C.P. No.117/07 Page 1 of 33 * IN THE HIGH COURT OF DELHI AT NEW DELHI + Company Petition No.117/2007 Judgment Reserved on : 06.03.2009 % Judgment Delivered on : 23.03.2009 LECOANET HEMANT INDIA PRIVATE LIMITED .....Petitioner Through: Mr. Sanjay Jain, Senior Advocte with Mr. Peeyosh Kalra, Mr. Amol Dixit, Mr. Sahil Taneja and Mr. Gaurav Pratap Singh, Advocates. versus INTERGLOBE AVIATION LIMITED .....Respondent Through: Mr. Sandeep Sethi, Senior Advocate with Mr. Siddharth Chopra and Mr. Saurabh Srivastava, Advocates. CORAM: HON'BLE MR. JUSTICE VIPIN SANGHI 1. Whether the Reporters of local papers may be allowed to see the judgment? No 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes VIPIN SANGHI, J. 1. This company petition under Sections 433(e), (f) and 434(1)(b) of the Companies Act 1956 (the Act) has been filed by the petitioner company to seek orders for winding up of the respondent company, namely, InterGlobe Aviation Limited. 2. The petitioner is a private limited company. The present petition has been filed on behalf of the petitioner through one Sh. C.D. Kingsly, appointed as the authorized representative of the petitioner company the board resolution dated 09.01.2007. It is stated C.P. No.117/07 Page 2 of 33 that Mr. Hemant Sagar and Mr. Lecoanet, the promoters of the Petitioner company are world renowned for their innovative, exquisite and exclusive garment designs since the year 1984. They have been known to produce the ready to wear line of garments every season under the name “Lecoanet Hemant”. 3. The respondent is a company incorporated under the Act having its registered office at Delhi. The authorized share capital of the respondent company is 155,00,00,000. The paid up capital of the respondent company as on 31.08.2006 as per the balance sheet filed with the Registrar of Companies on 31.03.2006, was Rs.99,00,00,000/-. The respondent is a company within the InterGlobe Enterprises Group, a travel corporation diversified in the field of aviation management, travel related services etc. The respondent company is engaged in the business of aviation and air transport services. It is responsible for, manages and control the airline IndiGo for servicing destination within the country. 4. The petitioner states that on account of the expertise and international acclaim of Mr. Sagar and Mr. Lecoanet in the aviation industry, the respondent approached and engaged the petitioner to design and deliver the uniforms for the airlines staff and personnel to be launched under the name “IndiGo”. The petitioner states that after detailed discussions and numerous meetings, it was agreed some time in the beginning of July, 2006 that the petitioner would create original designs in order to produce and supply garments/uniforms for the respondent company in terms of their proforma invoice, duly approved C.P. No.117/07 Page 3 of 33 by the respondent. The terms of the agreement are contained in the letter dated July 5, 2006 and also in an amendatory letter dated July 5, 2006. These have been placed on record as Annexures P-5 and P-6, respectively, along with the petition, and are not disputed by the respondent. The consideration to be paid by the respondent under the said agreement, according to the petitioner, was Rs.76,38,186.40. Out of the aforesaid amount, 50% had to be paid in advance and the balance within 30 days after delivery. The petitioner states that the respondent, in partial discharge of its aforesaid obligation, made payment of first instalment of Rs.18,13,062/- (after deducting TDS). The petitioner further states that the respondent made payment of the second instalment of Rs.18,87,800/- after deducting TDS. The second cheque for Rs.18,87,800/- was returned for rectification to the respondent, since the TDS had been deducted on an incorrect basis. The respondent company, however, did not return either the cheque for Rs.18,87,800/- or issue a fresh cheque after deducting TDS at applicable rates. The petitioner submits that the tender of the cheque of Rs.18,87,800/- by the respondent clearly tantamounts to an admission of an undisputed liability. The petitioner states that the principal liability of the respondent in respect of 5 invoices raised by it towards the manufacture of uniforms, of which the respondent did not accept delivery, stands at Rs.30,58,224.80. The details of the various invoices claimed to have been raised by the petitioner, and the computation by the petitioner of the amount which according to it is due and payable by the respondent company are as follows: C.P. No.117/07 Page 4 of 33 A. PARTICULARS OF UNIFORMS DELIVERED: S. No. Invoice No. Delivery Date Total Units Amount (Rs) 1 024/2006-07 dt. 20.07.2006 20.07.2006 104 131,414.40 2 025/2006-07 dt. 03.08.2006 31.07.2006 & 03.08.2006 709 908,200.80 3. 028/2006-07 dt. 14.08.2006 14.08.2006 705 919,880.00 4. 029/2006-07 dt. 17.08.2006 17.08.2006 214 208,384.80 5. 034/2006-07 dt. 29.08.2006 29.08.2006 200 212,628.00 TOTAL 23,80,508.00 B. UNIFORMS PRODUCED BUT DELIVERY NOT ACCEPTED: 24,90,778.80 C. LESS PART ADVANCE PAYMENT RECEIVED**: 18,13,062.00 TOTAL PRINCIPAL OUTSTANDING 30,58,224.80 5. The petitioner states that the aforesaid tabulation reflects the contractual liability of the respondent. However, the claim of the petitioner is not confined to the aforesaid amount. So far as the present petition is concerned, the petitioner is confining its claim to the contractual liability, while reserving its right to sue the respondent for all its monitory claims by way of civil suits. The petitioner states that on 17.11.2006, to its amazement it received a letter of termination of the agreement aforesaid. The petitioner states that it issued a statutory notice to the respondent dated 25.01.2007 demanding from the respondent company, inter alia, payment in respect of delivered and undelivered uniforms along with interest @ 12% per annum. The said notice was issued in compliance of Section 434 of the Act. The respondent sent its reply through a lawyer dated 20.02.2007, wherein the respondent had sought to raise frivolous issues such as delay of C.P. No.117/07 Page 5 of 33 delivery of uniforms, use of incorrect fabric and that the manufacture of the uniforms was not in accordance with the specifications and measurement. However, the Respondent has not denied the factum of issuance of the second cheque of Rs.18,87,000/- in discharge of its contractual liability and the fact that the same was returned by the Petitioner for being reissued after correction of the rate at which TDS should have been deducted. 6. Upon notice being issued in this petition, the respondent has filed its detailed reply. The respondent has raised two preliminary objections, to the maintainability of this petition. 7. Firstly, it is submitted that a civil dispute arises between the parties on account of contractual breaches by the petitioner of the aforesaid agreement. It is submitted that there is no admitted liability of the respondent towards the petitioner, and on that ground the petition is liable to be dismissed. It is submitted that the petitioner has already filed a civil suit to recover, inter alia, the amount which the petitioner claims to be admittedly due from the respondent, and which forms the basis for this petition. It is submitted that the present proceedings cannot be a substitute for recovery of money. 8. Secondly, the respondent submits that the petitioner has suppressed material facts. The correspondence leading to the agreement dated 05.07.2006, which has material bearing on the claim of the petitioner and other correspondence, which establishes the fact that the petitioner breached the agreement have been withheld by the petitioner from this Court. It is stated that though the agreement was C.P. No.117/07 Page 6 of 33 executed only in July, 2006, the work on the designs for the uniform had started as early as in March, 2006 and the production process was initiated in April, 2006, thus giving the petitioner sufficient time to deliver the manufactured and well-fitted standard uniforms to the respondent within the contractual period. Moreover, the respondent had sent various email communications repeatedly highlighting the breaches in the contract by the Petitioner, which had not been denied by the petitioner. In fact, the petitioner had never disputed its breaches and even acknowledged the same. 9. Mr. Sanjay Jain, Senior Advocate has appeared for the petitioner while Mr. Sandeep Sethi, Senior Advocate has represented the respondent. I have heard their detailed arguments and the learned senior counsel have taken me through the relevant record. 10. The agreement between the parties, as aforesaid, is contained in two communications dated 05.07.2006, issued by the petitioner to the respondent and accepted by the respondent. Some of the relevant clauses of the first communication dated 05.07.2006 are as follows: “Dear Sir, 1. We, Locoanet Hemant India Private Limited (“LH”), write with reference to our recent meetings with InterGlobe Aviation Private Limited (“IndiGo”) in course whereof we discussed diverse matters in relation to the designing, creating and supply of uniforms by our company to your personnel. The purpose of this letter is to clarify and record certain important issues related to the business arrangement envisaged between us. C.P. No.117/07 Page 7 of 33 2. In terms of the understanding arrived at between us, we shall design, create, produce and deliver uniforms for your ground staff, technical staff and on board personnel in terms hereof and for the consideration agreed herein. ………………………………………. 5. Without prejudice to the generality of the aforesaid, we have been given to understand by you that IndiGo is going to launch its operations by August and we acknowledge that with respect to IndiGo‟s initial requirements, we shall be obligated to design, create, produce and deliver the quantities of Garments mentioned in the first purchase order placed on LH on or before July 21, 2006. ………………………………………. 7.1 This Agreement shall be valid for a period of 5 years. You shall procure the Garments from us during the term of this Agreement and (a) if the parties mutually agree or (b) LH is unable to match a third party‟s competitive price quote offered to IndiGo (written evidence whereof must be provided to LH) to design, create, produce and deliver the Garments, as envisaged herein, provided IndiGo has given LH 60 days to match such an offer; IndiGo may terminate this agreement forthwith and procure uniforms for its personnel from the said third party which offered the competitive price quote. ………………………………………. 8. In consideration of the designing, creating, production and supply of the Garments, you shall pay us in accordance with the terms of Annexure B to this letter and such payments shall be subject to withholding taxes as may be applicable and such other deductions as mentioned in this letter. We hereby agree to bear the cost of the creation of the Designs and all labour and material used for the purpose of creating and supplying the Garments including all fabric. 9. Except for force majeure circumstances as envisaged in Clause 11 hereof, we acknowledge that if there is any delay in the delivery of the C.P. No.117/07 Page 8 of 33 Garments from the date that has been agreed to by the parties or if the Garments that are delivered do not meet the specifications, delivery criteria or Design requirements as agreed to by the parties, then LH shall be liable to pay IndiGo reasonable costs and expenses to compensate for IndiGo‟s losses. ………………………………………. 15. In addition to any other rights and remedies at law, this Agreement may be terminated by giving written notice to the other party who has breached this Agreement or defaulted in the following circumstances: 15.1 where you have failed to make payments as required under this Agreement; 15.2 where either of us has committed a serious breach of our obligations under this Agreement, unless the one is breached rectifies the position, as far as reasonably possible, within sixty days;” 11. The petitioner raised a proforma invoice bearing No.0612 dated 22.07.2006 for an amount of Rs.76,38,186.40 (inclusive of 4% VAT). The terms of payment stated in this invoice were “50% advance immediately, 50% balance 30 days after delivery 18 lakhs received 3rd July”. This proforma invoice was, according to the petitioner, accepted and approved by the respondent. 12. It appears that the petitioner made deliveries of the manufactured uniforms and accessories to the respondent from time to time. However, these uniforms and accessories were admittedly found to be defective in various respects. My attention has been drawn to a series of exchanges, which took place between the parties. I may refer to a few of these exchanges. On 03.08.2006 the respondent sent the following e-mail to the petitioner: - C.P. No.117/07 Page 9 of 33 “As per our conversation on 02 August we had discusses several isues 1/ Dye issue 2/ Incorrect fabric 3/ Deadlines and timelines 4/ Initial Uniforms through August 21, and retraction/replaceable items 5/ Itemized Orders 6/ Contact person I will address and summarize each point: 1. My understanding is that the dye used had been treated with a chemical. This chemical that when heated, created a chemical reaction resulting in purple bleeding. 2. We further understand that the fabric used was not the fabric IndiGo had ordered. 3. Thus, this caused a severe delay in the delivery of uniform items for the July 27 deadline and the 31 July deadline. 4. We discussed timelines: We have asked you to deliver new uniforms with the new material and dye, providing that Shan J. Iwanicki will be able to observe the dye process and release grant of approval from IndiGo. 5. Additionally, we discussed the items currently distributed, and items unavailable. The items currently distributed will be retracted upon completion of our original order. For now, the items that have been distributed will be supplied qty 1 per person.” 13. On 03.08.2006 the petitioner replied to the aforesaid e-mail stating that: “While we apologize for the difficulties in the current deliveries and will do everything possible to maintain the dates and quantity standards it needs to be said that the order process needs to be streamlined in order for everybody to be “on the same page” and to avoid any last minute actions that do not allow us to C.P. No.117/07 Page 10 of 33 respond to certain difficulties appropriately and effects our services (e.g. fittings!) profoundly.” 14. On 05.08.2009, the respondent sent the following e-mail to the petitioner: “Hi Vikas Following staff uniforms have not been received so far PUNE TRUPTI KAMBLE RAVINDRA RAJPUT BANGALORE KISHORE KUMAR PADMALATHA MONESH SAPNA NAIDU VEENA AMRITHA VADVAL GEETALI NEOG ANUSHA ANTONY SAPTARISHI MUKHERJEE SANDYA JOHN BHARTHI……………….do not have measurement G NAVEEN PAl GUWAHATI NIVEDITA SINGH SHAHNAZ AHMED RAJEEV MEDHI……………….do not have measurement RATNADEEP DUTTA ARINDHAM SHAW RONGPI…………..do not have measurement SIDHARTH CHOUDHURI HIMANSHU DEKA IMPHAL NINGAIHLIAN RATIP KUMAR SURCHAND SINGH SOYAH RAMESH SINGH……………….do not have measurement for the rest delivery would be the very latest Monday evening. Regarding the Del staff uniforms, I will get back to you. C.P. No.117/07 Page 11 of 33 Please advice the delivery dates for the above especially for GUA and IMF as these stations are already operational.” 15. On 13.08.2006 the respondent sent the following e-mail to petitioner: “Dear Anu, Please advice our uniforms department that the shirts for female collogues are losing color, thus causing stain marks on their sleeves. We are yet to check our trousers for same. We have still not received uniforms for Naveen Pal Kishor Kumar and Bharathi Regards” 16. On 14.08.2006 the respondent sent another e-mail to petitioner: “Hello This is an update regarding various complaints that we have been receiving from various staff.  Ladies shoes are very rough from the inside so that’s resulting in foot sores and torn stockings  The colour of the blue cloth piping on the white shirts is bleeding so that means they don’t have a proper shirt to wear.  The trousers are not made to proper measurements, either they are too tight or too loose. Kindly send atleast 2 more shirts per staff as is the regular uniform issue as per our company’s policy We hope that all these issues will be taken care of on an urgent basis Regards” C.P. No.117/07 Page 12 of 33 17. On 19.08.2006, the respondent sent the following e-mail to the petitioner: “Attention Minutes from meeting concerning Uniform Issues on August 17, 2006 Discussion of concerns 1. Many uniform items are missing in all stations 2. Many uniform items are not properly fitting. Too small, Too tight. 3. Shoes for Cabin Attendants are sharp on both sides. They are too narrow for a standard fit 4. Items that were suppose to be altered, and that were stated to be altered were in fact not altered. 5. Shirts are too tight on the bustier girls 6. Shirts are bleeding on the sleeves where the dye is blue 7. Skirts and jackets do not match in dye color 8. The material is faded and crumpled in appearance 9. Sizes are wrongly sized 10. Cotton on the shirts is coming up from the fabric Deadlines: 1. Arrival of new material 20 August 2006 2. Cabin Attendants Uniforms complete for Batch two by 24 August 2006, 56 pieces 3. Stations should have had complete uniforms by this date 28 August 2006. You have stated that you will not meet this Deadline. All other stations will be missing items until uniforms are produced.” 18. On 21.08.2006, the respondent sent the following e-mail to the petitioner: C.P. No.117/07 Page 13 of 33 “Hello Shan, I would like to bring to your notice the issues regarding the Pilots uniforms: 1. As like Cabin Attendants, ALL the pilots uniforms are either too tight or too loose. E.g. a Pilot supposed to get a Medium size shirt gets XXL and vice versa. And if it fits fine from the above, the length of the shirt is too short that it comes out from the trousers. 2. As everyone facing this problem, along with the major fitting problems with their jackets and trousers, I had to request every pilot to visit the factory once and show it to the designer/master there which is again very difficult for the pilots. 3. We have not recd any shoes for pilots till date as the shoe made are not fitting acc to the sizes given. 4. Complete sets for July uniforms not recd till date. 5. Not recd any belts with a bigger size. Only one size for the belt (10 belts) was initially given. Pilots are not at all happy with their uniforms fitting and esp getting incorrect sizes for shirts and jackets after taking the uniform measurements.” 19. In the light of the aforesaid complaints, admittedly, a meeting was held between the parties at DLF Corporate Park on 21.08.2006, wherein certain decisions were taken by the parties. The minutes of this meeting were recorded by the respondent in its e-mail dated 22.08.2006, which reads as follows: “Hello, Minutes from the meeting held at DLF Corporate Park August 21, 2006 1. Conducted a dye test with the new fabric in boiling water, and it did not bleed. Approval of new material as of August 21, 2008. C.P. No.117/07 Page 14 of 33 2. Do not use Surf Excel detergent while washing uniforms and the temperature should not be above 60 degrees. 3. Re-issue for all Cabin Attendants, Customer service agents, security and dispatchers will be re- issued new uniforms in the new blue material. 4. New Uniform deadline: All Stations and Cabin Attendants currently wardrobed in the old material will be re-issued the new uniforms by 21 Sep 5. Masterji will be traveling to the following stations for new measurements: 22 August DEL CCU 6E 302/Return CCU-DEL S2 316/22 August 23 August DEL BLR 6E 105 24 August BLR PNQ 6E 106 25 August PNQ DEL 6E 106 26 August DEL IMF 6E 201 27 August IMF GAU 6E 202 28 August GAU DEL 6E 202 I held a meeting with the following four uniform contacts on the following on August 21, 2006: NIdhi Dhingra/Flight Operations – She has been instructed to seek Pilots to be re-measured based on the above schedule with Masterji. The Pilots have been furthered instructed to seek Hemant‟s studio if they are here in Delhi for the re-measuring with the visual. In addition, the pilots will leave a footprint with Masterji to ensure proper fitting of the uniform shoe. AK Bhatnagar/Engineering – He has been instructed to ask all Engineers whom have returned all uniform to be re-measured the visual. Stations Delhi or outstations according to Masterji‟s schedule. Satvinder Kaur/Customer Service – She has been instructed to send Masterji to the above stations to re-measure for all staff. Ritu Saigal/In-Flight – We have had measurements taken from Masterji on August 20 for Batch 3. C.P. No.117/07 Page 15 of 33 Batches 2 and 3 will be issued with the new uniform material. Batch 2 will receive their uniforms by August 23, 2006. Batch 3 will receive their uniforms TBA. Batch one will receive new uniforms by September 21, 2006. All stations will receive new uniforms by September 21, 2006 If your station or department has not received issued items with the old material, do not panic. There will be a month of no issue. If you have employees currently not in uniform, black trousers, and the Indigo issued shirts is the temporary look. All grooming aspects still apply. Any questions, Please give me a call @ 9818624636 Shan J. Iwanicki Director In-Flight” 20. The undisputed position which emerges on a perusal of the aforesaid correspondence between the parties, which is not even denied by the petitioner is that the uniforms as originally manufactured and supplied by the petitioner were having various defects. The fabric being used for stitching the uniforms was not of standard quality and was leading to leaking of the dyes. In the meeting of 21.08.2006 the new fabric was approved by the respondent. It was further agreed that cabin attendants, customer service agents, security and dispatchers will be issued new uniform in the new blue material. The deadline set for delivery of new uniforms to all stations and cabin attendants, who were currently using the uniforms with the old fabric/material was fixed as September 21, 2006. C.P. No.117/07 Page 16 of 33 The schedule for taking of measurements of the staff and personnel at various locations was also decided between the parties. Specific individuals were named, who were assigned the responsibility of making arrangements so that the production and supply of the new uniforms is achieved as per schedule. It was also agreed that Batch-2 will receive their uniforms by August 23, 2006. Batch-3 was to receive their uniforms on a date to be announced. Batch-1 was to receive its new uniform by September 21, 2006. It was also agreed that all stations will receive new uniforms by September 21, 2006. 21. Mr. Sanjay Jain, learned senior counsel for the petitioner candidly stated that there was nothing on record to show that the uniforms of Batch-2 were, in fact, delivered by August 23, 2006, as per the agreement between the parties arrived at on 21.08.2006. In the meantime, on 28.08.2006 the respondent tendered a cheque for Rs.18,87,800/- after taking tax at source @ 5.61%. On the same day the petitioner returned the cheque to the respondent and sent an e- mail stating that the deduction of tax at source had been made under a wrong head. The petitioner stated that another cheque be issued in which the deductions of tax at source should be @ 2.24% an the cheque amount should be of Rs.19,55,200/-. 22. The submission of Mr. Jain is that the respondent did not make payment in terms of the request dated 28.08.2006, for no rhyme or reason. He also submits that the tender of the aforesaid cheque by the respondent tantamounts to an admission of liability on the part of the respondent. He submits that even if one were to accept the fact that C.P. No.117/07 Page 17 of 33 earlier there were complaints of delivery of inferior quality of product, delay in delivery of the uniforms and uniforms not being stitched according to specifications and