TaxTMI 
TaxTMI 
2024 (9) TMI 327
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....solution Professional Process against Think & Learn Private Limited (hereinafter referred as 'Corporate Debtor'/Respondent) for a default of total outstanding amount of Rs. 1,58,90,92,400/- (Rupees One Hundred Fifty Eight Crore Ninety Lakhs, Ninety-Two Thousand Four Hundred). In Part IV of Form No.5 filed with the application, the following information is given: 2 AMOUNT CLAIMED TO BE IN DEFUALT AND THE DATE ON WHICH THE DEFAULT OCCURRED Amount in Default: Rs 1,58,90,92,400/- (Rupees One Hundred Fifty-Eight Crore Ninety Lakhs Ninety Two Thousand Four Hundred) excluding the Tax Deducted at Source deposited by the Corporate Debtor and applicable Interest. Date of Default: 21/08/2022 The Record of Default in Form D issued by NESL is annexed at Page 184, which reflects 21/08/2022 as the Date of Default. Affidavit U/s 9(3) (b) is placed at Page 55 of the Petition & Demand Notice under Section 8(1) of the Code, in Form 4 was attached at Page 154 onwards. 2. Brief facts of the case, which are relevant to the issue in question, and as narrated by the Petitioner in the Petition, Form No.5 and subsequent written submissions are as follows: i) The Operational C....
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....Creditor for the financial year 2022-23. Further, in pursuance of Correspondence between the parties, the Corporate Debtor, vide its email dated 06/01/2023 gave its consent to the Petitioner to encash the Bank Guarantee of Rs 143,00,00,000/-for dues till ICC'WC 2022 which was encashed subsequently. However the amount was not sufficient to cover the entire amount, and this Bank guarantee was adjusted against Invoices No.1 to Invoice No.8 and Invoice No. 10,12 & 14 as explained in item 1 in part IV of Form No.5. Therefore, even after encashment of the Bank Guarantee, the following invoices aggregating to an amount of Rs. 1,58,90,92,400/- remained unpaid: Cricket series/Tour details Invoice Number Invoice Amount (in INR) TDS reflecting in Form 26 AS (in INR) Amount Unpaid (in INR) Date on which 50% amount was payable and default occurred Date of default for balance 50% amount payable South Africa, Australia, Srilanka, New Zealand Invoice 9 1,38,30,000 2,76,600 1,35,53,400 Aug 21, 2022 Sept 30, 2022 South Africa, Australia, Srilanka, New Zealand Invoice 11 1,38,30,000 2,76,600 1,35,53,400 Aug 29, 2022 Oct 9, 2022 Sou....
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....aving acknowledged the dues, the Corporate Debtor has failed to pay and instead, the Corporate Debtor repeatedly kept requesting the Operational Creditor for extension of time for payment as evidenced by the email dated 17/04/2023, wherein the Corporate Debtor requested extension of time upto May 2023; contending that the payments to be made in May 2023 and June of 2023 would be made in the respective months. By another email dated 15/05/2023 the Corporate Debtor again requested the Operational Creditor for accepting the payment of its dues between June 12, 2023 to June 15, 2023, since the fund raising for the former had gotten delayed till June 2023. It is contented that these emails were the admission of the Debt owed by the Corporate Debtor and the default had occurred since there was request for extension of the time repeatedly. The Respondent never disputed the invoices raised during the F.Y 2022-23 which have been listed above, and in fact also duly paid the invoice no BCCI/22-23/008 dated 20/05/2022; in full amounting to Rs 25,35,50,000/-(Rupees Twenty Five Crore Thirty Five Lakh Fifty Thousand), pertaining to the Invoice of the India South Africa series. vii) On 19....
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.....03.2022). A Mere grant of rights to the Respondent pertaining to a Sponsorship cannot be said to be the provision of a 'service' from the BCCI to the Respondent. No service was ever provided by the BCCI which was not a 'service provider' and the Respondent is not a 'service receiver' or recipient of any service from the BCCI. iii. That Section 5(20) & (21) of the Code, an 'operational creditor' can file an application seeking initiation of the CIRP process against a corporate debtor on account of non-payment of any 'operational debt'. On account of the reciprocal rights and obligations between the parties, BCCI merely granted certain 'Rights' and no 'services' were ever provided to BYJU'S under the Agreement. Since no service has been provided by the BCCI, it cannot be termed as a service provider and further does not fall under the definition of "Operational Creditor." iv. Even assuming that the alleged Claim is due and payable, the right to issue a demand notice and initiate CIRP under Section 9 of the code vests only with an 'operational creditor' as defined under Section 5(21) of the Code, wh....
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.... of discussions, in which the Respondents herein proposed extensions and various deals several times all of which was denied by the Operational Creditor. ix. It is pertinent that the proposed extension agreement was never finalised and consequently never executed. Therefore, it is an admitted position that as of 31/03/2022 and till date there exists no formal written agreement between the parties. Therefore, the alleged Operational Creditor has no right to claim that the purported invoices raised during the financial year 2022-23 were under the Agreement. x. The Respondent has relied on the following cases for the same; a. Stoughton Street Tech Labs Pvt Ltd v. Jet Skyesports Gaming Pvt Ltd[Appeal(L)No.16492 of 2022} b. Hardesh Ores Pvt v. Hede and Company, ( (2007) 5 SCC 61) c. Joshi Technologies International Inc. v. Union of India (UOI) and Ors. ( (2015) 7 SCC 728) etc Pre-existing Dispute between the parties xi. The Respondents contend that the since the negotiations of the Sponsorship was still in the process and the same was contended by the Respondents in reply to the Demand Notice dated 18/07/2023, despite the ex....
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....sub-delegate such specific functionality. Therefore, the present Petition filed by a legal manager of BCCI, without any specific authority permitting the same, is not maintainable under the law and is hence liable to be dismissed. xiv. Further the Respondent herein has filed IA 106/2024 seeking directing under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the parties to arbitration proceedings, since the Clause 19 of the Agreement stipulated that all disputes arising out of or in relation to the Agreement are mandatorily required to be adjudicated by way of Arbitration. Further it is also the contention of the Respondent that a number of substantial questions with respect to status of the alleged Creditor and legitimacy of contract etc have to be adjudicated upon, which cannot be undertaken in summary proceedings before the NCLT and must be relegated to Arbitration. 4. The Learned Counsel for the Petitioner have filed Rejoinder vide Diary No. 791 dated 05/02/2024, and Written Submissions vide Diary No. 2568 dated 30/04/2024 contending as hereunder: i. The term of the Agreement was originally till 31/03/2022, even after the said term of the Ag....
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....ices similar to the Services availed by the Respondent from the Petitioner are 'services' for the purposes of IBC. In Rapid Metro Rail Gurgaon Limited v. Icons Project India Private Limited MANU/NC/6200/2022, the NCLT, New Delhi held that an outstanding payment / debt pertaining to an outdoor advertisement right agreement wherein the sole and exclusive advertising rights for outdoor advertisements work on Rapid Metrorail Gurgaon line was granted to the corporate debtor falls within the definition of an 'Operational Debt' [Para 13 at page 6 of the judgment compilation filed by the Petitioner on March 11, 2024]. vi. Similarly, in Somesh Choudhary, Suspended Director at Global Fragrances Private Limited v. Knight Riders Sports Private Limited and Ors. MANU/NL/0619/2022 ("Somesh Choudhary"), the Hon'ble NCLAT, New Delhi held that as the corporate debtor was permitted to use the trademark 'KKR' in relation to the licensed products, it constitutes 'provision of service' and any amount due and payable arising out of such service is an Operational Debt. vii. In Chitra Publicity Company v. Sarkar Leisure Ltd., 2019 SCC OnLine NCLT 9905, ....
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....uently for initiating a proceeding under Section 9 of the IBC. The fact that the (a) Respondent never disputed having availed Services from the Petitioner or its liability to pay when the invoices were being sent by the Petitioner and (b) Respondent has admitted its liability to pay and sought extension of time to make payment towards the pending invoices raised post March 2022 and paid TDS against the invoices, clearly demonstrates that there was a mutually recognized and subsisting arrangement between the Parties. xii. That Regulation 7(2) of IBBI(Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that the existence of debt due to the operational creditor under the said regulations may be proved on the basis of the records available with an information utility, if any, or other relevant documents, including a contract for the supply of goods and services with corporate debtor OR an invoice demanding payment for the goods and services supplied to the corporate debtor, among others. Thus, it is clear from the scheme of IBC that an operational debt can arise on the basis of the invoices alone and does not have to be pursuant to a written agreeme....
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....ule 1(A)(bb) at page 681 of the compendium filed by the Respondent on March 13, 2024] has the power to delegate / sub-delegate any work, including the institution of proceedings for the Petitioner, under its Bye-laws xvi. In accordance with the Petitioner's Bye-laws, the Apex Council vide resolution dated October 27, 2022, appointed Mr. Jay Shah, Honorary Secretary of BCCI, as the authorized representative of the Petitioner inter alia to institute all legal proceedings. The resolution further authorized the Honorary Secretary to delegate the powers vested on him to any officer(s) of the Petitioner. [Resolution of the Apex Council is produced at page 193 of the section 9 petition]. The Honorary Secretary vide authority letter dated October 27, 2022, further authorized Mr. Biswa Patnaik, General Counsel of BCCI and / or Ms. Melinda Colaco, Senior Manager (legal) of BCCI to execute all documents to make necessary filings in legal proceedings. [Authority letter is produced at page 192 of the section 9 petition]. As such, the authority given to Senior Manager (legal) to initiate all legal proceedings is proper and in accordance with the Bye-laws governing the Petitioner and....
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....or and the pleadings on record, we proceed to analyse the following issues emerging in this case: 7.1. Whether the Petitioner herein is an "Operational Creditor"? a) The paramount question which arises in the present Petition is whether there is an 'Operational Debt' to be claimed as defined under the Code. Section 5(21) of the Code defines 'Operational Debt' as follows: 5 Definitions (1)*** (2)*** .. .. (21) "operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; The main argument of the Respondents is that the 'Team Sponsor' Agreement between the parties was a mutual set-up for gains and that the Petitioner merely granted certain 'Rights' and no 'services' were ever provided to Respondent under the Agreement. In this regard it is essential to note the term 'Rights' as per clause 1.1 (xxvii) of the agreement: xxvii) "Rights" sha....
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....the 'Claim' in respect of such provisions of 'goods and services', under the terms of the Agreement, fall within the ambit of the definition of 'Operational Debt' as defined under Section 5(21) of the Code." b) Hence, in the present case also an exclusive Sponsorship Right was licensed to the Respondents for a 'Rights fee' to be paid to the Petitioner. Moreover, the invoices raised against the Corporate Debtor also contemplate the due payment of GST for the services rendered. We have considered the principles laid down in Somesh Choudhary, (supra) and Jaipur Trades Export Centre Pvt Ltd v M/s. Metro Jet Airways Training Pvt Ltd, (2022) ibclaw.in 478 NCLAT. The Hon'ble NCLAT in these decisions has duly considered the implication of payment of GST; which is contemplated only for providing for 'goods' and 'services.' As per the Agreement, the payment of the fees was liable to levying of GST, hence it is implied that the Sponsor Agreement licensed is in respect of the 'services', and the 'rights fee' for which the Operational Creditor is liable to be paid by the Corporate Debtor does fall within the definition....
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....cuments, including - (i) a contract for the supply of goods and services with corporate debtor; (ii) an invoice demanding payment for the goods and services supplied to the corporate debtor; ..........." It is a settled principle under Section 9(3) read with Regulation 7(2)(b)(i) and (ii) of the Regulations 2016, that the Operational Creditor can substantiate its claim either with contracts or invoices. Further, it is not in dispute that the Respondent itself has duly availed the Rights granted under the Agreement even after the date of expiry of the Agreement and the Respondent has availed the entire benefits of the "Rights" provided under the same agreement and owing to such benefits availed, the Petitioner has raised invoices in pursuant to the same "Rights Fees". In fact, even after the original agreement coming to an end on 31/03/2022; BCCI and the Corporate Debtor exchanged correspondences to the effect that the arrangement was to continue pending the execution of the formal document. b) Moreover, it is apparent from the admission of the Respondent that the even after the expiry of the agreement, the bank guarantee was amended to p....
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....of being a sponsor like (a) marketing related services by way of the exclusive right to be the team sponsor of the Indian cricket teams and to display the Respondent's trademarks / brand names on the specified portion of the team kit worn by the Indian cricket teams; (b) advertising related services by way of a platform to display its brand through the use of video footage from cricket series and events organized and administered by the Petitioner; (c) promotional services by way of the network to engage with players of the Indian cricket teams for and in connection with advertising campaigns of the Respondent; (d) the permission to use the intellectual property of the Petitioner such as its logo and other official trademarks in its marketing materials; and (e) hospitality and non-hospitality tickets for every ticketed match organized by the Petitioner. d) In this regard, it is pertinent to refer to the Order of NCLT, Delhi, Principal Bench in the case of Daily Diary Essentials V. Goodhealth Industries Private Limited in CP (IB) No.628/(PB)/2023, order dated 02/04/2023, wherein it was held that, "16. In Part IV of the Form-5 as extracted above, the OC mentions....
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....whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be;" The Hon'ble Supreme Court in the case of Innoventive Industries Ltd. b. ICICI Bank (2018) 1 SCC 407 has held as under: "27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we have to go back to Section 3(6) which defines "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) " [Emphasis Supplied] b) Now, it is relevant to refer to the email correspondences pertaining to the invoices for which the payment remained ou....
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....ues after adjusting the payment received pursuant to the BG.* 3. After adjusting the payment from encashing the BG, any remaining dues till ICC WC'2022 and additional dues until 31st March'2023 would be paid by BYJU'S between 1st April'2023 and 30th June'2023. We reiterate that the above proposal to extend the deal period till March'2023 is subject to BCCI accepting the above mentioned payment schedule which allows BYJU'S to clear all the dues by making payments during the period 1st April'23 till 30' June'2023. This decision has been difficult for us but we acknowledge your request and appreciate the contribution of the BCCI to our growth story and we intend to conclude our partnership on amicable terms that are mutually satisfactory. Look forward to hearing from you on the way forward on the above. [Emphasis Supplied] ii) Email dated 17/04/2023, from Atit (Byjus-Respondent) to Hemang (BCCI-Petitioner) (@Annexure 30 of the Petition) Dear Hemang, "As discussed over the call today, we are expecting a few weeks delay in our fund raise. Our April 2023 payout to BCCI is running behind schedule and we a....
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....btor through Encashment of Bank Guarantee. It is only for remaining twelve invoices, also listed in Part-IV of Form-5 and reproduced in this order at Para 2.iv), the total outstanding amount of Rs.158,90,92,400/- was duly reflected in the Form-5 as the 'amount in default'. In the same email dated 06.01.2023, there is a commitment from the Corporate Debtor that after the adjustment of encashment of Bank Guarantee, the remaining outstanding dues until 31.03.2023 would be paid by Byjus between 01.04.2023 and 30.06.2023. This commitment was reiterated by the Corporate Debtor in the email dated 17.04.2023 and 15.05.2023, reproduced above. The contents of these email therefore clearly establish that there is an outstanding debt owed to the Operational creditor and there is a default on the part of the Corporate Debtor as provided under Section 3 (12) of the Code; which the Corporate Debtor has duly acknowledged by way of these three emails. The contents and the veracity of these email communications have not been disputed by the Respondent Corporate Debtor in this case. f) Thus since, the Respondent herein has time and again acknowledged and duly planned a repayment sche....
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....ing an application before the adjudicating authority under Sections 9(1) and 9(2) ****** ***** ***** [Emphasis supplied] c) Therefore the Hon'ble Apex Court has laid down the principle that under Section 8(2), for a pre-existing dispute to be the ground for dismissal of section 9, the same must exist before the receipt of the Demand notice, or the Invoice, as the case may be. The same was further reiterated by the Hon'ble NCLAT in the case of Mr. Rajpal Singh Solanki, Ex-Director of Minarch Overseas Pvt. Ltd. Vs. M/s. Quazar Infrastructure Pvt. Ltd. (2021) ibclaw.in 297 NCLAT, order dated 02/07/2021; as under "15. The judgments of the Hon'ble Apex Court in Mobilox Innovations Private Limited and Innovative Industries Limited civil appeals are basically about pre-existing dispute and that the Adjudicating Authority should be prima facie convinced about the pre-existence of a dispute before notice under Section 8 was sent, and not involve itself into examining the pre-existing dispute on merits " d) It is seen that the Respondents herein has relied upon the email dated 24/05/2022 to support the contention of pre-existing disput....
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....above discussion, the allegation of the Corporate Debtor raised now that there is no formal contract between the parties is just to somehow put forward a defence which is legally unsustainable as discussed above. Moreover, the Respondent herein has continued to be entitled of all the sponsorship rights even after 31/03/2022 and has also availed several benefits of being a Sponsor under the Agreement. Further, while from 24/05/2022 onwards the Petitioner have raised several invoices, the Respondent did not raise any specific disputes in respect of any particular invoice. The pre-existing dispute which may be the ground to reject an Application under Section 9 has to be a real dispute or a conflict or a controversy, a conflict of claims or rights should be apparent from the reply as contemplated under Section 8(2) of IBC, 2016. We do not find any document furnished by the Respondent that might show that there was any controversy/conflict between the parties so as to show the existence of dispute prior to the receipt of the demand notice/invoice in so far as the payment of the claims raised by the invoices are concerned. Therefore, the requirement of Section 8(2)(a) of IBC is not fulf....
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....isation: In so far as the argument of the Respondent regarding the maintainability due to lack of proper authority is concerned, we have examined the MOA of the BCCI and it is clear that as per Rule 7(3)(f) that the Secretary has the power to delegate any work to any person of the management. Hence we are satisfied with the explanation given by the Petitioner that the authority letter dated 27/10/2022, authorising the General Counsel of BCCI and Senior manager (Legal) to execute all the documents and initiate the present proceedings is proper and in accordance with the Bye-laws. Thus the objection in this regard is not acceptable. 8. Accordingly, this Adjudicating Authority is of the considered opinion that there is no reason to deny the petition filed under section 9 of the IBC, 2016 by the Operational Creditor to initiate CIRP against the Corporate Debtor, since the existence of a debt and a default in the payment of debt is clearly established. Therefore, the instant Company Petition bearing CP (IB) No. 149/2023 is admitted against the Corporate Debtor and moratorium is declared in terms of Section 14 of the Code. 9. As a necessary consequences of the moratorium in term....
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....f Rs 2,00,000/- (Rupees Two Lakhs Only) with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors. 12. The Interim Resolution Professional shall after collation of all the claims received against Think and Learn Pvt Ltd the Corporate Debtor and the determination of the financial position of the Corporate Debtor constitute a Committee of Creditors and shall file a report, certifying constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene first meeting of the Committee within seven days for filing the report of Constitution of the Committee. The Interim Resolution Professional is further directed to send regular progress reports to this Tribunal every fortnight. 13. A copy of the order shall be communicated to both the parties. The learned Counsel for the Petitioner shall deliver copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to send the copy of this order to the Interim Resolution Professional at his e-mail address forthwith. I.A 106/2024 ....