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2020 (9) TMI 601 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor - Operational creditor - inability to pay debt - existence of default or not - HELD THAT - It is clear from reading of clauses 4 and 5 of the SDA, the sub distributor purchases products from the distributor according to the price list applicable and terms of sale. The distributor has to bear the cost of price drop for stocks lying with sub distributor and its trade partners as per a mutually accepted process and the payment and credit terms have been specified in Annexure C attached with sub distributor agreement. Thus, it is clear that the transaction for mobile handsets and accessories is between the distributor (M/s. PP Telecell Marketing Pvt. Ltd.) and the Operational Creditor (M/s. Park Network Pvt. Ltd.) and not with any other entity. No where in this agreement there is a obligation placed of the mobile handset manufacturing company M/s. Syntech (HK) Technology Limited. Therefore, M/s. PP Telecell Marketing Pvt. Ltd. is clearly the Corporate Debtor and M/s. Park Network Pvt. Ltd. Is the Operational Creditor. Whether the debt in question is an operational debt? - HELD THAT - The operational debt means claim in respect of provision of goods and services. In the present case, the goods and services are being provided by the distributor to the sub distributor as per clauses of the sub-distribution agreement. Insofar as the purchase of mobile handsets is concerned, clause 6(c) of the SDA mentions that the sub distributor shall place orders in writing for supply of products. Products bought against such orders will be delivered by the Distributor or lifted by the Sub Distributor within 24 hours of billing and will in no case be stored at distributor s premises beyond this deadline. Therefore, as per clause 4(a) and clause 6(c) of the Sub Distribution Agreement, the Distributor is the seller of mobile handsets and accessories and the Sub Distributor is the purchaser of the products from the Distributor. Clause 4(a) of the Sub Distribution Agreement also makes it clear that Distributor shall bear the cost of price drop for stocks lying with Sub Distributor and its trade partners - However, it is not for us to decide on the quantum of operational debt. Our concern is to see whether this debt is more than the threshold amount specified for admission of application under Section 9 of IBC, 2016. Whether there was a dispute between the Corporate Debtor and Operational Creditor regarding the Operational Debt, which was raised by the Corporate Debtor after receipt of demand notice? - HELD THAT - Section 8(1) of the IBC 2016 requires the Operational Creditor to deliver a demand notice to Operational Debtor on occurrence of default in the prescribed form and manner, wherein the due date of debt has been shown as 2/5/2019. The reply to demand notice dated 2.5.2019 was sent through Advocate of the Corporate Debtor vide letter dated 21.5.2019. The letter mentions that the demand raised by the Occupational Creditor is totally illegal as the amount demanded is not the liability of the company (M/s. PP Telecell Marketing Pvt. Ltd.), as there was no direct transaction between the parties and the amount claimed by the Operational Creditor. As has been discussed earlier in this judgment, the Sub Distribution Agreement is valid and creates a Corporate Debtor and Operational Creditor relationship between M/s. PP Telecell Marketing Pvt. Ltd. and M/s. Park Network Pvt. Ltd. - the dispute tried to be raised by M/s. PP Telecell Marketing Pvt. through his reply to the demand notice is imaginary and not as defined in Section 8(2)(a) of the IBC 2016. Thus, it is clear that the demand notice was sent on 2/5/2019 by the Operational Creditor to the Corporate Debtor and the dispute raised does not hold any ground. Whether the application under Section 9 of IBC, 2016 was filed by the Operational Creditor within the time period of limitation? - HELD THAT - It is seen that the application dated 18.7.2019 was filed before the Hon ble NCLT (Adjudicating Authority) and as per para 4 of the application, the date of default has been mentioned as 5/1/2019 and the amount of debt in default is ₹ 20,02,782/-. Therefore the application was filed within limitation. There are no reason to interfere with the impugned order dated 27.5.2020 of Hon ble NCLT, New Delhi (Adjudicating Authority) - appeal dismissed.
Issues Involved:
1. Validity of the Sub-Distribution Agreement (SDA) between the Operational Creditor and Corporate Debtor. 2. Determination of whether the debt in question is an operational debt. 3. Existence of any dispute regarding the operational debt. 4. Timeliness of the application under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016. Issue-wise Detailed Analysis: 1. Validity of the Sub-Distribution Agreement (SDA): The Sub-Distribution Agreement (SDA) was signed between the Operational Creditor and the Corporate Debtor on 15.4.2015. The agreement detailed the terms for the supply and distribution of mobile phones and accessories. Clause 5 of the SDA outlines the obligations towards the sub-distributor, including the introduction of sales-boosting schemes and the responsibility for liabilities arising from non-serviceability or unsatisfactory performance of products. Clause 4 specifies that the sub-distributor purchases products from the distributor according to the applicable price list and terms of sale. The agreement does not place any obligations on the mobile handset manufacturing company, Syntech (HK) Technology Limited. Therefore, the relationship between M/s. PP Telecell Marketing Pvt. Ltd. (Corporate Debtor) and M/s. Park Network Pvt. Ltd. (Operational Creditor) is valid under the SDA. 2. Determination of Operational Debt: The definition of 'operational debt' under Sections 3(11) and 5(21) of the IBC, 2016, includes claims in respect of the provision of goods or services. The transactions between the distributor (Corporate Debtor) and the sub-distributor (Operational Creditor) involve the sale and purchase of mobile handsets and accessories. The ledger account attached to the email sent by the Corporate Debtor on 5.1.2019 confirms an amount of ?20,02,872/- due to the Operational Creditor. The Corporate Debtor's mention of a settlement offer by Syntech (HK) Technology Limited does not alter the nature of the debt. The debt of ?20,02,872/- is thus inferred to be an operational debt, and it is more than the threshold amount specified for admission under Section 9 of the IBC, 2016. 3. Existence of Dispute Regarding Operational Debt: Section 8(1) of the IBC, 2016, requires the Operational Creditor to deliver a demand notice to the Corporate Debtor on the occurrence of default. The Corporate Debtor's reply to the demand notice dated 2.5.2019, sent through an advocate on 21.5.2019, claimed that the demand was illegal and that there was no direct transaction between the parties. However, the Sub-Distribution Agreement establishes a valid relationship between the parties, making the Corporate Debtor's dispute imaginary and not as defined under Section 8(2)(a) of the IBC, 2016. Therefore, the dispute raised by the Corporate Debtor does not hold any ground. 4. Timeliness of the Application Under Section 9 of IBC, 2016: The application under Section 9 of the IBC, 2016, was filed by the Operational Creditor on 18.7.2019 before the Hon’ble NCLT (Adjudicating Authority). The date of default was mentioned as 5.1.2019, and the amount of debt in default was ?20,02,872/-. The application was thus filed within the limitation period. Conclusion: After detailed examination, the tribunal found no reason to interfere with the impugned order dated 27.5.2020 of the Hon’ble NCLT, New Delhi (Adjudicating Authority). The appeal was dismissed, and there was no order as to costs.
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