AI Drafter 
TaxTMI 
TaxTMI 
2013 (5) TMI 1074
X X X X Extracts X X X X
X X X X Extracts X X X X
....s the receivables under its commercial transaction 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 respec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "11. Recourse and Set-off 11.1 The Borrower hereby agrees that without prejudice to the various 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecation of Receivables. (iv) Notice of Assignment dated 25th January, 2008, vide which the respondent company required the approved debtor, Koutons Retail India Ltd., to make all payments to the petitioner, 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of a provisional liquidator ('PL'). Notice was issued on the said application on 11th September 2012. On 27th November 2012, EAPL entered appearance through counsel who submitted that he was not aware of the earlier proceedings. He offered on 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 affidav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....last opportunity, the matter was listed for 8th May 2013. 19. Today, the submissions of Ms. Anjali Sharma, learned counsel for Bibby and of Mr. Ashish Dhingra, learned counsel for EAPL have been heard. 20. In the reply filed by EAPL, a preliminary objection has been taken that the demand notice in terms of Section 434 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. Vitta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n other words, even if the condition under Section 434(1)(a) regarding service of notice on the company at its registered office by registered post is unable to be fulfilled, the petitioning creditor can show the Court that a company is nevertheless unable to pay its debts. In Kalra Iron Stores v. Faridabad Fabricators (P) Ltd. [1992] 73 Comp Cas 337, this Court 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h 2010: Rs. 73,838,634.75 As on 31st March 2011: Rs. 8,92,07,327.52 As on 31st March 2012 : Rs. 8,92,07,327.52 25. While learned counsel for EAPL has been unable to explain how the outstanding amount as on 31st March 2011 and 31st March 2012 can be the same, the above statements in the balance sheets are a clear admission by EAPL of the amounts owing by it to Bibby. 26. In Pradeshiya 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 rel....