Moorgate Industries UK Ltd v Mittal

A payment default under a settlement agreement may entitle a creditor to pursue the original judgment debt where the agreement uses cumulative language and does not require prior termination. Equitable set-off is available where cross-claims between the same parties arise in a sufficiently close enforcement context that it would be manifestly unjust to enforce one without taking the other into account.

A bankruptcy petition based on a statutory demand should not claim more than the demand, but an excess is a remediable defect where no substantial injustice is caused. An adjournment for payment requires a reasonable prospect of full payment within a reasonable period, supported by credible evidence.

Moorgate petitioned for the bankruptcy of Pramod Mittal in respect of a debt exceeding £139 million arising from an arbitral award, guarantees and a Commercial Court order. Mr Mittal opposed the petition on grounds concerning a settlement agreement, Moorgate’s set-off of a £66,000 costs award, alleged defects in the petition, and proposed future sources of payment.

The court considered whether Moorgate could pursue the full judgment debt without terminating the settlement agreement, whether the costs award could be set off, whether the petition required amendment or re-service, and whether the bankruptcy proceedings should be adjourned to allow payment.

1. Settlement agreement. The instalment payments required by clause 3.1.2 had not been made. The wording of clause 4, including the connector “and/or”, entitled Moorgate to pursue the full judgment debt on payment default alone. It did not first have to terminate the agreement. Moorgate nevertheless remained bound by clause 3.5, and had sufficiently complied with its obligations to take appropriate steps to obtain payment from GIKIL.
2. Set-off. Insolvency set-off under Insolvency Act 1986, section 323, and rules 14.24 and 14.25 of the Insolvency (England and Wales) Rules 2016 did not apply because neither party was already in formal insolvency proceedings. The governing test for equitable set-off, stated in Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667, was whether the claims were so closely connected that it would be manifestly unjust to enforce one without taking the other into account. The judgment debt and the costs award arose between the same parties in the continuing enforcement process and were sufficiently connected. The fact that Mr Mittal was jointly liable for one debt but solely entitled to the other did not prevent set-off.
3. Costs of the earlier petition. Even if set-off had been unavailable, the court would not stay the present petition under section 266(3) merely because costs from the withdrawn petition remained unpaid. Martin v Earl Beauchamp (1883) 25 Ch D 12 (CA) and James M’Cabe v Governor and Company of the Bank of Ireland (1889) 14 App Cas 413 (HL) concerned successive proceedings following a determination on the merits. The earlier petition had been withdrawn without such a determination.
4. Defects in the petition. The petition was not required to refer to the settlement agreement because default restored liability for the judgment debt. However, under rule 10.9 of the Insolvency (England and Wales) Rules 2016 and paragraph 12.2.2 of the Insolvency Practice Direction, a petition based on a statutory demand should not include additional interest accruing after the demand. The defect did not invalidate the proceedings because no substantial injustice had been caused, and it was remedied by reducing the petition debt to the amount in the statutory demand. No conversion of a foreign-currency debt into sterling was required.
5. Time to pay. Applying the principles summarised in State Bank of India v Mallya [2020] EWHC 96 (Ch), an adjournment required a reasonable prospect of the petition debt being paid in full within a reasonable period, supported by credible evidence. Mr Mittal’s proposed mediation, liquidation recovery and related payments were speculative and did not satisfy that test. A bankruptcy order was therefore made.

First-instance decision. No appellate history was stated in the judgment.