2014 (2) TMI 971 - HC - Companies Law

Winding up petition - Escrow account - Non payment for certain invoices - Creditor debtor relationship - Whether or not Yahoo was or could in law be bound by any such escrow agreement between Inflow and Apara - Held that - abundantly clear that Inflow s case is entirely speculative. It proceeds on a fanciful supposition, unsubstantiated by facts, unsupported by documents and belied by its own conduct, that Inflow is Yahoo s creditor. It is not. The reasons are many. Yahoo has paid the invoices on which Inflow founds its claim. It may not have paid these into the escrow account but that does not mean they were unpaid. If Apara, to whom direct payment was made of the invoices in question, did not in turn transmit them to the escrow account, then that is a matter between Inflow and Apara, one of no concern whatever to Yahoo. There is no cogent material that there ever existed any such tripartite escrow contract binding Yahoo such that its direct payments to Apara were to count for nothing. Inflow s suggestion is that if Yahoo paid Apara directly, it is Yahoo that should file recovery proceedings against Apara. That suggestion, wholly untenable, posits the existence of a binding and inflexible tripartite agreement with clearly spelled out terms applicable to all invoices and payments. There is none. Inflow s cause is also betrayed by its own conduct. For, in its email of 2nd July 2010, it spoke of future payments being made into the escrow account and sought payment advice details for past direct payments. That puts the matter beyond the pale. Mr. Tulzapurkar is, therefore, entirely correct in his submission that there is no debtor-creditor relationship between Yahoo and Inflow. The escrow account was but a mode of payment. It brought no privity between Yahoo and Inflow. None of Inflow s invoices are drawn on Yahoo, but always only on Apara. That they show Yahoo as the endcustomer does not establish any direct privity; it only specifies a destination, not a contractual liability - The petition is as thoroughly misconceived as it is misdirected and quite possibly mischievous as well - Decided against Petitioner.

Summary

Issues Involved:
1. Existence of a creditor-debtor relationship between the petitioner (Inflow Technologies Pvt. Ltd.) and the respondent (Yahoo India Pvt. Ltd.).
2. Validity and enforceability of the escrow agreement involving Yahoo, Inflow, and Apara Enterprise Solutions Pvt. Ltd.
3. Payment obligations and liabilities under the alleged tripartite agreement.
4. The relevance of direct payments made by Yahoo to Apara instead of the escrow account.
5. The applicability of legal precedents to the current case.

Issue-wise Detailed Analysis:

1. Existence of a Creditor-Debtor Relationship:
The court examined whether there was a creditor-debtor relationship between Inflow and Yahoo. Inflow claimed that Yahoo owed it Rs. 8,56,48,460.90, which was to be paid into an escrow account. However, the court found no evidence of such a relationship. Yahoo had made payments for the invoices, though not into the escrow account. The court concluded that Inflow failed to establish any legitimate debt owed by Yahoo.

2. Validity and Enforceability of the Escrow Agreement:
Inflow argued that Yahoo was bound by an escrow agreement involving Inflow, Apara, and Axis Bank, which required payments to be made into a joint account. The court found no material evidence to support that Yahoo was a party to this agreement. The agreement was primarily between Inflow and Apara, and Yahoo was not contractually bound by it. The court noted that the foundation of Inflow's claim rested on an unsubstantiated assertion that Yahoo was part of this escrow arrangement.

3. Payment Obligations and Liabilities under the Alleged Tripartite Agreement:
Inflow contended that Yahoo was bound by a tripartite agreement and should make payments into the escrow account. The court reviewed the correspondence and documents presented, including letters and invoices, but found no unequivocal commitment from Yahoo to be bound by such an agreement. The most that could be inferred was that Yahoo agreed to make payments into the escrow account for certain invoices, not all. Therefore, the court rejected Inflow's claim of a binding tripartite agreement.

4. Relevance of Direct Payments Made by Yahoo to Apara:
Yahoo argued that it had made payments directly to Apara, which should discharge its obligations. Inflow's claim was that these payments were irrelevant as they were not made into the escrow account. The court found this argument unconvincing, noting that Inflow had accepted payments routed through the escrow account without objection. The court concluded that Yahoo's direct payments to Apara were legitimate and that Inflow's claim was speculative and unsupported by facts.

5. Applicability of Legal Precedents:
Inflow relied on the decision in "In the matter of Advent Corporation Pvt. Ltd." to argue that Yahoo should be deemed unable to pay its debts. The court found this reliance misplaced, stating that Inflow first needed to establish a creditor-debtor relationship, which it failed to do. The court emphasized that a winding-up petition requires a bona fide debt, and speculative claims like Inflow's would be rejected.

Conclusion:
The court dismissed Inflow's petition, concluding that there was no creditor-debtor relationship between Inflow and Yahoo. The escrow agreement did not bind Yahoo, and Yahoo had fulfilled its payment obligations by paying Apara directly. The court found Inflow's claim to be speculative, unsupported by evidence, and based on a misinterpretation of legal principles.