Dismissed

Woolslayer Companies Inc., v. Deep Water Servcies (India) Ltd., Cin U63032MH2002PLC136714

Bombay HC16 Apr 2014CP/396/2013

Case brief

AI extract

What is this about?

The High Court dismissed a winding up petition filed by Woolslayer against Deep Water for a disputed debt. The court held the petition was not maintainable as the dispute was bona fide and substantial. It noted material suppression and contradictions in the petition, ordering Rs. 2.5 lakhs in costs against the petitioner.

What did the court decide?

Winding up petition dismissed. Order of costs in the amount of Rs. 2.5 lakhs against the petitioner.

Woolslayer Companies Inc., Vs Deep Water Servcies… — Company and Corporate | Bombay HC (2014)

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CP396-2013-F.DOC

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Shephali

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY PETITION NO. 396 OF 2013

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WOOLSLAYER COMPANIES INC.,
A Company registered in the State of
Oklahoma, USA having its registered
office at:
5416 S. Yale Avenue, Suite 500, Tulsa,
Oklahoma – 74135-6243, USA

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… Petitioner

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Versus

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DEEP WATER SERVICES INDIA
LTD.

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A Company registered under the
Companies Act, 1956, having its
registered office at Energy House, 81,
D.N.Road, Mumbai – 400001,
Maharashtra, India

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…
Respondent

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APPEARANCES

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FORTHEPETITIONER,Mr. Snehal Shah a/w Ms. Dipti Panda,
“Woolslayer”i/b M/s Thakore Jariwala and
Associates

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FORTHERESPONDENT,M/s D.D.Madon, Senior Advocate, a/w
“Deep Water”Mr. Zal Andhyarijuna & Mr. Vishal
Talsaniai/b M/s Motiwalla and
Co.

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CP396-2013-F.DOC

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:G.S.Patel, J.

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CORAM:G.S.Patel, J.
JUDGEMENT RESERVED ON:26th March 2014
JUDGEMENT PRONOUNCED ON:16th April 2014

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JUDGMENT : (Per G.S. Patel, J.)

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1.The petitioner, Woolslayer Companies Inc. (“Woolslayer”)
seeks the winding up of the respondent-company, Deep Water
Services (India) Ltd. (“Deep Water”) under Sections 433 and 434
of the Companies Act, 1956, on the ground that Deep Water has
failed to pay it a debt of Rs.4,92,73,244.75.

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2.Deep Water contests the claim. It claims that Woolslayer has
not only failed to honour its obligations under the contract in
question and on the basis of which the claim is laid, but that
Woolslayer has, in terms, admitted its default. The defence is not
merely that Deep Water has a counter-claim in damages, for that is
no valid answer to an ascertained and undisputed debt. It is that the
amount is, on account of Woolslayer’s demonstrable defaults, not
payable in the amount claimed, and that Woolslayer will need to
establish its claim by evidence, there now being disputed matters
incapable of resolution in a summary manner. For the reasons that
follow, I am unable to hold for Woolslayer, or to say that Deep
Water’s defence is without substance and not bona fide.

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3.Deep Water is the disponent owner of a marine rig, “Rig
Badrinath”, on hire from Deep Water’s parent company, GOL

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Offshore Ltd. The terms of Deep Water’s charter are such that all
repair and maintenance during the charter’s tenure are to be done
and paid for by Deep Water. Rig Badrinath was previously hired by
the Oil & Natural Gas Corporation Ltd (“ONGC”) under a
contract dated 10th March 2011. It was released from hire and then
hired by ONGC again on a nomination under a contract dated 5th
May 2011. Under that contract, the rig had to be deployed to ONGC
service on or before 6th February 2012.

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4.Even before ONGC’s latest hire, the rig was in need of
extensive refurbishment. Deep Water, responsible for this under the
terms of its charter with its parent company, believed this
refurbishing and recertification were best done by the original
equipment manufacturer, Woolslayer.

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5.Woolslayer’s technician inspected Rig Badrinath in late
December 2010, and then made available to Deep Water an
inspection report dated 31st December 2010. On 24th January 2011,
Deep Water emailed Woolslayer, saying that the rig would be at a
Singapore yard for repairs in April 2011 when the repairs suggested
by Woolslayer would be undertaken and the derrick recertified.
Deep Water asked for a quotation. It says that it had to remind
Woolslayer several times, and only received a Commercial Proposal
in March 2011, just a month before the rig was to be in the
Singapore yard. Ultimately, Deep Water placed a Repair Work
Order on Woolslayer on 6th April 2011. Despite what Woolslayer
later says, the work was clearly time-sensitive, given the terms of the
hire to ONGC.

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6.The terms of this Repair Work Order are material. Woolslayer
indicated it would need approximately 14 weeks for delivery. That
meant that Woolslayer would have to keep the material ready for
transport to Deep Water’s designated repair yard in Singapore
around 11th July 2011.

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7.The Commercial Proposal, Exhibit “B” to the Petition, are
FOB Tulsa, Oklahoma, USA, with an approximate delivery time of
14 weeks. It required a 50% down payment that was, it seems, not
made, but about which no grievance seems to have been made at the
time. The Repair Work Order of 6th April 2011, Exhibit “D” to the
Petition, references the Commercial Proposal. A letter of credit was
opened on 1st July 2011 and later amended periodically. The last of
these amendments is as late as 5th August 2011, Exhibit “F3” to the
petition. In this, the latest shipment date is 14th October 2011.

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8.Mr. Shah, learned counsel for the petitioner, Woolslayer,
submits that having accepted an extended delivery date, Deep Water
cannot now complain of the delay. In contract law, it has waived the
breach, if there was one. Mr. Madon, learned senior counsel for the
respondent-Company, Deep Water, counters this by saying that
what ought to have been done in about 14 weeks took 26 weeks,
That delay was due to Woolslayer alone. By that time, the rig was in
Singapore, arriving there on 10th October 2011. Deep Water then no
longer had the option of freighting the material to Singapore by sea;
it had to air-freight the consignment at inordinate cost. The delay
had a cascade effect: repairs to and recertification of the rig were
consequently delayed, causing further losses. Integral to the repair
and recertification of the vessel was the timely supply of material by

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Woolslayer. Some of the repair work was ultimately outsourced to a
third party.

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9.A further complication related to the second purchase order,
dated 12th April 2011, for a casing stabbing board. This was not only
delivered late, but did not meet specifications. It was incompatible
with the derrick. Though Deep Water paid US$56,000 to
Woolslayer for this component, it could not use the part; indeed, the
item was rejected by Woolslayer’s own representative. Woolslayer
has nonetheless pressed its claim under this purchase order too.

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10.The third purchase order was dated 8th September 2011. This
was a service contract for a supervisor and rig building crew.
Woolslayer projected a 34-day time-frame to completion. Its crew
took 35 days and completed only 50% of the assigned work. During
this time, further materials were found to be necessary. These were
ordered under a purchase order dated 21st November 2011, only to
be found to be redundant and the order was cancelled. Woolslayer
has a claim for cancellation charges.

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11.Deep Water also says it never received Woolslayer’s invoice
of 30th November 2011 for US$ 570,760 under the first repair work
order, or the invoice dated 31st March 2012 for the cancellation of
the purchase order of 21st November 2011.

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12.Woolslayer’s claim is thus under three invoices: the first dated
30th November 2011 for the supply of rig components (US$
570,760); the second dated 10th March 2012 for services and labour

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(US$ 109,141.00); and the third, dated 31st March 2012, for the
value of material manufactured but later cancelled (US$ 56,551).
Against each invoice claimed, Woolslayer has also claimed interest
at 18% per annum, although there is no agreement as to interest.

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13.The petition itself contains averments that, ex-facie, raise
disputes that require investigation. Paragraph 15 of the petition says,
inter alia:

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“15. The petitioner says that the time taken for procuring and then supplying the material had taken longer than expected for reasons beyond the control of the petitioner. It is pertinent to mention that time was never the essence of the purchase contract. The petitioner had put the Respondent No.1 on notice at the time of inception of the deal that any contemplation of time of delivery would be a reasonable estimate and not a commitment. The Respondent Company had appreciated the circumstances delaying production and delivery of the material. In this connection, the Respondent wrote an electronic mail to the Petitioner on August 9, 2011 calling for schedule for delivery of parts and repairs of the derrick and thereby informed the Petitioner that the rig Badrinath would be in Singapore around 10th of that month. By a subsequent electronic mail of October 11, 2011 the Respondent Company approved of delivery by air route. In another electronic mail of the same day the Respondent Company had informed the Petitioner that since air cargo was full during that period an advance notice would help the Respondent to secure a place on a cargo plane. In a subsequent mail of October 14, 2011, the Respondent informed its decision to truck the material to Houston since according to the Respondent the petitioner did not have proper resource to crate the material suitably for air freight. The material was eventually delivered on board M.V. Badrinath on November 11, 2011. At such time the

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CP396-2013-F.DOC

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crew of the Respondent Company on board the said vessel was still receiving safety instructions and therefore the opportunity to install the material had not arisen till then. Hence there was no actual delay in delivery of the material. The Respondent Company had also proceeded on such basis and never raised any contemporaneous issue or dispute with regard to the date of delivery. ”

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(emphasis supplied)

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14.Apart from the emphasized portions, the whole of this
paragraph is such that it once demands the taking of evidence.
Certainly, in a time-sensitive contract with forward third-party
commitments made, a delay from 14 weeks, even assuming that was
an approximation, to 26 weeks is not reasonable; nor can 26 weeks
be said to be an ‘approximation’ of 14 weeks without doing serious
violence to language. Moreover, the letter of credit required delivery
by ship; to say, therefore, that Deep Water ‘approved of delivery by
air route’ is, on the face of it, at the very least disingenuous in its
suggestion that the change in delivery mode was in no way
attributable to Woolslayer. Prima-facie, this is an unacceptable
economizing of the facts.

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15.But this formulation by Woolslayer is also contrary to the
documents. Exhibit G-3 to the Petition, an email from Deep Water
to Woolslayer of 4th October 2011, clearly displays the urgency of
the matter for Deep Water and its evident disgruntlement at
Woolslayer’s performance. The latter’s contention that Deep Water
received the material “without any objection or demur” is not
credible. On 30th July 2012, Deep Water’s Mohan Thadani wrote to
Steve Ellis of Woolslayer by email (Exhibit “Q”) pointing out (a)

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that there was a delay of about 80 days in delivering the
consignment under the repair work order, and that this delay
required air-freighting the consignment to Singapore at a freight
differential of about US$ 200,000; that the casing stabbing board,
for which Deep Water paid US$ 56,000 turned out to be
incompatible and therefore useless; and that despite the 34-day
repair work estimate, in 35 days, Woolslayer’s team and crew had
done only 50% of the work.

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16.Woolslayer responded on 4th August 2012 (Exhibit “Q”).
This response, albeit in the context of an attempted resolution, is
revealing. Though disclaiming all responsibility for project delays in
Singapore and consequential delays in delivery to the operator (i.e.,
ONGC), Woolslayer acknowledged its delay in shipping the
materials under the first purchase order. This admission is in direct
contradiction of its averments in paragraph 15 of the petition, where
Woolslayer says there was no delay, or, at any rate, none beyond the
terms of the contract. In that mail, Woolslayer also offered to
provide engineering review and ‘recommended corrective action’ to
install the casing stabbing board in the derrick.

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17.In paragraphs 27 and 28 of the petition, this is how
Woolslayer deals with this email exchange:

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“27. With a view to recover its dues by a process of amicable settlement, the petitioner’s authorized officer had met with the dealing executive of the Respondent Company and offered concessions. Copies of the electronic mails evidencing the above are annexed hereto and collectively marked as Exhibits “P-1” to “P-2”.

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The aforesaid concession was made in an effort to expedite recovery of payment and to maintain a commercial relationship between the parties in the long run. The Respondent Company made a vague and mischievous answer to the offer without either approving the same or rejecting the same or making any counter offer. The relevant electronic mail of the Respondent Company dated July 30, 2012 and the reply to the same issued by the Petitioner on August 4, 2012 are annexed hereto and collectively marked as Exhibit “Q”.”

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18.This is entirely misleading. Deep Water’s email of 30th July
2012 is anything by vague; it is certainly not mischievous. Of
Woolslayer’s admission of delay and defective supply there is
complete concealment. The so-called ‘concessions’, too, are a telling
commentary: Woolslayer offered a ‘discount’ of as high as 50% on its
second and third invoices in claim. That is not so much a concession
as an admission of default.

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19.An email exchange of November 2011 (Exhibit “4” to the
affidavit in reply) also only reinforces Mr. Madon’s submission that
not only was the contract time-sensitive, but Woolslayer knew of
this. Woolslayer was informed that if a specific deadline was not
met, Deep Water would lose the charter. Woolslayer acknowledged
that it would try and improve on the estimated time and confirmed
that its own vendor knew of the urgency as well. To say, therefore,
that “time was not of the essence” is plainly incorrect; and if that is
Woolslayer’s case, then it will need to show so in evidence when its
witness can be confronted with this material.

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20.Mr. Shah’s submission that the subsequent orders were
placed well after the first and that, therefore, there is no substance

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to the case on delay is, in my view, without substance. Woolslayer
was the original equipment manufacturer. It was the natural first
choice for such extensive repairs. In any event, the subsequent
orders were placed only after an inspection by Woolslayer, whose
technician reported extensive defects and the need for more parts.
This does not in any manner indicate a condonation of delay by
Deep Water.

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21.It is also to be noted that Woolslayer’s statutory notice dated
16th November 2012 met with a response from Deep Water’s
attorneys on 13th December 2012. In that reply, Deep Water took
every one of these defences, specifically.

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22.It is not possible, in these circumstances, to hold that the
dispute raised by Deep Water is not bona fide or without substance.
There is no cogent explanation about the validity of Woolslayer’s
invoice claim for services and labour, given Deep Water’s dispute
that only 50% of the work was done. There is no explanation at all
for its admissions in its email of 4th August 2012, or the patent
contradiction between that email and the averments in the petition.
Even the third invoice is seriously disputed, Deep Water saying that
the parts ordered were found to be superfluous, despite which
Woolslayer has presented its invoice in its entirety. There is, too, the
matter of the sizeable ‘discounts’ offered by Woolslayer, reductions
so high as to be improbable as the mere ‘concessions’ now alleged.
Finally, there is the question of Woolslayer’s claim for interest at a
rate unspecified in the contract.

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23. A winding up petition is not to be used as a pressure tactic to
compel payment of a debt that is genuinely disputed, i.e., where the
defence is not illusory, specious, spurious or speculative.1 Where
there is a substantial and bona fide dispute, the petition is not
maintainable. Such a petition can only be dismissed.2 It is.

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24.As to costs: I do not believe that this petition ought ever to
have been brought. The disputes existed well prior to the petition.
There is material suppression in the petition, including of
Woolslayer’s admissions in its email of 4th August 2012. The
petition contains averments directly contradictory to the record,
including the egregious assertion that time was not of the essence.
There is the inflated claim of interest too. There is no manner of
doubt that Woolslayer’s contractual performance was late and was
also sub-standard (the non-specification casing stabbing board, the
sub-par work by the repair crew, the ordering of a superfluous part).
In a matter like this, I see no reason why a court should feel
timorous in imposing costs. This is not a case evenly balanced.
Indeed, I would venture to suggest that it is only in those cases are
evenly balanced, and where the court finds it necessary to prefer one
view over the other, that costs ought not to be imposed. On the other
hand, where the finding is that the petition is ex-facie fraught with
matters beyond the remit of the company court, and where there are
statements made that are demonstrably inaccurate, costs must
follow as a matter of course. That is, indeed, the only way today that

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1 IBA-Health (I) Pvt. Ltd. v s Info-Drive Systems Sdn. Bhd. , (2010) 10 SCC 553; I.T.C. Limited v. Fomento Hotels and Resorts Ltd ., (1991) 70 Com Cases 459 (Bom);

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2 Amalgamated Commercial Traders Pvt. Ltd. v. A.C.K.Krishnaswami , (1965) 35 Com Cases 456 (SC)

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parties can be dissuaded from attempting to ‘take their chances’
with the court. Costs should “act as a deterrent to vexatious,
frivolous and speculative litigations or defences. The spectre of
being made liable to pay actual costs should be such, as to make
every litigant think twice before putting forth a vexatious, frivolous
or speculative claim or defence.”3 In the context of Section 35 of the
Code of Civil Procedure, 1908, the Supreme Court has repeatedly
emphasized the need to start imposing realistic costs approaching
actuals.4 I see no reason why a lesser measure or approach should
guide the hand of the Company Court. If anything, it should be
reverse. This is a commercial court, and this is where the vexatious,
the frivolous and the speculative must, with fixity of purpose, meet
their nemesis. Here, perhaps more than anywhere else, costs must
follow the event.

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25.In that view of the matter, there will be an order of costs in
the amount of Rs.2.5 lakhs against the petitioner.

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(G.S. Patel, J.)

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3 Vinod Seth v. Devender Bajaj and Anr. , (2010) 8 SCC 1

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4 Salem Advocates Bar Association v. Union of India (“ Salem-II ”), (2005) 6 SCC 344 : AIR 2005 SC 3353; Ashok Kumar Mittal v. Ram Kumar Gupta and Anr. , (2009) 2 SCC 656; In Sanjeev Kumar Jain v Raghubir Saran Charitable Trust & Ors. , (2012) 1 SCC 455

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Woolslayer Companies Inc., v. Deep Water Servcies (India) Ltd., Cin U63032MH2002PLC136714

Case brief

What is this about?

What did the court decide?

Woolslayer Companies Inc., v. Deep Water Servcies (India) Ltd., Cin U63032MH2002PLC136714

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

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