2024 (9) TMI 327 - Tri - Insolvency and Bankruptcy

Section 9 IBC petition admitted against corporate debtor by operational creditor, arbitration application dismissed as non-maintainable post-admission

NCLT Bengaluru admitted petition under Section 9 IBC 2016 filed by operational creditor against corporate debtor, finding existence of debt and default ... Seeking to initiate Corporate Insolvency Resolution Professional Process - Petitioner is Operational Creditor or not - Existence of debt and dispute or not - HELD THAT:- This Adjudicating Authority is of the considered opinion that there is no reason to deny the petition filed under section 9 of the IBC, 2016 by the Operational Creditor to initiate CIRP against the Corporate Debtor, since the existence of a debt and a default in the payment of debt is clearly established. Therefore, the instant Company Petition bearing CP (IB) No. 149/2023 is admitted against the Corporate Debtor and moratorium is declared in terms of Section 14 of the Code - Petition admitted. Prayer to Tribunal to pass directions under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the Parties in the present dispute to arbitration - contention of the Applicant is that since the claims of BCCI arise out of a purported Agreement and the said Agreement consists of a valid Arbitration clause under Section 19 of the Agreement the same ought to be referred to Arbitration by this Adjudicating Authority - HELD THAT:- The Adjudicating Authority has to either reject or Admit the Application and cannot postulate a third option. In this matter, the application U/s 9 of the IBC has been admitted by the Order passed today, therefore, the application for referring the matter for Arbitration is not maintainable - application dismissed. Issues Involved:1. Whether the Petitioner is an 'Operational Creditor.'2. Whether there was a contractual arrangement/agreement between the parties, evidencing the existence of Operational Debt.3. Whether the Corporate Debtor has defaulted as per Section 3(12) of the IBC.4. Whether there was any pre-existing dispute between the parties.5. Whether the instant Application is not maintainable due to lack of Proper Authorisation.Detailed Analysis:1. Whether the Petitioner is an 'Operational Creditor':The primary question is whether there's an 'Operational Debt' as defined under the Code. Section 5(21) of the Code defines 'Operational Debt' as a claim in respect of the provision of goods or services. The Respondent argued that the 'Team Sponsor' Agreement was a mutual setup for gains and that the Petitioner merely granted 'Rights' and no 'services' were provided. However, the Tribunal noted that the Agreement included marketing, advertisement, and promotional services, among others. Granting exclusive advertising rights amounts to providing services. Reliance was placed on the judgment in Somesh Choudhary vs. Knight Riders Sports Pvt. Ltd., which held that granting exclusive rights and licenses constitutes the provision of services. Hence, the Petitioner is deemed an 'Operational Creditor.'2. Whether there was a contractual arrangement/agreement between the parties, evidencing the existence of Operational Debt:The Respondent argued that the Agreement ended on 31/03/2022, and there was no functioning agreement thereafter. However, the Tribunal noted that the Respondent continued to avail services even after the expiry of the Agreement. The renewal of the Bank Guarantee and continuous email correspondences indicated that the Sponsorship arrangement was still in force. The Tribunal cited the case of Daily Diary Essentials vs. Goodhealth Industries Pvt Ltd., which held that business arrangements based on mutual terms could substantiate claims. Therefore, the Tribunal rejected the Respondent's objection regarding the lack of a proper agreement.3. Whether the Corporate Debtor has defaulted as per Section 3(12) of the IBC:Section 3(12) of the Code defines 'default' as non-payment of debt when it becomes due. The Tribunal referred to email correspondences where the Corporate Debtor acknowledged the debt and requested extensions for payment. The first invoice raised after the Agreement's expiry was paid, and subsequent invoices were covered by the encashment of a Bank Guarantee. The Tribunal held that the emails clearly established an outstanding debt and default, satisfying the conditions of Section 9 of the IBC.4. Whether there was any pre-existing dispute between the parties:The Respondent argued that there was a pre-existing dispute, citing an email dated 24/05/2022. However, the Tribunal noted that this invoice was paid, and the email did not reflect a dispute. The Tribunal referred to the case of Mobilox Innovations Pvt. Ltd. vs. Kirusa Software Pvt. Ltd., which held that a pre-existing dispute must exist before the receipt of the Demand Notice. The Tribunal found no evidence of a pre-existing dispute and held that the Respondent's objection was legally unsustainable.5. Whether the instant Application is not maintainable due to lack of Proper Authorisation:The Respondent argued that the Petition was not maintainable due to lack of proper authorization. The Tribunal examined the MOA of the BCCI and found that the Secretary had the power to delegate any work. The authority letter dated 27/10/2022, authorizing the General Counsel and Senior Manager (Legal) to initiate proceedings, was found to be proper and in accordance with the Bye-laws. The Tribunal rejected the Respondent's objection regarding maintainability.Conclusion:The Tribunal concluded that there was no reason to deny the Petition filed under Section 9 of the IBC by the Operational Creditor. The existence of debt and default in payment was clearly established. The Petition was admitted, and moratorium was declared in terms of Section 14 of the Code. The Tribunal appointed an Interim Resolution Professional and directed the Operational Creditor to deposit a sum of Rs. 2,00,000/- for expenses. The Corporate Debtor's application to refer the matter to arbitration was dismissed as the Tribunal found it not maintainable.