9911796707
TMI Blog2017 (7) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... on JK JUTE MILLS COMPANY LIMITED VERSUS SURENDRA TRADING COMPANY [2017 (6) TMI 254 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL] the mandate of sub-section (5) of section 9 is procedural in nature, a tool aid in expeditious dispensation of justice. Therefore, "directory" only. Otherwise also considering the facts and circumstances of the case as narrated in the foregoing paragraphs, this Bench had proposed a reference for setting up a Larger Bench which took some time awaiting decision of NCLAT on the controversy of the term "Dispute". Hence the delay cannot be attributed to the Petitioner. We therefore hold that merely on this technical ground alone this Petition need not be discarded at the threshold. Existence of dispute - This is not a case of raising of the dispute after the initiation of insolvency proceedings. This is a clear-cut case of existence of a dispute since raising of the alleged invoices. In the case of Kirusa Software Pvt. Ltd. Vs. Mobilox Innovations [2017 (6) TMI 984 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, MUMBAI] the interpretation of the term 'Dispute' is exhaustively discussed by the Hon'ble NCLAT Bench, New Delhi and held that the definition is illustrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence matter was adjourned awaiting the decision of the Hon'ble Appellate Authority. Now few decisions on the said controversy have been pronounced by NCLAT so it is appropriate to finalise this Petition. Herein below now proceed to discuss the merits of the case and thereafter deal with the legal question raised, in the light of the judgments now in hand pronounced by the Hon'ble Appellate Authority. 3. Facts of the case, in short, are that the Petitioner, a professional, is a Proprietor of Avon Capital Services, engaged in providing Financial Management Services to arrange Corporate Finance or Investment Bankers. The Respondent Debtor is in the business of real estate, working as Builders and Developers of building construction projects. On 07th January, 2016, as claimed by the Petitioner, an Agreement/Engagement letter was executed engaging him for Advisory and Capital Raising Services. The Company had appointed Avon Capital as an exclusive advisor to assist in the introduction of one or more financial strategic partners to the company. In the said Engagement Letter, a schedule was made on the basis of which the fees was to be charged by the Petitioner for the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d between Tattva Mittal Corporation Pvt. Ltd. The proposed Investment Amount by the investor was claimed to be ₹ 30 crores in the said company. The compilation has contained a letter of 14-09-2016 through which it was intimated that the Petitioner was retained for the said last month and informed that his service was not needed any more, it was intimated that for the fourth quarter the petitioner is not retained for the services. It was also intimated that if and when any of the leads viz. Milestone or SICOM would be closed, the commission would be calculated. 4. Claim of the Petitioner (Creditor):- Learned Representative of the Petitioner Mr. Akhil Sarathy has pleaded that the Petitioner is a professionally qualified person working as a Proprietor of Avon Capital Services, which is a financial and management services entity to arrange Corporate Finance or Investment Banking. The Petitioner was appointed on 07th January 2016 as an exclusive advisor to identify and find out financial partner. The claim of the Petitioner is that a term sheet dated 25-07-2016 was executed between the Respondent company and Milestone Capital Advisors Limited. The Petitioner was, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed to introduce even one financial partner. In the said letter of dispute, it was alleged that the Petitioner was having lack of experience. In spite of no services, professional fees for quarter starting from 1st February 2016 and ending on 30th April 2016 was duly paid. The claim regarding M/s. Milestone was denied. No work was done and no term sheet was signed. Learned Representative has pleaded that the Petitioner should be put to the strict proof of discharging primary onus. 5.1 According to Learned Advocate, in a situation when the Petitioner had concealed the presence of Notice of Dispute (25-01-2017) hence for concealing a fact willfully should lead to a punishment prescribed under section 76 of the IBC. Arguments such as presentation of a claim through unclean hand and suppression of fact have also been raised. 5.2 The next objection of the Respondent is that the Petitioner had deliberately delayed the proceedings and hence after the expiry of the mandatory period of 14 days the Petition is automatically not maintainable. A reliance has been placed for the legal proposition laid down in J.J. Plastalloy Vs. Miltech Industries Pvt. Ltd. (MA No. 48/2016 in C.P. No. 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said party had agreed for the finance arrangement. 7. SUR-REJOINDER BY THE RESPONDENT Learned Counsel has pleaded that the definition dispute is an illustrative definition and not an exhaustive definition. The Petitioner had totally failed in introducing a single party for investment. He had not done any work assigned to him hence the objections were raised at that very point of time. It is incorrect to argue that the Respondent had accepted the liability. Rather the Respondent had cancelled the retainership due to non-performance by the Petitioner. The dispute was duly communicated to the Petitioner at that very point of time. Reliance on two decisions was reiterated viz. Kisura Software Vs. Mobilox Innovations (supra) and MCL Global Vs. Essar Projects (supra). 7.1 Again it is pleaded that the prescribed period of 14 days had already lapsed therefore, the Petition is not maintainable unless and until time is extended by recording reasons in writing as held in the case of JK Jute Mills Company Vs. Surendra Trading Company (Company Appeal No. (AT) 06 of 2017) order dated 1st May 2017. 7.2 Further raised an issue that the status of the petitioner is not established as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debt means a claim in respect of the provision of goods or services including employment or a debt in respect of repayment of dues arising under any Law. The term used in mis definition Services has not been defined under this Code. However, the expression Service as per Blacks Law Dictionary is, the act of doing something useful for a person or company, usually for a fees . Another meaning as per the Dictionary is, an intangible commodity in the form of human effort, such as labour, skill or advice . Likewise, meaning of Service Charge as per the Dictionary is a Charge assessed for performing a service. If we examine the expression service in other provisions of an Act, namely Section 2 in the Consumer Protection Act, 1986, then it means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit of the Respondent Company. What we have noticed from the documents annexed that the Petitioner has only submitted the letter of assignment i.e. Engagement Letter dated 07-01-2016 and thereafter the issuance of invoices and finally notice for the recovery. The evidences such as the work done by the professional or any due diligence report submitted to the Respondent Company are missing in this case. The Petitioner has not filed a single evidence to demonstrate that by his effort a Corporate Financer has factually invested in the Respondent Company. The invoices are therefore not indicating the raising of bill vis-a-vis fund raising, but simply demanding quarterly retainership fees. The professional fees invoice dated 27-09-2016 of ₹ 74,12,900 do not describe the services rendered and the funds arranged but merely referred clause 4, para 2 of the engagement agreement dated 07-01-2016. On the contrary, in the said letter under the head 'remuneration', the fees to be payable was only on introduction and execution of term sheet from the investor/lender. The success fees was also to be calculated partly (25%) on signing of MOU with any of the investors and balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tentious claim, and second, an existence of the 'Dispute' the Petition in question is not maintainable. 8.6 Before we part with, a gist is hereby drawn from the foregoing discussion that in a case where there is an existence of bona fide dispute the Petitioner Creditor cannot be regarded as a legitimate Creditor under the Insolvency Code so as to commence the Insolvency Process. A bona fide dispute implies the existence of a substantial ground for the dispute raised. Where it is found that a debt on which a Petition is founded is a hotly contested debt and also doubtful, then the IB Code prohibits to entertain such a Petition. Naturally it is expected to go into the causes of refusal to pay the outstanding debt before coming to that conclusion, and also at what point of time a Dispute had been raised is an important factor; as we have noticed in this case that since inception when the invoices were raised the Respondent had objected. Likewise, it is also expected to ascertain that the refusal to pay the debt is genuinely supported by a reasonable cause and a reasonable dispute. In the definition Section 5(6)(b) the term Dispute also relate to the quality of service ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
