A contractor is liable to discharge GST liability of Security Deposit only when same has been adjusted on happening of a contingent event as defined on the Agreement; High Court Of New Delhi

J IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment Reserved on: 24.02.2021 Judgment Pronounced on: 09.11.2021 CS(COMM) 691 2019 FLOW COOL INDIA PVT. LTD. ..... Plaintiff Through Mr.Naveen Sharma Adv. FLOW TECH AIR PVT. LTD. Through Mr.Vikas Sharma Advs. Defendant HON BLE MR. JUSTICE JAYANT NATH JAYANT NATH J.IA Nos. 17787 2019 & 1954 2020 IA No.17787 2019 is filed under Order 38 Rule 5 read with Order 39 Rules 1 and 2 CPC seeking an ex parte injunction to direct the defendant not to dispose of or alienate or encumber or part with possession of any assets current fixed intangible tangible including moveable and immoveable properties etc. to the tune of Rs.3 47 18 402.80 except in the ordinary course of business. Other reliefs regarding the bank accounts of the defendant are also sought. IA No.1954 2020 is filed under Order 39 Rule 4 CPC seeking to The accompanying suit is filed by the plaintiff seeking a decree for an vacate the order dated 16.12.2019. amount of Rs.3 47 18 402.80. It is the case of the plaintiff that the plaintiff company entered into an arrangement for supply of cooling towers and its components with the IA Nos.17787 2019 & 1954 2020 in CS(COMM) 691 2019 defendant company to be subsequently installed by the defendant in pursuance of its contract with its various customers. It is stated that the defendant was to provide for the timely release of the amount due and payable on account of the invoices vide which the goods in question were supplied. It is urged that despite repeated demands the defendant has been dilly dallying and avoiding making payment of the balance due on account of the invoices. There is an apprehension that the defendant would siphon off the funds upon receipt from its customers. It is further urged that the defendant is in the habit of not making payment to its creditors and systematically siphoning off funds from its bank accounts received from the It is further reiterated that the plaintiff has supplied cooling towers in question to the defendant on the assurance to release the amount forthwith. Now with a view to defraud and cheat the plaintiff the defendant has not disclosed the receipt of the amounts and avoided making payments on some pretext or the other. It is further stated that the plaintiff has also deposited Goods and Services Tax corresponding to the invoices raised. The defendant has also confirmed the receipt and supply of the goods in terms of the invoices by filing a return under GSTR 2A online on the GST portal. It is urged that the factum of receipt and supply of goods in question is admitted. Hence the present suit. The defendant has filed a written statement. In the written statement it is stated that the defendant is one of the only four Indian Companies and approximately 50 world wide holding a world standard certification in cooling towers. It is stated that the plaintiff is not a manufacturer of cooling towers and is engaged in the business of supply and trading of the raw IA Nos.17787 2019 & 1954 2020 in CS(COMM) 691 2019 materials required for manufacturing of cooling towers. The plaintiff has been a supplier of certain raw materials i.e. resin fiber cobalt etc. to the defendant since 2017. The plaintiff has neither the expertise nor any facilities for manufacturing cooling towers. It is stated that till 2019 the defendant made payments to the plaintiff on an “on account” basis and no invoices were raised by the plaintiff. The defendant and the plaintiff had a common accountant i.e. Mr.Sabal Singh Rawat who was responsible for handling their inter se transactions and the plaintiff colluded and conspired with Mr.Rawat to fudge and inflate the account to siphon money out of the defendant company. In 2019 in the course of an internal review it came to the light that there were serious discrepancies in the amounts being claimed by the plaintiff. The defendant with the help of a reputed chartered accountant conducted an internal verification and following discrepancies were identified in the plaintiff’s account: The Plaintiff Company had heavily overstated the value of the stocks supplied to the Answering Defendant. This was verified from the purchase invoices from vendor(s) of the The invoices submitted by the Plaintiff were not in line with the actual materials supplied by the Plaintiff to the Answering Defendant.” It is stated that it was discovered that the plaintiff had been acting in collusion and conspiracy with Mr.S.S.Rawat and Mr.Biju Joseph to over bill the defendant and thereby siphoning off money. The said Mr.S.S.Rawat and Mr.Biju Joseph are said to have made false entries in the defendant’s record in collusion with the IA Nos.17787 2019 & 1954 2020 in CS(COMM) 691 2019 proprietor of the plaintiff company. It is stated that Mr.Biju Joseph admitted his part of the conspiracy and tendered his resignation on 04.09.2019. The defendant has terminated the service of Mr.S.S.Rawat on 10.11.2019. A police complaint was also filed on 10.09.2019. Para 18 of the written statement spells out the detailed comments as to the invoices delivery note etc. of the plaintiff are wrong. The defendant has also denied that they have confirmed the receipt and supply of goods in terms of the invoices by filing a return under GSTR 2A online on the GST portal. I may note that when the matter came up before this court on 16.12.2019 this court recorded that the plaintiff is prima facie entitled to recovery of a sum of Rs.3 47 18 402.80 and passed an interim order directing Manager HDFC Bank Charmwood Plaza Upper Ground Floor Charmwood Village Faridabad Haryana not to release any amount to the defendant lying in the account except for the payments of salaries and statutory dues in the ordinary course of business. A similar direction was also passed to the Manager Bank of India Chitranjan Park New Delhi. On 26.02.2020 the interim order granted on 16.12.2019 was kept in I may also note that the plaintiff had earlier also filed a suit for same relief being CS(COMM) 555 2019. On 30.09.2019 this court noted as abeyance. “7. Though from a reading of the plaint it appears that the claim subject matter of the suit is with respect to specific invoices but from the documents filed by the plaintiff it appears that the claim is for the balance amount due at the foot of the account. IA Nos.17787 2019 & 1954 2020 in CS(COMM) 691 2019 Such dichotomy cannot be permitted and if overlooked at this stage is the root cause for the suits remaining pending endlessly. Moreover the plaintiff has instituted this suit as a commercial suit. I have in ViforLtd. Vs Suven Life Sciences Ltd. 2019 SCC OnLine Del 7514 observed that a change of attitude at the end of the advocates is required to make the Commercial Courts Act 2015 workable. Alas none appears to be reading the judgments also.” 11. The plaint was rejected. It was clarified that the plaintiff shall be entitled to sue afresh on the same cause of action. 12. Even now in the present suit the plaint completely lacks details of invoices proof of delivery of goods and further details. No facts are narrated specifying as to why the plaintiff has arrived at the figure of Rs.3 47 18 402.80. A statement of account is filed alongwith list of documents which seems to be an extract from the ledger account of the plaintiff. As per the statement of account a sum of Rs.3 47 18 402.80 is pending. The statement of account is not signed by the defendant. The same will have to be proved by the plaintiff. 13. There is nothing to suggest that a prima facie case is made out in favour of the plaintiff or to suggest that the defendant is seeking to dissipate the assets to defeat any decree that is likely to be passed in favour of the plaintiff. dismissed. 14. There is no merit in IA No.17787 2019. The same is accordingly 15. As far as IA No.1954 2020 is concerned there is no interim order in favour of the plaintiff. The same is also disposed of. NOVEMBER 09 2021 v JAYANT NATH J. IA Nos.17787 2019 & 1954 2020 in CS(COMM) 691 2019 

Summary: The petition was filed under Order 38 Rule 5 read with Order 39 Rules 1 and 2 CPC seeking an ex-parte injunction to direct the defendant not to dispose of the part with possession of any assets, and the same issue was held in the judgement passed by a single bench judge HON’BLE MR. JUSTICE JAYANT NATH, in the matter FLOW COOL INDIA PVT. LTD. V. FLOW TECH AIR PVT. LTD. dealt with an issue mentioned above. The IA No.1954/2020 was filed under Order 39 Rule 4 CPC seeking to vacate the order dated 16.12.2019. And also the accompanying suit is filed by the plaintiff seeking a decree for an amount of Rs.3,47,18,402.80, which was also mentioned. In this case, the plaintiff company entered into an arrangement for the supply of cooling towers and their components with the IA Nos.17787/2019 &amp; 1954/2020 in CS(COMM) 691/2019 defendant company, to be subsequently installed by the defendant in pursuance of its contract with its various customers. It was stated that the defendant had to provide for the timely release of the amount due and payable on account of the invoices vide which the goods in question were supplied, There was an apprehension that the defendant would siphon off the funds upon receipt from its customers. It is further urged that the defendant is in the habit of not making payment to its creditors and systematically siphoning off funds from its bank accounts received from the debtors. Later plaintiff has supplied cooling towers where it was viewed to defraud and cheat the plaintiff, the defendant has not disclosed the receipt of the amounts and avoided making payments on some pretext or the other, and also the defendant had only confirmed the receipt whereas the supply of the goods in terms of the invoices by filing a return under GSTR 2A online on the GST portal itself. Meanwhile, a written statement was filed by the defendant, In the written statement, it was stated that the defendant is one of the only four Indian Companies and approximately 50 worldwide holding a world standard certification in cooling towers. The plaintiff has been a supplier of certain raw materials, to the defendant since 2017, Also the plaintiff has neither the expertise nor any facilities for manufacturing cooling towers. Accordingly, the defendant and the plaintiff had a common accountant i.e. Mr Sabal Singh Rawat, who was responsible for handling their inter-se transactions, In 2019, in the course of an internal review, they noticed that there were serious discrepancies in the amounts being claimed by the plaintiff. So the defendant with the help of a reputed chartered accountant conducted an internal verification. Later the plant was rejected. It was clarified that the plaintiff shall be entitled to sue afresh on the same cause of action. A statement of account was filed along with the list of documents which seems to be an extract from the ledger account of the plaintiff. As per the statement of account, a sum of Rs.3,47,18,402.80 is pending but, the statement of account is not signed by the defendant. The same will have to be proved by the plaintiff. The court perused the facts and argument’s presented, it thought that- “There is nothing to suggest that a prima facie case is made out in favour of the plaintiff or to suggest that the defendant is seeking to dissipate the assets to defeat any decree that is likely to be passed in favour of the plaintiff. There is no merit in IA No.17787/2019. The same is accordingly dismissed. As far as IA No.1954/2020 is concerned, there is no interim order in favour of the plaintiff. The same is also disposed of”.