2017 (7) TMI 1232 - Tri - Companies Law

Corporate Insolvency Resolution Process - existence of Operational Debt - qualification as a Operational Creditor - period of limitation - existence of pretentious claim, and an existence of the Dispute - Held that - In this case, an unchallenged fact is that the Petitioner is a professional rendering services of arranging Corporate Finance and Investment Banking. Even the Respondent had engaged the Petitioner in that capacity only. Hence qualifies as Operational Creditor i.e. a person to whom an Operational Debt is owed for rendering professional services. A Professional Service provided by a Chartered Accountant definitely fall under the expression Services as incorporated in the definition of Operational Debt U/s. 5(21) of the Code. Once it is hereby held that the impugned debt falls within the ambits of Operational Debt hence to be adjudicated under the provisions of Section 8 and Section 9 of the Code . As a result, the Petitioner in question definitely qualifies as Operational Creditor. Delay in making application - As relying on JK JUTE MILLS COMPANY LIMITED VERSUS SURENDRA TRADING COMPANY 2017 (6) TMI 254 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL the mandate of sub-section (5) of section 9 is procedural in nature, a tool aid in expeditious dispensation of justice. Therefore, directory only. Otherwise also considering the facts and circumstances of the case as narrated in the foregoing paragraphs, this Bench had proposed a reference for setting up a Larger Bench which took some time awaiting decision of NCLAT on the controversy of the term Dispute . Hence the delay cannot be attributed to the Petitioner. We therefore hold that merely on this technical ground alone this Petition need not be discarded at the threshold. Existence of dispute - This is not a case of raising of the dispute after the initiation of insolvency proceedings. This is a clear-cut case of existence of a dispute since raising of the alleged invoices. In the case of Kirusa Software Pvt. Ltd. Vs. Mobilox Innovations 2017 (6) TMI 984 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, MUMBAI the interpretation of the term Dispute is exhaustively discussed by the Hon ble NCLAT Bench, New Delhi and held that the definition is illustrative and not exhaustive. A dispute is to be raised by the Corporate Debtor with sufficient particulars and material. Prima facie the Respondent has successfully demonstrated through sufficient material the absence of any liability toward the Petitioner since inception. So, it was held that the provisions of section 9(5) prohibits the Adjudicating Authority from proceeding further, if there is a genuine dispute raised. This is not a case where we can say that the Respondent Company had given a colour of a genuine dispute or the dispute is illusory. Thus due to two reasons first, ethe Petition in question is not maintainable. Petition in question deserves to be dismissed.

Summary

Issues Involved:
1. Status of the Petitioner as an "Operational Creditor."
2. Maintainability of the Petition after the prescribed period of 14 days.
3. Existence of a "dispute" under section 5(6) of the Insolvency & Bankruptcy Code.

Detailed Analysis:

1. Status of the Petitioner as an "Operational Creditor":
The Tribunal examined whether the Petitioner qualifies as an "Operational Creditor" under sections 5(20) and 5(21) of the Insolvency & Bankruptcy Code (The Code). The Petitioner, a professional providing financial and management services, was engaged by the Respondent for advisory and capital raising services. The Tribunal noted that the Petitioner’s services fall within the definition of "Operational Debt" as they involve the provision of services. This was supported by a precedent where professional services, such as those provided by a Chartered Accountant, were considered "Operational Debt." Consequently, the Tribunal concluded that the Petitioner qualifies as an "Operational Creditor."

2. Maintainability of the Petition after the Prescribed Period of 14 Days:
The Tribunal addressed whether the Petition is maintainable despite being filed after the prescribed period of 14 days under section 9(5) of The Code. Referring to the NCLAT decision in JK Jute Mills Company Limited Vs. M/s. Surendra Trading Company, the Tribunal held that the 14-day period is procedural and directory, not mandatory. The delay was attributed to awaiting a decision on the legal issue of "Dispute" from the NCLAT, thus the Petition should not be dismissed on this technical ground alone.

3. Existence of a "Dispute" under Section 5(6) of The Code:
The Tribunal thoroughly examined the merits of the case to determine the existence of a "dispute." The Petitioner claimed unpaid professional fees and issued invoices for services rendered. However, the Respondent contended that the Petitioner failed to introduce any financial partner and disputed the services rendered. The Tribunal noted the absence of concrete evidence from the Petitioner demonstrating the actual services provided or any successful financial arrangement. The invoices raised did not substantiate the claim of services rendered or funds raised. The Respondent had communicated dissatisfaction with the Petitioner’s performance and terminated the engagement. The Tribunal found that the Respondent had raised a genuine dispute regarding the services and the claimed debt, which was not an afterthought but existed since the invoices were raised. Consequently, the Tribunal held that there was a bona fide dispute, making the Petition not maintainable.

Judgment:
The Tribunal concluded that the Petitioner qualifies as an "Operational Creditor" but the Petition is not maintainable due to the existence of a genuine dispute regarding the services rendered and the claimed debt. The Tribunal emphasized that in cases of bona fide disputes, the Insolvency Code prohibits entertaining such Petitions. The Petition was dismissed and consigned to records.