E & M SPECIALTY CO.INC vs MR ANIL WAHAL (DIRECTOR)

* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 14 December 2023
Judgment pronounced on : 07 February 2024
+ CCP(CO.) 24/2016 & CO.APPL. 128/2021
E & M SPECIALTY CO.INC ….. Petitioner
Through: Mr. Nikhil Palli & Mr. Kshitij
Pal, Advocates
versus
MR ANIL WAHAL (DIRECTOR) ….. Respondent
Through: Mr. Anil Nag, Adv.
+ CO.PET. 981/2015 & CO.APPL. 3878/2015
GREATSHIP GLOBAL ENERGY SERVICES
PTE.LTD.,SINGAPORE ….. Petitioner
Through: Mr. Shikhil Suri, Ms. Madhu
Suri, Ms. Jyoti Suri and Ms.
Mahima Aggarwal, Advocates.
versus
INTERDRIL ASIA LIMITED ….. Respondent
Through: Mr. Anil Nag, Adv.
+ CO.PET. 120/2016 & CO.APPL. 544/2016 & CO.APPL.
545/2016
NISA INDUSTRIAL SERVICES PVT. LTD…… Petitioner
Through: Mr. Manish Misra, Advocate.
versus
INTERDRIL ASIA LTD. ….. Respondent
Through: Mr. Anil Nag, Adv
CORAM:
HON’BLE MR. JUSTICE DHARMESH SHARMA
J U D G M E N T

1. The present Company Petitions have been moved under
Sections 433(e) & (f), 434 and 439 of the Companies Act, 1956, read
with Rules 6 and 9 of the Companies (Court) Rules, 1959, seeking

winding up of the respondent company – M/s. Interdril Asia Ltd.,
predicated on the non-payment of dues amounting to USD 171,903/-
(approximately Rs. 1,13,06,051.70, at the time of filing of the petition)
in CO.PET.981/2015; and Rs. 30,25,397/- in CO.PET. 120/2016,
along with due interest.

FACTUAL BACKGROUND:
CO.PET. 981/2015

2. Briefly stated, the petitioner company placed a Purchase Order
with the respondent company on 27.02.2012 for the supply of Spiral
Drill Collars and Spiral Heavy Drill Pipes for a total amount of USD
573,012/-. Thereafter, on 19.03.2012 in furtherance of the Purchase
Order and per the terms of the agreement, the petitioner paid an
advance of 30% of the Purchase Order value, amounting to USD
171,903/-, receipt of which was confirmed by the respondent company
vide email dated 20.03.2012.
3. However, the respondent company failed to supply the goods,
consequent to which the petitioner company terminated the Purchase
Order vide letter dated 22.11.2012 as well as email dated 25.11.2012,
and sought a refund of the advance payment from the respondent
company. The termination of the Purchase Order was acknowledged
by the respondent company vide email dated 27.11.2012.
4. Despite repeated reminders and follow ups, the respondent
company neglected to repay the advance amount paid by the petitioner
company, as a result of which the petitioner company was constrained
to serve a statutory legal notice under Section 433 and 434 to the
respondent company on 15.10.2015, calling upon them to pay the due

amount along with interest @ 6% from 19.03.2012 onwards i.e. the
date of remittance of the advance. The said notice was not replied to
and the due amount remained unpaid by the respondent company,
hence, the petitioner company preferred the present company petition.
5. This court issued notice of the company petition to the
respondent company on 01.02.2016.

CO.PET. 120/2016

6. This petition for winding up has been moved by the petitioner
company which is engaged in the business of providing Security
Services. The petitioner company entered into a Security Services
Agreement with the respondent company on 25.06.2011 and agreed to
deploy security personnel at a unit of the respondent company in
Raigad District.
7. It is stated that the respondent company was irregular in making
payments towards the invoices/bills raised by the petitioner company,
and has deliberately neglected to make payment of an amount of Rs.
30,25,397/- arising out of invoices raised for the period from
01.01.2013 to 24.02.2015. It is further stated that the respondent
company is also liable to pay interest @ 24% per annum on the
delayed payments.
8. The respondent company failed to discharge its liability and
neglected to pay the outstanding amount despite several reminders.
Consequently, the petitioner company was constrained to serve a
statutory legal notice upon the respondent company on 31.07.2015, as
provided for under Section 433 and 434 of the Companies Act, 1956.

Although the notice was served to the site office, directors and the
corporate office of the respondent company, the same was not replied
to and neither was the outstanding amount paid.
9. This court issued notice of the company petition to the
respondent company on 16.02.2016.

SUBMISSIONS:

10. It has been submitted on behalf of the petitioner in CO.PET.
981/2015 that the present company petition stands to be admitted by
this court. A two-fold argument has been put forth in this regard.
Firstly, it has been submitted that a statement of the respondent
company came to be recorded in the order of this court dated
07.02.2018, whereby the respondent company undertook to pay the
monies due to the petitioner, and further stated that in case the
respondent company is unable to pay the outstanding amount, the
admission of this petition would not be resisted. It has been submitted
that since the respondent company has failed to pay the outstanding
amount, in view of the order of this court dated 07.02.2018, the
petition stands to be admitted. Secondly, it has also been submitted
that notice of this petition had been issued on 01.02.2016. Therefore,
in keeping with Rule 5 of the Companies (Transfer of Pending
Proceedings) Rules, 2016, which provides that only those petitions
which have not been served shall be transferred to the National
Company Law Tribunal1; the present petition stands to be admitted by
this court since notice has already been issued.

1 NCLT

11. Per contra, it has been submitted on behalf of the respondent
company that the present petitions stand to be transferred to the NCLT
since nothing irreversible has been done in the winding up
proceedings. In furtherance of the same, reliance has been placed on
the decision of the Supreme Court in Action Ispat and Power Pvt.
Ltd. v. Shyam Metalics and Energy Ltd.2

2 (2021) 2 SCC 641
3 NCLAT

ANALYSIS & DECISION

12. At the outset, it is apposite to note that these winding up
proceedings are a complete non-starter. On a perusal of the record, it
appears that not even a Provisional Liquidator is appointed to the
respondent company yet and so far no substantive orders have been
passed.
13. Moreover, it has been brought to the notice of this court that
vide order dated 22.12.2022, the learned NCLT admitted an
application seeking to move an Insolvency Petition against the
respondent company, appointing an Interim Resolution Professional
and declared moratorium in terms of the Insolvency and Bankruptcy
Code, 2016. The same came to be challenged by the respondent
company before the learned National Company Law Appellate
Tribunal3, and the constitution of the Committee of Creditors came to
be stayed by the NCLAT vide order dated 18.01.2023; and that the
matter is still pending before the learned NCLAT.
14. However, in view of the inceptive nature of the present winding
up proceedings, as also the fact that the appeal for instituting the

Corporate Insolvency Resolution Process4 is underway before the
learned NCLAT, it is the opinion of this court that these winding up
petitions stand to be transferred to the NCLT so as to prevent duplicity
of proceedings and ensure judicial propriety and consistency.
15. During the pendency of these proceedings, the Insolvency and
Bankruptcy Code, 20165 has since been enacted, along with the
introduction of Companies Act, 20136. In particular, Section 434 of
the said Act has to be considered, which provides for the transfer of
proceedings relating to winding up, pending before High Courts, to
the National Company Law Tribunal7, and reads as under:

4 CIRP
5 IBC
6 The Act
7 NCLT

-434. Transfer of certain pending proceedings
(1) On such date as may be notified by the Central Government in
this behalf,-
(a) all matters, proceedings or cases pending before the Board of
Company Law Administration (herein in this section referred to as
the Company Law Board) constituted under sub-section (1) of
section 10E of the Companies Act, 1956 (1 of 1956), immediately
before such date shall stand transferred to the Tribunal and the
Tribunal shall dispose of such matters, proceedings or cases in
accordance with the provisions of this Act; (b) any person
aggrieved by any decision or order of the Company Law Board
made before such date may file an appeal to the High Court within
sixty days from the date of communication of the decision or order
of the Company Law Board to him on any question of law arising
out of such order: Provided that the High Court may if it is satisfied
that the appellant was prevented by sufficient cause from filing an
appeal within the said period, allow it to be filed within a further
period not exceeding sixty days; and

(c) all proceedings under the Companies Act, 1956 (1 of 1956),
including proceedings relating to arbitration, compromise,
arrangements and reconstruction and winding up of companies,
pending immediately before such date before any District Court or
High Court, shall stand transferred to the Tribunal and the Tribunal

may proceed to deal with such proceedings from the stage before
their transfer: Provided that only such proceedings relating to the
winding up of companies shall be transferred to the Tribunal that
are at a stage as may be prescribed by the Central Government.
Provided further that only such proceedings relating to cases other
than winding-up, for which orders for allowing or otherwise of the
proceedings are not reserved by the High Courts shall be
transferred to the Tribunal [Provided also that]-
(i) all proceedings under the Companies Act, 1956 other than
the cases relating to winding up of companies that are reserved for
orders for allowing or otherwise such proceedings; or
(ii) the proceedings relating to winding up of companies which
have not been transferred from the High Courts; shall be dealt with
in accordance with provisions of the Companies Act, 1956 and the
Companies (Court) Rules, 1959.]
Provided also that proceedings relating to cases of voluntary
winding up of a company where notice of the resolution by
advertisement has been given under subsection (1) of section 485
of the Companies Act, 1956 but the Company has not been
dissolved before the 1st April, 2017 shall continue to be dealt with
in accordance with provisions of the Companies Act, 1956 and the
Companies (Court) Rules, 1959..

16. The transfer of winding up petitions pending before High
Courts has also been dealt with by a Notification of the Ministry of
Corporate Affairs, dated 07.12.20168, whereby the Companies
(Transfer of Pending Proceedings) Rules, 2016 were enacted, Rule 5
of which is relevant and reads as under:

8 G.S.R. 1119 (E) dated 07.12.2016, Ministry of Corporate Affairs.

-5. Transfer of pending proceedings of Winding up on the ground
of inability to pay debts.—
(1) All petitions relating to winding up under clause (e) of section
433 of the Act on the ground of inability to pay its debts pending
before a High Court, and where the petition has not been served on
the respondent as required under rule 26 of the Companies (Court)
Rules, 1959 shall be transferred to the Bench of the Tribunal
established under sub-section (4) of section 419 of the Act,
exercising territorial jurisdiction and such petitions shall be treated
as applications under sections 7, 8 or 9 of the Code, as the case
may be, and dealt with in accordance with Part II of the Code:

Provided that the petitioner shall submit all information, other than
information forming part of the records transferred in accordance
with Rule 7, required for admission of the petition under sections 7,
8 or 9 of the Code, as the case may be, including details of the
proposed insolvency professional to the Tribunal within sixty days
from date of this notification, failing which the petition shall abate.

17. It would also be expedient to consider the decision of the
Supreme Court in Action Ispat and Power Limited v. Shyam
Metalics and Energy Limited9, the relevant extract of which is
provided below:

9 (2021) 2 SCC 641

-22. Given the aforesaid scheme of winding up under Chapter XX
of the Companies Act, 2013, it is clear that several stages are
contemplated, with the Tribunal retaining the power to control the
proceedings in a winding up petition even after it is admitted. Thus,
in a winding up proceeding where the petition has not been served
in terms of Rule 26 of the Companies (Court) Rules, 1959 at a
preadmission stage, given the beneficial result of the application of
the Code, such winding up proceeding is compulsorily transferable
to the NCLT to be resolved under the Code. Even post issue of
notice and pre admission, the same result would ensue. However,
post admission of a winding up petition and after the assets of the
company sought to be wound up become in custodia legis and are
taken over by the Company Liquidator, section 290 of the
Companies Act, 2013 would indicate that the Company Liquidator
may carry on the business of the company, so far as may be
necessary, for the beneficial winding up of the company, and may
even sell the company as a going concern. So long as no actual
sales of the immovable or movable properties have taken place,
nothing irreversible is done which would warrant a Company Court
staying its hands on a transfer application made to it by a creditor
or any party to the proceedings. It is only where the winding up
proceedings have reached a stage where it would be irreversible,
making it impossible to set the clock back that the Company Court
must proceed with the winding up, instead of transferring the
proceedings to the NCLT to now be decided in accordance with the
provisions of the Code. Whether this stage is reached would
depend upon the facts and circumstances of each case..

18. This above noted decision of the Supreme Court has been relied
upon by this court in Citicorp International Limited v. Shiv-Vani
Oil & Gas Exploration Services Limited10 wherein it was held that
winding up proceedings pending before High Courts, which are at a
nascent stage and have not progressed to an advanced stage, ought to
be transferred to the NCLT. It is but evident that both the present
company petitions have not yet reached an advanced stage and no
substantive orders have been passed towards the winding up of the
respondent company.
19. In light of the foregoing discussion and in light of the fact that
the NCLT has already admitted an application for initiating CIRP
against the respondent company vide order dated 22.12.2022, albeit
the appeal against the same is still pending before the learned
NCLAT. It is the view of this court that such proceedings cannot
simultaneously proceed between the two fora and these winding up
proceedings deserve to be transferred to the NCLT accordingly.
20. At this juncture and in this regard, reliance may be placed on
the decision of the Supreme Court in K.N. Rajakumar v. V.
Nagarajan11, wherein it was held that the primary objective of the
Insolvency and Bankruptcy Code, 2016 is the revival of the corporate
debtor and liquidation has to be resorted to only as a last resort. The
relevant portion of the said judgment reads as under:

10 CO.PET. 446/2013
11 C.A. No. 1792/2021, date of decision 15.092021

-It could thus be seen that one of the principal objects of the IBC is
providing for revival of the Corporate Debtor and to make it a
going concern. Every attempt has to be first made to revive the

concern and make it a going concern, liquidation being the last
resort..

21. The present petitions are therefore transferred to the learned
NCLT. The claimants herein are at liberty to pursue their claims
before the learned NCLT.
22. The parties are directed to appear before the NCLT on
01.04.2024.
23. The electronic records of this Court shall be transmitted to the
Registrar NCLT within one week along with a copy of today’s order.
24. Hence, the present company petitions, along with all pending
applications, are disposed of accordingly.

CCP(CO.) 24/2016 & CO.APPL. 128/2021

25. This contempt petition has been preferred by the petitioner
under Sections 11 and 12 of the Contempt of Courts Act, 197112,
against the respondent – Mr. Anil Wahal, director of M/s Interdril
Asia Limited, for non-compliance with the order of this court dated
12.02.2016, passed in CO.PET. No. 666/2014.
26. Briefly stated, the petitioner company had filed CO.PET.
666/2014 seeking winding up of M/s. Interdril Asia Limited, which
came to be disposed of vide order dated 12.02.2016 passed by this
court, on the basis of a settlement arrived at between the parties. The
settlement was placed before this court vide an application bearing CA
No. 466/2016 dated 09.02.2016, moved by the parties under Order 23
Rule 3 and Rule 9 read with Section 151 of the CPC, as per which the
respondent was to repay a sum of USD 299,384/- in 11 monthly

12 CC Act

instalments and the petitioner had agreed to accept this sum as full and
final settlement of its claims. It was also agreed upon between the
parties that in case of default, the respondent would be liable to pay
interest @ 18% per annum.
27. It is the case of the petitioner company that despite repeated
reminders, the respondent failed to make the payments as per the
settlement arrived at the parties and has not paid the outstanding
amount to the petitioner company, and therefore contempt proceedings
shall be initiated against the respondent for violating the order of this
court dated 12.02.2016.
28. A perusal of the record indicates that the respondent/director
has been granted several opportunities to settle the matter as well as to
make payments towards the outstanding amount. It is also borne out
from the record that the respondent undertook to make the payments
by 31.03.2020, and the same came to be recorded in the order dated
30.08.2019 in CO.EPT. 981/2015 and thereafter in the present
contempt petition vide order dated 02.09.2019. Per the Affidavit of
Undertaking, the respondent had stated that the company was in the
process of arranging funds through an Asset Reconstruction Company
and that an infusion of funds was expected in the month of March
2020.
29. It has also been brought to the notice of this court, as stated
above, that during the pendency of these proceedings, an application
seeking to move an Insolvency Petition came to be moved against the
Respondent Company at the behest of Punjab National Bank, before

the NCLT, which was admitted vide order of the NCLT dated
22.12.2022, and the appeal pertaining to the matter is currently
pending before the learned NCLAT.

SUBMISSIONS

30. It has been submitted on behalf the petitioner that the
respondent is in violation of the order of this court dated 12.02.2016,
and has wilfully disobeyed to make good the outstanding payments
due to the petitioner, despite undertaking to make the payments as per
the settlement arrived at between the parties. It has been submitted
that the settlement arrived at between the parties as well as the
undertaking to repay the outstanding dues of the petitioner company
was given by the director before this court, prior to the date of the
order being passed by the NCLT. Therefore, non-compliance with the
order of this court dated 12.02.2016 as well as the undertaking placed
before this court which came to be recorded in the order dated
30.08.2019 in CO.PET. 981/2015 and order dated 02.09.2019 in the
present contempt petition, amounts to contempt, and proceedings
under the Contempt of Courts Act shall be initiated against the
respondent.
31. Per contra, it has been submitted on behalf of the respondent
that the non-compliance with the order dated 12.02.2016 was neither
wilful nor intentional, and failure to make payments towards the
outstanding amount due to the petitioner was on account of reasons
beyond the control of the respondent. It is stated that to show
bonafides, the respondent made a payment of USD 10,000/- by
arranging funds through personal loans.

32. It has further been submitted that the respondent has made all
attempts to revive the respondent company, by arranging attempts to
infuse funds through an Asset Reconstruction Company, namely
Invent ARC Pvt. Ltd. In furtherance of the same, the respondent also
persuaded its bank – Oriental Bank of Commerce, to agree for a One-
Time Settlement (OTS) to the tune of Rs. 24 Cr, by way of assignment
of its debt to Invent ARC Pvt., Ltd. However, this OTS failed and a
dispute arose with regard to the release of one of the mortgaged assets
by the bank, despite release of 10% of the OTS amount by Invent
ARC to the bank. Despite best efforts, the respondent could not
successfully revive the company, but it has been submitted that efforts
have been made to repay the outstanding amount due to the petitioner
company, and that the non-payment of the amount is not wilful.
33. It has also been submitted that the NCLT admitted an
application for moving an Insolvency Petition against Interdril Asia
Ltd. vide order dated 22.12.2022 whereby an Interim Resolution
Professional has been appointed. The same has been challenged by
Mr. Manish Wahal, and the appeal is currently pending before the
learned NCLAT, whereby the constitution Committee of Creditors has
been put in abeyance. However, it is submitted that the company is
presently under the control of the Interim Resolution Professional.
Further, it has been submitted that an affidavit has been placed on the
record pursuant to directions dated 01.11.2022, wherein it is
categorically stated that none of the assets of the company have been
transferred in any for to any third party, since 12.02.2016.

34. In view of the above, it has been submitted that the inability to
pay the outstanding amount is a consequence of business failure and
for reasons outside the control of the respondent. Reliance has been
placed on the judgement of this court in Ved Prakash Abbot v.
Kishore K. Avarsekar & Ors13, wherein it has been held that
inability to pay in terms of an undertaking would not amount to wilful
disobedience, specially when insolvency proceedings are pending
against the company and the control of the management has been
vested with the Interim Resolution Professional. Furthermore, reliance
has also been placed on the judgement of this court in Vijay Kumar
Bhatia v. Som Datt Enterprises Ltd.14, which held that credible
material must be placed to show that the alleged contemnor
deliberately and wilfully avoided to make payments, despite having
the resources.

13 Contempt Case (Civil) No. 579/2017
14 2018 SCC OnLine Del 12764

ANALYSIS & DECISION:

35. Having heard learned counsels for the parties and on perusal of
the record, unhesitatingly, this Court finds that the respondent cannot
be proceeded against for any wilful disobedience of the directions of
this Court under the Contempt of Courts Act, 1971.
36. It is well ordained in law that the contempt proceedings must
demonstrate a wilful and intentional disobedience of an order or
direction of the Court. Avoiding a long academic discussion, it was

propounded in the case of U.N. Bora v. Assam Roller Flour Mills
Assn.15 :-
(i) -It should be shown that there was due knowledge of the
order or directions and that the disobedience is a deliberate,
conscious and intentional act.
(ii) When two views are possible, the element of wilfulness
vanishes as it involves a mental element.
(iii) Since the proceedings are quasi-criminal in nature, what is
required is a proof beyond reasonable doubt since the
proceedings are quasi-criminal in nature.
(iv) When a distinct mechanism is provided and that too, in the
same judgment alleged to have been violated, a party has to
exhaust the same before approaching the court in exercise
of its jurisdiction under the Contempt of Courts Act, 1971..
37. Therefore, the proposition of law is established that
disobedience of the orders of the Court have to be shown to be
=wilful‘, such that there lies a certain mental element, and that such
inaction or disobedience is done knowingly, intentionally, consciously
and in a calculated and deliberate manner, with full knowledge of the
consequences that may be flowing therefrom.
38. Hence, it flows that even when there is disobedience of an
order, in such cases where the disobedience is a result of compelling
circumstances, outside the control of the contemnor, the contemnor
cannot be punished. The plea canvassed on behalf of the respondent is
sound in so far that it has been urged that the disobedience was not
wilful or intentional and this court finds the same to be sustainable in
law. There has never been any wilful disobedience to violate the
directions of this Court. It is but evident that efforts have been made to
repay the outstanding amount as also towards revival of the company

15 (2022) 1 SCC 101

through infusion of funds. The fact that winding up proceedings were
underway and thereafter proceedings under the IBC have been
initiated in the interim, affords a valid and sustainable defence to the
contemnor in these proceedings.
39. In view of the foregoing discussion, the present contempt
petition is dismissed. All pending applications are disposed of
accordingly.

DHARMESH SHARMA, J.
FEBRUARY 07, 2024
Sadique