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2019 Supreme(Kar) 846
IN THE HIGH COURT OF KARNATAKA
P.B. BAJANTHRI, J.
IL&FS Engineering and Construction Company Ltd, Formerly Maytas Infra Ltd. - Appellant
Versus
Government of Karnataka - Respondent
Writ Petition No. 33210 of 2016
Decided On : 04-09-2019
Advocate Appeared:
Thiruvengadam B.C., Adv., B.J. Eshwarappa, Adv., M. Ajay Kumar, Adv.
Headnote:
Constitution Of India,1950 - Article 285(1) - General Clauses Act,1956 - Section 3(31) - Bangalore Development6 Authority Act,1976 - Section 2 of Section 3 - Land Acquisition Act, 1894 - Section 3(e) - Appointment sole arbitrator - Claim exemption from State taxation - Petitioner had certain disputes with BDA during execution of work- In terms of provision in contract to invoke arbitration proceedings it had filed CMP before this Court- This Court appointed sole arbitrator to resolve dispute among petitioner and BDA- Sole Arbitrator of Arbitral Tribunal proceeded to pass an award while awarding a sum and interest amount a sum respondent-BDA did not settle payment in terms of award- In this regard petitioner sent a communication release payment along with interest for period in effecting payment- Further a bill was raised for a sum released a sum respectively –Held, Court must bear in mind one more celebrated principle and consider whether company has reached a stage where it is obviously and plainly and commercially insolvent that is to say that its assets are such and its existing liabilities are such as to make court feel clearly satisfied that current assets would be insufficient to meet current liabilities along with other principles consider whether respondent-company has become defunct or has closed its business for quite some time whether it is commercially insolvent- For purpose of finding commercial insolvency a mere look into financial data is relevant to examine about its soundness- In all matters relating to winding up court may have regard to wishes of creditors and contributories and may if necessary ascertain their wishes appropriately- If company is solvent wishes of contributories would carry more weight as they are persons mainly interested in assets company to pay its debts form prescribed under Companies (Court) Rules clearly indicates that petitioner should provide all necessary material particulars petitioner is obliged to show that financial status or monetary substratum or commercial viability of company has gone so low and down that winding up is obviously and evidently unavoidable settled proposition of law that a winding up petition is not a legitimate means of seeking to enforce payment of a debt which is disputed by company bona fide- A winding up petition ought not to be aimed at pressurising company to pay money- Such an attempt would be nothing but tantamount to blackmailing or stigmatizing concerned company by abusing process of court petition is not an appropriate mode enforcing bona fide disputed debts and it is nothing but misuse and abuse of process of court winding up petition is not an alternative form for resolving debt dispute –
JUDGMENT :
P. B. BAJANTHRI J.
1. The instant petition, petitioner has sought for the following relief:
'To direct the first respondent Government of Karnataka to wind up the Bangalore Development Authority for non payment of award dated 31.03.2014 (Annexure- B).
To appoint an official liquidator to take over the assets of the Bangalore Development Authority and discharge its liabilities.
2. Brief facts of the case are that petitioner is reputed company in the business of infrastructure construction. Earlier it was known as Maytas Infra Private Limited and it is now changed as IL & FS Engineering and Construction Company Ltd., It was registered under the Companies Act, 1956. The petitioner is stated to have executed number of projects over a period of two decades. Thus, petitioner had a rich experience. In this background, petitioner and 2nd respondent-Bengaluru Development Authority (for short 'BDA') entered into contract on 09.12.2005 for the construction of six lane outer- ring road with a two lane service road on either sides, connecting Mysore Road and Magadi Road from Kilometre 51.880 to Kilometer 56.700. The contract price was agreed upon for a sum of Rs.53,53,50,000/- which is in terms of contract executed among the petitioner and BDA. The contract period is for 18 months. It was for the period from 19.12.2005 and 18.6.2007. The petitioner is stated to have completed the project in terms of the contract.
3. The petitioner had certain disputes with the BDA during the execution of work. In terms of provision in the contract to invoke arbitration proceedings, it had filed CMP No.60/2012 before this Court. This Court on 26.6.2012 appointed sole arbitrator to resolve the dispute among the petitioner and BDA. Sole Arbitrator of the Arbitral Tribunal proceeded to pass an award on 31.3.2014 while awarding a sum of Rs.19,97,42,927/- and interest amount a sum of Rs.15,97,39,612/-. The 2nd respondent-BDA did not settle the payment in terms of the award. In this regard, the petitioner sent a communication on 27.5.2014 to release payment along with interest for the period in effecting payment. Further, a bill was raised for a sum of Rs.36,05,11,539/- and the BDA released a sum of Rs.20,00,00,000/- and Rs.11,49,03,813/- on 12.8.2014 and 26.8.2014, respectively. The BDA refused to pay the balance amount of Rs.05,07,45,298 on the score that due to certain deduction value added tax @ 5.5% instead of 4% under the contract's General Conditions Clause 2.32.2 as on 31.7.2005. Further, BDA withheld5 a sum of Rs.1,42,00,000/- in terms of advice of the office of the Controller of Accounts and Auditor General without furnishing any details. In this background, petitioner further made a communication on 23.3.2016 (Annexure-H) demanding release of withheld payment. Since there was no response, the present petition seeking for direction to the 1st respondent-Government of Karnataka to wind up the BDA for non-compliance payment of award dated 31.3.2014 and further to appoint Official Liquidator to take over assets of the BDA and discharge its liabilities.
4. Learned counsel for the petitioner vehemently contended that BDA has failed to implement the award in full, unnecessarily certain amounts have been withheld which is contrary to the contract executed among the petitioner and BDA. Therefore, BDA is to be wind up while appointing the Official Liquidator. Learned counsel for the petitioner submitted that BDA is like a State Government company in view of sub Section 2 of Section 3 of the Bangalore Development6 Authority Act,1976 (for short 'Act 1976'). Learned counsel for the petitioner stressed his argument that BDA- authority shall be a body corporate. Therefore, it is a State Government Company. There is a total failure on the part of the BDA in not complying the arbitral award which has attained finality among the petitioner and BDA. BDA is bound by the arbitration award and has failed to pay the dues of the petitioner in terms of the award. Conseque
