2024 (11) TMI 675 - AT - IBC

NCLAT upholds NCLT decision rejecting Section 9 IBC application due to genuine pre-existing dispute over NOC provision

LAW & KENNETH SAATCHI & SAATCHI PRIVATE LIMITED Versus PATANJALI PARIDHAN PRIVATE LIMITED

NCLAT dismissed the appeal challenging rejection of Section 9 IBC application. The operational creditor's application was properly rejected by NCLT due to ... Dismissal of application of the Appellant under Section 9 of the Insolvency and Bankruptcy Code, 2016 - application under Section 9 was not admitted on the grounds of pre-existing dispute as the material supplied by the Operational Creditor was from a tainted source - HELD THAT:- In the facts and circumstances of the case it is undisputed that the Corporate Debtor was demanding NOC from the Operational Creditor, through various emails and legal notice to enable him to register the copyright of TVC, which the Operational Creditor has failed to provide. Clause 26 of the Terms and Conditions stipulated in the proforma invoice, without any exception, state that “LKSS or Producer will provide the necessary NOC or any other paper which may require for the IP registration to the Client.”. The Appellant Operational Creditor has failed to provide the NOC and the Corporate Debtor was unable to register the copyright. It is noted that the dispute was real and genuine, and not moonshine or feeble, and is supported by evidence, and also that the Corporate Debtor, despite having made substantial payment as advance, had not used the TVC in absence of copyright. The correspondence and dispute regarding issuance of NOC is prior to the issuance of notice under Section 8 of the IBC, and thus, qualifies to be treated as “pre-existing dispute”, which is a valid ground for rejection of application under Section 9 of the IBC. The Ld. NCLT had rightly rejected the application under Section 9 of the IBC and we do not find any merit in this appeal - The appeal is accordingly dismissed. Issues Involved:1. Whether the Operational Creditor's application under Section 9 of the Insolvency and Bankruptcy Code, 2016, should have been admitted.2. Whether there was a pre-existing dispute between the Operational Creditor and the Corporate Debtor regarding the issuance of a No Objection Certificate (NOC).3. The impact of the absence of a written agreement and the role of the proforma invoice in the transaction.4. The necessity of the NOC for copyright registration under the Copyright Act, 1957, and the Copyright Rules, 2013.5. The relevance of judicial precedents regarding pre-existing disputes and the admission of applications under Section 9 of the IBC.Detailed Analysis:1. Admission of Application under Section 9 of IBC:The appeal concerns the dismissal of the Operational Creditor's application under Section 9 of the IBC by the National Company Law Tribunal (NCLT). The Operational Creditor argued that the debt was acknowledged by the Corporate Debtor, and thus, the application should have been admitted. However, the presence of a pre-existing dispute, as argued by the Corporate Debtor, was a critical factor in the NCLT's decision to dismiss the application.2. Pre-existing Dispute Regarding NOC:The core issue revolves around the failure of the Operational Creditor to provide a No Objection Certificate (NOC) as stipulated in Clause 26 of the proforma invoice. The Corporate Debtor's repeated requests for the NOC, which were not fulfilled, led to a dispute over the registration of the TVC's copyright. The Operational Creditor contended that the NOC was unnecessary since the TVC was produced by its employees. However, the Corporate Debtor maintained that the NOC was essential for copyright registration, creating a genuine dispute that existed before the issuance of the demand notice under Section 8 of the IBC.3. Role of Proforma Invoice and Absence of Written Agreement:The transaction was governed by the terms outlined in the proforma invoice, which included conditions for payment and the provision of an NOC. The absence of a separate written agreement did not negate the obligations stated in the invoice. The invoice's terms were crucial in determining the rights and duties of the parties, particularly regarding the NOC.4. Necessity of NOC for Copyright Registration:The Corporate Debtor cited Rule 70 of the Copyright Rules, 2013, which requires an NOC for copyright registration when the application is submitted by the owner of the right. This requirement was central to the Corporate Debtor's argument that the absence of an NOC prevented the registration and use of the TVC, thereby causing a substantial loss.5. Judicial Precedents on Pre-existing Disputes:The judgment referenced several judicial precedents, including the Supreme Court's decision in Mobilox Innovation P Ltd. v. Kirusa Software Pvt. Ltd., which provides guidelines for identifying pre-existing disputes. The court emphasized that a dispute must be genuine and not merely a feeble legal argument. The existence of a pre-existing dispute, as evidenced by the correspondence between the parties, was a valid ground for rejecting the application under Section 9 of the IBC.Conclusion:The Appellate Tribunal upheld the NCLT's decision to dismiss the application under Section 9 of the IBC, citing the existence of a pre-existing dispute regarding the issuance of the NOC. The Tribunal found the dispute to be genuine and supported by evidence, thereby justifying the rejection of the application. The appeal was dismissed, and no costs were awarded.