2021 (2) TMI 1090 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Corporate Debtor - Operational Creditor - designing of advertisement and allied services provided - existence of dispute regarding the operational debt between the corporate debtor and operational creditor prior to the filing of application by the Operational Creditor under Section 8 of the IBC. Whether Katalist View paper Pvt. Ltd. is the Corporate Debtor and Inspired Traveller (proprietor Saurav Keshan) the Operational Creditor with regard to the designing of advertisement and allied services provided? - HELD THAT - There is certainly no dispute regarding the quality of work and service given or any other aspect of the services provided by the Operational Creditor to the Corporate Debtor. This is also supported by the fact that Katalist View paper Pvt. Ltd. has been making payments as per invoices raised by Inspire Travellers and only later some payments remained, when this imaginary dispute has been raised. Reading the e-mails the impression we have gathered is that after Corporate Debtor placed Purchase Orders and as per the purchase Orders services were rendered by Operational Creditor, Corporate Debtor released some payments but later made Operational Creditor run for its dues to other entities claiming amount had to come from Group M. In such situation only because Operational Creditor approached other entity does not mean that it was a tripartite relationships. It was plain and straight matter. Corporate Debtor placed Purchase Order and Operational Creditor rendered service accordingly which has only been partly paid by Corporate Debtor. In absence of any formal agreement entity placing Order for services is the entity liable to pay when matter is under I B Code, 2016 - it is quite evident that some dues as claimed by the Operational Creditor Inspired Travellers remained unpaid by the Corporate Debtor Katalist View paper Pvt. Ltd.This responsibility cannot be shifted or apportioned to any other party. Whatever informal and internal arrangements exist between Honor, Group M and Katalist View paper Pvt. Ltd. cannot affect or impact status of Inspired Traveller as Operational Creditor and also the relationship of Inspired Traveller with Katalist View paper Pvt. Ltd. as Corporate Debtor. It is abundantly clear that Appellant M/s Katalist View paper Pvt. Ltd. is the Corporate Debtor and Inspired Traveller (with its proprietor Saurav Keshan) is the Operational Creditor in accordance with the definitions given in the IBC. Whether any real dispute exists regarding the operational debt between the corporate debtor and operational creditor prior to the filing of application by the Operational Creditor under Section 8 of the IBC? - HELD THAT - A dispute is sought to be raised by alluding to the trail of email exchanged between all the parties concerned, which are attached in the appeal paper book on pages 49-71. A close examination of these emails makes it clear that the dispute that is sought to be shown is a creation as an afterthought to escape from the responsibility of making good the operational debt owed by Katalist (the Corporate Debtor). A detailed discussion on this point has already been done. It stands to reason that the Operational Creditor Inspired Traveller should not be made victim of the unresolved issues of accounts reconciliation between Group M and Katalist View paper Pvt. Ltd. This dispute has no relevance to the provision of services or its quality by Inspired Traveller and, therefore, it is not a dispute as covered under Section 5(6) of IBC. Since it is not a pre-existing dispute regarding the services rendered by the Operational Creditor and hence, it will have no cover of help from the judgment of the Hon ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT . Thus, the Appellant has not been able to make a water-tight case in his favour by either refuting the relationship of Corporate Debtor with Operational Creditor (between itself and Inspired Traveller) or establish pre-existing dispute as is required in Section 8 (2)(a) of the IBC to escape from the rigours of CIRP - there is no pre-existing dispute with regard to the services rendered and considering the purchase orders issued by the Corporate Debtor, in the absence of any documents to the contrary establishing liability to the contrary, the Corporate Debtor was/ is liable for the Operational Debt. The dispute created in the e-mails by the Corporate Debtor to shift liability to Group M is not true dispute with regard to the services taken from the Operational Creditor and services rendered by the Operational Creditor. The defence raised by the Appellant is spurious and illusory and thus can be no basis to deny admission of the Application under Section 9. There are no merit in the appeal - appeal dismissed - decided against appellant.

Summary

Issues Involved:

1. Whether Katalist Viewpaper Pvt. Ltd. is the Corporate Debtor and Inspired Traveller the Operational Creditor with regard to the services provided.
2. Whether any real dispute exists regarding the operational debt between the corporate debtor and operational creditor prior to the filing of the application under Section 8 of the IBC.

Issue-Wise Detailed Analysis:

Issue 1: Whether Katalist Viewpaper Pvt. Ltd. is the Corporate Debtor and Inspired Traveller the Operational Creditor with regard to the services provided.

The Appellant, an erstwhile Director of Katalist Viewpaper Pvt. Ltd. (Corporate Debtor), argued that Katalist was merely an intermediary between Inspired Traveller (Operational Creditor) and Group M Media Pvt. Ltd. The Appellant claimed that Group M engaged the Operational Creditor for designing advertisements, and Katalist's role was limited to providing digital and documental support, issuing purchase orders on behalf of Group M, and routing payments from Group M to the Operational Creditor. The Appellant contended that there was no liability on Katalist to make payments, as Group M failed to release the payments to the Operational Creditor.

The Respondent No. 1 (Operational Creditor) countered that purchase orders for the services were issued by Katalist, and invoices were accepted for payment by Katalist. The Operational Creditor provided evidence of TDS deposited by Katalist and referenced the Balance Sheet and Statement of Profit and Loss, which showed the Operational Creditor as a creditor.

The Tribunal reviewed purchase orders, invoices, TDS certificates, and emails exchanged between the parties. It was established that Katalist issued purchase orders to the Operational Creditor, who raised invoices for the services rendered. Payments were made by Katalist for some invoices, but others remained unpaid. The Tribunal found that Katalist was the Corporate Debtor and Inspired Traveller the Operational Creditor, as the purchase orders and invoices indicated a direct relationship between the two.

Issue 2: Whether any real dispute exists regarding the operational debt between the corporate debtor and operational creditor prior to the filing of the application under Section 8 of the IBC.

The Appellant argued that the Adjudicating Authority failed to appreciate the existence of a dispute regarding the liability of payment. The Appellant claimed that the emails exchanged between the parties indicated that Group M was responsible for the payments, not Katalist. The Appellant also cited case laws to support the argument that CIRP cannot be initiated when the liability to pay the operational debt is disputed.

The Respondent No. 1 maintained that the purchase orders and invoices were undisputed and that Katalist had made partial payments against the invoices. The Respondent argued that the dispute raised by Katalist was a sham and did not constitute a dispute under Section 5(6) of the IBC.

The Tribunal examined the emails and found that the dispute was an afterthought by Katalist to escape liability. The Tribunal noted that Katalist had made payments for some invoices without raising any issues and that the emails indicated an internal account reconciliation issue between Katalist and Group M, which did not affect the Operational Creditor. The Tribunal concluded that there was no pre-existing dispute regarding the services rendered by the Operational Creditor and that the dispute raised by Katalist was spurious and illusory.

Conclusion:

The Tribunal found no merit in the appeal and upheld the Adjudicating Authority's order admitting the application under Section 9 of the IBC. The appeal was dismissed with no order as to costs.