TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1392
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....nding before ICC, London. The legal advisors of the Respondent - Three Crowns LLP and Respondent agreed to take independent expert service in respect to certain claims filed against Emaar MGF Land Limited. 2.2 A letter dated 26.02.2020 was sent by the Appellant to the Respondent as well as Three Crowns LLP, the legal advisor, containing terms and conditions for engagement of the Appellant including fee structure for conducting the engagement of the Appellant. 2.3 The Respondent has filed an arbitration case against Emaar MGF Land Limited in reference to which the Appellant was engaged in reference to its Senior Managing Director, Mr. Montek Mayal, who was consultant of Economic and Financial Consulting practice in India, who signed the agreement on behalf of the FTI. The work was divided in four phases. Under Phase-1 of the work maximum fee agreed was USD 30,000/-. After the aforesaid, service agreement dated 26.02.2020, where the FTI agreed to provide the service as contemplated, FTI extended services to the Respondent. 2.4 Mr. Montek Mayal, who was Senior Managing Director in FTI left the FTI on 14.01.2022. 2.5 On 20.05.2022, the Appellant issued first invoice to the ....
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.... was also entered between the Respondents and Mr. Montek Mayal through business entity Osborne Partners. The services rendered by the Appellant to the Respondent were with regard to valuation services remained confined to and performed by Mr. Montek Mayal. After disassociation of Mr. Montek Mayal with the Appellant, the Appellant was unable to provide any service. Respondent has paid an amount of Rs. 3.88 Crores to Mr. Montek Mayal acting for and on behalf of FTI and has paid an amount of Rs. 2.07 Crore to Mr. Montek Mayal acting through Osborne Partners. The claim was refuted as false and incorrect. 2.9 The Appellant sent a letter dated 04.11.2024 responding to the Reply to the Demand notice dated 25.07.2024. On 10.01.2025, the Appellant filed Section 9 application claiming an outstanding amount of USD 367,353.29/- including interest. The date of default in Part IV was mentioned as 01.07.2024. The Respondent filed a reply to the Section 9 application refuting the submissions. The Adjudicating Authority passed an order permitting the Appellant to file an affidavit by order dated 28.01.2025 that application is maintainable. An Affidavit was filed by the Operational Creditor in re....
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....d between May, 2022 to February, 2023 and no contemporaneous dispute or objection were raised either as to invoice amount or underlying service. Contract with Osborne Partners was executed on 01.06.2023 approximately nine months after service of outstanding invoices were completed. Even if Osborne Partners provided any overlapping services, the same cannot be under any law or facts absolve the Respondent from servicing its debt under the subsisting service contract. Observation of the Adjudicating Authority that outstanding invoice raised by the FTI were contractual in nature and not genuine is not sustainable. The observation of the Adjudicating Authority that present dispute is purely commercial and beyond purview of the NCLT also cannot be supported. When the operational debt was due, the Appellant was fully entitled to invoke proceedings under Section 8 and 9 of the I&B Code. Neither the Respondent nor in the impugned order any pre-existing dispute has been identified against the claim of the Appellant. The Respondent failed to produce any correspondence or document prior to demand notice to prove that ingredients of pre-existing dispute are satisfied and the Adjudicating Autho....
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....l prepare a comprehensive independent expert report setting out our detailed assessment of the Claimants' losses based on the work done in Phase 1; (2) in Phase 3, you will likely require a separate detailed independent expert report to be submitted in response to any expert evidence filed by the Respondents; and (3) in Phase 4, should the matter proceed to a hearing, you will also require assistance in addressing damages and financial issues, providing expert testimony at the hearing, and assistance with any damages or financial issues that may arise after the hearing." 7. Para 12 of the letter contained a statement that Mr. Montek Mayal will be primary contact for the matter. Para 12 of the letter is as follows: "12. Mr Montek Mayal ("Mr Mayal"), Senior Managing Director in FTI Consulting's Economic and Financial Consulting practice in India, will be the primary contact for this matter. Mr Mayal together with Mr James Nicholson ("Mr Nicholson"), Senior Managing Director of FTI Consulting based in Singapore, will be responsible for the planning, coordination, and completion of this engagement" 8. It is admitted fact that Mr. Montek Mayal wa....
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.... Explanation.-For the purposes of this section, a "demand notice" means a notice served by an operational creditor to the corporate debtor demanding [payment] of the operational debt in respect of which the default has occurred. 9. Application for initiation of corporate insolvency resolution process by operational creditor. - (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process. (2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed. (3) The operational creditor shallJ2, along with the application furnish- (a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor; (b) an affidavit to the effect that there is no notic....
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....cant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority. (6) The corporate insolvency resolution process shall commence from the date of admission of the application under sub-section (5) of this section." 10. As per Section 8, an Operational Creditor on occurrence of default may deliver a demand notice of unpaid operational debt demanding payment. Under Section 8(2) provides that the Corporate Debtor shall be within a period of ten days of the receipt of the demand notice bring to the notice of the operational creditor (a) existence of a dispute (b) the payment of unpaid operational debt. Section 8(2) is quoted above. 11. Clause (a) of Sub-section (2) of Section 8 uses expression 'existence of a dispute, if any, or record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute'. Clause (a), thus, is divided into two parts i.e. Corporate Debtor to bring into the notice of the Operational Creditor (i) existence of dispute; or (ii) record of pendency of the suit or arbitration proceeding filed before the receipt of ....
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....e of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending4 against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under sub-clause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority." 13. Section 9 Sub-section (5) Clause (ii) Sub-clause (d) provides that the Adjudicating Authority shall reject the application if notice of dispute has been received by the Operational Creditor or there is record of dispute in the information utility. The Adjudicating Authority after noticing the case of both the Applicant/ Appellant and the Respondent come to the conclusion that application filed by the Appellant is a dispute purely commercial in nature which arises out of a contract/agreement and the Applicant cannot be permitted to use this forum as a recovery mechanism. In Para 6(xxii) following has been held: "xxii. Further, we agree with the submissions of the Corporate....
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....xtent of services rendered by your Client, more than the legitimate fee due and payable, were duly paid to FTI Consulting India Private Limited. 12. Our Client instructs us to state that an amount of USD 219600 (equivalent to approximately INR 1.80 crores) stands paid by our Client to FTI Consulting India Private Limited which fact also stands acknowledged by your Client FTI Consulting India Private Limited. 13. Our Client instructs us to state that the amount USD 219600 was released by our Client even though our Client bonafidely believes that corresponding services to the extent of value of payment made were not rendered. 14. Our Client further instructs us to state that the payment of USD 219600 was released even though the Agreement itself capped the fees infact rendered by your Client at USD 30,000. The amounts released by our Client comes out to nearly 7 times over and above the capped fee. 15. Our Client instructs us to state that in meanwhile, it was informed to our Client that Mr. Montek Mayal, the Expert Witness for our Case before ICC, London, was no longer associated with your Client FTI Consulting India Private Limited, as such the s....
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....e unpaid operational debt in relation to such dispute? If any one of the aforesaid conditions is lacking, the application would have to be rejected. Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act." 19. Explaining the existence of dispute, the Hon'ble Supreme court laid down that it has to be examined whether there is plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. In Para 51 of the judgement following was laid down: "51. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It is clear that such notice must bring to the notice of the operational ....
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....pellant. It is on the record that work which was divided into Phase 1 to 4 allotted to the Appellant under the Agreement dated 26.02.2020 and the agreement dated 01.06.2023 also, the work has been overlapping. When we look into the letter dated 01.06.2023, the letter indicates that work of Phase 1 by Osborne Partners is completed and fee is payable on signing the letter. It clearly indicates that the work by Osborne Partners was entrusted much prior to 01.06.2023. It is useful to notice following statement in letter dated 01.06.2023: "In Phase 1, we have been asked to prepare and submit an expert report setting out the value of Emaar India for the period 2020 to 2Q23 based on the financial statements and other publicly available information for Emaar Properties PJSC and its subsidiaries. Based on our current understanding of the scope for Phase1, we will agree to a fixed fee of USD 50K. The work is complete, and the fee Is payable on signing of this letter." 22. In the reply the demand notice, the Respondent has also filed relevant details of various payments made to Mr. Montek Mayal through its business entity Osborne Partners amounting to Rs. 2.07 Crores. The said sta....
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....een pleaded: "15. It is significant to note that Mr. Mayal had already been disclosed as the expert witness on behalf of the Corporate Debtor in the ongoing ICC arbitration proceedings. The Service Agreement was entered into specifically based on Mr. Mayal's professional expertise and personal involvement. Consequently, his exit from the Applicant disrupted the structure of the engagement and frustrated the purpose of the contract. Therefore, the Corporate Debtor was constrained to enter into a new agreement with Mr. Mayal through Osborne Partners, dated 01.06.2023. A copy of the agreement dated 01.06.2023 executed between the Corporate Debtor and Osborne Partners is annexed herewith and marked as Annexure R/2. 16. That it is respectfully submitted that no amount whatsoever is due or payable to the Applicant. The Corporate Debtor has already made substantial payments well in excess of the value of the services actually rendered under the Service Agreement. Further, the Corporate Debtor exclusively engaged with Osborne Partners, an independent consultancy firm, pursuant to a new agreement entered into following the departure of Mr. Montek Mayal from the Applicant. Under thi....
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....the reason as indicated in the reply notice as well as reply to the Section 9 application by the Respondent. 27. Proceeding under Section 9 are proceedings for initiation of insolvency against a Corporate Debtor who fail to make payment after receipt of demand notice provided notice of dispute has not been given by the Corporate Debtor. Section 9 proceeding are not proceeding where contractual dispute between the parties for payment of fee or services can be examined and adjudicated. Present is not a case where claim raised by the Appellant is admitted by the Respondent. 28. Hon'ble Supreme Court in "S. S. Engineers vs. Hindustan Petroleum Corporation Ltd. & Ors., 2022 SCC OnLine SC 1385" held that Operational Creditor can trigger CIRP process when there is an undisputed debt. In Para 32 following was held: "32. There are noticeable differences in the IBC between the procedure of initiation of CIRP by a financial creditor and initiation of CIRP by an operational creditor. On a reading of sections 8 and 9 of the IBC, it is patently clear that an operational creditor can only trigger the CIRP, when there is an undisputed debt and a default in payment thereof. If the cl....