get a slice of it for himself, a charge that it not infrequently made in all deals in this country, involving a foreign element, entered into either at the corporate or the government levels. The new management of the company was apparently not unaware of the major source of resilience of the Swiss economy. It is also true that neither Kejriwal nor the company, while it was under his control, ever raised any dispute with regard to the claim of the German company and sought early release of institutional funds to meet this liability. In characterising the petition as mala fide, the company is perhaps implying that, ordinarily left to itself, a foreign collaborator would prefer to walk out of a collaboration arrangement rather than get involved in legal confrontation in a foreign country with endemic delays and heavy costs. The company is possibly thinking of the traditional attitude of a foreign collaborator to accept the axiomatic Re. 1 for its stake in or claim on the company rather than enter into a course of litigation, without having in this country either a branch, or a agent. But I am unable to see how all or any of these elements could lend a taint of mala fides to the petition, which is based on a claim under the collaboration agreement in terms of which the project had to be carried out with the technical know-how, services and assistance of the German company. It is quite possible that if the claim of the German company fructifies against the company, Kejriwal may, in some way, be a beneficiary either in the settlement of any outstanding account between the German company and Kejriwal, or otherwise but even that would not be sufficient to give the taint of mala fides to the present petition.

5. But even if the petition has been filed with the bona fide object of enforcing what is considered to be a legitimate claim that would not, by itself, justify its admission. The company is not only functioning and in production, but also is admittedly otherwise financially sound. The dispute raised by the company is said to be mala fide on the ground that the claim was never disputed before the statutory notice was sent to the company. This criticism is, however, clearly unjustified because the new management had some reservations with regard to the claim even when the takeover was in the process and it is amply reflected in the minutes of the meeting held during the period when the process if take-over was in process. It is also borne out from the records, and was candidly conceded on behalf of the German company, that the dispute raised by the company with regard to the entitlement of the German company was not raised not the first time after the statutory notice, and there has not only been correspondence between the company, under its present management, and the German company, on the subject, Mr. Somany also had a meeting in Germany with the representative of the German company, and the German company promised to forward to the company certain documents said to certain the drawings and other technical data, which were said to be missing. What is more, the claim of the company, against the German company, for refund of amount already paid and for damages has since been referred to arbitration in terms of the arbitration clause, contained in the collaboration agreement, and since the claim of the company against the German company and the claim on which the winding up petition is based would raise common questions between the parties, the German company is also bound to avail of the arbitral forum for the settlement of its claim since the present petition, even if admitted, would be incapable of extending the period of limitation. It is neither necessary nor proper for this court to rule on the rights or wrongs of the claim and the counter claim, for which one of the parties has already sought the intervention of an appropriate arbitral forum, which is equally available to the other. Mr. Bhatt, who appeared for the German company was, thereforee, quite prepared that the petition may be adjourned, as it is, with suitable directions to the company with regard to the preservation of its assets, so as to ensure successful execution of any decree that may be made pursuant to the arbitral award. This was vehemently opposed on behalf of the company.

6. It appears to me that even though the petition is prima facie not mala fide and its dismissal in liming would not be justified, particularly, having regard to the fact that the liability of the company was unreservedly admitted at one stage, even though by the previous management, the admission of the petition and any further proceedings on that basis would be equally unjustified having regard to the disputes raised by the new management which could not be thrown out of hand on the existing material. Winding up jurisdiction is intended to deal with companies, which are liable to be would up. It should not, however, be allowed to deteriorate into an instrument of arm-twisting of a corporate body to compel it to meet a claim, which it would not otherwise pay for legitimate reasons, even though the reasons may not eventually be able to survive a close judicial scrutiny. Moreover, the admission of the petition and any direction of the nature sought, even without an order of admissions, are likely to adversely affect the prospects of a newly set up industrial unit and be capable of destabilishing it. One of the parties has already taken the matter to the arbitral forum and the other party is likely to follow suit. The safeguards which the German company seeks to protect its interests by the preservation of the assets of the company, inter alia, by restraint on alienation of any part of its assets, could be sought by the German company from a court of competent jurisdiction in view of the pendency of arbitral proceedings. Any such direction by this court could be misconstrued and have an adverse effect on the financial arrangement that the company may have had with the financial institutions.

7. Having regard to all the circumstances, it is a fit case in which the petition should be adjourned sine die, as it is, with liberty to the German company to seek its revival, and to the company to see its dismissal, on the outcome of the proceedings in arbitration between the parties. I direct accordingly.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //