Embee Software Private Limited vs Swash Convergence Technologies ... on 29 November, 2023

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Delhi High Court - Orders

Embee Software Private Limited vs Swash Convergence Technologies ... on 29 November, 2023

Bench: Dharmesh Sharma

                             $~C-7
                             *         IN THE HIGH COURT OF DELHI AT NEW DELHI
                             +         CO.PET. 6/2015 and CO.APPL. 17/2015 (For Directions) and
                                       CO.APPL. 18/2015 (For Directions)

                                       EMBEE SOFTWARE PRIVATE LIMITED ..... Petitioner
                                                                            Through:                 Mr. Lzafeer Ahmad, Adv.

                                                                            versus

                                       SWASH CONVERGENCE TECHNOLOGIES LIMITED
                                                                      ..... Respondent
                                                   Through: Mr. Manan Bansal, Adv.

                                       CORAM:
                                       HON'BLE MR. JUSTICE DHARMESH SHARMA
                                                                            ORDER

% 29.11.2023

1. Learned counsel for the petitioner has alluded to order dated 07.01.2015 whereby the following observations were made:-

"CO.PET. 6/2015

This petition has been filed by Embee Software Private Limited under Sections 433 and 434 of the Companies Act, 1956 seeking winding up of the Swash Convergence Technologies Limited on the ground that the respondent has failed to pay the admitted amount of Rs.53,33,644/-. It is also alleged in the petition that in addition to this the respondent is also liable to pay a further sum of Rs. 11,81,877.06/-towards interest @ 24% per annum. Counsel for the petitioner states that these amounts are due and payable to the petitioner towards purchase of 70 Microsoft Azure Licenses from the petitioner by the respondent in terms of the agreement that was executed between the parties in September, 2013 and pursuant thereto, a purchase order was also placed by the respondent on the petitioner on 17th September, 2013 in respect of which an appropriate invoice was duly raised on 3rd October, 2013 and delivered to the respondent. It is further alleged that after confirming receipt of the goods, vide its letter dated 2nd November, 2013, respondent also sent two cheques for Rs.26,66,822/-each towards discharge of their obligation under the contract along with a request to the petitioner to defer the encashment of the said This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/11/2023 at 23:09:52 cheques for a while.

At this juncture, on 14th December, 2013 respondent is stated to have terminated the contract between the parties, purportedly, due to "technical reasons". It is the petitioner's case that this termination can only fall under Clause 7(b) of the agreement which deals with some of the incidents of termination of contract. Clause 7(b) reads as follows:

"Termination without cause. Either party may terminate this agreement, without cause, upon 60 days written notice. In the event of termination, new Enrollments will not be accepted but any existing Enrollment will continue for the term of such Enrolment and be governed by this agreement."

In this context, it is the case of the petitioner that since the said termination is without cause, therefore, existing contract of the licence would continue to operate for that period. The relevant period is stated to be of one year in terms of the purchase order itself.

Later, after the petitioner sent a communication to the respondent that its request for cancellation of the Agreement stands rejected, and that it is liable to pay the entire amount of Rs.53 ,33,644/- immediately, the respondent responded by an email stating that the programmes sold by the petitioner suffered from, "major defects of handover and technical difficulties of migration. ... ". In this context, it is the case of the petitioner that the aforesaid communication appears to be an attempt at setting out a sham defence, and nothing more. This, according to counsel for the petitioner, is also demonstrated by a clear lack of requisite notice under Clause 7 (c) of the Agreement between the parties, which provided for any cancellation for good reason.

It is also alleged that the notice of winding sent to the registered address of the respondent/company has been returned unclaimed with the report that the respondent is not available at the given address.

Issue notice to the respondent to show cause as to why the company be not wound up.

List on 21st April, 2015.

Co.A. 17/2015

Issue notice to the respondent, returnable on 21st April, 2015.

Co.A. 18/2015

Issue notice to the respondent, returnable on 21st April, 2015. Till the next date of hearing respondent company shall not alienate or otherwise take over possession of the assets to the tune of Rs.65 lakhs."

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/11/2023 at 23:09:52

2. Upon notice to the respondent, a detailed reply has been filed, wherein inter-alia, it has been stated that the present petition is not maintainable as there is existence no valid debt or liability to be discharged by the respondent. Inter-alia, reference is invited to the decision of the Supreme Court in the case of M/s. Iba Health (I) P. Ltd. v. M/s. Info-Drive Systems SDN.Bhd [(2010) 10 SCC 553] wherein it was held that if the creditor‟s debt is bonafidely disputed on substantial grounds, the court cannot continue with the winding up petition.

3. Rejoinder has already been filed by the petitioner, besides additional documents on behalf of the respondent.

4. Be that as it may, this matter has been pending for long. The instant winding up proceeding has been a complete non-starter, so much so, that even a Provisional Liquidator has not been assigned. Further, during the pendency of this petition, the Insolvency and Bankruptcy Court, 2016 has been enacted and all pending proceedings under Section 434 of the Companies Act, 1956 are mandatorily required to be transferred to the National Company Law Tribunal (NCLT). The said provision reads as under:-

"434. Transfer of certain pending proceedings (1) On such date as may be notified by the Central Government in this behalf.-

(a) all matters, proceedings or cases pending before the Board of Company Law Administration (herein in this section referred to as the Company Law Board) constituted under sub-section (1) of section 10E of the Companies Act, 1956 (1 of 1956), immediately before such date shall stand transferred to the Tribunal and the Tribunal shall dispose of such matters, proceedings or cases in accordance with the provisions of this Act;

(b) any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Company This is a digitally signed order.

Provided that the High Court may if it is satisfied that the appellant was prevented by sufficient cause from filing an appeal within the said period, allow it to be filed within a further period not exceeding sixty days;

and

(c) all proceedings under the Companies Act, 1956 (1 of 1956), including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and the Tribunal may proceed to deal with such proceedings from the stage before their transfer:

Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government.

Provided further that only such proceedings relating to cases other than winding-up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal [Provided also that)-

(i) all proceedings under the Companies Ac Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or

(ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts, shall be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.] Provided also that proceedings relating to cases of voluntary winding up of a company where notice of the resolution by advertisement has been given under sub-

section (1) of section 485 of the Companies Act, 1956 but the Company has not been dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959,"

9. The issue of transfer of winding up petitions to the NCLT has been dealt with in the notification dated 7th December, 2016 passed by the Ministry of Corporate Affairs where in respect of pending proceedings for winding up, Rule 5 states as under:-

"5. Transfer of pending proceedings of Winding up on the This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/11/2023 at 23:09:52 ground of inability to pay debts. (1) All petitions relating to winding up under clause (e) of section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under rule 26 of the Companies (Court) Rules, 1959 shall be transferred to the Bench of the Tribunal established under sub-section (4) of section 419 of the Act, exercising territorial jurisdiction and such petitions shall be treated as applications under sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code:

Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7,8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from the date of this notification, failing which the petition shall abate.

Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with rule 7, required for admission of the petition under sections 7,8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal upto 15th day of July, 2017, failing which the petition shall stand abated:

Provided further that any party or parties to the petitions shall, after the 15th day of July, 2017, be eligible to file fresh applications under sections 7 or 8 or 9 of the Code, as the case may be, in accordance with the provisions of the Code:

Provided also that where a petition relating to winding up of a company is not transferred to the Tribunal under this rule and remains in the High Court and where there is another petition under clause (e) of section 433 of the Act for winding up against the same company pending as on 15th December, 2016, such other petition shall not be transferred to the Tribunal, even if the petition has not been served on the respondent."

10. The said issue of transfer of pending cases has also been considered by this Court in Company Petition No. 446/2013 titled Citicorp International Limited v. and Shiv-Vani Oil & Gas Exploration Services Limited. and in Company Petition No. 147/2014 titled Uma Sharma V. Octagon Builders & Promoters & Anr. and wherein the Court relying on the decision of the Supreme Court in Action Ispat and Power Limited v. Shyam Metalics and Energy Limited (2021) 2 SCC 641 has observed as under:

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/11/2023 at 23:09:52 "20. As per the proviso highlighted above, upon the application being filed by any of the parties to the proceedings, the transfer may be made by the Court in terms of the second proviso of Section 434 (1) of the Companies Act, 1956. In Action Ispat (supra), if the winding up is not at an advanced stage, the High Court may transfer the matter to the NCLT. The relevant portion of the said judgement is set out below:

31. Given the aforesaid scheme of winding up under Chapter XX of the Companies Act, 2013, it is clear that several stages are contemplated, with the Tribunal retaining the power to control the proceedings in a winding up petition even after it is admitted. Thus, in a winding up proceeding where the petition has not been served in terms of Rule 26 of the Companies (Court) Rules, 1959 at a pre-admission stage, given the beneficial result of the application of the Code, such winding up proceeding is compulsorily transferable to the NCLT to be resolved under the Code. Even post issue of notice and pre admission, the same result would ensue. However, post admission of a winding up petition and after the assets of the company sought to be wound up become in custodia legis and are taken over by the Company Liquidator, section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case."

5. On a conjoint reading of Rule 5 of the notification dated 7 th December, 2016 along with the aforementioned judgment, it is This is a digitally signed order.

6. Therefore, the present petition is transferred to the NCLT. The claimant in this petition is free to pursue its claim before the NCLT.

7. List the matter before the Principal Bench, NCLT on 10.01.2024.

8. The electronic records of this Court shall be transmitted to the Registrar NCLT within one week along with a copy of today‟s order.

9. The petition, along with all pending applications, is disposed of in the above terms.

DHARMESH SHARMA, J.

NOVEMBER 29, 2023 sp This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 30/11/2023 at 23:09:53

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Delhi High Court - Orders