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2019 (8) TMI 223 - HC - Companies LawScope the term Creditor - Termination of agreement - Stock Purchase Agreement - scope of assignment - HELD THAT - In the instant case, there is no dispute or disagreement that the main company petition was presented in this Court on 15.7.2016 after termination of the master services agreement on 15.1.2016. This takes us to the covenant captioned 'Term and Termination' in the Master Services Agreement and the relevant clause is 4.4 captioned 'Effects of Termination'. A perusal of effects of termination adumbrated therein reveals that it has been covenanted that upon expiration or termination of master services agreement, all obligations of parties shall cease with the exception of obligations that accrued prior to the effective date of termination which shall survive and Agilis shall deliver all deliverables of Megasoft, besides, Agilis being under obligation to destroy all originals and copies belonging to Megasoft if so directed by Megasoft. After such termination on 15.1.2016, statutory notice inter-alia under Section 434(1) of the said Act was issued on 31.3.2016 followed by another demand on 17.6.2016. This position is admitted by Megasoft in the application filed in support of the instant application. The effect of stock purchase agreement dated 03.12.2013 cannot be said to be assignment of master services agreement or performance contemplated thereunder by Agilis to Infogix. To be noted, assignment of master services agreement or performance thereunder alone cannot be done without prior written consent of Megasoft. In the instant case, it is a demand made post termination, i.e., demand vide a statutory notice under said Act. Therefore, there are two reasons as to why the argument of Megasoft is unacceptable. One is, clause 7.5 captioned 'Assignment', extracted supra, stood terminated. The second reason is, it is not an assignment of agreement or performance contemplated thereunder. Interpretation of statute - expression 'creditor, by assignment or otherwise', occurring in sub-section (1) Clause (a) of Section 434 of the said Act - HELD THAT - The term 'creditor' is not a term of art qua said Act. In other words, it is not a term which is defined in the said Act. In Harinagar Sugar Mills Co. Ltd. case, Supreme Court held that the expression 'otherwise' takes in any person to whom another becomes indebted howsoever the relationship of creditor and debtor is brought about between them - the stock purchase agreement dated 03.12.2013 certainly qualifies and neatly / snugly fits into the expression 'otherwise' occurring in Section 434(1)(a) of the said Act. Agilis is alive - HELD THAT - As I have already negatived the argument that Infogix does not qualify to maintain this company petition on the ground that it had stepped into the shoes of Agilis and in the light of the fact that it neatly / snugly fits into the expression 'otherwise' by applying Harinagar Sugar Mills Co. Ltd. principle laid down by Supreme Court, the submission that Agilis is still alive is of no consequence. In the instant case, in the light of whether the petitioner in the main company petition is a creditor qua respondent also is a triable issue and it cannot be answered on affidavits and counter affidavits. Therefore, it is made clear that this question is not decided finally one way or the other in this order, but it is held to be a triable issue which is left open to be conclusively decided when the main company petition is tested / tried on merits. Application dismissed.
Issues Involved:
1. Validity of the Stock Purchase Agreement and its impact on the Master Services Agreement. 2. Whether Infogix qualifies as a creditor under Section 434(1) of the Companies Act, 1956. 3. The status of Agilis and its implications on the winding-up petition. Detailed Analysis: 1. Validity of the Stock Purchase Agreement and its impact on the Master Services Agreement: The core of the dispute revolves around a Master Services Agreement dated 18.06.2013 between Agilis and Megasoft, and a Stock Purchase Agreement dated 03.12.2013 between Agilis and Infogix. Megasoft contends that the Stock Purchase Agreement does not bind it due to Clause 7.5 of the Master Services Agreement, which restricts Agilis from subcontracting, delegating, assigning, or transferring rights and obligations without Megasoft's prior written consent. The court noted that Clause 7.5 specifically pertains to the assignment of the agreement and the performance contemplated therein, which requires Megasoft's prior written consent. However, the court emphasized that the Stock Purchase Agreement, which took effect post-termination of the Master Services Agreement on 15.01.2016, does not constitute an assignment of the agreement or its performance. Therefore, the argument that the Stock Purchase Agreement is invalid due to lack of consent was rejected. 2. Whether Infogix qualifies as a creditor under Section 434(1) of the Companies Act, 1956: Megasoft argued that Infogix is neither a creditor nor an assignee under Section 434(1) of the Companies Act, 1956, which uses the term "a creditor, by assignment or otherwise." The court referred to the Supreme Court's interpretation in Harinagar Sugar Mills Co. Ltd. v. M.W. Pradhan, which clarified that the term "creditor" under the Companies Act includes any person to whom another becomes indebted, irrespective of how the relationship is established. Applying this principle, the court concluded that Infogix, through the Stock Purchase Agreement, fits into the term "otherwise" in Section 434(1)(a), thus qualifying as a creditor. 3. The status of Agilis and its implications on the winding-up petition: Megasoft contended that since Agilis continues to exist post the Stock Purchase Agreement, Infogix cannot maintain the winding-up petition. The court examined the nature of the Stock Purchase Agreement, which involved the sale of shares by five individuals who originally held shares in Agilis to Infogix. It was clarified that this transaction was not a merger or amalgamation but a sale of shares, allowing Agilis to continue its existence. However, the court held that the continued existence of Agilis does not affect Infogix's rights under the Stock Purchase Agreement and does not preclude Infogix from filing the winding-up petition. Conclusion: The court dismissed Megasoft's application challenging the maintainability of the winding-up petition. It held that the Stock Purchase Agreement does not violate Clause 7.5 of the Master Services Agreement, Infogix qualifies as a creditor under Section 434(1) of the Companies Act, and the continued existence of Agilis does not negate Infogix's rights. The court also indicated that the issue of whether Infogix is a creditor is a triable issue to be decided on merits in the main company petition. Consequently, the application was dismissed without costs, and Megasoft was advised to address the main petition on its merits.
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