TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 97
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....2.2017. 2. Brief facts of the case, as mentioned in the Petition, which are relevant to the issue in question, are as follows: (1) M/s. Flemingo Airport Retail Limited (hereinafter referred to as 'Petitioner/Operational Creditor') is a Company incorporated under the provisions of Companies Act with CIN: 52605MH2014PLC253193 and having its registered office situated at D-73/1, TTC Industrial Area, MIDC, Turbhe, Navi Mumbai-400705. (2) M/s. Caravan Evolved Craft Private Limited (hereinafter referred to as 'Respondent/Corporate Debtor') is a Private Limited Company incorporated on 11.09.2008 under the provisions of Companies Act, 1956 with CIN: U52393KA2008PTC047760 and having its registered office situated No.78, Royal Enclave, Sreerampura, Jakkur Post, Bengaluru-560064. Its Nominal Share Capital is Rs. 5,00,00,000/- and Paid-up Share Capital is Rs. 1,59,01,340/-. (3) It is stated that the Petitioner entered into 'Heads of Terms' with the Respondent on 01.02.2016, along with annexures thereto ("the said agreement") - by virtue of which, the parties mutually agreed to jointly operate the retail outlet at the designate location at the Chhatrapati Shivaji ....
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.... the amount payable to them for the months of April and May, 2016. In the said calculation sheet, the Petitioner requested the Respondent to make payment of the Revenue Shares for the given months were lower. (8) The Respondent, despite regular follow-ups by the Petitioner, failed to make payments of the dues owed to the Petitioner. (9) Thereafter, by the Petitioner's e-mail dated 13.07.2016, the Respondent were sent a debit note for the month of June, 2016. In response, vide e-mail dated 13.07.2016, the Respondent, while acknowledging the commercial understanding in place and resulting dues, sought to cite frivolous and ambiguous reasons to urge the terms of the said Agreement to be revisited and revised on ground that they were unviable as they stood. The Respondent's e-mail of 13.07.2016 was suitably replied to by the Petitioner's e-mail of 18.07.2016, inter alia reiterating the need for the said Agreement to be honoured and dues to be paid. (10) Subsequently, representatives of the parties had a meeting on 29.07.2016. In the said meeting, considering the request made by the Respondent, the Petitioner agreed, without prejudice, to give the Respondent certain co....
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....r payment of dues owed. On 02.02.2017, the Respondent addressed an e-mail to the Petitioner and while acknowledging liability, submitted that the plan for payment is to make a payment in February and thereafter, close the balance in March. The Respondent, once again, requested the Petitioner to provide the sales statement. On 02.02.2017 itself, by way of e-mail, the Petitioner forwarded the revised sales details for the period April, 2016 to February, 2017. (15) However, till present date, no payment has been made by the Respondent towards the dues owed to the Petitioner. (16) Thus, for the period between April, 2016 and February, 2017, the monies due and payable by the Respondent to the Petitioner include a sum of Rs. 55,60,000/- towards MMG, a sum of Rs. 7,93,175/- towards Fixed Cost and a sum of Rs. 21,85,000/- towards Capital Expenses in terms of the said Agreement - totalling, including interest as of February, 2017, to Rs. 93,52,343/-. (17) The total outstanding, including interest, which is due and payable by the Respondent to the Petitioner, for the Period between April, 2016 and February, 2017, is given hereunder: Basic (Rs.) Service Tax(Rs.) Total Receiva....
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....e in the Mumbai International Airport Terminal for sale of home products as the returns are significantly higher for sale of jewellery products. Even so, relying on Petitioner's assurance that they would arrange for the Respondent to sell jewellery products in that space after some time, the Respondent opted to continue its discussions with Petitioner. (4) Petitioner offered two options to Respondent for payment of the fee for the space (a) Revenue share at the rate of 22%; or (b) Monthly minimum assured/guaranteed amount. (5) The Petitioner was aware that, in relation to hiring space within Airport Terminals, the monthly minimum assured/guaranteed amount is a function of the passenger traffic. The amount payable as fee is linked to the number of passenger expected to pass through the terminal. On the other hand, the revenue share model entitles the Petitioner to retain 22% of the revenue earned by Respondent from actual sales of its products. (6) The Respondent was not comfortable with the monthly MMG form of fee as the Petitioner was not permitting the Respondent to sell its jewellery products. The Respondent requested the Petitioner to furnish the details of the expect....
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....iscounted by 22% and raised its Invoices accordingly. The Respondent has raised the following three Invoices, all of which remain unpaid till date: (i) Invoice No. FARL/01/2015-16, dated March 31, 2016 for a sum of Rs. 5,22,153/-; (ii) Invoice No. FARL/02/2016-17, dated May 19, 2016 for a sum of Rs. 1,12,164/-; and (iii) Invoice No. FARL/03/2016-17, dated June 24, 2016 for a sum of Rs. 2,14,365/-. (13) All the products and the Invoices were received and accepted by the Petitioner. In the circumstances, the Petitioner is bound and liable to pay the Respondent an aggregate sum of Rs. 8,48,682/- together with interest on the amount of each Invoice from the respective due dates until payment. (14) The Petitioner sent the Sales Reports for the month of May and up to June 15, 2016 only, which reflected insignificant sales as apprehended by the Respondent. Hence, the Respondent took a decision to terminate the arrangement and in that regard held discussions and exchanged e-mails with the Petitioner. The Respondent was surprised at the Petitioner's demand, raised for the first time only in July, 2016, for payment of the fee as per the monthly MMG model. The Respondent met the....
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....o with the hiring of any space from the Petitioner. (b) Neither on receipt of the Respondent's Invoices nor thereafter nor even in these proceedings before this Hon'ble Tribunal has the Petitioner disputed the Respondent's Invoice. This makes it evident that the parties had agreed, as offered by the Petitioner, and did not opt for the monthly minimum guarantee model. (c) It is only several months later, i.e. in July, 2016 that, for the first time, the Petitioner sent an e-mail forwarding some sales figures to the Respondent and claiming to have attached a debit note. The debit note is not produced in the Petition. (d) The Respondent promptly replied to the e-mail setting out the correct facts and denying liability to pay the Petitioner under the monthly minimum guarantee model. (e) The Petitioner continued to aggressively demand payment under the monthly minimum guarantee model, due to which the Respondent terminated the arrangement in August, 2016 itself. (f) Instead of calmly responding to the Respondents points, by its letter, dated September 7, 2016, the Petitioner continued with its baseless insistence on terms outside the agreed and binding arrangement w....
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....talments, and Revenue share 22% or Monthly MMG. Both these are stated to be mentioned in Annexure C (Details of cost) to this Heads of Terms. It is also seen from this Agreement that, as per Clause 2, the Respondent will supply goods to the Petitioner at agreed MMG/Revenue Share, and as per Clause 5, the Respondent, upon supply of products specified in the Purchase Order, will raise invoices on the Petitioner. The payments are due from both sides, from the Petitioner for the products supplied by the Respondent, and from the Respondent for the space provided by the Petitioner. As regards the payment to be made by the Respondent, the basis and details of the same is stated to be mentioned in Annexure C to the Agreement. A perusal of the same shows details of Capex, Additional cost under different heads, and the basis, MMG/Revenue Share. However, it is seen that at the bottom of this Annexure while the Petitioner has signed the same as "Agreed and accepted on behalf of Flemingo", this Annexure does not bear the signature of the Respondent under "Agreed and accepted on behalf of the Brand" (i.e. the Respondent). Thus, as far as the very important issue of basis of payment between the t....
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....er hand, the Respondent raised Invoices dated 31.03.2016, 19.05.2016 and 24.06.2016 for Rs. 5,22,153/-, Rs. 12,164/- and Rs. 2,14,365/- respectively, totalling Rs. 8,48,682/-, which remained unpaid. The Respondent, in its meeting with the Petitioner expressed its intention to terminate the arrangement. 10. The position of law on the issue is clear that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified reasons as per the Code. The Hon'ble Supreme Court in the case of Mobilox Innovations Private Ltd. v. Kirusa Software Pvt. Ltd. [2017] 85 taxmann.com 292/144 SCL 37 has inter alia, held that IBC, 2016 is not intended to be substitute to a recovery forum. In Transmission Corp. of A.P. Ltd. v. Equipment Conductors & Cables Ltd. [CA No. 9597 of 2018, dated 23-10-218] the Hon'ble Supreme Court of India, held that existence of undisputed debt is sine qua non of initiating CIRP. As per para 34 of this judgment, it is stated that the Adjudicating Authority, while examining an application filed under Section 9 of Code, will have to determine: (i) Whether there is an 'operational debt' as defined ex....