2020 (5) TMI 195 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and prior dispute or not - HELD THAT - It is true operational creditor entered into service agreement with the corporate debtor. The operational creditor to render customer care services to the customers of corporate debtor. The main contention of corporate debtor that the services rendered by the operational creditor are not satisfactory and there are several deficiencies in the services of operational creditor. The contention of the corporate debtor that customers expressed total dissatisfaction of the services rendered by the operational creditor. The corporate debtor has relied on the reviews of the customers which are shown at page Nos. 75 to 82 of the counter. It is true, information from the customers found in these mails shows that they are totally dissatisfied with the services of the operational creditor. It is undisputed fact that service agreement dated October 30, 2015 was cancelled and termination notice was issued on April 19, 2018 and termination would come into effect from May 19, 2018. Thus, one months' notice was issued prior to termination. The termination of service agreement was prior to demand notice dated June 17, 2018. In the termination notice, the corporate debtor specifically stated that the services rendered by the operational creditor are not satisfactory - The termination will be with effect from May 19, 2018. There is no dispute about issuing of termination notice. The termination notice goes to show that there was prior dispute in the sense corporate debtor was not satisfied with the customer care services extended to the customers of corporate debtor. The termination notice was prior to the issue of demand notice. Thus, the dispute was raised prior to demand notice. Further the corporate debtor also filed opinion expressed by the customers with regard to the customer care services as such when there is a pre-existing dispute the present petition cannot be admitted. Thus, corporate debtor established a pre-existing dispute - Petition dismissed.

Issues Involved:

1. Default in payment of operational debt.
2. Validity of the demand notice and compliance with the Insolvency and Bankruptcy Code, 2016.
3. Allegations of breach of service agreement by the operational creditor.
4. Allegations of deficient services by the operational creditor.
5. Termination of the service agreement and its compliance with contractual terms.
6. Pre-existing dispute between the parties.

Issue-wise Analysis:

1. Default in Payment of Operational Debt:
The petitioner, M/s. Vertex Customer Management India P. Ltd. (Vertex), filed the petition under section 9 of the Insolvency and Bankruptcy Code, 2016, claiming that the corporate debtor, M/s. Abhibus Services (India) P. Ltd. (Abhibus), defaulted on a total amount of ?1,83,87,559, including interest at 18% per annum. The debt amount included ?1,13,71,917 for services rendered, interest of ?5,07,330, a penalty for breach of contract of ?55,08,313, and ?10,00,000 for mental agony.

2. Validity of the Demand Notice and Compliance with the Insolvency and Bankruptcy Code, 2016:
The respondent argued that the application was frivolous and failed to specify the date of delivery of the demand notice, making it impossible to calculate the 10-day period required under section 9 of the Insolvency and Bankruptcy Code, 2016. The respondent also claimed that a notice of dispute was sent on July 27, 2018, but the petitioner did not acknowledge it.

3. Allegations of Breach of Service Agreement by the Operational Creditor:
The respondent contended that the petitioner breached multiple provisions of the service agreement, including failure to employ adequate trained personnel, provide proper IT infrastructure, and manage customer care services effectively. The respondent claimed that these breaches led to penalties from the Telangana State Road Transport Corporation and loss of reputation and business.

4. Allegations of Deficient Services by the Operational Creditor:
The respondent highlighted various deficiencies in the services provided by the petitioner, including failure to employ its own personnel, poor customer care services resulting in negative reviews, and inadequate IT infrastructure. The respondent provided customer reviews expressing dissatisfaction with the services.

5. Termination of the Service Agreement and its Compliance with Contractual Terms:
The service agreement was terminated by the respondent with a notice dated April 19, 2018, effective from May 19, 2018. The respondent argued that the termination was due to the petitioner's failure to meet project deliverables and provide satisfactory services. The petitioner claimed that the termination was without proper notice and unjustified.

6. Pre-existing Dispute Between the Parties:
The tribunal found that there was a pre-existing dispute between the parties, as evidenced by the termination notice and customer reviews indicating dissatisfaction with the services. The tribunal referred to the Supreme Court's judgment in Mobilox Innovations P. Ltd. v. Kirusa Software P. Ltd., which emphasized that the existence of a genuine dispute should lead to the rejection of the insolvency application.

Conclusion:
The tribunal concluded that there was a pre-existing dispute between the parties regarding the quality of services provided by the petitioner. The termination notice issued prior to the demand notice indicated that the respondent was not satisfied with the services. Therefore, the tribunal rejected the petition filed by the operational creditor.

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