2026 (1) TMI 427 - AT - IBC

GST-backed proforma invoice payment claim and non-signatory tripartite agreement dispute; s.9 IBC petition dismissed as disputed

The NCLAT examined whether a s.9 IBC application was maintainable on the claimed operational debt. It held that reliance on proforma invoices bearing GST ... Dismissal of the Section 9 application - pre-existing disputes - contractual agreements provided for arbitration clause - proforma invoices which contained a GST number - unsigned documents - failed to meet the minimum threshold requirement of Rs. 1 Cr. - deficiencies in the management of the property and business operations of the Respondent - HELD THAT:- When Section 9 application was filed on the basis of proforma invoices which contained a GST number, it was incumbent on the part of the Appellant to make GST payment. When the Adjudicating Authority gave reasonable opportunity to the Appellant to submit GST details and yet the latter failed to furnish the same, it gave sufficient basis for the Adjudicating Authority to doubt the validity of the claim. Since the Appellant failed to provide the GST details inspite of being given a chance by the Adjudicating Authority to do so, the Appellant cannot justifiably assert any infirmity in the impugned order on this count. When we look at the signatories of the SMA dated 10.06.2019, we find that the Appellant was not a signatory therein. The SMA was a tripartite agreement executed between LSMHPL, Corporate Debtor and IBFW with the Appellant clearly not being a party thereto. We, therefore, find substance in the contention of the Respondent that there was no privity of contract between the Appellant and the Respondent in respect of the SMA and hence the claim qua the SMA is misconceived as there was no contractual obligation on the Corporate Debtor. It is the case of the Appellant that the Corporate Debtor had been continuously availing the services from the Operational Creditor without raising any disputes contemporaneously. When there were no real- time disputes raised before the Section 8 Demand Notice it shows that the defence raised by the Corporate Debtor was feeble defence raised as an after- thought. If the disputes were genuine, it remains unexplained as to why the FMA was not terminated. Thus, at the point of time when the Appellant had raised a formal demand of outstanding debt under Section 9 of IBC, there was no record of dispute. Hence, the concerns raised by the Corporate Debtor on the quality of services rendered by the Operational Creditor and other deficiencies/ shortcomings/irregularities after the filing of the Section 9 application could not have been treated as pre-existing disputes as has been erroneously done by the Adjudicating Authority. It was also vehemently contended that not only were the agreements between the Appellant and Respondent not terminated but even the invocation of arbitration proceedings was done after the filing of the Section 9 application and hence cannot be treated as pre-existing dispute. The law on this aspect is well settled that in Section 9 proceedings, the Adjudicating Authority is not required to enter final adjudication with regard to existence of dispute between the parties regarding the operational debt but what has to be looked into is whether the defence has raised a plausible dispute which needs further adjudication by a competent court. Section 9 cannot be triggered for any debt which amount falls below threshold limits or for debts which are steeped in disputes. The stance taken by the Appellant that the Corporate Debtor was trying to manufacture disputes fails to pass muster for reasons discussed above. The defence raised by the Corporate Debtor cannot be held to be moonshine, spurious, hypothetical or illusory and for such disputed operational debt, Disputes pertaining to contractual issues are not to be resolved in Section 9 proceedings and hence in the present factual matrix, the Section 9 proceeding cannot be initiated at the instance of the Operational Creditor. In the given facts and circumstances, this is not a case where the Adjudicating Authority could have admitted the Section 9 application. We are of the considered view that the Adjudicating Authority has not committed any error in dismissing the Section 9 application filed by the Appellant. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the claimed dues were supported by valid record/evidence of transaction and default, particularly where the claim was founded on proforma invoices bearing a GST number without furnishing corresponding GST filings as required in Section 9 proceedings. (ii) Whether the operational debt crossed the statutory threshold when (a) interest was added despite absence of a contractual basis for interest, and (b) substantial components of the claim were founded on instruments to which the applicant was not a party. (iii) Whether amounts claimed under a memorandum of understanding and a sales/marketing agreement were maintainable in the absence of privity of contract with the applicant. (iv) Whether there existed a pre-existing dispute rendering the debt 'disputed' and thereby barring initiation of insolvency under Section 9 for the claimed operational debt. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): GST-related evidentiary compliance and reliance on proforma invoices Legal framework: The Tribunal considered Regulation 2B of the applicable insolvency regulations requiring an operational creditor (having a GST number) to furnish relevant extracts of GST returns (GSTR forms) along with the Section 9 application as record/evidence of the transaction and default. Interpretation and reasoning: The invoices relied upon were proforma invoices and displayed a GST number. In that context, the Tribunal held it was incumbent on the applicant to furnish corresponding GST proof/returns. The Adjudicating Authority had specifically directed filing of written submissions 'along with GST proof' and provided opportunity to comply. Non-furnishing of GST proof, despite opportunity, provided a legitimate basis to doubt the validity of the claim founded on such invoices. Conclusion: Failure to provide GST payment/return details where invoices carried a GST number supported rejection of the claim as inadequately evidenced for Section 9 purposes, and the applicant could not fault the dismissal on this ground. Issue (ii) & (iii) (grouped): Threshold requirement; inadmissible interest; non-maintainability of claims lacking privity Interpretation and reasoning (management/service fee component): Under the franchise/management arrangement, monthly service fee dues as principal were found to be limited to the amount asserted as outstanding management fees. However, the Tribunal accepted the objection that the agreement did not permit interest on the service fee in the manner claimed; the relevant clause contemplated interest on amounts other than service fees. Accordingly, the interest addition was held inadmissible, and the operational debt could not be inflated by an unsupported interest component. Interpretation and reasoning (MoU component): A separate memorandum of understanding contained a statement that the corporate debtor would pay certain 'old dues' to the applicant. Yet, the applicant was not a signatory to that MoU. The Tribunal held that, in the absence of privity of contract, the applicant could not maintain a claim under that MoU against the corporate debtor in Section 9 proceedings. The Tribunal also held that interest computation on this MoU amount was not maintainable since the MoU did not provide for interest. Interpretation and reasoning (sales/marketing agreement component): The sales and marketing agreement was tripartite among other entities, and the applicant was not a signatory. The Tribunal found no privity of contract between the applicant and the corporate debtor in respect of that agreement, and therefore held that the applicant's claim premised on that agreement was misconceived, including the claim for interest where no interest stipulation existed. Conclusion: After excluding (a) inadmissible interest and (b) amounts claimed under instruments to which the applicant was not a party, the maintainable admitted principal remained below the statutory threshold; therefore, Section 9 could not be triggered on such reduced claim. Issue (iv): Existence of pre-existing dispute Interpretation and reasoning: The Tribunal held that initiation of arbitration after filing of the Section 9 application did not, by itself, constitute a pre-existing dispute, and an arbitration clause does not bar filing under Section 9. However, the Tribunal relied on documented communications and a specifically referenced meeting prior to the demand notice in which deficiencies in services and operational/financial issues were raised and discussed, followed by a legal notice raising detailed grievances and counter-claims. The Tribunal applied the settled principle that in Section 9 proceedings the authority is not to finally adjudicate the dispute, but only to examine whether a plausible dispute exists requiring adjudication elsewhere. On the facts, the defence was held not to be moonshine, spurious, hypothetical, or illusory. Conclusion: The operational debt was found to be steeped in disputes existing prior to the demand notice; consequently, insolvency could not be initiated under Section 9 for such disputed claims.