2019 (10) TMI 1268 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - pre-existing dispute or not - HELD THAT - This Bench has observed that the Corporate Debtor has on 23.03.2019, which was before the receipt of demand notice, raised disputes by sending legal notice to the Applicant in relation to Advertising Agreement dated 09.07.2018. The Corporate Debtor vide the said notice also suspended the services and outstanding payments to the Applicant under the Advertising Agreement. Further, the Corporate Debtor also replied to the Demand Notice within the statutory period of 10 days and disputed the unauthorised use of brand keywords and reporting of incorrect geographical locations of leads by the Applicant. The contention of the Corporate Debtor that Applicant breached the representations and warranties under clause 4(a) of the Contract dated 09.07.2018 amounts to pre-existing dispute - the present Application filed under section 9 of the I B Code is not maintainable and liable to be rejected. Application dismissed.

Summary

Issues:
Application under section 9 of Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process based on default in payment by Corporate Debtor.

Analysis:
The Application was filed by the Operational Creditor claiming a total default amount of ?6,35,13,977 against the Corporate Debtor for digital marketing and advertising services provided as per the Contract dated 09.07.2018. The services included generating market leads for the Corporate Debtor's online gaming portal through various advertising and digital marketing campaigns. Invoices were raised and duly paid by the Corporate Debtor, but the operational debt arose from an unpaid invoice dated 28.12.2018. The Corporate Debtor disputed the payment demand, alleging unauthorized use of brand keywords and overcharging. The Corporate Debtor also raised concerns about the Applicant's conduct, including bribery and collusion with its employees.

The Corporate Debtor served a legal notice prior to the demand notice, alleging unauthorized activities and suspending services and payments under the Agreement. The Corporate Debtor supported its defense with a forensic investigation report from Deloitte Touche Tohmatsu India LLP. The Tribunal considered the pre-existence of disputes as per the Hon'ble Supreme Court's judgment in "Mobilox Innovations Private Limited vs Kirusa Software Private Limited (AIR 2017 SC 4532)." The Court emphasized that disputes must exist before the receipt of the demand notice, as defined under Section 5(6) of the I&B Code. In this case, the Corporate Debtor had raised disputes before the demand notice and within the statutory period, making the Application not maintainable under section 9 of the I&B Code.

Therefore, the Tribunal rejected the Application for initiating Corporate Insolvency Resolution Process. It clarified that the decision did not address the merit of the claim, allowing the Applicant to pursue appropriate legal actions as per the law.