TaxTMI 
TaxTMI 
2026 (9) TMI 1218
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....uthorized share capital of Rs. 2,11,00,00,050/- and paid up share capital of Rs. 2,09,32,08,000/- and address at No. 191, Poonamallee High Road, Kilpauk, Chennai, Tamil Nadu - 600 010, India, Tamil Nadu, within the jurisdiction of this Tribunal. In Part III of the application, the Operational Creditor has not proposed anyone as the IRP. Part IV of the application sets out the details of the debt being Rs. 1,43,14,464/- (excluding GST and interest as on 31.10.2023 and less amount paid Rs. 35,12,608/-) total amount due as on 31.10.2023 is Rs. 1,08,01,856/- (Rupees one crore eight lakhs one thousand eight hundred fifty six only) along with interest @ 12% p.a. until the payment of debts, with the date of default as 01.11.2023. This application has been filed on 03.12.2025. 2.2. It is submitted that the Corporate Debtor had approached the Applicant for professional assistance in handling the orders and notices issued in GST proceedings initiated by the Tamil Nadu State Goods and Services Tax Authorities. Pursuant thereto, an Engagement Letter dated 16.12.2023 was executed between the parties. Under Clause 7 of the Statement of Work, the Corporate Debtor was required to pay Rs. 25,00,....
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.... authority orders, demand and recovery notices, email correspondence, ledger and NeSL intimation in support of the existence of the operational debt and default. 2.8. It is finally submitted that a crystallised operational debt is due and payable by the Corporate Debtor and that, despite repeated demands and service of the statutory Demand Notice, the Corporate Debtor has failed to discharge the outstanding amount, thereby committing default under the provisions of the IBC. 3. SUBMISSIONS OF THE RESPONDENT 3.1. The Respondent/ Corporate Debtor stated that the present Application is misconceived and liable to be dismissed, as there exists a genuine and bona fide pre-existing dispute between the parties in relation to the alleged success fee claimed by the Petitioner. 3.2. It is stated that the Respondent had engaged the Petitioner under an Engagement Agreement dated 16.12.2023 for professional services in connection with GST proceedings for FYs 2019-20, 2020-21 and 2021-22 and also contends that the agreed professional fee was a fixed amount of Rs. 25,00,000/-, which was duly invoiced and paid in full and final settlement on 19.01.2024. 3.3. It is disputed that the Pe....
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.... policy, is also hit by Section 23 of the Indian Contract Act, 1872 and the question of legality and enforceability of the alleged fee requires detailed adjudication and cannot be decided in the summary jurisdiction of this Tribunal under Section 9 of the Code. 3.9. It is contended that the disputes raised are contractual in nature and concern the interpretation and enforceability of the Engagement Agreement, the alleged success fee clause and the services rendered by the Petitioner and they relied upon Mobilox Innovations Private Limited v. Kirusa Software Private Limited. 3.10. It is also contented that payment of the first tranche of Rs. 25,00,000/- amounts to waiver of the dispute regarding the alleged second tranche and that the part payment does not constitute an unconditional admission of liability for the remaining amount and cannot amount to waiver of a pre-existing dispute. 3.11. It is also stated that a substantial portion of the alleged success fee is premature and not due or payable, since the GST order dated 04.04.2024 forming the basis of the Petitioner's computation for FY 2020-21 had already been quashed by the Hon'ble Madras High Court. Consequent....
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....e as required under Section 9 of the IBC. The initial payment of Rs. 25,00,000/- and the admitted contract, services rendered and relief obtained demonstrate acceptance of the contractual arrangement, while the objections were raised only after the liability had crystallised. 4.7. It is submitted that its entitlement became due upon the GST adjudication order dated 04.04.2024, and the subsequent challenge before the Hon'ble High Court does not retrospectively extinguish the accrued contractual right. The decision in Umesh Saraf v. Tech India Engineers Pvt. Ltd., 2020 SCC OnLine NCLAT 677, relied upon by the Respondent, is stated to be distinguishable. 5. WRITTEN SUBMISSIONS OF THE APPLICANT 5.1. The Applicant has reiterated all the contentions made in the main petition and rejoinder. 5.2. The Applicant relies upon Jayaswal Ashoka Infrastructure Pvt. Ltd. v. Pansare Lawad Sallagar, 2019 SCC OnLine Bom 578, to contend that an outcome-based fee arrangement entered into by a person who is not acting as a legal practitioner is not rendered void under Section 23 of the Contract Act, 1872. 5.3. It is further submitted that on the issue of pre-existing dispute, the email....
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..... P. Ashok; and Shree Pathology Laboratory v. Bigdream Ventures Pvt. Ltd., to contend that such success fee arrangements are unenforceable and also submits that the Petitioner's status as a separate legal entity cannot be used to circumvent statutory professional prohibitions. 6.6. The Respondent distinguishes Jayaswal Ashoka Infrastructures Pvt. Ltd. v. Pansare Lawad Sallagar, relied upon by the Petitioner, submitting that the said decision did not concern services governed by a statutory professional framework such as Section 116 of the CGST Act. 7. FINDINGS OF THE TRIBUNAL 7.1. We have heard the Learned Counsels for both the parties and perused the documents placed on record. 7.2. The Applicant has filed the present Petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, claiming an operational debt of Rs. 3,11,25,785.03/-, comprising principal and interest, towards an alleged outcome-based professional fee under the Engagement Letter dated 16.12.2023. 7.3. It is not in dispute that the parties had entered into the aforesaid Engagement Letter and that the Applicant was engaged in connection with the GST proceedings of the Corporate Debtor. The Ap....
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....nal fixed professional fee but a success fee calculated as a percentage of the relief obtained in statutory proceedings. The Respondent has raised a specific objection that such an arrangement, insofar as it relates to services which could be rendered only through regulated professionals, is contrary to the statutory and professional restrictions governing such professions and is consequently opposed to public policy under Section 23 of the Indian Contract Act, 1872. 7.8. The Respondent has relied upon the decisions in G, A Senior Advocate of the Supreme Court, In Re, (1954) 2 SCC 171; B. Sunitha v. State of Telangana, (2018) 1 SCC 638; R.B. Basu v. P.K. Mukherjee; O. Muthu v. P. Ashok; and Shree Pathology Laboratory v. Bigdream Ventures Pvt. Ltd., in support of its contention that result-based professional fees, where prohibited by the governing regulatory framework, cannot be enforced. The Applicant, on the other hand, relies upon Jayaswal Ashoka Infrastructures Pvt. Ltd. v. Pansare Lawad Sallagar, 2019 SCC OnLine Bom 578, to contend that an outcome-linked consultancy fee is not per se unenforceable. 7.9. We are conscious that this Tribunal, while exercising jurisdiction un....