2022 (6) TMI 1332 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - Time limitation - HELD THAT - The instant C.P. has been filed on 09.04.2021. The agreement for the Digital Application Development Services executed by the parties was on 05.05.2016 and the Addendum thereof was on 04.06.2018. The Annexure-A2, Statement of Accounts reflecting the amounts in default was consisting of various Invoices issued during the period from 04.02.2019 to 10.02.2020. The various email correspondences and the Annexure-A6 reconciliation statement dated 27.03.2020, where the amount was reconciled between the parties though the Respondent allegedly disputed the total debt amount, saved the limitation period and hence the instant C.P. is held to be filed within the period of limitation. It is the settled law that the relevant date for determining the existence of a dispute is the date of the demand notice issued under Section 8 of the IBC, 2016. In the instant case, the Petitioner at the first instance, issued Annexure-8 Demand Notice dated 04.09.2020 for which the Respondent/Corporate Debtor given a reply vide Annexure-A9 dated 03.10.2020, wherein categorically mentioned about the various disputes pending between the parties. Admittedly, the Petitioner having realized that Annexure-A8 demand notice dated 04.09.2020 was not in accordance with the facts and transactions occurred between the parties, issued a fresh Annexure-A10 notice dated 05.03.2021 again under Section 8 of the IBC, 2016 - the date of the valid Demand notice issued by the Petitioner was on 05.03.2021 (Annexure-A10) and the Respondent/Corporate Debtor is able to show that there were disputes between the parties vide Annexure-A6 dated 27.03.2020 i.e., even prior to the issuance of the discarded demand notice dated 04.09.2020 and also from the reply dated 03.10.2020 of the Respondent/Corporate Debtor which was much prior to the date of issuance of the demand notice dated 05.03.2021. The Respondent/Corporate Debtor able to show the existence of the dispute between the parties prior to the relevant date i.e., prior to 05.03.2021 - Petition dismissed.

Summary

Issues Involved:
1. Existence of Operational Debt
2. Default on Payment
3. Pre-existing Dispute
4. Validity of Demand Notices
5. Limitation Period
6. Jurisdiction and Parallel Proceedings

Detailed Analysis:

1. Existence of Operational Debt:
The Petitioner, First Walkin Technologies Pvt. Ltd., claimed that Coffee Day Global Limited (Respondent) owed Rs. 1,75,73,690/- for services rendered under an Agreement for Digital Application Development Services. The Respondent acknowledged the debt in email communications dated 19.03.2020 and 27.03.2020 but disputed the amount later.

2. Default on Payment:
The Petitioner raised 12 invoices between 04.02.2019 and 10.02.2020, totaling Rs. 2,36,59,289/-. After mutual set-offs and deductions, Rs. 1,75,73,690/- remained unpaid. The Respondent failed to make payments despite several reminders and legal notices from the Petitioner.

3. Pre-existing Dispute:
The Respondent argued that there were disputes regarding the quality and completion of services provided by the Petitioner. The Respondent cited multiple instances of deficiencies and failures by the Petitioner to meet agreed timelines and specifications. These disputes were documented in emails and meetings, including the minutes of a meeting on 04.10.2018. The Respondent also claimed that the Petitioner did not return the source code and confidential information after the termination of the agreement.

4. Validity of Demand Notices:
The Petitioner initially issued a demand notice on 04.09.2020, which was disputed by the Respondent on 03.10.2020. The Petitioner then issued a final demand notice on 05.03.2021, specifically discarding the earlier notice. The Tribunal held that the relevant date for determining the existence of a dispute is the date of the valid demand notice, which was 05.03.2021. The Respondent provided evidence of disputes existing before this date, including the reconciliation statement dated 27.03.2020, which mentioned ongoing negotiations/disputes.

5. Limitation Period:
The Tribunal noted that the reconciliation statement dated 27.03.2020 saved the limitation period, making the petition filed on 09.04.2021 within the period of limitation.

6. Jurisdiction and Parallel Proceedings:
The Respondent had filed a commercial suit (Com O.S. 229/2021) against the Petitioner in the Commercial Court, Bengaluru, seeking remedies related to the same agreements and issues. The Commercial Court had granted interim reliefs and framed issues regarding the financial liabilities of the parties, which were under trial. The Tribunal acknowledged that the disputes were already subject to adjudication in the commercial suit.

Conclusion:
The Tribunal concluded that the Respondent successfully demonstrated the existence of a pre-existing dispute prior to the relevant date of the valid demand notice (05.03.2021). Consequently, the petition to initiate Corporate Insolvency Resolution Process (CIRP) was dismissed. However, the Tribunal clarified that this order does not preclude the Petitioner from pursuing other legal remedies.

Order:
The petition CP (IB) No. 67/BB/2021 was dismissed.