2021 (11) TMI 609 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational creditors - existence of debt and dispute or not - HELD THAT - In Part-IV of Form No. 5 in the Petition, it has been mentioned that the Operational Creditor had assigned exclusive rights for advertisement to the Corporate Debtor of the MCGM in kiosks installed in Mumbai. This arrangement between the parties by way of an agreement was dated 08.08.2014 was based on 50-50% profit sharing ratio and certain minimum payment/guarantee per month per kiosk. However, subsequently the Agreement between the parties was revised (Revised Agreement) on 09.03.2016 - As per the revised Agreement, both the parties were free to compete with each other as per Clause-I of the Agreement subject to other provisions of the Agreement. It is the case of the Corporate Debtor that the Section which restricts the Operational Creditor was essentially relating to taking over the existing clients of the Corporate Debtor by the Operational Creditor by offering lower prices for the advertisement. The Bench notes, that the Operational Creditor had given an assurance to the Respondent that the important clients like LIC, Bank of Baroda and PNB who are currently with the Respondent will not be taken over by offering a lower price by the Operational Creditor, Infobay Interactive Private Limited as they are its long existing clients - The Bench notes that the basis of the dispute posed by the Corporate Debtor is based on his averments that Mr. Jerald Stephen was in connivance with the Operational Creditor and got the orders of the Corporate Debtor diverted to the Operational Creditor. However, the Bench finds that this argument does not hold ground based on the fact that Mr. Jerald continued as an employee of the Corporate Debtor till May 2017 and all the bills/invoices and payments relate to the period up to 31st March 2017 which pre-dates the month of resignation of Mr. Jerald Stephen. It is clear to the Bench that the Corporate Debtor is in default of a debt due and payable and the default is in excess of minimum amount of ₹ 1 lakh stipulated in u/s. 4(1) of the IBC. In view of this, the Company Petition, CP (IB)-MB-2019 is Admitted . Petition admitted - moratorium declared.

Summary

Issues Involved:

1. Whether there exists an operational debt owed by the Corporate Debtor to the Operational Creditor.
2. Whether there is a pre-existing dispute between the parties that would bar the initiation of Corporate Insolvency Resolution Process (CIRP).
3. Whether the Petition under Section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC) is maintainable.
4. Appointment of Interim Resolution Professional (IRP) and declaration of Moratorium.

Issue-Wise Detailed Analysis:

1. Existence of Operational Debt:

The Petitioner, M/s. Infobay Interactive India Private Limited (Operational Creditor), entered into an agreement with the Respondent, M/s. Clear Channel India Private Limited (Corporate Debtor), on 08.08.2014 for exclusive advertisement rights. The Corporate Debtor initially made timely payments but later defaulted. A revised agreement on 09.03.2016 terminated the previous agreement and allowed both parties to compete freely. The Petitioner claimed an outstanding amount of ?1,07,23,700 plus interest ?55,27,734, totaling ?1,62,51,434. The Petitioner issued a demand notice on 19.02.2019, which was not settled by the Corporate Debtor. The Petitioner proposed Mr. Dhanshyam Patel as the IRP, who consented to act in this role.

2. Pre-Existing Dispute:

The Corporate Debtor argued that there was no operational debt and that significant sums were owed to them by the Petitioner. They cited serious disputes existing prior to the demand notice and claimed that the Petitioner breached the terms of the revised agreement. The Corporate Debtor alleged that a former employee, Mr. Jerald Stephen, colluded with the Petitioner, causing a loss of ?2.30 crore. However, the Tribunal found no evidence supporting these allegations and noted that the disputes were hypothetical and illusory. The Corporate Debtor had also deducted and paid TDS for three invoices, indicating acknowledgment of the debt.

3. Maintainability of the Petition:

The Respondent contended that the Petition was not maintainable due to the absence of an operational debt and pre-existing disputes. They also raised issues regarding the stamping of the agreements and the absence of an affidavit and financial institution certificate as required by Section 9(3) of the IBC. The Tribunal found that the Petitioner had provided sufficient evidence of the debt and that the disputes raised by the Corporate Debtor were not genuine. The Tribunal also noted that the deducted TDS on invoices indicated the availing of services by the Corporate Debtor.

4. Appointment of IRP and Declaration of Moratorium:

The Tribunal appointed Mr. Dhanshyam Kantilal Patel as the IRP and declared a Moratorium as per Section 13 read with Section 15 of the IBC. The Moratorium prohibits the institution of any suits or parallel proceedings and the liquidation of the Corporate Debtor's assets until the completion of the Insolvency Resolution process. The IRP is to perform duties as defined under Section 18 of the IBC and report progress within 30 days.

Conclusion:

The Tribunal found that the Corporate Debtor was in default of a debt due and payable, exceeding the minimum amount stipulated under Section 4(1) of the IBC. The Petition under Section 9 was admitted, and the Corporate Insolvency Resolution Process commenced from the date of the order. The Registry was directed to communicate the order to both parties and the IRP immediately.