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TMI Blog2013 (5) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... action to the Factor, and also specifically makes itself liable for rendering all outstanding amounts to the Factor, in the event of the purchaser of goods defaulting in making payment of the Borrower's receivables to the Factor. Effectively, what the respondent would do in this transaction is to sell goods to its purchaser; and in consideration of its executing the relevant factoring documents, the respondent, as borrower, would then be paid a part of the value of the said goods by the Petitioner, i.e., the Factor. Thereafter, both the purchaser of goods (referred to in the transaction as 'approved debtor') and the seller (i.e. the 'Borrower' in factoring transaction') would be liable to make payments to the Factor, until receipt of all dues under the transaction by the Factor." 3. An agreement was executed between the parties on 28th January 2008 for factoring of receivables (hereafter 'factoring agreement'). Under the said agreement, EAPL was described as 'the borrower'. The various terms used in the factoring agreement were defined as under: "1.8 Debtor means a person who is or may become indebted to the Borrower in respect of any Receivable under a Supply Contract and who i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights that Bibby has hereby reserved or otherwise available to Bibby under law, Bibby shall have the right to Recourse as under: a. in respect of each Receivable which Bibby has not received by the due date whether by reason of legal constraints or acts or orders of government or for any other reason whatsoever. b. in respect of each Receivable which the Debtor or his legal representative disputes. c. in respect of all outstanding Receivables upon the occurrence of a Termination Event; d. in respect of the Receivables wherein the Debtor is insolvent; Bibby may notify the Borrower on which Receivables Bibby intends to exercise its Recourse. Without prejudice to the foregoing, the Borrower agrees that Bibby's Recourse to the Borrower shall be automatic after the lapse of 30 day of the due date of the Receivable. 11.2 Upon Bibby exercising its Recourse in respect of any Receivable the Borrower shall be liable to pay Bibby the amount prepaid by Bibby plus any associated costs and charges in respect of the Receivable pursuant to clause 3 herein contained. The Borrower shall pay all such amounts on receipt of demand for payment from Bibby. Without prejudice to the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner, duly accepted by Koutons. (v) Guarantees and undertakings executed by the directors of the respondent, affirming that all payments would be rendered, etc. 10. In terms of Clause 4.1 of the factoring agreement Koutons Retail India Ltd. ('KRIL') was the Approved Debtor. The arrangement was that for the supplies made by EAPL to KRIL, the payment to be made by KRIL against the invoices raised by EAPL would be made directly to Bibby. It was made clear in the notice of assignment of debt dated 25th September 2008 addressed by EAPL to KRIL, with a copy to Bibby, that the receipt of payments by Bibby would constitute a valid discharge of the amounts due and payable by KRIL to EAPL under the invoices. Simultaneously, KRIL issued a letter to Bibby accepting the terms of the letter dated 25th September 2008 issued by EAPL to KRIL informing it of the factoring agreement. 11. On 3rd March 2010, a Debtor Letter was issued by Bibby to EAPL, giving the up-to-date details as regards KRIL. This was accepted and co- accepted by both EAPL and KRIL by countersigning the letter. A Letter of Guarantee was executed by Mr. Gagandeep Singh Sahni, the Director of EAPL and his father, Mr. Harmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of EAPL to settle the disputes with Bibby. The Managing Director ('MD') of EAPL was directed to remain present on the next date and also to pay the costs of Rs. 10,000 for filing a reply within three weeks. 15. On the next date, i.e., 12th February 2013, again no reply was filed. Again, no reply was filed. The following order was passed on that date: "Mr. Hemant Chaudhary, Advocate appears for the Respondent. Mr. Gagandeep Singh, the Managing Director ('MD') of the Respondent is also present. As a last opportunity, reply to the petition be filed on or before 1st March 2013, subject to costs of Rs. 2,500 being paid by the Respondent to the Petitioner before that date and proof of payment of costs be filed along with the reply. Rejoinder, if any, be filed before the next date. In the reply, the MD of the Respondent will set out the details of all the assets, movable and immovable and enclose with the affidavit the balance sheets, profit & loss account and the statement of bank accounts for the last three years. Till the next date of hearing, the Respondent is restrained from transferring, alienating, creating any third party rights or charge in respect of any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act was not served at the registered office of EAPL. It is stated that the documents placed on record show that the legal notice was served at F-9, Udyog Nagar, Peeragarhi Chowk, New Rohtak Road, New Delhi - 110 041, whereas EAPL shifted from the said office in March 2011. It is stated that an e-Form 18 was filed with the Registrar of Companies ('ROC') to that effect in April 2011. It is stated that with effect from 26th April 2011, the registered office of EAPL has been shifted to Plot No.11, Samalka, Kapashera-Najafgarh road crossing, New Delhi 110 037. Reliance is placed on the decisions in Winter Misra Diamond Tools Ltd. v. Payal Granites (P) Ltd. (2005) 59 SCL 337 (Raj.), N.L. Mehta Cinema Enterprises (P) Ltd. [1991] 70 Comp Cas 31 (Bom), Donghee Vision Industrial Company Ltd. v. Tube Investments of India Ltd. (2001) 104 Com Cases 460, P.S.V.P. Vittal Rao v. Progressive Constructions P. Ltd. (1999) 2 Comp LJ 228 (AP), Vyasa Bank Ltd. v. Randheer Steel and Alloys (P) Ltd. (1993) 76 Com Cases 244 (Bom), Kold- Hold Industries P. Ltd. v. Arabian Exports Ltd. (2004) 119 Com Cases 1(Bom.), Andhra Cements Limited v. Bhatia International Ltd. (2008) 145 Com Cases 681 (AP-DB), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that "even without invoking the deemed inability of the company to pay its debts, a creditor can seek winding up of a company under section 433(e) read with Section 434(1)(c)." However, in order to succeed on that basis, there has to be a pleading with reference to Section 433(e) or in respect of Section 434(1)(c) of the Act. In the absence of such pleading, the Court will decline to entertain the petition where the requirement of Section 434(1)(a) has not been met [see State Black Sea Shipping Co. v. Viraj Overseas Pvt. Ltd. [2005] 125CompCas831(Delhi)]. 23. In the present case, even if one proceeds on the basis that the statutory notice under Section 433 read with Section 434(1)(a) was not delivered at the registered office of EAPL, the averments in the petition satisfy the requirement of Section 433(e) read with Section 434(1)(c) of the Act. In paras 15 and 16, it is averred as under: "15. The petitioner therefore issued a statutory notice of demand to the respondent, on the 30th of June 2011. The petitioner demanded vide the same that the sum of Rs. 8,98,80,162 (Rupees Eight Crores Ninety Eight Lakhs Eighty Thousand One Hundred and Sixty Two only), along with other con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Industrial and Investment Corporation of U.P. v. North India Petro Chemicals Ltd. [1994] 79 Comp Cas 835 the Supreme Court explained that the expression "unable to pay its debts" under Section 433(e) should be taken in the commercial sense in that the company "is unable to meet the current demands." The Court must be satisfied that "the existing and probable assets would be insufficient to meet the existing liability." In IBA Health (India) Private Limited v. Info-Drive Systems Sdn. Bhd. (2010) 10 SCC 553, the Court explained that "A determination of examination of the company's insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company's liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice under Section 434(1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand." It w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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