TaxTMI 
TaxTMI 
2013 (7) TMI 160
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....l outstanding amounts to the Factor, in the event of the purchaser of goods (approved debtor) 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 company, as borrower, would then be paid the contracted value of the said goods by the petitioner, i.e., the Factor, against assignment of receivables in favour of the Factor. On the due date as per the agreement, the payment would then be made by the approved debtor to the Factor; and in the event of default of payment by the debtor, the borrower (which, in the present case, is the respondent hereto) would be liable to make the said payment." 3. Pursuant to the negotiations between the parties, an agreement of factoring of receivables (hereafter 'factoring agreement') was executed on 18th February 2010. Mr. Alok Aggarwal, the Managing Director ('MD') of KIPL, gave an undertaking to the effect, inter alia, that the cheques issued by KIPL would be honoured on presentation. Additionally, Mr. Aggarwal also executed a guarantee deed, by ....
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....sible." IFL was requested to hold back the legal action against KIPL and it was requested that the action should "jointly be directed at M/s Koutons Retail India Ltd." Further assurances were given by another letter dated 12th August 2011 from KIPL to IFL. 6. On 29th December 2010 itself, IFL had issued a legal notice under Section 433 read with Section 434 of the Act to KIPL pointing out that as on 30th November 2010 the outstanding balance was as under: "Principal Amount Rs. 3,01,98,967 Interest Rs. 13,73,909 Other charges Rs. 1,722 Total Rs.3,15,74,598 7. Meanwhile, the cheques issued by KIPL, when presented to the Bank by IFL for payment, were dishonoured with the remarks 'insufficient funds'. Thereafter, on 17th January 2011, notice was issued to KIPL calling upon it to make payment of Rs. 3,00,00,000 against the dishonoured cheques together with interest @ 24% p.a., failing which the proceedings will be initiated under Section 138 of the Negotiable Instruments Act, 1881 ('NI Act'). It is stated that the criminal proceedings initiated by IFL under the NI Act against KIPL are pending. It is in the above circumstances that the present peti....
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....aints have been filed by it against KRIL as well. 11. By judgment dated 30th January 2013 in Crl. M.C. 905 and 906 of 2012 (KIPL v. State), a learned Single Judge of this Court dismissed the two petitions filed by KIPL under Section 482 of the Code of Criminal Procedure, 1973 ('Cr.P.C.') seeking the quashing of the two criminal complaints filed by IFL against it under Section 138 of the NI Act. 12. At one stage of these proceedings, Mr. Arun Bhardwaj, learned Senior counsel appeared for KIPL and stated that KIPL would make an offer in writing to IFL, without prejudice to its rights and contentions, for settlement of all disputes. It is stated by Ms. Anjali Sharma, learned counsel for IFL, that the offer made to IFL by KIPL was both unreasonable and unrealistic and, therefore, unacceptable to IFL. 13. Ms. Sharma submitted that all the elements of Sections 433 and 434 are fulfilled in the present case. There is a clear acknowledgment of liability by KIPL in its correspondence with IFL. The clauses of the factoring agreement made it clear that in the event of default by KRIL in paying its debts to IFL, the client, i.e., KIPL would be called upon to make good the amount. She s....
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....court has dismissed a petition for winding up where the creditor claimed a sum for goods sold to the company and the company contended that no price had been agreed upon and the sum demanded by the creditor was unreasonable (See London and Paris Banking Corporation [1874] L.R. 19 Eq. 444). Again, a petition for winding up by a creditor who claimed payment of an agreed sum for work done for the company when the company contended that the work had not been done properly was not allowed. (See Re. Brighton Club and Norfolk Hotel Co. Ltd. [1962] Ch. 406) Where the debt is undisputed the court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular debt (See Re. A Company 94 S.J. 369). Where however there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court will make a winding up order without requiring the creditor to quantity the debt precisely (See Re. Tweeds Garages Ltd. [1865] 35 Beav. 204, 208) The principles on which the court acts are first that the defence of the company is in good faith and one of substance, secon....
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....t be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed under Section 439 in reliance of the presumption under Section 434(1)(a) that the company is unable to pay its debts, the law should take its own course and the company of course will have an opportunity on the liquidation application to rebut that presumption." 17.3 It was further explained in para 25 as under: "25. An examination of the company's insolvency may be a useful aid in determining whether the refusal to pay debt is a result of a bona fide dispute as to the liability or whether it reflects an inability to pay. Of course, if there is no dispute as to the company's liability, it is difficult to hold that the company should be able to pay the debt merely by proving that it is able to pay the debts. If the debt is an undisputedly owing, then it should be paid. If the company refused to pay, without good reason, it should be able to avoid the statutory demand by proving, at the statutory demand stage, that it is solvent. In other words, commercial solvency can be seen as relevant as to whether there was a dispute as to the d....
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....mount outstanding as on that date. The factoring agreement has not been terminated and is binding on the parties. Although there is an arbitration clause in the factoring agreement, the right of IFL to seek recourse to other remedies in law for the recovery of the admitted debt is not precluded. On its part, IFL has satisfied the requirements of Clause 14 of the Schedule read with Clause 11(1)(a) of the factoring agreement and has notified the Client "to repurchase" the notified receivables at a price equal to the amount remaining unpaid by KRIL. 19. There is a clear admission of liability by KIPL in more than one way. In its letter dated 17th March 2011 addressed to IFL, KIPL has, after mentioning the default committed by KRIL, informed IFL that it had till then deposited Rs. 1,29,40,065 and was enclosing two further cheques of Rs. 10,00,000 and Rs. 5,00,000 respectively. It undertook to pay a further sum of Rs. 25,00,000 and Rs. 35,00,000 in March 2011 and to take care of outstanding by July 2011. Again, by letter dated 8th July 2011, KIPL requested IFL to "hold your legal action against us as this action should jointly be directed at M/s. KRIL. We undertake to make arrangemen....