1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO. 12 OF 2010 Unity Infraprojects Limited. ... Petitioner Vs Srimauli Infrastructure Private Limited. ... Respondent Mr. Virag V. Tulzapurkar i/b Kadam & Co. for the Petitioner. Mr. S.C. Naidu i/b G.S. Rao for the Respondent. CORAM : S.J. VAZIFDAR, J. DATED : 18TH JUNE, 2010. P.C. : 1. This is a Company Petition for winding up the Respondent- company on the ground that it is unable to pay its debts. According to the Petitioner, the company is indebted to it in the sum of Rs. 4,00,00,000/-. 2. The Petitioner’s case is based essentially upon eight different Memoranda of Understanding, all dated 31st March, 2009 and the cheques issued pursuant thereto. The Government of Maharashtra had 2 invited bids for the work of four-laning of a road on a build, operate and transfer basis. The Respondent-company’s bid was accepted on 19th May, 2007. In view of the defence sought to be raised by the Respondent, it may only be noted at this stage that the tender documents were purchased by sixteen companies including the Petitioner. The Petitioner submitted the pre-qualification bid, but did not qualify. On 10th may, 2007, the Respondent was declared as the successful bidder. The Respondent alleges that there were discussions between the Petitioner and the Respondent wherein broad terms of a joint-venture were discussed and certain basic parameters were agreed upon. 3. As recorded in the MOU, a letter of acceptance dated 28th March, 2008, was issued by the PWD in the Respondent’s favour. As per the terms and conditions of the agreement between the Respondent and the Government of Maharashtra, the Respondent was to furnish an unconditional and irrevocable bank guarantee for an amount of Rs.4,00,00,000/- as security for the due and punctual performance of the Respondent’s obligation under the agreement. The Abhyudaya Co-operative Bank Limited furnished a bank guarantee in 3 favour of the Government of Maharashtra in the sum of Rs. 4,00,00,000/-. At the request of the Respondent, the Petitioner pledged its fixed deposits of a sum of Rs.4,00,00,000/- with the bank. 4. Discussions ensued between the parties for the release of the Petitioner’s fixed deposits. As further recorded in the MOU, the Respondent approached the Petitioner with a proposal to release the Petitioner’s fixed deposits by providing a fresh fixed deposit or alternatively by providing a fresh bank guarantee. Clauses 3, 4, 8 and 13 of the MOU read as under : “3. Srimauli agrees and confirms to release the Fixed Deposit pledged by Unity against the Bank Guarantee of Rs.4,00,00,000/- (Rupees Four Crore Only) in either of the following manners, so that Unity can receive and appropriate the said amount in the manner it deems proper viz; (a) Srimauli hereby agrees, undertakes and confirms to provide either a fresh Fixed Deposit of an equivalent security amount i.e. Rs.4,00,00,000/- (Rupees Four Crore Only) to Abhyudaya Co-operative Bank Ltd. OR (b) provide a Bank Guarantee of Rs. 4,00,00,000/- (Rupees Four Crore Only) to the Governor of Maharashtra, represented by 4 Executive Engineer, Public Works Department from any other Bank and release the Bank Guarantee issued from Abhyudaya Co-operative Bank Ltd. 4. Srimauli has simultaneously on the date of execution of this MOU issued post dated cheque of Rs. 50,00,000/- (Rupees Fifty Lacs Only) bearing No. 392307 dated 24.4.2009 drawn on Union Bank of India, Princess Street Branch (herein after referred to as the “said post dated cheque”) out of the aforesaid amount of Rs.4,00,00,000/- (Rupees Four Crore Only) in favour of Unity, which shall be encashed by Unity if Srimauli fails to comply with the obligations stated herein above in clause (3) within a time period of 15 days from the date of execution of this MOU. ............ 8. Srimauli agrees and undertakes that they shall perform their obligations under this MOU within a period of 15 days from the date of execution of this MOU. Time shall be the essence of contract. ............ 13. This MOU, including the recitals, embodies all the terms and conditions agreed to between the parties as to the subject matter hereof and supersedes all prior agreements, arrangements or understandings, whether oral or in writing, between the Parties on the subject matter hereof. This MOU shall not be altered, changed, supplemented or amended, except by written instruments executed and delivered by this Parties.” 5. Eight such Memoranda of Understanding were executed. Thus eight post-dated cheques of Rs.50,00,000/- each were issued by the Respondent in favour of the Petitioner. Further, in view of clause 8 the Respondent was to perform its obligations within fifteen days i.e. by 5 15th April, 2009. 6. The Respondent having failed to comply with its obligations under clause 3, the Petitioner became entitled to encash the said cheques. The said cheques were, however, dishonoured as the Respondent issued stop-payment instructions. . 7. If these MOUs are established, there is no defence whatsoever to the Respondent’s case. I have come to the conclusion that the Petitioner has established the genuineness of the MOU. 8. The Respondent has alleged that the MOU is fabricated. The Respondent has alleged that after it was declared to be the successful tenderer, the Petitioner’s representatives approached it around November, 2007 and offered to enter into a joint-venture agreement with the Respondent in respect of the project. The basic structure of the joint-venture was finalised and agreed upon. The joint-venture was to be by way of a new company by the name “Yelan I.D. Infra Connectors Private Limited” in which the Respondent and the Petitioner were to have a share of 51% and 49% respectively. The 6 outlay for the project was Rs.400 crore. Rs.100 crore was to be brought by the Respondent and the Plaintiff by contributing Rs.100 crore towards the share capital in the above proportion. The balance Rs.300 crore was to be brought in the manner in stated in paragraph 3 -L of an affidavit in reply filed on behalf of the Respondent to a summons for judgment in Summary Suit No.2279 of 2009 filed by the Petitioner. It is pertinent to note that in paragraph 3-L(vi), it is admitted that the details as to which party would provide which material were yet to be finalized. Admittedly, the shares were not subscribed to at least by the Petitioner. There is another curious term to the effect that the Petitioner and the Respondent would each be responsible for the construction of different parts of the road. It is alleged that the entire project was to be so divided into three stages. It is difficult to understand how each of the parties would be entitled to develop a part of the road if the entire project was to stand transferred to a joint-venture company. Assuming that to be so, there are no particulars as to how then the liabilities, responsibilities and profits were to be shared. There was thus no final or concluded agreement. 7 9. It is obvious, therefore, that even assuming there were such negotiations, there was a lot that was left to be discussed and finalized. I, therefore, proceed on the basis that negotiations did ensue as alleged by the Respondent. However, even assuming that to be so, it would not furnish the Respondent any defence to the Petitioner’s claim. Even assuming that negotiations did ensue as alleged by the Respondent, the genuineness of the MOU is established for more than one reason. 10. It is of vital importance to note two e-mail messages. The first is dated 14th April, 2009 from the Respondent to the Petitioner which reads as under :- “Good Evening, we have submitted the property documents in UNION BANK OF INDIA. But because of several holidays in last 15 days, the disbursement process has been delayed. Disbursement Process will be completed in another 8 to 10 days and I will replace your Bank Guarantee as early as possible. Sorry, For the inconvenience caused.” As stated earlier, under the MOU, the Respondent was to comply with its obligations within fifteen days i.e. by 15th April, 2010. 8 Thus the additional 8 to 10 days period sought would extend the Respondent’s obligations under the MOU from 15th April, 2009 to 23rd or 25th April, 2009. The e-mail is in conformity with and relatable to the MOU. The Petitioner responded to the said e-mail by its e-mail message dated 21st April, 2009 which reads as under : “Dear Mr. K P Reddy, I had taken into consideration the request put at your end on the 14th April, 2009 by your mail to grant an grace extension period of 8 to 10 days for you to get my companies BG released in view of the explanation putforth at your end. The period of 10 days gets elapsed on the coming 24th April, 09. I hope you appreciate that before this too I have been quite patient in awarding you enough time in getting my BG released. In view of the same & the long delay already done in the matter, I hope you honour the commitment as stated by you & get our BG released on the same date i.e. 24th April, 09 as per your commitment given.” This e-mail corresponds exactly to the time-frame stipulated in the MOU. There is no other explanation for the Petitioner mentioning 24th April, 2009 to be the date on which the grace period of 10 days 9 elapsed. Mr. Naidu, the learned counsel appearing on behalf of the company was unable to give any other explanation for these dates. Thus, the two e-mails read together establish beyond doubt the genuineness of the MOU. 11. Moreover, the Respondent admitted having issued the said eight post-dated cheques of Rs.50,00,000/- each aggregating to Rs. 4,00,00,000/-. This is the exact amount of the Petitioner’s claim. This is the value of the Bank Guarantee which was furnished by the Respondent to the Government of Maharashtra and in respect whereof, the Petitioner had pledged the fixed deposits of the same value. The issuance of the said post-dated cheques would also establish the Petitioner’s case. There is nothing else on record which furnishes any other explanation for the issuance of the said cheques. 12. Realising the importance of these two factors, the Respondent endeavoured to furnish an explanation for the same. 10 It admitted the said e-mail messages, but contended that it’s e- mail message dated 14th April, 2009, inadvertently stated that the bank guarantee was to be provided by the Respondent and what was really meant was that the bank guarantee would be released by the proposed new company where both the parties were to be contributors. 13. This explanation is wholly unacceptable for more than one reason. Firstly, this new company was not incorporated at least at the relevant time viz. 14th April, 2009 when the e-mail message was sent. There is no way in which it could have been incorporated within 8 to 10 days and thereafter arrange for the release and/or substitution of the bank guarantee. In fact, seven days had passed by the time the Petitioner sent its reply e-mail message dated 21st April, 2009. There was no further response from the Respondent regarding its alleged inadvertent error. Moreover, the Petitioner had addressed a statutory notice on 31st August, 2009 stating the said facts, including as regards the MOU. After one month there was an interim reply on behalf of the Respondent merely denying the statements in the statutory notice and stating that a detailed reply would follow. If, indeed, the MOUs were 11 fabricated and the cheques were issued for some other reasons as now alleged and which I will refer to shortly, the same would have been so stated immediately. It is important to note that the Company Petition was filed two months thereafter on 16th December, 2010. There was no reply till then. The reply, in which the contentions have now been raised, was addressed only on 13th January, 2010 i.e. almost five months after the statutory notice dated 31st August, 2009. If a document was fabricated and if there was a valid explanation to the issuance of cheques in the sum of Rs.4,00,00,000/- parties, such as the Respondent, would have stated so at the earliest and, in fact, on the first available opportunity. The fact that the Respondent did not do so militates against its contention. 14. As regards the cheques Mr.Naidu submitted that the same were issued only as a collateral security till the fresh guarantee was furnished and the Petitioners fixed deposits were released. 15. The issuance of the said cheques is naturally a very important circumstance against the Respondent. The Respondent’s allegations as regards the cheques are virtually established to be false. 12 In the reply to the statutory notice dated 13th January, 2010, the Respondent’s allegation as regards the eight cheques is as under :- “8. My clients further state that the eight cheques given by them were in fact blank signed cheques which were given only as security cheques until the Bank Guarantee was converted in the name of proposed Company Yelan, and the same were never given for encashment. My clients also deny that they have ever consented for presenting the said cheques for payment.” 16. The falsity of these allegations are established by a totally contrary case pleaded in an affidavit in reply to the Notice of Motion taken out by the Petitioner for attachment before judgment being Notice of Motion No.3203 of 2009 in the said Summary Suit No.2279 of 2009. Paragraph 22 of the said affidavit is as under : “22. The defendant No.1 denies that they undertook the necessary formalities for releasing the Plaintiff’s fixed deposits. The defendants deny that they had given any post dated cheques to the plaintiffs. In any event the said cheques were not towards consideration as sought by the plaintiff, since the cheques forwarded by the defendants were given only as security cheques and not against payment of any liability. The aforesaid cheques were forwarded by defendant No.2 to plaintiff towards deposits to be made for securing MSEB connection at Yesdi-Latur and Nanded-Loha sector. Royalty payable to the collector to commence the project because tender was in the name of the defendant No.1. The plaintiffs have 13 abused the trust, confidence and faith in reposed by Defendant No.2 in them and have misused the cheques entrusted to them. The only agreement evidenced in writing between the Defendant No.1 and plaintiff was that Bank Guarantee would be from the proposed Company.” 17. Apart from the above paragraph being totally unsustainable the fact that two totally contradictory defences have been pleaded on one of the most crucial aspects of the matter establishes the falsity of the defence. There is no reason why cheques would be handed over to the Petitioner for securing the MSEB connection. There is nothing to suggest that the Petitioner participated in the work to the extent of obtaining the MSEB connection or even otherwise. Nor am I inclined to accept the explanation regarding the bank guarantee being released by the new company. In the circumstances, I am constrained to state that the defence is not only not bona fide, but is false. 18. Indeed, to deny the Petitioner relief would be a traversity of justice. Whatever may have been the discussions between the parties, the fact is that it never crystallized into an agreement between them. The result, therefore, is that the Respondent either by itself or through the other company is executing the entire contract, thus availing the benefits thereof in full, while the Petitioner’s fixed deposits remain 14 with the bank as security for the bank guarantee which now inures only for the benefit of the Respondent. 19. However, in order to afford the company an opportunity of paying the said amount, the following order is passed : (i) In the event of the Company paying the Petitioner a sum of Rs.4,00,00,000/- on or before 30th July, 2010, the Petition shall stand dismissed. The payment, if made, shall, however, not preclude the Petitioner from claiming any further amounts, including interest in any other proceedings, including the said Summary Suit. (ii) In the event of the company paying the said sum of Rs.4,00,00,000/-, the Petitioner shall not deal with the fixed deposits deposited with the Abhyudaya Co- operative Bank, without the leave of this court. Further, in that event, liberty to the company to apply only in respect of the said fixed deposits. 15 (iii) In case of failure on the part of the Company to pay the amount as aforesaid, the Petition shall stand admitted and to be advertised in Free Press Journal, Maharashtra Times and Maharashtra Government Gazette. In that event the Petitioner to deposit an amount of Rs.10,000/- with the Prothonotary and Senior Master of this Court within four weeks from the date of default.