TaxTMI 
TaxTMI 
2020 (5) TMI 324
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....under the Code and Rules thereon. 2. BRIEF FACTS (1) M/s. Cerestra Advisors Private Limited/Operational Creditor is a company incorporated under the Companies Act, 1956 which is engaged in the business of investing in "Real Estates". (2) M/s. M.N. Takshila Industries Private Limited/Corporate Debtor is a Company registered under the Companies Act, 1956 which is into the business of leasing out office space to Pharma, Research and Development and Life Science Companies. (3) The Corporate Debtor along with M/s. MN Science & Technology Limited, M/s. MN Gachibowli Tech Park Private Limited, M/s. MN Gachibowli II Tech Park Private Limited, M/s. Deccan Bio Ventures Private Limited, M/s. MN Science Centre (Pagnapur) Pvt Ltd, M/s. Takshila Tech Parks & Incubators (India) Private Limited, M/s. Genome Valley Tech Parks & Incubators Pvt Ltd, M/s. MN Bio-Technology Private Limited (herein after referred to as "Fund Subsidiaries") approached the Operational Creditor for providing services and executed Advisory Agreement dated 5-9-2016 followed by first addendum to the Advisory Agreement dated 1-3-2018 (ANNEXURE-7) between M/s. Lighthouse Canton Pte Ltd (herein after referred to as FUND M....
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....evelopment Industry, in turn engaged the services of Operational Creditor. Both the Petitioner and Fund Manager executed an Advisory Agreement dated 5-9-2016. The Respondent was not a party to this Agreement as such no services were provided to the Respondent. That as per the terms of Advisory Agreement, the advisory fee is to be paid only subject to satisfactory performance and compliance, out of the management fees received by the Fund Manager from the Fund. In other words, once the Fund Manager receives its fee from the fund, it would further pay fees to the Operational Creditor/Petitioner herein. However, it is alleged that the petitioner failed in its obligations which caused cash flow constrains and the Fund suggested to defer payment of advisory fees to the Petitioner to October 2020 extendable by another 2 years. Further the purpose of executing Addendum Agreement dated 1-3-2018 was to enable the Fund and Fund Manager to make payments to the Petitioner directly from the Respondent subject to approval of invoices by the Fund Manager. According to the Respondent there was no consideration between the Petitioner and Respondent because Advisory Agreement provides for considerat....
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....corporated several companies using intellectual property and Trademark of the subsidiaries of the Fund and further in control of domain name "mnreit.in" and "mnpark.in". Consequently, Notice of Breach dated 29-10-2018 was issued bringing to the notice of the Petitioner, its breaches with a direction to transfer the Intellectual property illegally misappropriated by the Petitioner. The Fund Manager on receipt of sale consideration of Vivo, transferred Rs. 50,00,000/- on 26-2-2019 to the Petitioner. The Respondent's Board was under the Management and control of the Petitioner till the breaches of Petitioner were identified by Fund, Fund Manager and Respondent took measures to rectify them. (6) The next allegation is that TDS was paid to the Petitioner at the instructions of one Mr. Vikas Malpani, Director, common to both Petitioner and Respondent Companies which is a breach of Advisory Agreement as no prior approval of the Fund Manager was obtained. According to the Respondent, the Petitioner cannot rely on such illegally siphoned off TDS amounts to maintain this petition. (7) Respondent claim that it sustained huge loss due to failure on the part of Petitioner in timely coll....
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....um Agreement by Fund Manager to Operational Creditor and not by Corporate Debtor to Operational Creditor. As such, there is no pre-existing dispute between Operational Creditor and Corporate Debtor. (2) As per clause 2 of the Addendum Agreement, the Operational Creditor provided services to Corporate Debtor and raised invoices. The Corporate Debtor availed the services without any objection and made part payment of Rs. 50,00,000/- out of total debt of Rs. 4,67,13,343/-. The Petitioner is not accepting the contention of Corporate Debtor that there is no Creditor-Debtor relationship, notwithstanding deduction of TDS by the Corporate Debtor, which depicts that bills have been accounted for and TDS paid. 5. ADDITIONAL AFFIDAVIT DATED 28-9-2019 BY OPERATIONAL CREDITOR (1) According to the Petitioner, several incorrect statements transpired from the side of Corporate Debtor during the hearing held on 25-9-2019, which necessitated the Petitioner to file additional affidavit dated 28-9-2019 to place on record additional documents that were not filed earlier on the ground that the documents were bulky. In the additional affidavit, the Petitioner relied on clause 2.1 and 2.3 of the Agre....
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....h it does not have any bearing on the invoices raised by the Petitioner. 6. REPLY DATED 24-10-2019 TO THE ADDITIONAL AFFIDAVIT (i) The Corporate Debtor filed reply dated 24-10-2019 contending that the additional affidavit filed by the Petitioner deserves no consideration as it is filed after the arguments were completed on 25-9-2019 without seeking leave of this Tribunal, which is an afterthought as admitted by the Petitioner. It is alleged the documents filed by the Petitioner are irrelevant to this case. (ii) The Corporate Debtor relied on Clauses 13.1 and 2.1 of the Advisory Agreement and clause 2.3 of the Addendum Agreement and categorical admission of the Petitioner is that payment to be made only upon receipt of approval of Fund Manager. According to the Corporate Debtor, the Petitioner failed to produce any document that shows the Invoices were approved by the Fund Manager. (iii) As regards to balance confirmation letter issued by the Corporate Debtor is concerned, it was issued without any approval from the Fund Manager. (iv) It is the case of Corporate Debtor till date approval of the Fund Manager has not been obtained for the alleged invoices and that the conting....
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....ebtor and its subsidiaries. 12. The learned counsel contended that as per clause 2.1 of the Addendum, the operational creditor was required to raise Invoices on the corporate debtor in respect of Fund Manager and as per clause 2.3 all the payments to be made basing on the Invoices raised by the operational creditor upon approval by the Fund Manager. The learned counsel contended that an invoice of Rs. 1,40,00,000/- for the period from July 2017 to March 2018 was raised only after receiving confirmation from the Fund Manager. The invoice was raised on the corporate debtor dated 30-3-2018 and submitted to the corporate debtor on receipt of confirmation from the Fund Manager on 26-4-2018. The corporate debtor also confirmed it through E-mail dated 18-9-2018 the amount due to the operational creditor at the end of the financial year, viz. 31-3-2018 and the total amount due and payable to the operational creditor by the corporate debtor was Rs. 1,63,80,000/- as on 31-3-2018. The balance confirmation letter signed by the corporate debtor is shown as Annexure-2. 13. The learned counsel contended that the operational creditor requested the corporate debtor to give invoicing details for t....
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....basing on the Advisory Agreement as well as Addendum only on the instructions of M/s. Lighthouse Canton Private Limited, the Fund Manager. The learned counsel contended that services were provided by the operational creditor to the corporate debtor. The corporate debtor received the services without any objection or demur. There was correspondence with the corporate debtor. At no point of time the corporate debtor raised any dispute. In fact, TDS was also paid to the Government. The corporate debtor issued TDS Certificate to the operational creditor. Yet no payment is made. Only part payment was made. The balance remained unpaid. Thereafter, Demand Notice was issued on 20-3-2019 and reply was received on 29-3-2019. Thus, the learned counsel contended that a futile attempt was made by the corporate debtor denying liability and tried to establish that there was prior dispute between the operational creditor and the Fund Manager. On the other hand voluminous documentary evidence is filed which would establish that the operational creditor has rendered services to the corporate debtor and Invoices were properly raised and there was no prior dispute and the petition deserves to be admit....
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....#39;debt'. 17. The learned counsel contended that the petitioner is providing services to the Fund Manager. Thus, the corporate debtor is, in no way, connected to the services rendered by the operational creditor to the Fund Manager. Thus, if any payment is made by the corporate debtor, it is for and on behalf of the Fund Manager, which will be subject to the satisfaction of the Fund Manager with reference to the services rendered by the operational creditor. Therefore, no liability is created by the corporate debtor. The learned counsel contended that there were disputes as is evident from the documents filed by the operational creditor. The claim by the operational creditor is illegal against the corporate debtor. Thus, there was dispute with regard to breach of terms of Agreement. The learned counsel has relied on Annexure-2 to the Advisory Agreement. The learned counsel further relied on clause 2.3 of the Addendum to Advisory Agreement, which reads as under: "The Advisory Fees shall be paid on the basis of Invoices raised by the Asset Advisory to the Fund Subsidiaries from time to time for the services rendered under the Advisory Agreement. Such Invoices shall be approve....
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.... Calcutta, rendered by the Hon'ble Supreme Court of India vide order in [Civil Appeal No. 539 of 1964, dated 24-11-1965] (iv) Prayag Polytech (P.) Ltd. v. Gem Batteries (P.) Ltd. rendered by the Hon'ble NCLAT, New Delhi vide order in [Company Appeal (AT) (Insolvency) No. 713 of 2019, dated 24-9-2019] (v) Rahul Jain v. Vasant Raj Pandit, decided by the High Court of Delhi vide order in [CS (OS) 623 of 2005, dated 12-8-2015] (vi) Utility Powertech Ltd. v. Amit Traders, decided by the Hon'ble High Court of Delhi vide order in [RFA 515 of 2015, dated 15-5-2018] (vii) S.P. Brothers v. Biren Ramesh Kadakia, decided by the Hon'ble High Court of Bombay vide order and 27-3-2008 in [Appeal No. 628 of 2007, dated 11-3-2008] (viii) Shree Associates v. Gammon India Ltd., decided by the Hon'ble High Court of Bombay vide order in [Company Petition No. 108 of 2014, dated 30-1-2015] (ix) J.K. Engineering (P.) Ltd. v. ANE Industries (P.) Ltd., decided by the Hon'ble High Court of Calcutta, vide order in [G.A. No. 2522 of 2016, dated 7-2-2019] 20. The corporate debtor is challenging the application filed by the operational creditor on three grounds, namely, (i) ....
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....Fund Manager shall pay the Asset Advisor such fee as provided in Annexure II of this Agreement (the "Advisory Fees"), unless otherwise agreed between the Fund Manager and the Asset Advisor from time to time." 22. Thus, the contention of the corporate debtor that the operational creditor has to render services to the Fund Manager and it is the Fund Manager who shall pay to the operational creditor/Asset Advisor. 23. It is true that there was agreement between the Fund Manager, viz. Messrs Lighthouse Canton Private Limited and the operational creditor. Messrs Lighthouse Canton Private Limited is the Fund Manager of the Fund. According to the said Advisory Agreement, the operational creditor has to render services to the Fund Manager and fee is also to be paid by the Fund Manager. However, the Advisory Agreement was subsequently amended and as a consequence, Addendum Agreement was entered into between the Fund Manager, the operational creditor, the corporate debtor and other subsidiaries of the Fund. The Addendum was executed among them on 1-3-2018. The contention of the operational creditor that by virtue of the terms of the Addendum, the operational creditor was empowered to raise....
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....anager, which is retained by Fund. Ownership of the Fund in the corporate debtor is 100%. 26. The operational creditor heavily relied on Clauses 2.1 to 2.4. For easy reference said clauses as shown at page 113 of the Addendum are referred to herein: "2.1 It is hereby agreed by all the parties that notwithstanding any of the provisions in contrary, on and after July 1, 2017, an amount equal to the Advisory Fees (to the extent possible) shall be paid to the Asset Advisor by the Fund Subsidiaries in such proportion among the Fund Subsidiaries as may be mutually agreed by the Fund Manager and the Fund Advisor. 2.2 For the avoidance of doubt, where an amount equal to the Advisory Fees is paid by the Fund Subsidiaries to the Fund Advisor, no further amounts shall be due and payable by the Fund Manager to the Fund Advisor pursuant to the Advisory Agreement. 2.3 The Advisory Fees shall be paid on the basis of the Invoices raised by the Asset Advisor to the Fund Subsidiaries from time to time for the services rendered under the Advisory Agreement. Such Invoices shall be approved by the Fund Manager before payment of the Advisory Fees. 2.4 All other provisions contained in the Advis....
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....debtor. The operational creditor has relied on the unpaid Invoices, six in number, raised on the corporate debtor, shown as Annexure-8, at pages 119-124 of the Paper Booklet filed by the operational creditor. All the Invoices are raised in the name of the corporate debtor. It is also not the case of the corporate debtor that the amount under Invoices was paid by the Fund Manager. The operational creditor can proceed only against the corporate debtor, because the Addendum has expressly provides raising Invoices in the name of the Fund Subsidiary and payment to be made by the Fund Subsidiary. The operational creditor is able to establish that it has raised Invoices for the services rendered to the corporate debtor. 29. The next contention of the corporate debtor is that there is no debtor-creditor relationship between it and the operational creditor. It is also the case of the corporate debtor that the Fund Manager may defer the fee to be paid to the Estates Advisor/operational creditor to the end of the life of the Fund and hence it is only a contingent fee. The Fund Manager was appointed to manage the Fund invested in the corporate debtor. The operational creditor is providing ser....
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....rt-payment due towards payment in respect of total amount due under the Invoices. Of course, the corporate debtor is giving lame excuses that this was given under the directions of the operational creditor. Being aware of the terms of the Addendum, it is not open to the corporate debtor to contend that part-payment was made without any prior approval by the Fund Manager. 32. It is very interesting to note that the corporate debtor deducted TDS for the amounts covered by the Invoices. It is not in dispute that TDS was deducted. It was deducted under section 194J of the Income-tax Act, 1961, which is applicable to the services rendered by the operational creditor to the corporate debtor. 33. Payment of Rs. 50,00,000/- as well as deduction of TDS mandatorily required to be approved by the Fund Manager through on-line banking system. Therefore, TDS was deducted and part-payment was made. It cannot be said that there was no prior approval of the Invoices by the Fund Manager. 34. The contention of the corporate debtor that TDS was paid at the instance of one Vikas Malpani. However, TDS Certificate was issued by Shri Atul Bhardwaj, which is shown at page 141 of the Paper Booklet. Shri ....
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....orate debtor. The alleged dispute between the Fund Manager and the operational creditor cannot be extended to the liability arising under the Invoices. As regards the services rendered, no dispute is raised. It cannot be said that there was prior dispute basing on the alleged notice of breach. The alleged breach is in connection with the Trade Mark. The corporate debtor is totally unconnected with the dispute. It is stated that the operational creditor registered a company with the brand name 'MN' long prior to entering into the Advisory Agreement with the Fund Manager. The dispute, if any, over Trade Mark is neither directly nor indirectly connected to the services rendered to the corporate debtor by the operational creditor. Therefore, we do not agree with the contention of the corporate debtor that there was a pre-existing dispute. 36. The contention of the learned counsel is that mere fact that deduction of TDS does not mean that there was an admission of liability. In this connection the learned counsel for the corporate debtor has relied on the decisions cited supra. On the other hand the operational creditor has produced relevant forms filed with the Income-tax Depa....