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

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 & 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”.

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Judgment Reviewed by: Mandira BS

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