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2019 Supreme(Del) 1579
IN THE HIGH COURT OF DELHI
PRATHIBA M. SINGH, J.
IFCI Factors Limited - Plaintiff
Versus
Ramsarup Industries Limited & Others - Defendants
CS. (COMM). No. 752 of 2018
Decided On : 01-08-2019
For the Plaintiff :Anupam Srivastava, Dhairya Gupta, Advocates, Lalit Narayan Joshi, AR.
For the Defendants :Dileep Tandon, Neha T. Phookan, Advocates.
The main legal point established in the judgment is the maintainability of a suit for recovery of receivables under the Factoring Regulation Act, 2011 and the applicability of the moratorium under Section 14 of the IBC to guarantors.
Headnote:
Factoring Agreement - Recovery of Receivables - Factoring Regulation Act, 2011 - Section 14 of the Insolvency and Bankruptcy Code, 2016 - Section 138 of the Negotiable Instruments Act, 1888
Fact of the Case:
Plaintiff, a Non-banking Finance Company, filed a suit against the Defendants for recovery of receivables under a factoring agreement. Defendant No.1 faced insolvency proceedings, and Defendant No.2, the guarantor, raised various defenses including limitation and maintainability of the suit.
Finding of the Court:
The court found that the suit was maintainable under the Factoring Regulation Act, 2011 and the amendment to the CPC, and the moratorium under Section 14 of the IBC did not apply to Defendant No.2. The court also held that the suit was within limitation and decreed the suit for a sum of Rs. 10 crores along with interest against Defendant No.2.
Issues: The issues involved the maintainability of the suit under the Factoring Regulation Act, 2011, the applicability of the moratorium under Section 14 of the IBC, and the defenses raised by Defendant No.2.
Ratio Decidendi: The court held that the suit was maintainable under the Factoring Regulation Act, 2011 and the amendment to the CPC, and the moratorium under Section 14 of the IBC did not apply to Defendant No.2. The court also found that the suit was within limitation and decreed the suit for a sum of Rs. 10 crores along with interest against Defendant No.2.
Final Decision: The suit was decreed for a sum of Rs. 10 crores along with interest at the rate of 8% per annum from the date of filing of the suit, till date, against Defendant No.2 to be paid to the Plaintiff within a period of three months from the date of the judgment.
JUDGMENT :
I.A. No. 13840/2018 (seeking leave to defend) & I.A. No.13841/2018 (for delay)
1. Plaintiff – IFCI Factors Limited has filed the present suit under Order XXXVII CPC against the Defendants - assignor/principal borrower, Ramsarup Industries Limited, and guarantor, Mr. Ashish Jhunjhunwala – Defendant No. 2. The suit was registered and summons were issued. Defendant No.1 – Ramsarup Industries Limited filed I.A. No.7212/2018 under Section 151 CPC read with Section 14 of the Insolvency and Bankruptcy Code, 2016 (hereinafter ‘IBC’) for stay of the present suit proceedings. On 7th September, 2018, it was ordered as under:
“…
2. Since the claim is pending and the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 has commenced, insofar as the Defendant No.1 is concerned, the suit will remain stayed. However, insofar as Defendant No. 2 is concerned, the suit shall proceed. Upon the end of the moratorium period, liberty is given to the Plaintiff to revive the suit qua Defendant No.1, depending upon the outcome of the proceedings in the NCLT.
3. I.A. is disposed of.”
2. Defendant No.2 had filed I.A. No.13840/2018 seeking leave to defend. The same was filed with condonation of delay in re-filing being I.A. No.13841/2018. Delay in re-filing of the said application is condoned. I.A. is disposed of.
3. Submissions were heard on the application for leave to defend.
4. The case of the Plaintiff is that the Plaintiff is a Non-banking Finance Company (hereinafter ‘NBFC’). Defendant No.1 is, inter alia, engaged in the business of manufacturing of wires, TMT bars and steel. It had made supplies to various clients, who were the approved debtors. Defendant No.1 approached the Plaintiff for grant of domestic factoring facility (hereinafter ‘facility’). Defendant No.2 is a director of Defendant No.1. The facility was sanctioned by the Plaintiff on 30th December, 2009. An agreement for factoring of the receivables (hereinafter ‘factoring agreement’) dated 31st December, 2009 was entered into with Defendant No.1.
5. Under the factoring agreement, the Plaintiff was to disburse up to 80% of Defendant No. 1’s invoice value raised by the approved debtors, in exchange for Defendant No. 1’s receivables, interest and other charges in terms of the schedule to the agreement. After execution of the facility agreement, Defendant No.2 executed a guarantee in favour of the Plaintiff dated 31st December, 2009. The amount guaranteed was Rs.10 crores along with interest at the agreed rate, cost, charges and other expenses. Sometime in 2011, further approved debtors were added. The Plaintiff had disbursed 80% of the invoice value of the various approved debtors. A total sum of Rs.10,00,07,323/- was disbursed by the Plaintiff, to the Defendant No.1. Under the agreement, apart from the amounts disbursed, the charges payable were as under:
…
| 6. Discount Charges (Clause 7) | 13.00% p.a. |
| 7. Handling charges (Clause 7) | 0.15 % of the total amount of invoices factored on approved Debtors, payable monthly (with a minimum of Rs. 250.00 per invoice). + Service Tax as applicable. |
| 8. Limit Set Up Charges (Clause 7) (Non- Refundable) | 0.750 % of the prepayment limit + Service Tax as applicable. |
| 9. Other Charges (Clause 7) | (a) As applicable, from time to time. (b) Penal Charges @ 4 % over the discount charge, referred to in Clause No. 6 above, will be levied in case the account is irregular or payments are not made when demanded. |
6. Notices of assignment of debts were also duly issued by Defendant No.1 to all the debtors and the acceptance was issued by the debtors in favour of the Plaintiff.
7. Under the guarantee issued by Defendant No.2 in favour of the Plaintiff it was clearly undertaken that the guarantor would be liable upto a sum of Rs.10 crores. The relevant clause in the guarantee reads as under:
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