TaxTMI 
TaxTMI 
2020 (2) TMI 1076
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....e in question, are as follows: (1) M/s. Firefly Creative Studio Pvt. Ltd. (Herein after referred to as Petitioner/Applicant/Operational Creditor). The Company was incorporated under the Companies Act, 1956, with CIN: U92114TG2003PTC041520. (2) M/s. Rockline Entertainment Private Limited (herein after referred as Respondent/Corporate Debtor/CD) was incorporated on 04.05.2005 under the Companies Act, 1956 with CIN: U32304KA2005PTC036224. Its Nominal Share Capital is Rs. 10,00,00,000/- (Rupees Ten Crores only) and Paid-up Capital of Rs. 4,76,00,000/- (Rupees Four Crores Seventy-Six Lakhs only). (3) The Operational Creditor commenced its business during the year 2001, under the name "firefly Entertainment" wherein Shri Nagesh HN was running it as a proprietor focusing its business on Visual Effects (VFX), User Interface Design, and Multimedia etc. Subsequentiy, it was converted from proprietorship into a private limited Company focusing chiefly on VFX services for feature films and also, Pre-and Post-production/design services for feature films. It received its prominent project, when it successfully developed the VFX for the Telugu movie Anji' (featuring Mega Star Chiranjeev....
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....he work was assigned to it. Accordingly, the Respondent paid a nominal amount of Rs. 4,50,000/- vide cheque (after 10% TDS deduction of Rs. 50,000/-, totalling to 5 Lakh) on 29th May, 2014. The Petitioner has diligently reviewed the work and suggested various creative inputs/newer technique, further De-aging tests and methods, Visual Effects samples which were indispensable to the very production and release of the film 'Lingaa' between June to August 2014 as the project initiated period. The Respondent took almost four months of time for signing a formal written agreement with the Petitioner. Since substantial groundwork was already done, the Petitioner urged the Respondent several times to come forward and sign the agreement. The agreement was finally signed on 25.08.2014 ("Agreement") and the original agreement is retained by the Respondent and a copy of the Agreement was handedover to the Petitioner. (6) The Petitioner had successfully completed such a humungous milestone within a short time period of six and a half months (between June and first week of December, 2014). The Petitioner being a Principal vfx studio had to deploy and dedicate (a) deploy visual effects/s....
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....ditional calendar dates for the Petitioner In the end, all works were submitted and approved by the Director for safe release of the film for public view. The film was released on 12th December, 2014. The invoice was issued on 4th December, 2014, as per the initial contractual terms. Due to lack of time to enumerate the exact quantum of work as everybody at CD was looking forward to complete the film to meet the film release deadlines and also, solely on the kind request from CD to bill the additional work later on; subsequently final invoice was released based on actual duration of work output as per terms mentioned in the Agreement. The CD had never questioned on the quality of service or any issue as regards the work of the Applicant during the currency of the assignment or thereafter. Until now the CD has remitted only a portion of the amount actually payable for the entire services rendered. After submission of all the works and after waiting 30 days from the release of the film as requested by the CD in the contract, the Applicant started pressing for paying outstanding amount including amounts due towards Taxes since 2015. (9) The CD had requested at the time of signing of....
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....39;. The CD had replied on 09.06.2015 vide text message from +91 - 9341232275 'ok sir'. Thus, it was within the knowledge of the CD. (13) On or about July, 2015, the Applicant moved out of the old office premises due to huge liquidity crisis arising out of the default of the CD. The Applicant had immediately reflected the same on its website, the new office address. The Applicant had also been communicating with TFCC since 2015 and in all communication, the Applicant's new office address was set out. The said letter was also forwarded to TFCC and to the CD and it was well within the knowledge of CD that Applicant is operating out of a new office address. The TFCC had been contacting both CD and Applicant and there was no direct communication between them during this time. The Applicant has sent several emails between April, 2015 and June, 2016, however have failed to receive any response from the Applicant. (14) The CD filed an arbitration application AA 231/2017 on 06.05.2017, under Section 9 of the Arbitration Act, 1996 specifying the Applicant's old office address and obtained ex parte and ad interim order preventing Applicant to create any charge or dilute a....
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....39;ble Court to impound the said document by virtue of section 33 of the Act. Hence there is no basis for the Applicant's claim. Under Rule 6 of the IB (Application to Adjudicating Authority Rules) 2016 an operational creditor will not be able to maintain any application seeking liquidation proceedings unless the application is presented along with all the legally admissible documents as contemplated under BBI (IRP for Corporate Persons) Regulations 2016. Hence the very application becomes non-maintainable under law and deserves to be dismissed at the threshold. (3) A conjoint reading of section 3(6), 3(10), 3(11), 3(12), 5(20) and 5(21) of the I&B Code 2016 makes it amply clear that to maintain application seeking CIRP proceedings before this Hon'ble Tribunal, existence of clear "operational debt" and an inferable debt liability either admitted or adjudged should be there. In the absence of same, a mere claim will not suffice to initiate proceedings under the provisions of Code. The purpose of law is not to convert this Hon'ble Forum into a Debt Recovery Court. The entire gamut of law is to ensure that an incapable corporate entity does not survive or exist as would ....
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....s from various lenders in the market and from the banks, with a firm hope that the movie will make a bit hit and will generate good income. (6) It is submitted that in order to make a best quality High Definition movie the services of the vendor rendering the Computer Graphics, Designing, VFX Services, Special Effects, Services, De-aging finishes etc., has to be of an extremely good quality and timely services are all the more essential. Mr. Rockline Venkatesh was considering the options of vendors for the said services. During the relevant time, the Applicant, under the reference of Director of the movie, had requested for assignment of work to them. Since the Applicant was recommended by the Director of the movie and assurance of most competitive price, high quality and timely deliveries, Mr. Rockline Venkatesh agreed to assign the work of VFX services of Scenes and De-Aging to the Applicant. In pursuance to that a document dated 25.08.2014 came to be forwarded by the Applicant quoting an extent of 4.5 crores towards the specified work. A huge advance consideration was paid. Whereas, once the work began, Mr. Rockline Venkatesh went into a deep distress and depression due to the....
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....evasive tactics and failed to come forward to settle the legitimate demand of the Respondent. Under the circumstances, having no other alternative left, the Respondent served urgent warning notice calling upon the Applicant to make good the amounts as demanded and has cautioned that they would be forced to legalize the situation. The Applicant though was served of the caution, paid no heed to the same and on the contrary they were making efforts to dilute the assets of the Company in order to escape a probable decretal liability. (10) Since the Respondent's efforts confront and convince them personally was not fruitful, the Respondent having no other way left decided to seek an award of recovery from the Arbitral Tribunal through arbitration and had addressed a demand notice in furtherance of the same to the Respondent. But the Applicant had not acted in terms of the said notice of demand and has pushed the same aside. Thereafter, putting the matter before the arbitration Tribunal was under process. The Applicant was continuing its unlawful drives against the Respondent by of bringing irksome and mischievous complaints before the Film Chamber of Commerce, Industry heads and a....
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....roperties Private Limited, has availed an Inter-Corporate Deposit of Rs. 1,99,00,000/- on 24.07.2006 from the Respondent, which amount together with interest, though shown in the books of the respective parties i.e., the Applicant and the Respondent, has not been settled by the Applicant till date. Therefore, the accounts between the parties are required to be reconciled. (14) The Applicant has an effective and efficacious alternate remedy available under the provisions of the Arbitration and Conciliation Act, 1996 and this Hon'ble Tribunal cannot be used as an executing court for execution of awards. (15) The Respondent is a solvent Public Listed Company and has been declaring profits of approximately Rs. 90 to 100 Crores each year for the last three (3) financial years and is in active business and therefore, cannot be termed as a 'Corporate Debtor'. 4. Heard Shri Manu Kulkarni, learned Counsel for the Petitioner/Applicant/Operational Creditor and Shri M.S. Shyamsundar, learned Senior Counsel for the Respondent. We have carefully perused the pleadings of the respective parties and the extant provisions of the Code and the law on the issue. 5. Shri Manu Kulkarni,....
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....by inter-alia contending as follows: (1) Entire case and claim of the Applicant is based upon the so-called agreement dated 25.8.2014, claimed to have been entered into between the parties. There is no mention in the agreement as to where it is made. The Applicant has argued that it is made at Hyderabad-Andhra Pradesh to counter the argument of this Respondent that the agreement is chargeable with stamp duty under the Karnataka Stamp Act and it is not admissible in evidence since it is unstamped. Even if the argument of the Applicant is to be accepted, nothing ensures to its benefit because the Indian Stamp Act, 1899 which is applicable in Andhra Pradesh, also makes the Agreement relied upon by the Applicant a compulsorily dutiable document in terms of Schedule to the Indian Stamp Act. Precisely, in terms of section 35 of the Indian Stamp Act 1899, which is applicable to Andhra Pradesh, the document/agreement relied upon by the Applicant is inadmissible. That apart, even as per section 15 of the Indian Stamp Act also, the document/agreement cannot be looked into. Hence, the entire case and claim of the Applicant which is wholly dependent upon the said document shall fail under la....
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.... ensures optimum adherence of Principles of Natural Justice and fair approach to law. When there are ample substitute ways available under law to put a person under proper notice, playing blind is inexcusable. Hence, the Application of the Applicant deserves to be dismissed. (5) In the records of AA No. 231/2017 placed by the Applicant alone, this Respondent has pointed out that while complaining to Film Chamber of Commerce, the Applicant has claimed more than 5 crores and odd, which is far larger than what is claimed in the present Application. The Invoices relied upon do not tally nor is there any proof of their admission by this Respondent. Some alleged approvals made by the Director or a strange person is being pointed out as if the admission by this Respondent, which is absurd. The scribble corrections made on the alleged agreement to suit this argument is again inacceptable since there is no counter signature; and more over the very agreement is illegal under law. Entire case of the Applicant is based upon electronically extracted documents and there is no certificate as required under section 65B of the Indian Evidence Act. It is well settled law that by virtue of Section ....
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.... for considering Firefly Creative Studio to render VFX services for your upcoming prestigious film "Lingaa". Please find below our Price for scenes execution and De Aging. Scenes Sl. No. Min Sees Rate/Sec Price 1 45 2,700 8,500 22,950,000 2 Discount 2,950,000 3 Sub Total 20,000,000 De-Aging Sl. No. Mins Sees #Sec Rate Price 4 60 3,600 6,000 21,600,000 5 Discount 1,600,000 6 Sub Total 20,000,000 7 8 Sub Total (3+6) 40,000,000 9 Service Tax (12.36%) 4,944,000 10 Total 44,944,000 Operating Terms * Any addition/Reduction in the duration in Scenes/De Agining the price will also be added/reduced accordingly. * Scenes budget does not include De-Aging budget in it. All the De-Aging work in the film duration will be calculated separately. * Firefly will execute all De-Aging shots through digital painting and its proprietary projection technique. * For Scenes Visual Effect Firefly will be executing cleanup, Camera Tracking, FX, Digital Sets, Character animation and compositing. * Firefly will pu....
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....derabad, and signed there. And there is no date of execution under signature of the parties. Moreover, the Petitioner itself said the said Agreement was signed after lapse of four months, after substantial work was already done. Therefore, we agreed with the contention of Learned Senior Counsel for the Respondent that the Agreement in question cannot be enforced in a court of law. Moreover, the questions revolved around the Agreement in question, cannot be gone into in the instant summary proceedings. Therefore, there is no debt arise in the instant case basing on valid legal document. Moreover, whether the Adjudicating Authority being the Authority to examine the issue summarily, could not go into the details of the validity of the Agreement in question. Therefore, the validity of the Agreement can be examined by competent Civil Court, after adducing relevant evidence. Since the terms of Agreement are acted upon by the Parties and thus validity of it is no more re sintegra is not tenable. 10. The next question is whether the alleged debt in question is dispute or not. The Code sections 3(6) 8B(11) of the Code, defined 'Claim and Debt. "Debt" means a liability or obligation in....
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....y, the Telugu Film Chamber of Commerce, in turn has addressed a letter dated 27.10.2015, to the Corporate Debtor to furnish the reply immediately to the Telugu Film Chamber of Commerce. However, the matter kept pending since the Respondent approached Civil Court, under Arbitration Act. The Corporate Debtor has also addressed a letter dated 26.07.2016 to the Petitioner by inter-alia demanding to pay them a sum of Rs. 10,00,00,000/- (Rupees Ten Crores only) towards refund of excess payments, damages and losses suffered by them due to their deceitful and unscrupulous business practices and also communicated to them to initiate arbitration proceedings against them as per the Indian Arbitration and Conciliation Act at Bangalore by appointing Arbitrator/s by consent or through the Hon'ble High Court of Karnataka. 12. Subsequently, the Corporate Debtor has filed an Application (AA.No.231/2017) before the Hon'ble Principal City Civil and Sessions Judge at Bangalore, U/s 9 of Arbitration and Conciliation Act, 1996, against the Petitioner, by inter-alia seeking to pass an order of Interim Injunction restraining the Managing Director and Directors of the Respondent Company from creat....
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....0,11,394/- and total net worth of the Company is Rs. 16,89,69,046/- for the Financial Year 2017-18. The Company is also a going concern having so many people dependent on it. 15. It is a settled position of law that the provisions of the Code can be invoked where fundamental issues like debt, default, are not in dispute as it is summary proceedings in nature. Relevant issues to be examined in a Petition filed U/s 9 of the Code is whether there are debt and default in question and whether any pre-existing dispute is there or not. It is relevant to point out the observation of Hon'ble Supreme Court of India vide judgment dated 3rd December, 2019 passed in Civil Appellate Jurisdiction in the case of M/s. Embassy Property Developments (P.) Ltd. v. State of Karnataka & [2019] 112 taxmann.com 56 (SC) wherein, under para 29, has inter alia held as follows: "Para 29: The NCLT is not even a Civil Court, which has jurisdiction by virtue of Section 9 of Code of Civil Procedure to try all suits of a civil nature excepting suits, of which their cognizance is either expressly or implied barred. Therefore, jurisdiction as prescribed by the Statute, the law in respect of which, it is called....