2020 (1) TMI 591 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment - existence of debt and dispute - HELD THAT - Admittedly, the Corporate Debtor had made payments at steps. There was no payment of some amounts, as neither draft red-herring prospectus was filed with SEBI, nor the IPO offerings were made - Since these milestones were not achieved, no invoices were also raised by the Petitioner by 15.09.2015 i.e., on completion of 12 month's period. Further, since the IPO was not issued within 12 month's period, the Petitioner should have raised invoice on the basis of 'standard hourly rate' as provided in clause 2.3 to a maximum of the fixed fee. However, no such invoice was raised. The operational creditor has also not clearly placed on record any documentary proof that clearly states the amounts due and payable confirmed in writing by the Corporate Debtor with regard to the alleged dues - The email correspondence among many such communications, much before the issuance of demand notice U/s. 8 of IBC, 2016 dated 24.3.2018 indicates that there existed substantial dispute between the parties with regard to fulfilment of obligations under the Agreement entered into on 15.09.2014. This Adjudicating Authority is of the view that there was pre-existing dispute between the parties and, accordingly, deems it fit not to admit the present application in terms of Section 9(5)(ii)(d) of IB Code, 2016 - Application dismissed.

Summary

Issues Involved:
1. Validity of the Petition under the Insolvency and Bankruptcy Code (IBC), 2016.
2. Alleged default in payment by the Corporate Debtor.
3. Pre-existing dispute between the parties.
4. Limitation period for filing the petition.

Issue-wise Detailed Analysis:

1. Validity of the Petition under the Insolvency and Bankruptcy Code (IBC), 2016:
The petition was filed by the Operational Creditor under Section 9 of the IBC, 2016, read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. The Operational Creditor claimed an outstanding amount of ?1,29,42,660/- (principal amount of ?97,31,324/- along with interest amount of ?32,11,336/-) based on an Agreement for Legal Services dated 15.09.2014.

2. Alleged default in payment by the Corporate Debtor:
The Operational Creditor provided legal services for the initial public offering (IPO) of shares in the Corporate Debtor and raised three invoices. The Corporate Debtor allegedly failed to pay one of these invoices amounting to USD 150,221.13. Despite repeated requests and a Demand Notice dated 27.03.2018, the payment was not made.

3. Pre-existing dispute between the parties:
The Corporate Debtor contended that the petition was filed beyond the limitation period and that the Operational Creditor did not provide the entirety of the services as agreed. The Corporate Debtor argued that the services were to be provided to financial institutions and not directly to the Corporate Debtor. The payment schedule was contingent upon specific milestones, such as the filing of the draft red herring prospectus (DRHP) with SEBI, which was never completed. The Corporate Debtor had already paid USD 50,000 and USD 13,178.34 for initial services and disbursements. The remaining amounts were not payable as the IPO and private placement were not completed within 12 months. The Corporate Debtor also highlighted that the standard hourly rates were never communicated, and the invoice was raised arbitrarily after the expiry of the 12-month period.

4. Limitation period for filing the petition:
The Corporate Debtor argued that the petition was filed almost three months after the limitation period expired. The Agreement stipulated that any invoice should be raised within 12 months from the date of the Agreement if the IPO and private placement were not completed. The limitation period for claiming any amounts under the Agreement ended on 15.09.2018, but the petition was filed on 06.12.2018.

Judgment:
The Tribunal observed that the Agreement for Legal Services was entered on 15.09.2014, and the payment schedule was clearly outlined in Clause 2. The Corporate Debtor had made initial payments as per the Agreement, but no further payments were made as the milestones were not achieved. The Tribunal noted that the Operational Creditor did not raise any invoice based on the standard hourly rates within the stipulated period. The Tribunal also found that there was substantial pre-existing dispute between the parties, as evidenced by numerous email correspondences, including one dated 21.06.2016, where the Corporate Debtor requested a waiver of the outstanding amount.

In view of the pre-existing dispute and the failure to meet the stipulated conditions in the Agreement, the Tribunal decided not to admit the petition under Section 9(5)(ii)(d) of the IBC, 2016. The application was rejected, and no order as to costs was made.