TaxTMI 
TaxTMI 
2024 (5) TMI 726
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....td. - Operational Creditor seeking initiation of Corporate Insolvency Resolution Process ('CIRP' in short) against the Roadways Solutions India Infra Ltd - Corporate Debtor. Aggrieved by this impugned order, the present appeal has been preferred by the Appellant. 2. Outlining the factual matrix, the Learned Counsel for the Appellant submitted that the Corporate Debtor needed financial assistance to complete certain projects including the construction of Vadodara Mumbai Expressway of NHAI and had approached the Appellant to assist in coordinating with the lenders for sanction of credit facilities. For this purpose, a Mandate Letter dated 14.07.2021 was issued to the Appellant to engage their advisory services to raise credit facilities up to Rs.1750 cr for its projects including the Package X Project. It was submitted that the Appellant performed its obligations under the Mandate Letter and on 04.01.2022, due to their efforts, a term loan of Rs.480 cr was sanctioned by Canara Bank and the facility was credited in favour of the said SPV of the Corporate Debtor set up for Package X. Thus, an amount of Rs.7.20 cr along with GST became due and payable by the Corporate Debtor to the A....
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....of the towards the work done under the said Mandate Letter for Package X Project, the Corporate Debtor never responded either to the emails or invoices. Neither did they send any response to the Demand Notice. All objections/disputes are a belated after-thought raised after the filing of Section 9 application. Thus, though the Appellant had acted in compliance of the Mandate Letter, the Corporate Debtor by failing to make payment of the outstanding fees had committed a default which has been wrongly glossed over by the Adjudicating Authority in dismissing the Section 9 application. 4. Refuting the contentions raised by the Appellant, the Learned Counsel for the Respondent submitted that the Appellant had been given mandate to procure financial credit facility for Package VIII & IX. It was further pointed out that the sanction of Rs.480 cr by Canara Bank to the SPV for Package X was not facilitated by the Appellant but by another party. Thus, when the Appellant did not provide any services to the Corporate Debtor in relation to Package X, it cannot enforce its rights for seeking fees on this count. Since the Adjudicating Authority must first satisfy itself that there was a debt p....
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....ication under Section 9 and this is exactly the course of action followed by the Operational Creditor and we therefore find nothing wrong in this course of action. It is only at this stage when the Operational Creditor moved an application before the Adjudicating Authority under Section 9 that the Corporate Debtor has endeavoured to protect its interests and raised the issue of pre-existing disputes. 8. Given this backdrop and the factum that the Corporate Debtor has not replied to the Demand Notice but raised its defence for the first time before the Adjudicating Authority, it will be useful to find out how the Adjudicating Authority has considered the spectrum of facts and passed the impugned order rejecting the Section 9 application on the grounds of pre-existing disputes. The relevant portion of the impugned order is as extracted hereunder: "5.3.2. As regards contention that the mandate letter allegedly did not contemplate the provision of services in relation to the Package X Project, This bench finds that the agreement for the advisory services was entered for raising finance up to Rs 1750 Crores and the Operational Creditor was responsible for preparation of Info....
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....ing of Finance for package 10 project, while the IDBI Caps is also been paid for the similar services. 5.4. In view of the above findings this bench feels that present petition deserves to be dismissed on the ground of prior dispute in relation to existence of debt." 9. It is the case of the Appellant that the Adjudicating Authority had erroneously dismissed the Section 9 application on the ground of prior dispute by holding that the Appellant did not have the mandate to raise finance for Package X project as this task had been performed by IDBI Capital for which services IDBI had been paid. The Adjudicating Authority also wrongly concluded that the obligation to pay the fees for the services provided by the Appellant under the Mandate Letter was payable by the SPV and not by the Corporate Debtor. It is the contention of the Appellant that though the Mandate Letter provided for establishment of an SPV of the Corporate Debtor to which the monies sanctioned amount would be disbursed to, the obligation for payment of fees is on the Respondent- Corporate Debtor. It is also their case that the Adjudicating Authority has incorrectly held that the obligation to pay the fees wo....
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....Private Limited to IDBI Capital are as under: "4. Scope of Services 4.1 The scope of services envisaged for the Assignment is outlined as follows: ............. d. Assist the Client in approaching potential leader(s), initiating discussions, associating in joint presentations along with the Client (if required) getting commitments and negotiating detailed term sheet/s e) Assist in arranging the debt for the Project from Banks/NBFCs/Multilateral Financial Institutions. Any increase in the quantum of syndication of the required debt and/or addition of new lenders would be taken up after due consultations with the Client. ......... 8. Remuneration and Expenses The remuneration payable to the Advisor for the various services as stated above would be realized at milestone completion basis as under: Sr. No. Milestone Fees Payable (Rs. In Lakhs) 1. On receipt or in - principle sanctions, which are not accepted by the Client 10.00 2. On receipt of in- principle sanctions, which are accepted by the Client 0.35% of the sanctioned amount .................. 10. Payment Condition....
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....ate Letter, we find that the word "Company" has not been defined. However, in the payment clause, it states that the 'Company' shall pay 50% on the acceptance of the sanction and 50% on the disbursement of the respective SPVs. Quite clearly there is ambiguity in the terms contained in the Mandate letter, on whether the SPV or the Corporate Debtor is to be treated as the 'Company' for the purposes of deciding as to who shall be liable to pay the fees. This is clearly a bone of contention and a ground of existing dispute between the two parties. 13. Coming to the role of the Appellant in raising the loan facility, it is contended that the Mandate Letter dated 14.07.2021 was issued to them by the Corporate Debtor to engage their advisory services to raise credit facilities up to Rs.1750 cr including the Package X Project that active efforts were put in by the Appellant is reflected in the correspondence exchanged between the Appellant and the Respondent as well as the correspondence exchanged between the Appellant and Canara Bank in this regard. The concession agreement and information memorandum of Package X was shared by the Corporate Debtor as placed at page 270 and 274 of APB. ....
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.... that part payment by the Corporate Debtor basis the proforma invoice is a clear acknowledgment on the part of the Corporate Debtor of its liability to make payment of the fees due and payable to the Appellant. In any case, the emails dated April 26, 2022; May 2, 2022; May 24, 2022; and May 30, 2022 sent by them to the Corporate Debtor were captioned "Debit Note Roadway Solutions" and therefore constituted a debit note as it provided information to the Corporate Debtor of their upcoming debt obligations based on amounts which were to be officially invoiced in near future. The rival submission made in the reply to the Section 9 application by the Corporate Debtor is that the Mandate Letter stipulated the raising of debit note by the Operational Creditor to seek payments. The Mandate Letter being in the nature of contract was required to be followed in letter and spirit by both the Operational Creditor and Corporate Debtor. Further it is the contention of the Respondent that the Appellant has not paid GST or accounted for it in their books of accounts which shows that the proforma invoices were not final invoices and hence cannot be held as operational debt. Thus, in the present case....