HIGH COURT OF DELHI
Zhuhai Hansen Technology Co. Ltd.
versus
Shilpi Cable Technologies Ltd.
CO. PETITION No. 333 of 2012
MARCH 19, 2013
JUDGMENT
1. The Petitioner, Zhuhai Hansen Technology Co. Ltd., a company incorporated in People’s Republic of China having its office in Guangdong, China, has filed this petition under Sections 433(e) and 434 of the Companies Act, 1956 (‘Act’) seeking the winding up of the Respondent, Shilpi Cable Technologies Ltd.
Background facts
2. The Petitioner states that it is an acknowledged industry leader in providing antenna-system solutions and service to telecommunication network operators and providing cable operators the last mile connectivity. The Petitioner further states that it offers a complete range of RF and CATV cables to meet every application and budget requirement. It has a state-of-art manufacturing facility in Zhuhai, China. In 2011 the Petitioner had a turnover of US $ 500 million.
3. The Petitioner states that it had a long standing business relationship with the Respondent dating back to the year 2005 when the Respondent started to purchase cables and accessories from the Petitioner. In February 2009, the Respondent conveyed to the Petitioner its urgent requirement for about 1500 km of 7/8″ super flex cables used in the telecom industry. A Memorandum of Understanding (‘MOU’) was entered into between the parties on 18th February 2009 whereby the Respondent agreed to purchase and the Petitioner agreed to supply 1300-1500 km of 7/8″ super flex cables.
4. The terms and conditions of the MOU were that the shipment of the above goods was expected to take place between 1st March and 5th April 2009. Upon receipt of the original standby letter of credit (‘L/C’) or bank guarantee (‘BG’), the Petitioner would immediately arrange for production. The MOU noted that an L/C or BG for a cable length of 100 km had already been provided to the Petitioner. The Respondent was to establish a separate L/C or BG for an additional 150-200 km by 25th February 2009. The material was to be shipped from Zhuhai. The Petitioner was to email to the Respondent the scanned copies of the invoice and packing list. The Respondent was to establish a confirmed irrevocable L/C for 100% invoice value of the dispatched materials within “10 working days of On-Board Date.” The establishment of the L/C was not to be linked to any possible disputes/claims. The Respondent was responsible for any demurrage, storage, warehousing and handling charges outside Zhuhai. Clause 9 of the MOU stated that the Respondent had also agreed to supply “1.5 M 1/2′ S DIN M – DIN F e51 Jumpers, Connectors and Surge Arrestors.”
5. A purchase order (‘PO’) was placed by the Respondent on the Petitioner on 25th February 2009 for supply of 1500 km of 7/8″ super flex RF feeder cable at the unit price of US $ 2.14 per meter for a total value of US $ 3,210,000. The payment terms indicated in the PO were that the L/C should be opened with usance credit at 180 days and interest to the account of the “applicant”. The delivery had to be completed before 31st March 2009. The goods had to be invoiced to the Respondent.
6. On 2nd March 2009 the Petitioner sent an email to the Respondent asking it to arrange the BG or standby L/C for at least 150 km and extend the validity of the last L/C for 200 km 7/8″. The Respondent was asked to speed up the process so that the delivery could be made within time. The Petitioner states that it had shipped a total quantity of 1301.015 km of 7/8″ super flex cables to the Respondent between 25th March and 21st May 2009. However, the Respondent failed to establish the L/C. Some of the correspondence exchanged between the parties has been enclosed with the petition. One of them is an email dated 11th May 2009 from the Petitioner to the Respondent stating that around 950 km 7/8″ of cables had been shipped without an L/C being furnished, by the Petitioner.
7. The Petitioner states that on 14th May 2009 a schedule was sent by the Respondent to the Petitioner for establishing the balance L/C for the goods dispatched till 8th May 2009. According to the Petitioner, since the schedule was under the signature of Mr. Ghanshyam Pandey, Chief Executive Officer (‘CEO’) of the Respondent it constituted “a clear and unconditional undertaking and commitment” on the part of the Respondent to open the L/C in respect of all supplies made or to be made by the Petitioner. It is further stated that on the basis of the above assurance the Petitioner shipped the remaining quantity of the product, with the last of the shipments being made on 24th May 2009. However, the Respondent failed to establish the L/C in terms of the said schedule and undertaking. It also did not get the goods released from the Indian Customs with whom the goods had been lying since March-May 2009.
8. In para 13 of the petition the Petitioner has given the details of the invoices for the period from 26th March 2009 till 21st May 2009 for a total sum of US $ 1,891,556.70 towards several invoices which remained unpaid by the Respondent till 31st August 2009. According to the Petitioner, the Respondent wrote to it on 3rd September 2009 citing its weak financial condition as the sole reason for not being able to open the L/C for the goods dispatched by the Petitioner and its inability to collect the goods from the customers. It is stated that the Respondent suggested an alternate mode of payment for paying the dues of the Petitioner and in order to support the Respondent “in its moment of financial crisis”, the Petitioner agreed to the said proposal. A reference is also made to an email dated 4th September 2009 from the Respondent asking the Petitioner to present the documents “under respective L/C only” and that the Respondent would start opening L/Cs from 7th September 2009 on wards. It is stated that on 8th September 2009 the Respondent opened an irrevocable L/C drawn on State Bank of India (‘SBI’) in favour of the Petitioner for an amount of US $ 1,891,556.70 thus covering the outstanding balance amount owing by the Respondent to the Petitioner. According to the Petitioner, the Respondent thus made a “clear, unequivocal and categorical admission” of its liability in respect of the aforementioned sum to the Petitioner. A reference is also made to email dated 10th September 2009 whereby the Respondent requested the Petitioner not to present all the documents at one go and to present document of one bill of lading (‘B/L’) on the third day as this would help the Respondent in honoring the payment on timely basis. This was followed by another email dated 1st October 2009 whereby the Respondent informed the Petitioner that its understanding with SBI could not be worked. It had accordingly decided to cancel the L/C and make upfront payment of the documents. The Petitioner was requested to present one document on ‘document against payment’ (‘DP’) basis to Karur Vysya Bank Limited (‘KVBL’) for payment. The Respondent requested that the documents on DP basis be presented ‘one by one’ and stated that “it may take some time, but once the process is through, we will come out of this mess.”
9. It is stated by the Petitioner that it agreed to the cancellation of the said L/C in lieu of payment on DP basis, in good faith and in order to help the Respondent, believing that the Respondent would make the balance payment against the goods already shipped to it. It is stated that subsequently, on the Respondent’s instructions, the Petitioner presented the documents for payment to the banker and received payment towards invoices for the supply of 98.23 km of the product on 23rd October 2009 and another invoice for supply of 98.31 km of cable on 15th November 2009 thereby reducing the outstanding amount from US $ 1,891,556.70 to US $ 1,470,941.84 in respect of 687.365 km. The Petitioner states that despite making payments in October/November 2009, the quantities were collected only in May and July 2010 thus incurring, on daily basis, storage and detention charges by shipping line and demurrage charges by Inland Container Depot (‘ICD’) at Tughlakabad, New Delhi.
10. According to the Petitioner, after taking delivery of the last two shipments, the Respondent realized that the detention and demurrage charges in respect of the balance amount had escalated well over the value of the goods which therefore, became economically unviable for the Respondent. According to the Petitioner, in order to avoid making payment the Respondent started raising issues as regards the condition/quality of goods by email dated 24th May 2010 for the first time. This was replied to by the Petitioner on 26th May 2010 stating that long time storage of the goods and humidity at the port was responsible for the condition of the goods but the same would have no impact on the quality of the goods. It was further pointed out that the Respondent had never rejected any of the shipments on the ground of quality of the goods. The Respondent inquired from the Petitioner by email dated 23rd July 2010 as to how to clear the shipments with minimum loss and this was replied to on 23rd July 2010 itself.
11. On 4th November 2010 the Petitioner sent to the Respondent a notice calling upon the Respondent to make the following payments of the outstanding amounts set out in the form of a table, within 15 days from the date of the receipt of the notice:
