TaxTMI 
TaxTMI 
2019 (11) TMI 422
X X X X Extracts X X X X
X X X X Extracts X X X X
.... M/S. CloudWalker Streaming Technologies Private Limited ('Petitioner/ Operational Creditor) is a Private Limited Company, incorporated under the Companies Act, 1956 and it is engaged in the business of import and supply of LED TVs and is having its registered office at 503-505, Business Suites 9, S.V. Road, Santacruz West, Mumbai 400 054. (2) M/S. Flipkart India Private Limited ('Respondent/ Corporate Debtor) is a Private Limited Company was incorporated on 19.09.2011, under the provisions of the Companies Act, 1956, Its Nominal Share Capital is Rs. and that of Paid-up Share Capital is of Rs. 85,08,947/- It is engaged in retail sale of products on their online platform. (3) It is stated that the Corporate Debtor has contacted the Operational Creditor, and showed keen interest in selling its Products of LED TVs, as the same were having latest techn010U, features and several allied advantages over the competition. To that end, the Operational Creditor and Corporate Debtor entered into a Supply Agreement dated 29.12.2016. The Operational Creditor had been importing and supplying to the Corporate Debtor from time to time LED TVs in pursuant to purchase orders placed by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that the Operational Creditor facing heavy financial losses issued a notice and invoked the Arbitration Clause of the Supply Agreement. The Corporate Debtor on receipt of the Arbitration Notice threatened to withdraw from the deal entirely and not collect any of the remaining shipments unless the Operational Creditor withdrew the Notice. The Corporate Debtor even sent a letter where they worded the withdrawal letter which they demanded that the Operational Creditor sign and send. There is currently no other dispute or litigation pending before any Court or Tribunal in relation to the present subject matter. The Operational Creditor constrained by various financial issues at this point had no choice but to accept the demands of the Corporate Debtor and continue on its terms. It is stated that the trailing emails dated 6th November, 2017 and 24th September, 2018 related to the warehousing issues allegedly faced by the Corporate Debtor along with arbitrary promise of providing a delivery schedule, demand of withdrawal of Arbitration Notice, demand of price reductions, promises of bearing excess storage and handling costs, etc. (6) The Corporate Debtor has neither provided any proo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Respondent is a profit making Company with sufficient financial strength and is actively doing business in the wholesale B2B (Business to Business) sales. There is no admitted debt or liability in the present instance. The Respondent has already paid an amount of Rs. 85,57,OO,664/- towards the invoices raisexi by the Petitioner/ Operational Creditor. The Respondent/ Corporate Debtor is not liable to make any payment to the petitioner/Operationa1 Creditor. Therefore, the allegation that the Respondent has no money to pay the Petitioner to meet its current and existing demands/ liabilities is baseless, frivolous, bereft of truth and filed with mala fide intentions. (3) The Petitioner/Operational Creditor had approached the Respondent expressing its desire and interest in establishing a business relation with the Respondent for of the Petitioner's Products through the resellers of Respondent. Pursuant to due deliberations between the Petitioner and Respondent, the parties had entered into a Supply Agreement dated 29.12.2016.The relevant clause from the Supply Agreement, as agreed by the Petitioner is reproduced below for ease of reference: "Clause 2 Ordering, planning and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Petitioner against any risks or costs incurred by the Applicant. Further, it is agreed that the Petitioner shall bear all the expenses of packaging, storage and transportation of the Products. i.e., all deliveries made to Flipkart shall be free ramp, duty and tax paid. The Petitioners claim of Rs. 5,25,OO,OOO/- towards Customs charges is denied by the Respondent and it falls to the grounds based on the terms agreed by the Operational Creditor under Clause 2(g) of the Supply Agreement. a. It is submitted that, the Petitioner has failed to produce any document to show that there is an outstanding due amount of Rs. payable by the Respondent towards value of goods. The Respondent denies any outstanding due amount of Rs. payable to the Petitioner. The Respondent has cleared all dues payable to the Petitioner for the products delivered by them based on the PO's raised by the Respondent in accordance with the Supply Agreement. The Petitioner's claim of Rs. 7,25,OO,OOO/- as interest @12.65% is denied by the Respondent. The Respondent does not have any outstanding due amount payable to the Petitioner. Therefore, there is no interest payable to the Petitioner and moreover, the int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r in the Invoice raised by the Petitioner, and/or (iii) defective or deficient, it shall notify the same to the Petitioner. If there is a difference in the number of Products received by Respondent, the same shall be recorded by the Respondent at the bottom of the Invoice as short supply along with the Respondent's seal and signature. (8) It is stated that as detailed above the documents provided with regard to Transaction No. 1 & 2 clearly show the reason for disparities in the Invoice amount and the payment amount is due to the short supply of the Products which has been duly noted in the Invoice along with the Respondent's seal and signature. The difference in the number of Products mentioned in the invoice and the number of products received by the Respondent has been noted down at the bottom of the Invoice. It is also stated that a mere reading of the Petition will indicate that the Petitioner is really a claim for damages and not for debt. (9) The claim of the Petitioner is that he Respondent had placed various purchase orders and that the goods were to be picked up but was not so picked up as promised by it. This caused huge financial losses. Under the Sale of Go....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it and pay outstanding amount and did not raise any pre- existing dispute as prescribed under the Code in order to avoid initiation of CIRP. And merely alluding to some form of without there being any deficiency in service, contemporaneous evidence at this stage after ignoring the demand notice is not sufficient to deny the legitimate claims of the Operational Creditor. 5. Heard Shri Ajit Anekar along with Ms. Urvi Vaidya, learned Counsels for the Petitioner and Shri Dhyan Chinnappa, learned Senior Counsel with Shri Chinmay J Mirji and Ms. Charitha.V, learned Counsels for the Respondent. I have carefully perused the pleadings of both the parties and also the extant provisions of the Code and the rules made there under and various decisions relied upon by the parties as mentioned supra. 6. The case is listed for hearing on admission on 29.07.2019, 19.08.2019, 09.09.2C19, 26.09.2019 and on 24.10.2019, and it is adjourned on those dates at the request of the parties, in order to serve the notice and also to give an opportunity to the parties to explore the possibility of settlement of the issue in question as the Corporate Debtor claims that it is solvent Company. However, the Corp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....support of his contentions, he has relied upon the judgments as cited supra. At the end of his argument, the Learned Senior Counsel expressed his readiness to pay the outstanding amount, if the Adjudicating Authority determines the outstanding amount and will also furnish bank guarantee to the extent. 9. As stated supra, the Corporate debtor has inter-alia contended there is existing disputes between the parties, which are to be adjudicated by a competent civil court upon appreciating the evidence placed on record by the parties against each other's claim. And in the absence of full-fledged trial, this Petition cannot be adjudicated and the same deserves to be dismissed. And it is contended that the Respondent has without prejudice to its rights and contentions chosen to not initiated any legal action against the Petitioner due to the deficiency in service and has chosen to withhold payments that was not due as a result of such deficiency in services. The Corporate Debtor, while admitting that the goods in question was ordered and upon the delivery of the Products, the Respondent reserves the right to verify and determine whether the products supplied by the Petitioner are in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Logistics, which reads as under: "Hi Sushma, As discussed With Ankur, please raise slot requests for the following quantities at the earliest. Hi Ankur - As discussed, owing to capacity constraints at out end, we wilt pick up the following on an immediate basis and the remaining in the 3rd week of November. FSN Model NLC Nelam- angala Hyderabad Chennai Bhiwandi Ahmedabad Kolkata Noida Luhari Patna Total TVSEYD EJHUCE 5ACH CLOUD TV 39SH 22500 43 33 46 36 25 15 10 45 3 256 TVSEYD EJPKHM ZC49 CLOUD TV 50SH 32400 35 27 37 29 20 12 8 36 3 206 TVSEYD EJ6TMY QDQZ CLOUD TV 50SU 37000 35 27 37 29 20 12 8 36 3 206 Again, Shri Jagdish Rajpurohit, from M/S. CloudWaIker (Petitioner) has sent an email reply dated 06.11.2017 @17.00 P.M to Ms. Sita Subramanian of M/S. Flipkart India Pvt. Ltd. (Respondent), which reads as under: "Hi Santosh, The slots received are for hatf of the qty which we both agreed on when additional price support was given. Please inform urgently by when is the balance qty being given slots as you know we have special call specifically based on qty. assured as per our discussion and also confirmed by yo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....above correspondence, clearly established that the Petitioner imported goods in question as per purchase orders made by the Corporate Debtor and it is the Corporate Debtor, who has committed default to take some of goods due to its inability to lift them and thus committed default. 12. As stated supra, the Corporate Debtor admittedly did not raise any dispute with regard to alleged deficiency in service or brought to the notice of Operational Creditor about alleged breach of terms of Supply Agreement in question. Clause 8 of Agreement deals with particulars of delivery and clause 8(b) confer power on the Flipkart (Corporate Debtor) to terminate the Agreement, if the Operational Creditor commits breach of terms of the Agreement. It is not the case of Corporate Debtor that it has terminated the Agreement in question and even it did not respond to statutory Demand Notice issued to it. And all the alleged defence is being raised by the Respondent only by way of statement of objection to the instant petition. And it is settled position of law that in order to avoid to initiate CIRP, in an Application/ Petition filed, under Section of 9 of the Code, there should be pre-existing dispute.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se judgements were questioned before the Hon'ble NCLAT, as per Section 61 of Code. One of the case is filed by filed by M/S. Next Education India Pvt. Ltd. Vs. M/S. K12 Techno Services Pvt. Ltd., vide CP (1B)No.114/BB/2017, which was dismissed by this Adjudicating Authority, vide Order dated 20.12.2018, by inter-alia adverting as under: "13... The Hon'ble Supreme Court in the case of B.K.Educational Services Pvt. Ltd. Vs. Parag Gupta and Associates (2018) SCC Online SC 1921 , has inter alia held that provisions of Limitation Act will apply to proceedings or appeals before NCLT/NCLAT. Section 238A of the Code make provisions of Limitation Act would appty to proceedings under the Code. As stated supra, debt in question fell on various dates on and after October, 2011 and there is no explanation for the laches and delay on the part of the petitioner. Moreover, as per the terms and conditions as stipulated in the Master License Agreement in question, the debt in question itself is subject to various compliances as stated supra. The Hon'ble Supreme Court of India, in a recent case, in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited (2018) 1 SCC 35....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ailed to notice the aforesaid issue and observed that 'debt' in question is not only serious dispute but also barred by limitation and laches and not discussed under which provision the 'Master Service Agreement' with 'Sri Gowtham Academy of General and Technical Education' was consequently issued on 8th February, 2016 and the reply to the Demand Notice was issued on 8th August, 2017. For the reasons aforesaid, we set aside the impugned order dated 20th December, 2018 and remit the case to the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench for admitting the Application U/ s. 9 of the 'I&B Code' after notice to the 'Corporate Debtor'. We allow the 'Corporate Debtor' to settle the claim before its admission, if it so chooses. The appeal is allowed with aforesaid observations and directions. 15. In another case, this Adjudicating Authority has rejected the Company Petition bearing cp (1B)No.25/BB/2018 filed by M/S. Gupshup Techn010U India Pvt. Ltd. Vs. M/S. Interpid Online Retail Pvt. Ltd., and it was rejected by an Order dated 08.11.2018, which inter-alia reads as under:- "Hence, C.P. (1B)No.25/BB/2018 is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....invoices raised by the Appellant in the years 2014, 2015 and 2016. 4. It is stated that for the first time Respondent defaulted in making the payment towards the invoices on 16th June, 2015 and had not made any payment towards the debt since then, as a result of which its services were discontinued after July, 2015. 5. On 15th April, 2017, the Respondent acknowledged the debt and informed that they were expecting some funds from its investors, which was delayed and it was the reason for non-payment of the outstanding dues. 6. The record of the services carried out as on 5th September, 2017 shows that the Respondent availed the services through the SMS Dashboard and had its own dedicated user name and password for logging. However, the Respondent in their email dated 5th September, 2017 sought details of email logs and other supporting documents in order to verify the invoices. 7. The Appellant issued a Demand Notice under Section 8(1) on 24th October, 2017 and for the first time the Respondent in its reply under Section 8(2) by intimation dated 3rd November, 2017 raised false and frivolous allegations. 8. After completion of more than 10 days, the Appellant filed an appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sons: "Hence, by exercising powers conferred on the Adjudicating Authority UIs. of IBC, 2016, is hereby rejected. However this order will not come in the way of Petitioner filing appropriate proceedings before Appropriate Court, having jurisdiction over the matter". And aggrieved by both the parties, the Petitioner has filed an Appeal before the Hon ble NCLAT, New Delhi in Company Appeal (AT) (Insolvency) No. 720 of 2018 and the Hon'ble NCLAT, New Delhi, vide its order dated 24.07.2019, has set aside the order of this Tribunal and thus remitted the case to the Adjudicating Authority with the following directions: "The Appellant- 'Pedersen Consultants India Pvt. Ltd. ('Operational Creditor') filed application under Section 9 of the Insolvency and Bankruptcy Code, 2016 ("I&B Code" for short) against 'M/S. Nitesh Estates Limited'- ('Corporate Debtor'). The Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench, Bengaluru, discussing the claim and counter claim of the parties, rejected the application by impugned order dated 5th October, 2018 with following observations: "7. The above narration of facts discloses that there are va....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited case. Therefore, this C.P.(IB) No.35/BB/2018 is liable to be dismissed. " 5. In an application under Section 9, it is always open to the 'Corporate Debtor' to point out existence of dispute, if any. Such existence of dispute should be that of a period prior to the issuance of the demand notice under Section 8(1) of the 'I&B Code'. 6. In "Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited- 2017 1 SCC Online SC 353", the Hon'ble Supreme Court held that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing - i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. The Hon 'ble Supreme Court further observed: "33. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on non-payment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice 7 Of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be given. Once this is done, the adjudicating authority may either admit the application or reject it. If the application made under subsection (2) is incomplete, the adjudicating authority, under the proviso to sub-section 5, may give a notice to the applicant to rectify defects within 7 days of the receipt of the notice from the adjudicating authority to make the application complete. Once this is done, and the adjudicating authority finds that either there is no repayment of the unpaid operational debt after the invoice (Section 9(5)(i)(b)) or the invoice or notice of payment to the corporate debtor has been delivered by the operational creditor (Section 9(5)(i)(c)), or that no notice of dispute has been received by the operational creditor from the corporate debtor or that there is no record of such dispute in the information utility (Section 9(5)(i)(d)), or that there is no disciplinary proceeding pending against any resolution 66 professional proposed by the operational creditor (Section 9(5)(i)(e)), it shall admit the application within 14 days of the receipt of the application, after which the corporate insolvency resolution process gets triggered. On the other hand, the ad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s "claim" to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4). The corporate insolvency resolution process may be triggered by the corporate debtor itself or a financial creditor or operational creditor. A distinction is made by the Code between debts owed to financial creditors and operational creditors. A financial creditor has been defined under Section 5(7) as a person to whom a financial debt is owed and a financial debt is defined in Section 5(8) to mean a debt which is disbursed against consideration for the time value of money. As opposed to this, an operational creditor means a person to whom an operational debt is owed and an operational debt under Section 5(21) means a claim in respect of provision of goods or services. 28. When it comes to a financial creditor triggering the process, Section 7 becomes relevant. Under the explanation to Section 7(1), a default is in respect of a financial debt owed to any financial creditor of the corporate debtor- it need not be a debt owed to the applicant financial creditor. Under Section 7(2), an application is to be made under sub-section (1) in su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich is pre-existing- i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code. " 10. From the aforesaid findings, it is clear that the claim means a right to payment even if it is disputed. Therefore, merely because the 'Corporate Debtor' has disputed the claim by showing that there is certain counter claim, it cannot be held that there is pre-existence of dispute. 11. In the present case, as we have observed that there is no record to suggest pre-existence of dispute with regard to the services rendered by the Appellant, we hold that the application under Section 9 should not have been rejected by the Adjudicating Authority on the ground that the dispute about the quantum of payment cannot be determined. 12. The Respondent disputed that the alleged debt is not the amount as shown in the Form. However, on mere dispute of amount, the application under Section 9 cannot be rejected, as in terms of Section 3(6) which defines 'claim' to mean a right to payment even if it is disputed. The Hon'ble Supreme Court in '{Innoventive Indust....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pak Saruparia, bearing IP Regn. No. IBB1/1PA-001/1P-P00660/2017-18/ 11689, is suggested as Interim Resolution Professional to conduct the CIRP in respect of Corporate Debtor. He has also filed his written consent dated 31.07.2019 in Form-2, by inter alia stating that he is an insolvency professional registered with Indian Institute of Insolvency Professionals of ICAI having registration Number IBB1/1PA-001/1P-P00660/2017-2018/ 11689; he is currently qualified to practice as an insolvency professional; there are no disciplinary proceedings pending against him with the Board etc. Therefore, the Adjudicating Authority is of considered opinion the said Resolution Professional is provisionally eligible to be appointed as IRP and the instant petition is fit case to admit by initiating CIRP, appointing IRP, imposing moratorium etc in respect of the Corporate Debtor. 19. In view of the above facts and circumstances of the case, by exercising powers conferred on the Adjudicating U/s 9(5)(i) and other extant provisions of the IBC, Adjudicating Authority passed the following orders: (1) C.P.(IB)No.260/BB/2019 is hereby admitted by Authority, 2016, the initiating Corporate Insolvency Resolu....