G.S. Patel, J.@mdashThe respondent company, Yahoo India Pvt. Ltd. ("Yahoo") provides various Internet and Web-based services. The petitioner, Inflow Technologies Pvt. Ltd. ("Inflow") is a distributor of various information-technology goods, products and services, including hardware and software. Briefly stated, Inflow''s case is that it had an arrangement with one of its ''channel partners'' or resellers, one Apara Enterprise Solutions Pvt. Ltd. ("Apara"), stemming from certain inter-se payment issues. Inflow and Apara agreed that any amounts owed to the latter by third party purchasers would be paid into an Inflow-Apara joint account, styled as an ''escrow'' account. Yahoo is one such third party purchaser. Inflow claims that Yahoo agreed to be bound by this ''escrow'' arrangement. Certain products were routed from Inflow to Apara and then to Yahoo. Inflow''s invoices are drawn on Apara and show Yahoo as the end-customer. Inflow claims that certain invoices, aggregating to Rs. 8,56,48,460.90, remain unpaid; and that Yahoo has not paid the invoices in this amount into the escrow account. Having heard Dr. Saraf for Inflow and Mr. Tulzapurkar for Yahoo, and, with their assistance, having gone through the record, I am not satisfied that there exists any creditor-debtor relationship between Inflow and Yahoo, or that the amount claimed by Inflow is, in point of fact, legitimately due. Indeed, there is material to show that some, and perhaps all but one, of the invoice amounts claimed by Inflow have been paid by Yahoo, though not into the escrow account. Whether or not Yahoo was or could in law be bound by any such escrow agreement between Inflow and Apara is another question in doubt. I am unable to agree with Dr. Saraf''s submission that Yahoo is indebted to Inflow and that it must be deemed to be unable to pay its debts. This petition must be dismissed, for the reasons that follow.
2. In 2008, Inflow took up a distributorship for the software and IT products of an overseas company called Network Appliances or NetApp. Inflow had its own channel partners or resellers in India. One of these was Apara. The system or method of supply of NetApp products was this: when an end-user or customer placed an order with one of Inflow''s channel partners or resellers, Inflow procured the required IT-related product from NetApp and had it supplied to the end-user through the channel partner or reseller in question. Inflow''s liability to pay NetApp stood outside any recoveries it made from its resellers, partners or end-users.
3. Apara had placed several orders with Inflow for NetApp products for supply to Yahoo and to other end-customers. Inflow claims that as of July 2009, Apara owed it about Rs. 1.42 crores. Apara seemed to be unable to pay this amount. Inflow refused to make further supplies till its dues were cleared. An escrow agreement dated 9th July 2009 was executed between Inflow, Apara and Axis Bank. A joint account was opened with Axis Bank in the names of Inflow and Apara. All end-customer payments were agreed to be routed through this account.
4. Inflows'' claim that the escrow agreement was suggested by Yahoo and Apara together because Yahoo needed the NetApp products ''desperately'' seems to me to be extremely unlikely. There is no material to support this. Yahoo was not a party to this escrow agreement. No end-customer was a party to it. The agreement was also not limited to payments due from Yahoo. Yet this is the foundation on which the edifice of Inflows'' entire claim against Yahoo rests.
5. There then follows in the petition, an incremental accretion to this claim. Paragraph 11 of the petition is a narrative of what supposedly transpired between Apara and Inflow and assurances said to have been given by the former to the latter. It is entirely unsubstantiated. It is made only in order to bring Yahoo into the sweep and ambit of the escrow agreement and to bind it to the terms of that agreement. Inflow builds on that construct--that Yahoo was bound by the terms of the agreement and is therefore Inflow''s direct debtor--in the subsequent paragraphs 12 to 14 which refer to correspondence between 2009 and 2010. I will turn to that correspondence presently. Inflow then contends that not only was Yahoo mentioned as the end-customer on every invoice raised by Inflow on Apara, but a term in Apara''s own corresponding invoices on Yahoo specifically required payment to be made to the joint escrow account with Axis Bank. This, Inflow claims in paragraph 16, resulted in an "understanding" between the parties and was sufficiently documented in the correspondence read with the back-to-back invoices. The escrow mechanism is therefore described as "tripartite". Copies of the invoices (raised by Inflow on Apara and by Apara on Yahoo) are annexed. Inflow sent a statutory notice to Yahoo on 1st June 2011. Yahoo replied, and further correspondence was exchanged till about February 2012, with Yahoo maintaining that it had no contractual privity with Inflow and that while it had made some payments against Apara invoices into the escrow account, it had paid other Apara invoices directly and that there was, therefore, no liability at all. Inflow, for its part, contended that it was not concerned with any direct payments that Yahoo might have made to Apara, as there was a ''tripartite agreement'' and that several invoices did not show payment into the escrow account and were hence due.
6. Prima-facie, this formulation of Inflow''s claim is unconvincing. It is difficult to see how, on the escrow agreement and the invoices, any relationship of creditor and debtor between Inflow and Yahoo can be said to have been established. There is, too, the matter of Yahoo''s contention of having paid some invoices directly to Apara, and Inflow''s only response being that that is a matter of no moment. Perhaps it is for this reason that Dr. Saraf, learned Counsel for Inflow, attempted to spell out from the correspondence the so-called tripartite escrow agreement that he claims binds Yahoo to making payments only into the Axis Bank escrow account. He took me through a compilation of documents (all annexed to the rival pleadings and only put together for convenience). The first of these is an undated letter from Apara to Inflow. It does not mention Yahoo by name at all, though it is with reference to the escrow agreement and is, therefore, presumably of around June or July 2009. Then there is a letter of 29th July 2009 from Apara to Yahoo, asking Yahoo to make payment into the escrow account. There are the invoices to which I have already referred. Dr. Saraf lays great emphasis on the next document, at page 19 of the compilation. This is an undated letter from Yahoo to Apara. It does not establish any privity between Yahoo and Inflow. It only says that there has been a delay in payment, and Yahoo acknowledges that it will make payment of the invoices mentioned in that letter into the escrow agreement. Again, no such tripartite agreement can be unequivocally discerned from this document. There then follow some letters of 26th February 2010 from Apara to both Yahoo and Inflow and from Inflow to Yahoo and Apara all demanding payment into the escrow account. This is repeated in the correspondence of March 2010. There is, finally, a letter of 26th May 2010 by which Yahoo acknowledged to both Apara and Inflow that it had paid one particular invoice into the escrow account. What of the correspondence between the parties'' advocates? Dr. Saraf referred to Yahoo''s advocates'' reply dated 14th July 2011 in paragraph 3 of which Yahoo''s advocates said that "a payment made to [Apara] towards the purchase of the NetApp Products constitutes a full and final discharge of our client''s payment obligations to you." This, Dr. Saraf contends, is a clear admission of a tripartite agreement.
7. I disagree. This is altogether too slender a thread on which to hang such a claim. There is no unequivocal commitment by Yahoo to be bound by any such agreement for every invoice. The most that might be said is that for certain invoices, Yahoo agreed to make payment into the escrow account, and nothing more.
8. In its affidavit in reply, Yahoo raised these defences: First, that there was no debt, and no debtor-creditor relationship established. Evidently, this is pivotal, and it was for Inflow to establish the existence of such a relationship. Yahoo also pointed out that Inflow had already filed civil proceedings in Bangalore against Yahoo and others. Apara is a party to that suit. Relief is sought against both Yahoo and Apara jointly and severally. In September 2009, Apara had informed Yahoo of the creation of the escrow account because "certain reconciliations" were being carried out between Apara and Inflow. It asked Yahoo to make payment into the escrow account jointly held by Apara and Inflow. Yahoo also pointed out that Apara''s letters of 29th July 2009, 26th February 2010, 15th March 2010 and 25th March 2010, all annexed to the petition as Exhibits "F" to "F-3", were merely requests or instructions from Apara as to the mode of payment to be effected. It mattered not to Yahoo what payment mode Apara preferred. It was, therefore, at Apara''s request that Yahoo issued some payment cheques specifying the escrow account number. But it also issued some cheques directly to Apara. It seems that Apara did then transfer the amount of some of these Yahoo payments (but not all) into the escrow account. Inflow seems not to have objected at the time. It was not till 2nd July 2010 that Inflow made a grievance about direct payments. Inflow''s email of that date is annexed to the affidavit in reply. In this, Inflow specifically asked that future cheque payments be made into the escrow account. As for payments already made, it asked for payment advice details to facilitate reconciliation. From this, it seems that Apara, though it received payment from Yahoo, did not transmit some of those payments into the escrow account.
9. Inflow''s affidavit in rejoinder speaks of the dishonour of some of Apara''s cheques. This is entirely irrelevant. It can form no part of Yahoo''s liability to Inflow. The rest of the rejoinder does not carry the matter further.
10. A convenient tabulation of the various invoices and payments in question was tendered by Mr. Tulzapurkar, learned Senior Counsel for Yahoo. That tabulation makes for the most interesting, and telling, reading. Between 31st July 2009 and 9th July 2010, Yahoo placed 16 separate purchase orders. Each has a corresponding Apara invoice number. Inflow''s claim is based on five of these purchase orders:
(a) No. 2478 of 25th June 2009,
(b) No. 2541 of 15th July 2009;
(c) No. 2908 of 5th November 2009;
(d) No. 3134 of 18th December 2009; and
(e) No. 3472 of 29th March 2010.
Apara''s letter of 29th July 2009 asking Yahoo to make payment into the escrow account is immediately after the second of these; the first two invoices, (a) and (b) in the list above, were paid directly to Apara. Between the invoices at (b) and (c) there were two payments. One was against Yahoo''s purchase order no. 2469 dated 22nd June 2009. It was paid on 28th October 2009 into the escrow account. The second is Yahoo''s purchase order no. 3052 dated 7th December 2009 paid on 24th March 2010 directly to Apara, i.e., not into the escrow account. Inflow has made no claim whatever in respect of this payment. After the payment of purchase order at item (d) above and before the payment of purchase order at item (e), Yahoo again made as many as five direct payments to Apara. Again, Inflow makes no claim for any of these. After the purchase order at item (e) there are three further payments against three different purchase orders; all were made into the escrow account, but all three purchase orders were paid after Inflow''s email of 2nd July 2010 to Yahoo.
11. The upshot of this is that Inflow''s claim against Yahoo is in respect of, and only of, those payments that Yahoo made directly to Apara but which Apara did not then route into the escrow account. Where Apara did make such corresponding payments into the escrow account (i.e., by depositing into the escrow account the amounts it received from Yahoo), Inflow makes no claim at all, but accepts the payment. There are six such transactions, Yahoo to Apara and Apara to the escrow account. They are all after the so-called tripartite escrow agreement that Inflow claims binds Yahoo. In itself, this undoes Inflow''s case of a tripartite and binding escrow agreement, and of Yahoo''s direct payments to Apara being irrelevant or of no consequence. It is worth noting that the petition is entirely silent about these six payments, although they cannot have been unknown to Inflow. Nowhere in the petition or in correspondence, even in its advocates'' correspondence, does Inflow even attempt to explain this incongruity in its own conduct.
12. In short, Inflow seeks to recover from Yahoo what Yahoo has already paid to Apara but which Apara has not paid into the escrow account. The suggestion that Yahoo must, its payments notwithstanding, be made to pay twice over is one that needs only to be stated to be rejected.
13. Seen in this context, Dr. Saraf''s reliance on the decision of a single Judge of this Court
14. It seems to me to be more than abundantly clear that Inflow''s case is entirely speculative. It proceeds on a fanciful supposition, unsubstantiated by facts, unsupported by documents and belied by its own conduct, that Inflow is Yahoo''s creditor. It is not. The reasons are many. Yahoo has paid the invoices on which Inflow founds its claim. It may not have paid these into the escrow account but that does not mean they were unpaid. If Apara, to whom direct payment was made of the invoices in question, did not in turn transmit them to the escrow account, then that is a matter between Inflow and Apara, one of no concern whatever to Yahoo. There is no cogent material that there ever existed any such tripartite escrow contract binding Yahoo such that its direct payments to Apara were to count for nothing. Inflow''s suggestion is that if Yahoo paid Apara directly, it is Yahoo that should file recovery proceedings against Apara. That suggestion, wholly untenable, posits the existence of a binding and inflexible tripartite agreement with clearly spelled out terms applicable to all invoices and payments. There is none. Inflow''s cause is also betrayed by its own conduct. For, in its email of 2nd July 2010, it spoke of future payments being made into the escrow account and sought payment advice details for past direct payments. That puts the matter beyond the pale. Mr. Tulzapurkar is, therefore, entirely correct in his submission that there is no debtor-creditor relationship between Yahoo and Inflow. The escrow account was but a mode of payment. It brought no privity between Yahoo and Inflow. None of Inflow''s invoices are drawn on Yahoo, but always only on Apara. That they show Yahoo as the end-customer does not establish any direct privity; it only specifies a destination, not a contractual liability. The question in this case is not whether the defence is bona fide and substantial but whether there is a case to be answered at all. In my view, there is not. The petition is as thoroughly misconceived as it is misdirected and quite possibly mischievous as well. Such a petition deserves only to be dismissed. It is.
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