Tribunal denies petition under Insolvency & Bankruptcy Code due to pre-existing dispute over legal services payment.

The Tribunal rejected the petition under the Insolvency and Bankruptcy Code, 2016, as there was a substantial pre-existing dispute between the parties regarding payment for legal services provided for an IPO. The Corporate Debtor had made initial payments as per the agreement, but further payments were contingent on specific milestones not achieved. The Tribunal found that the Operational Creditor did not raise invoices based on standard hourly rates within the stipulated period. Due to the pre-existing dispute and failure to meet conditions in the agreement, the petition was not admitted, and no costs were awarded.

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Issues Involved:
1. Validity of the Petition under the Insolvency and Bankruptcy Code (IBC), 2016.
2. Alleged default in payment by the Corporate Debtor.
3. Pre-existing dispute between the parties.
4. Limitation period for filing the petition.

Issue-wise Detailed Analysis:

1. Validity of the Petition under the Insolvency and Bankruptcy Code (IBC), 2016:
The petition was filed by the Operational Creditor under Section 9 of the IBC, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Operational Creditor claimed an outstanding amount of Rs. 1,29,42,660/- (principal amount of Rs. 97,31,324/- along with interest amount of Rs. 32,11,336/-) based on an Agreement for Legal Services dated 15.09.2014.

2. Alleged default in payment by the Corporate Debtor:
The Operational Creditor provided legal services for the initial public offering (IPO) of shares in the Corporate Debtor and raised three invoices. The Corporate Debtor allegedly failed to pay one of these invoices amounting to USD 150,221.13. Despite repeated requests and a Demand Notice dated 27.03.2018, the payment was not made.

3. Pre-existing dispute between the parties:
The Corporate Debtor contended that the petition was filed beyond the limitation period and that the Operational Creditor did not provide the entirety of the services as agreed. The Corporate Debtor argued that the services were to be provided to financial institutions and not directly to the Corporate Debtor. The payment schedule was contingent upon specific milestones, such as the filing of the draft red herring prospectus (DRHP) with SEBI, which was never completed. The Corporate Debtor had already paid USD 50,000 and USD 13,178.34 for initial services and disbursements. The remaining amounts were not payable as the IPO and private placement were not completed within 12 months. The Corporate Debtor also highlighted that the standard hourly rates were never communicated, and the invoice was raised arbitrarily after the expiry of the 12-month period.

4. Limitation period for filing the petition:
The Corporate Debtor argued that the petition was filed almost three months after the limitation period expired. The Agreement stipulated that any invoice should be raised within 12 months from the date of the Agreement if the IPO and private placement were not completed. The limitation period for claiming any amounts under the Agreement ended on 15.09.2018, but the petition was filed on 06.12.2018.

Judgment:
The Tribunal observed that the Agreement for Legal Services was entered on 15.09.2014, and the payment schedule was clearly outlined in Clause 2. The Corporate Debtor had made initial payments as per the Agreement, but no further payments were made as the milestones were not achieved. The Tribunal noted that the Operational Creditor did not raise any invoice based on the standard hourly rates within the stipulated period. The Tribunal also found that there was substantial pre-existing dispute between the parties, as evidenced by numerous email correspondences, including one dated 21.06.2016, where the Corporate Debtor requested a waiver of the outstanding amount.

In view of the pre-existing dispute and the failure to meet the stipulated conditions in the Agreement, the Tribunal decided not to admit the petition under Section 9(5)(ii)(d) of the IBC, 2016. The application was rejected, and no order as to costs was made.

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