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Delhi High Court Transfers Winding-Up Petition to NCLT Due to Rent Payment Defaults.

Case Title: ATAMJIT SINGH & ORS. Vs. SPORTS FIT WORLD PVT. LTD.

Case No.: CO.PET. 48/2016

Dated on: May 07, 2024

Quorum: HON’BLE MR. JUSTICE DHARMESH SHARMA

Facts of the Case:

The case involves a petition filed by Atamjit Singh & others against Sports Fit World Pvt. Ltd. under Sections 433(e) and (f) of the Companies Act, 1956, seeking winding up of the respondent company due to non-payment of outstanding rent amounting to Rs. 1,99,70,730/- for the period from June 2013 to November 2015. The petitioner leased commercial property to the respondent with a monthly rental of Rs. 9,25,000/-, but the respondent repeatedly defaulted on payments, leading to legal notices and court proceedings. Despite the petitioner’s efforts, no liquidator was appointed, prompting the court to transfer the case to the National Company Law Tribunal (NCLT) as per the provisions of the Companies Act, 2013.

Issues framed by the Court:

  1. Whether there lies a default in fulfilling lease agreement obligations?
  2. Whether the failure of the respondent to reply to legal notice discharge its liabilities?
  3. Whether the proceedings should be transferred to the National Company Law Tribunal based on the stage of the winding-up proceedings?

Legal Provisions:

Section 433 (e) of the Companies Act, 1956: Deals with the power of the court to wind up a company.

Section 433 (f) of the Companies Act, 1956: It states that a company can be wound up if the company has acted against the interests of the sovereignty and integrity of India, security of the State, friendly relations with foreign States, public order, decency or morality.

Section 434 of the Companies Act, 1956: It pertains to the jurisdiction of the court for the winding up proceedings.

Section 439 of the Companies Act, 1956: Empowers the HC to make rules for regulating the proceedings under the Act.

Section 13 of the Punjab Rent Control Act: It provides for the tenant’s obligation to pay rent.

Section 485 (1) of the Companies Act, 1956: Deals with the power of the Central Government to make rules for carrying out the provisions of the Act.

Rule 26 of the Companies (Court) Rules, 1959: Pertains to the submission of documents and petitions in court proceedings under the Companies Act. It outlines the requirements and procedures for filing documents, petitions, or applications with the court.

Section 290 of the Companies Act, 2013: Pertains to the power of the Central Govt. to make rules regarding the winding up of companies.

Contentions of the Appellant:

The contentions of the appellants, Atamjit Singh & Ors., revolve around their petition seeking the winding-up of Sports Fit World Pvt. Ltd. due to non-payment of rent. The appellants assert that Sports Fit World Pvt. Ltd. has constantly defaulted on rent payments for the commercial property leased to them. Despite agreements and legal actions taken against the respondent, the outstanding rent remains unpaid. Further, they highlight that they served legal notices to the respondent regarding the outstanding rent and initiated legal proceedings under Section 138 of the Negotiable Instruments Act, 1881, and Section 13 of the Punjab Rent Control Act. However, the respondent failed to respond adequately, leading to the filing of the present petition.

The appellants argue that the respondent’s failure to pay its debts in the ordinary course of business justifies the filing of a winding-up petition under Sections 433(e) and (f) of the Companies Act, 1956, read with relevant provisions of the Act. They acknowledge the enactment of the Insolvency and Bankruptcy Code, 2016, and the Companies Act, 2013, during the proceedings. They contend that given the absence of appointed liquidators and the progression of legal frameworks, transferring the case to the National Company Law Tribunal (NCLT) is appropriate, as per Section 434 of the Companies Act, 2013.

Contentions of the Respondent:

A mere interpretation can be brought in order to determine the contentions of the respondent herein, which may include: Dispute over Rent Payment, Legal Defenses, Counterclaims, Procedural Objections and Request for Alternative Remedies. 

Court’s Analysis and Judgement:

The court’s analysis and judgment focus on the petitioner’s request for winding up of the respondent company due to non-payment of rent. The court notes the sequential default by the respondent in rent payments, legal actions taken by the petitioner, and the absence of appointed liquidators in the case.

However, it cites certain relevant legal provisions, including Section 434 of the Companies Act, 2013, which allows for the transfer of winding-up proceedings from High Courts to the National Company Law Tribunal (NCLT). The court also references a Supreme Court decision indicating that cases at a nascent stage should be transferred to the NCLT. Therefore, the court decides to transfer the case to the NCLT, disposing of the current petition and directing the electronic record to be transmitted to the NCLT. The judgment emphasizes the NCLT’s authority to consider the matter further and pass appropriate orders.

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Judgement Reviewed By- Shramana Sengupta

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Delhi High Court Raises Compensation to Rs. 66 Lakhs for Appellant with 100% Disability, Awards 9% Interest per Annum

Case Title: JAGJOT SINGH VS. OM PRAKASH & ANR

Case No.: MAC. APP. 277/2019 & CM APPL. 53916/2019

Dated on: May 07, 2024

Quorum: HON’BLE JUSTICE MR. DHARMESH SHARMA

Facts of the Case:

The appellant, Jagjot Singh, was involved in a road accident on October 15, 2012, near the Azadpur flyover underpass in Delhi. He was hit by a Bajaj Auto delivery van driven by Om Prakash in a rash and negligent manner, due to which Jagjot Singh suffered multiple grievous injuries, resulting in a 100% Permanent Locomotor Disability and rendering him in a vegetative state since the accident. As a result, legal proceedings were supervened, and Jagjot Singh filed a claim petition seeking compensation under the Motor Vehicles Act, 1988. The Motor Accident Claims Tribunal ruled in favor of Jagjot Singh, awarding compensation totaling Rs. 66,00,000/- with interest. Thereafter, Jagjot Singh appealed against the Tribunal’s decision, arguing that the awarded compensation was insufficient, particularly considering his disability. However, the HC acknowledged the severity of Jagjot Singh’s injuries and ordered an enhancement of the compensation amount, especially for pain and suffering, loss of amenities, and loss of marriage prospects.

Issues framed by the Court:

  1. Whether the accident occurred due to the rash and negligent driving of the respondent, resulting in injuries to the appellant?
  2. If the appellant is entitled to compensation, what amount and from whom?
  3. Relief sought by the appellant.

Legal Provisions:

Section 173 of the Motor Vehicles Act, 1988: Deals with the duty of the driver in case of an accident and states that the driver of a motor vehicle involved in an accident resulting in death or bodily injury to any person or damage to property shall, if required by any police officer in uniform, give his name and address and the name and address of the owner of the vehicle, and also the registration mark of the vehicle.

Section 168 of M.V. Act: Pertains to the requirement of obtaining a driving license.

Contentions of the Appellant:

The appellant in this case primarily contends that the compensation awarded is insufficient, especially considering the appellant’s 100% Permanent Locomotor Disability. They argue that the correct multiplier wasn’t applied for future medical expenses, and the compensation for attendant charges was inadequate. Additionally, they claim that the tribunal didn’t consider the revision in minimum wages and didn’t provide compensation for loss of matrimonial life/marriage prospects or for the disability/disfigurement resulting from the accident. They also seek compensation for automatic wheelchair and its maintenance, and for ongoing medical expenses throughout life.

Contentions of the Respondent:

The respondent, represented by Ms. Suman Bagga, Advocate, denied the allegations of negligence and fault on their part. They asserted that the accident resulted from the negligence of the appellant and not their own. The respondent claimed that the offending vehicle was insured with United India Insurance Co. Ltd. at the time of the accident, covering third-party risks. Further, the respondent contested the appellant’s claim for higher compensation, arguing against the appellant’s assertions regarding the insufficiency of the awarded compensation and the arrangement for future medical expenses.

Court’s Analysis and Judgement:

The High Court analyzed the evidence and submissions made by both parties. It observed that the Tribunal’s compensation was insufficient, particularly considering the appellant’s 100% Permanent Locomotor Disability. The court revised the compensation, considering various factors such as future medical expenses, loss of earning capacity, pain and suffering, attendant charges, and special diet expenses. After a detailed analysis, the court enhanced the compensation to Rs. 66,00,000 and awarded interest at 9% per annum from the date of filing the claim petition.

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Judgement Reviewed by- Shramana Sengupta

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Delhi High Court Reduces Deposit Requirement in Stamp Duty Dispute to 25%: Pending Further Adjudication

CASE TITLE – HARI PARVAT FINANCIAL ADVISORS AND CONSULTANTS PRIVATE LIMITED v. OFFICE OF THE COLLECTOR OF STAMPS

CASE NUMBER – LPA 383/2024 & CM APPL. 28428/2024, CM APPL. 28429/2024

DATED ON – 13.05.2024

QUORUM – Hon’ble Acting Chief Justice Ms. Manmeet Pritam Singh Arora

FACTS OF THE CASE

This is an appeal put forth by the Appellant, challenging the decision of a Learned Single Judge of the same Hon’ble High Court of Delhi. Where the Appellant was granted an interim stay subject to deposit a 50% pay demanded by the Collector of Stamps, Chanakyapuri. The Learned Counsel for the Appellant stated that the Appellant in September, 2017 had approached the Collector of Stamps with an application under Section 31 of the Indian Stamp Act, 1899 for the determination of the stamp duty payable. However, the appellant after much delay on 1st April, 2024 received an order from the Collector of Stamps inter alia (‘among other things’) indicating that the appellant is liable to pay stamp duty along with a penalty, totaling to Rs.1,00,20,167/-.

ISSUES

Whether the Collector of Stamps is out of his jurisdiction when exercising his powers of adjudication while his duty is merely those of an Advisory one?

LEGAL PROVISION

Section 31 of the Indian Stamp Act, 1899, prescribes the procedure on how to get official clarification on the required stamp duty for a document from the Collector of Stamps.

Section 56 of the Indian Stamp Act, 1899,  prescribes the establishment of the oversight power by which the Chief Controlling Revenue Authority reviews the Collectors’ decisions in certain matters.

CONTENTIONS BY THE APPELLANT

The Appellant states that the order passed by the Collector of Stamps is wholly without jurisdiction and directing the appellant to deposit 50% of the demand raised as a pre-condition would prima facie legitimize an order passed without jurisdiction. The argument is also based on the fact that when an “instrument” is submitted to a collector under Section 31 of the Stamp Act for determination of stamp duty, the jurisdiction exercised by the collector is an advisory jurisdiction and the collector is not called upon to exercise powers of adjudication. While exercising power under Section 31, the collector has to merely determine the duty and has no power to impound the document.

CONTENTIONS BY THE RESPONDENT

The Learned Counsel for the Respondent submitted that the writ petition in itself is not maintainable as the appellant has an alternative effective remedy of approaching the Chief Controlling Revenue Authority under Section 56 of the Stamp Act.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble Court did not deem it appropriate to comment as to the merits of the case as it was still pending adjudication before the Learned Single Judge of the same Court. However, keeping in view the facts and circumstances of the case, reduced the amount of the deposit to 25% of the demand raised by the Collector of Stamps. And had instructed the amount to be deposited with the Registry of this Court within four weeks from the date. And due to the current position that the Court finds itself in, it had further strongly iterated that although the current Appeal has been disposed of, it refused to make any comments regarding it’s merits, and also mentioned that the rights and contentions of either parties remain open.

This could also mean that the parties could work on and further strengthen their arguments and even bring forth a clear precedent regarding this issue.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Delhi High Court Upholds Commercial Court’s Decision: Defendant’s Contradictory Claims Rejected, ₹5.91 Lakh Awarded to Plaintiff with 18% Pre-Suit Interest

CASE TITLE – Casa 2 Stays Pvt. Ltd. v. Comfia Ecom Private Ltd.

CASE NUMBER – RFA(COMM) 187/2023 &CAV 445/2023

DATED ON – 13.05.2024

QUORUM – Justice Vibhu Bakhru & Justice Tara Vitasta Ganju

FACTS OF THE CASE

This appeal at the Delhi High Court originated after a judgement (hereafter referred to as the Impugned order) passed by the learned Commercial Court in favour of the Respondent (the Plaintiff in the suit first filed – hereafter referred to as ‘the Plaintiff’), where the Appellant was and (hereafter referred to as ‘the Defendant’). The Plaintiff claims that it runs an online apparel store by the name of Poptailor Corporate Apparel and manufactures customized clothing as per the requirements of its clients. The defendant operates a chain of hotels in India and had placed orders for a supply of apparel to be delivered to different locations in the country. The Plaintiff filed the above-mentioned suit inter alia claiming that the Defendant had placed an order dated 30.06.2018 for manufacture and delivery of 2500 T-shirts of various sizes customized as per its requirement. The total value for the said Purchase Order was ₹5,70,725/-, which was payable on delivery of the goods. The plaintiff claims that it had made clear to the defendant that the goods once sold were not returnable and that the plaintiff being an establishment, under the MSMED Act, would be entitled to an interest at the rate of 18% per annum after 45 days of the delivery of the goods. The plaintiff claimed that it had delivered 2500 T-shirts against the afore-mentioned purchase order, which was duly received and acknowledged by the defendant. However, the defendant had not made the payment against the said delivery. The Plaintiff served a legal notice dated 27.07.2019 calling upon the defendant to pay a sum of ₹6,73,455.5 payable as of 27.07.2019. The said amount included ₹5,70,725/- towards the principal amount and ₹1,02,730.5 towards interest. However, the defendant did not clear the said dues. The plaintiff claimed that as on 30.05.2019, an amount of ₹8,49,385/- including the outstanding balance of ₹5,91,906/- towards the principal amount and an amount of ₹2,57,479/- towards interest at the rate of 18% per annum was payable.

 

ISSUES

  1. Whether plaintiff is entitled to the recovery of Rs.5,91,906/- towards balance amount for supply of goods to the defendant?
  2. Whether plaintiff is entitled to interest claimed @ 18%per annum w.e.f. July, 2019 till the filing of the suit, amounting to Rs.2,57,479/- from the defendant?

LEGAL PROVISIONS

Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act)

CONTENTIONS BY THE APPELLANT

The defendant filed it’s statement of defence disputing the claim made by the plaintiff. The defendant denied that the plaintiff had supplied the goods in question, 2500 T-shirts. It also denied that the goods were received and acknowledged by the defendant. But on the other hand, It claimed that the goods were never delivered on time and the goods so delivered were always of a bad quality. The defendant also claimed that the goods delivered by the plaintiff did not conform to the agreed design and quality and that the plaintiff had changed the design of the T-shirts as per their whims and fancies, and due to this fact, were returned. Therefore, the amount as claimed by the plaintiff was not payable. In addition, the defendant claims that the learned Commercial Court had erred in allowing pre-suit interest at the rate of 18% per annum on the basis that the plaintiff was covered under the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter MSMED Act). However, no such averment was made in the plaint. It claimed that the defendant had paid all the legitimate dues to the plaintiff. The next entry in the ledger account was a debit entry of ₹5,70,725, leaving a credit balance of ₹1,58,677/-. The learned counsel for the defendant earnestly contended that this clearly reflected that the payments were made in advance and therefore, the invoice in question was paid in advance. He submitted that the plaintiff’s suit was thus, required to be dismissed.

CONTENTIONS BY THE RESPONDENT

The plaintiff had filed the said suit [CS (COMM) 83/22] for recovery, alleging that it had supplied goods to the defendant. However, the amounts payable in terms of the invoices raised were not fully discharged. It claimed that the dispute between the parties, essentially, related to the supply of 2500 T-shirts, which were covered under an invoice dated 30.06.2018 (Ex.PW-1/2A) for an amount of ₹5,70,725/-. The plaintiff had also produced the ledger account of the defendant as maintained in its books of account for the period 01.04.2018 to 22.08.2020, which reflected the outstanding amount of ₹5,91,906/-. The plaintiff claimed that it had delivered 2500 number of Tshirts against the afore-mentioned purchase order, which was duly received and acknowledged by the defendant. However, the defendant had not made the payment against the said delivery. The plaintiff claimed that since there was an already running business relationship between the parties, it did not raise any immediate objection towards non-clearance of the dues of ₹5,70,725/- but it made several efforts thereafter through formal and informal channels for clearance of the said dues. The plaintiff also claims that the defendant had cleared various amounts in respect of various other completed transactions; however, the invoice dated 30.06.2018 in respect of the 2500 number T-shirts remained unpaid.

COURT ANALYSIS AND JUDGEMENT

The Hon’ble High Court viewed that the learned Commercial Court evaluated the evidence led by the parties and considered the issues. The learned Commercial Court observed that the pleadings were not drafted properly, however, the Court is required to not only consider the pleadings but evaluate the documents and evidence brought on record as well. The Hon’ble High Court noticed that the written statement filed by the defendant is contradictory. Where, the defendant had denied receiving the supply of goods of 2500 number of T-Shirts. However, it also claimed that goods supplied were not of good quality. The said claims were mutually inconsistent. If the defendant did not receive the goods, there is no question of it objecting to the quality of the goods. There was also no communication from the defendant claiming that it had not received the goods in question goods covered under an invoice. Even one of the evidence that was cross-examined, confirmed that the defendant had not returned the defective goods. It was clear from the evidence led by the parties that the goods in question were supplied to the defendant but the same were never returned to the plaintiff. An e-mail between the employees of the parties dated 10.07.2018, claimed that the said products were from the batch of 2500 T-Shirts and were found to be defective. However, he acknowledged that the goods were never returned. He was specifically asked as to the whereabouts of the said T-Shirts. To which he responded that they were in different locations. Although, the defendant has relied on the e-mail dated 10.07.2018, and has suggested that the entire lot was defective there is no correspondence on record to indicate that the entire lot was found to be defective. And as noted above, admittedly, the defendant had not taken any steps to return the goods in question. The High Court then accepted and were able to concur with the decision of the Commercial Court that the plaintiff was entitled to a sum of ₹5,91,906/- as reflected in the ledger account maintained by the plaintiff. And the question as to whether the Plaintiff were entitled to the a pre-suit interest at the rate of 18% per annum, they noticed that the Defendant did not contest about whether the Plaintiff was an establishment under the MSMED Act, and the fact, that the Defendant had notice of the interest that claimed by the Plaintiff much prior to the institution of the suit, which included the principal amount and the interest on it, also allowed the High Court to concur with the Commercial Court to accept the plaintiff’s claim for pre-suit interest at the rate of 18% per annum.

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Judgement Reviewed by – Gnaneswarran Beemarao

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Unfair Termination Due to Conduct Inquiry Without Officer’s Knowledge Violates Natural Justice: Delhi HC

Case Title: GOVT OF NCT OF DELHI AND ORS v. VIRENDER

Case No: W.P.(C) 12696/2023, CM APPL. 50153/2023

Decided on: February 28, 2024

Quorum: HON’BLE MR. JUSTICE V. KAMESWAR RAO and HON’BLE MR. JUSTICE ANOOP KUMAR MENDIRATTA

Facts of the case

On June 29, 2016, Virender was hired as a Warder by the Delhi Subordinate Services Selection Board, and he was placed on two years of probation. He was found in possession of forbidden items on April 11, 2017, and a FIR was filed in accordance with the NDPS Act sections. On April 24, 2017, his services were terminated in accordance with CCS (Temporary Services) Rules, 19651, Rule 5(1).

Issues

Whether Virender was entitled to protection under Article 311 of the Indian Constitution and whether the termination of his services was lawful?

Legal Provisions

The Narcotic Drugs and Psychotropic Substances Act of 1985, Article 311 of the Indian Constitution, and Rule 5 of the CCS (Temporary Service) Rules, 19651 were all relevant in this case.

Appellant’s Contentions

The appellants contended that Virender’s employment termination was lawful since he was discovered in possession of prohibited items, which called for prompt action. They argued that the action done was compliant with the regulations governing the employee’s probationary status and temporary service. The appellants highlighted that Virender’s services should have been terminated due to the seriousness of the charges against him, without the need for a thorough investigation.

Respondent’s Contentions

Because the termination was predicated on an incident that was still being investigated by the police, Virender argued that it was speculative and premature. He claimed that because he was not given an opportunity to present a fair defense, the termination was against the fundamentals of natural justice. In addition, the respondent stated that his termination did not take into account his claim to protection under Article 311 of the Constitution.

Court Analysis and Judgement

The court considered whether due process was observed and examined the conditions surrounding the termination. It investigated whether Article 311 and the 1965 CCS (Temporary Services) Rules applied to the case. The court assessed the validity of the termination order by taking into account earlier rulings and legal precedents. In the end, the Delhi High Court overturned Virender’s termination order and maintained the Central Administrative Tribunal’s ruling. The court’s ruling was supported by a careful analysis of the relevant legal provisions, the arguments made by each party, and the natural justice principles.

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Judgement Analysis Written by – K.Immey Grace

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