The National Company Law Tribunal dismissed an application under Section 9 of the IBC. The court held that the operational debt was not justified due to the expiry of the underlying agreement, lack of a subsequent agreement, and the existence of a pre-existing dispute.
The petition under Section 9 of the IBC is rejected and dismissed without costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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THE NATIONAL COMPANY LAW TRIBUNAL “CHANDIGARH BENCH, CHANDIGARH” (Exercising powers of Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016)
CP (IB) No. 313/Chd/Hry/2019
Under Section 9 of the Insolvency and Bankruptcy Code, 2016.
In the matter of:
Amatya Business Consulting Pvt. Ltd. having their registered office at 407, 4th Floor, Pearls Business Park, Netaji Subhash Place, Pitampura Delhi-110034 CIN: U74900DL2012PTC238499
…Petitioner-Operational Creditor
Vs.
Health Biotech Limited
having its registered office at SCO 162-164, Indian Airlines Towers Top Floor, Sector-34-A Chandigarh- 160036 CIN: U24233CH2001PLC024356
…Respondent-Corporate Debtor
Judgement delivered on: 09.02.2023
Coram: Hon’ble Mr. Harnam Singh Thakur, Member (Judicial) Hon’ble Mr. Subrata Kumar Dash, Member (Technical)
For the Petitioner- : Mr. Krishan Vrind Jain, PCS Operational Creditor
For the RespondentCorporate Debtor : Mr. Nitin Kaushal, Advocate
CP (IB) No. 313/Chd/Hry/2019
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Per: Harnam Singh Thakur, Member (Judicial)
JUDGMENT
The present petition is filed, under Section 9 of the Insolvency and Bankruptcy Code, 2016 ( for brevity ‘IBC’ / ‘Code’ ) , by Amatya Business Consulting Pvt. Ltd. through its General Manager (Finance), Mr. Raghuvir Mardolker ( for brevity ‘Operational Creditor’ / ‘Petitioner’ ), with a prayer to initiate Corporate Insolvency Resolution Process ( CIRP ) in case of Health Biotech Limited ( for brevity ‘Corporate Debtor’ /
‘Respondent’ ).
CP (IB) No. 313/Chd/Hry/2019
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i.e.when the bill was raised and sent to Corporate Debtor. Copy of invoices (Annexure-4), Ledger Accounts Statement (Annexure-5), Agreement with Health Biotech Limited (Annexure-10), Statement of Bank Account (Annexure-11) is attached with the main petition. 5. A demand notice is stated to be issued by the operational creditor on 03.04.2019 and the same was delivered as the postal receipts and tracking report are attached at Annexures- 7 and 8 with the main petition. The corporate debtor gave a reply dated 10.04.2019 to the demand notice wherein it was stated that as per Clause 7 of the Agreement, the agreement was valid for a period of 6 months from the date of the agreement and the responsibilities including disbursement of amounts from banks/ financial institution were to be performed within stipulated period of 6 months starting from 06.06.2017 and ending on 05.12.2017 i.e. the validity of the Agreement. The Operational Creditor failed to perform such duties within the stipulated time and after the expiry of the agreement the Corporate Debtor had no relation to the said services.
CP (IB) No. 313/Chd/Hry/2019
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agreement between the parties subsequent to the aforementioned agreement and the claim is based upon an invoice dated February,2019. The application does not disclose any details of the transaction on account of which the debt fell due. As per Clause 3 no agreement much less disbursal of loan amount could be arranged by the Operational Creditor within the contract period. As per Clause 4 the advance fee already stands paid to the applicant and the same has been duly admitted by the applicant. The claim is based on the invoice which is raised more than 15 months from the expiry of the agreement, in the absence of an agreement the applicant is precluded from raising any demand. The invoice has been raised for professional charges for consulting services relating to funding of one-time settlement. The invoice appears to be raised in lieu of a success fee of Rs.25 lakhs. The Operational Creditor sent an email dated 07th February claiming a successful payment of OTS dues to SBI which was a malicious intent to raise a claim. It is further submitted that there is a pre-existing dispute between the parties.
CP (IB) No. 313/Chd/Hry/2019
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27,14,000/- (Clause 4 of the agreement). The applicant raised bills in 2019 for a mandate entered in the year 2017. It is further submitted that the existence of disputes raised by the respondent was after the issuance of the demand notice and not at the time of availing services of the applicant.
i. Whether or not the present application discloses any details of the
transaction on account on which the operational debt fell due?
It is submitted that no transaction has been provided by the applicant to show as to how the amount is being claimed fell due. The claim was based upon the invoice raised more than 15 months from the expiry of the agreement without having entered into any subsequent agreement for providing any consultancy service. In absence of the agreement, the Operational Creditor is precluded from raising any demand/ invoice upon the
CP (IB) No. 313/Chd/Hry/2019
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Corporate Debtor. The invoice had been raised for a consulting service relating to funding of One Time Settlement. The invoice appeared to be raised in lieu of success fee of Rs. 25 lakhs. There was no successful transaction entered at the behest of the applicant till 05.12.2017.
ii. Whether the documentary evidence furnished with the application
shows that the aforesaid debt is due and payable and has not yet been paid ?
The agreement was entered into between the parties for the period of six months commencing from 06.06.2017 to 05.12.2017. As per Clause 3 of the agreement the Operational Creditor has certain responsibilities. The remuneration was to be paid as per Clause 4 of the Agreement. The applicant failed to perform his responsibilities and no agreement much less disbursal of loan amount could be arranged by the applicant within contract period i.e. till 05.12.2017. As per clause-4, the advance fee already stands paid to the operational creditor and the same has been duly accepted by the Operational Creditor. As per the agreement dated 06.06.2017, the terms and conditions between the parties were set out. The Clause 7 clearly provides that “ Termination- The Agreement with AMATYA and will be valid for a period of 6 months commencing from the date of this Agreement ”. The claim was based upon the invoice raised more than 15 months from the expiry of the agreement without having entered into any subsequent agreement for providing any consultancy service. In absence of any fresh agreement, the Operational Creditor is precluded from raising any demand/ invoice upon the Corporate Debtor. The invoice had been raised for a consulting service relating to funding of One Time Settlement. The invoice
CP (IB) No. 313/Chd/Hry/2019
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appeared to be raised in lieu of a success fee of Rs. 25 lakhs. There was no successful transaction entered at the behest of the applicant till 05.12.2017. Moreover, respondent had availed consulting services, but the invoice had been raised for professional charges for consulting services relating to funding of one-time settlement. The invoice appeared to be raised in lieu of a success fee of Rs.25 lakhs. Therefore, the documentary evidence furnished with the application fails to show that the aforesaid debt is due and payable and has not yet been paid.
iii. Whether or not there is any pre-existing dispute between the parties?
The Corporate Debtor vide its reply to the demand notice dated 10.04.2019 denied any liability towards the applicant and raised a dispute regarding the invoice dated 07.02.2019. The existence of dispute under Section 8(2)(a) of the Code stands settled by the Hon’ble Supreme Court of India in the case of Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. (2018) 1 SCC 353 , wherein it was stated that:-
“38. It is, thus, clear that so far as an operational creditor is concerned, a demand notice of an unpaid operational debt or copy of an invoice demanding payment of the amount involved must be delivered in the prescribed form. The corporate debtor is then given a period of 10 days from the receipt of the demand notice or copy of the invoice to bring to the notice of the operational creditor the existence of a dispute, if any. We have also seen the notes on clauses annexed to the Insolvency and Bankruptcy Bill of 2015, in which “the existence of a dispute” alone is mentioned. Even otherwise, the word “and” occurring in Section 8(2)(a) must be read as “or”
CP (IB) No. 313/Chd/Hry/2019
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keeping in mind the legislative intent and the fact that an anomalous situation would arise if it is not read as “or”. If read as “and”, disputes would only stave off the bankruptcy process if they are already pending in a suit or arbitration proceedings and not otherwise. This would lead to great hardship; in that a dispute may arise a few days before triggering of the insolvency process, in which case, though a dispute may exist, there is no time to approach either an arbitral tribunal or a court. Further, given the fact that long limitation periods are allowed, where disputes may arise and do not reach an arbitral tribunal or a court for upto three years, such persons would be outside the purview of Section 8(2) leading to bankruptcy proceedings commencing against them. Such an anomaly cannot possibly have been intended by the legislature nor has it so been intended. We have also seen that one of the objects of the Code qua operational debts is to ensure that the amount of such debts, which is usually smaller than that of financial debts, does not enable operational creditors to put the corporate debtor into the insolvency resolution process prematurely or initiate the process for extraneous considerations. It is for this reason that it is enough that a dispute exists between the parties”.
In light of the above judgment, the creditor raised an invoice relying on the agreement dated 06.06.2017 which expired on 05.12.2017. Therefore, the invoice raised is without any transaction/service delivery and cannot be a ground for initiation of CIRP. The present application is not maintainable inter-alia due to a pre-existing dispute between the parties as well as no explanation/ details forthcoming as to the basis of the invoice dated 06.06.2017.
CP (IB) No. 313/Chd/Hry/2019
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Sd/-
(Subrata Kumar Dash) Member (Technical)
Sd/-
(Harnam Singh Thakur) Member (Judicial)
February 09, 2023 SM/TB
CP (IB) No. 313/Chd/Hry/2019
3 issues framed by the court
Whether the application discloses details of the transaction on account of which the operational debt fell due?
Whether the documentary evidence shows that the debt is due and payable and has not been paid?
Whether there is a pre-existing dispute regarding the validity of the debt?
Colour shows how this judgement treated each authority
Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd.Explained¶55
Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd. (2018) 1 SCC 353 · Who else cites this
2 provisions across 1 enactments
Amatya Business Consulting Pvt. Ltd.
Health Biotech Limited
Harnam Singh Thakur
Subrata Kumar Dash
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
