Madras High Court Yokogawa Blue Star Ltd. vs Soffia Software Ltd. (Formerly Soffia ... on 11 October, 2002 Equivalent citations: [2004]119COMPCAS929(MAD), [2004]55SCL340(MAD) JUDGMENT P. Sathasivam, J. 1. The petitioning creditor has filed the above company petition under Sections 433(e), 434(1)(a) and 439(1)(b) of the Companies Act, 1956, for winding up of the respondentcompany. 2. In the company petition, it is stated that the respondentSoffia Software Ltd. was incorporated under the provisions of the Companies Act, 1956. The authorised share capital of the respondentcompany is Rs. 2,99,50,500 divided into 29,95,050 equity shares of Rs. 10 each. The issued, subscribed and paidup capital is Rs. 2,99,50,500 divided into 29,95,050 equity shares of Rs. 10 each. The main objects for which the respondentcompany was incorporated are to carry on business in computer software development. The respondent is presently engaged in the business of software development. The petitioner is in the business of software consulting. The petitioner specializes in software design and development, computer consulting and contract programming services, etc. The respondent was carrying on business in the United States of America through its branch office under the name and style of Soffia Technologies Ltd. The petitioner entered into a client agreement dated September 26, 2000, with the respondent. The agreement was executed between the petitioner's branch office in New Jersey and the respondent's branch office in California. Under the terms of the client agreement, the petitioner agreed to send its employees to work on the projects of the respondent as computer programmers/analysts. The respondent was to raise orders from time to time on the petitioner giving details of the employees required and the duration of the requirement. The respondent agreed to pay the petitioner the amounts mentioned under the invoices within 30 days of its receipts. 3. It is further stated that the respondent placed three orders on September 26, 2000, and October 23, 2000, requiring the services of 12 employees of the petitioner for a period of 12 months. The petitioner accordingly sent its employees to the respondent's project sites. The petitioner, thereafter, raised invoices on the respondent from time to time for the services rendered by its employees. The respondent paid the petitioner the amounts due on some of the invoices but failed to pay the amounts due on about 31 invoices. Since the respondent failed and neglected to pay the amounts due despite several reminders, the petitioner requested a meeting with the senior officials of the respondent. Accordingly, a meeting was held on August 9, 2001, between the managing director of the respondent, the general manager and the additional general manager of the petitioner. At this meeting the respondent admitted its liability to the petitioner for a sum of USD 1,83,744.50 for the invoices raised up to June, 2001, and promised to settle the amounts due before the end of December, 2001. The respondent also requested the petitioner to withdraw any legal action till the end of December, 2001. The respondent also promised to pay a portion of the dues before the end of August, 2001. The respondent failed to make any payment. The petitioner on September 26, 2001, sent a legal notice to the respondent under Section 434 of the Companies Act calling upon them to pay the amounts due. The respondent received the notice on September 28, 2001, but neither replied nor paid the amounts due. The respondent is presently due and payable to the petitioner a sum of USD 1,99,944.50 comprising USD 1,83,744.50 (equivalent to Rs. 95,97,336 at Rs. 48 per USD) and also liable to pay interest thereon at 24 per cent. per annum. Further, the financial status of the respondentcompany is far from satisfactory. The losses of the respondentcompany are mounting daybyday and it is not in a position to out source orders or infuse funds for its business. The respondent is carrying on business only on borrowed funds. The respondent is commercially insolvent within the meaning of Section 433(e) and also under Section 434(1)(a) of the Companies Act and is liable to be wound up. 4. The respondent has filed a counteraffidavit disputing various averments made by the petitioner. It is stated that there is no privity of contract between the petitioner and the respondent. The agreement referred to by the petitioner was entered on September 26, 2000, between Soffia Technologies Ltd., a corporation organised and operating under the laws of California and having its principal office at 460, Bergeu Blvd 4,200, Palisades Part NJ07650. In terms of the agreement, the legal proceedings can be initiated only in the court of State of California, hence the present proceedings for winding up by the petitioner against the respondent are misconceived and abuse of proces