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TMI Blog2017 (7) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... maintainability on the ground that the amount in question being a "disputed amount", hence out of the purview of the provisions of section 9 of The Code. On this legal question claims and counter-claims were made by the respective sides supported by the judgments of different Benches of NCLT. As a consequence, when the decisions of the different Benches are expressing divergent views, this Bench had referred the matter to the Hon'ble President for constitution of a larger Special Bench. However, later on it was found that this very legal issue of "Dispute" is sub-judice before the respected NCLAT, Delhi Bench and some of the cited decisions are challenged before the Appellate Authority, hence 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 Propriet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en examined. As prescribed under section 8 of The Code, the Creditor had delivered a Demand Notice on Form No. 3 under Rule 5 of Adjudicating Authority Rules, 2016. The Petition contains list of unpaid invoices. The impugned "Engagement Letter" dated 07-01-2016 is also on record. An unsigned letter of 25th July, 2016 is also annexed, stated to be from the side of an investor proposing an investment of Rs. 30 crores for two residential projects developed by M/s. Tattva Mittal Group (Respondent). However, it is pointed out that the said letter was not written to the respondent i.e. Tattva & Mittal Lifespace Pvt. limited, but the term sheet was executed between Tattva & Mittal Corporation Pvt. Ltd. The proposed Investment Amount by the investor was claimed to be Rs. 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 comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel Pvt. Ltd. bearing C.P. No. 20/I & BP/NCLT/MAH/2017 Order dated 06.03.2017; (b) Kirusa Softwares Pvt. Ltd. Vs. Mobilox Innovations Pvt. Ltd. (Company Appeal (AT) (Insolvency) 6 of 2017 Order dated 24.05.2017. 5. Denial by Respondent (Debtor):- Learned Counsel Mr. Aditya Thakkar has opened his argument by stating that on 25-01-2017 the Demand Notice was disputed. The said dispute letter or Notice of Dispute was duly received by the Petitioner. At the outset he has raised question that why the said notice of dispute dated 25-01-2017 was not disclosed by the Petitioner. The Respondent has objected that the Petitioner had completely failed 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt had paid one quarter fees to the Petitioner. This payment thus itself proved that the services were rendered and the liability of quarterly payment as a retainership fees was duly acknowledged by the Respondent. On 16-11-2016 the petitioner had issued a letter/claim of outstanding due through his Counsel wherein it was stated that based upon the assurances made by the Respondent, the Petitioner had continuously made efforts to identify as well as to find out the financial partner. The signing of term sheet by Milestone Advisors on one side and acceptance by the Respondent made it clear that by the persistent efforts of the Petitioner the 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 Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing against the "Operational Debtor" is in the nature of "Professional Fees". The first question which is raised during the course of hearing is whether the 'Professional Services' shall fall under the definition of "Operational Debt" as defined u/s. 5(21) of the I & BP Code. The definition is as under:- "(21) "Operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, as State Government or any local authority." 7. Thus the Definition of "Operational 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 "Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apacity of a professional to render certain services as agreed upon. The Petitioner was therefore assigned to introduce a Corporate Financers as a financial/strategic partners to the Respondent Company. The Company was exploring the options for raising the funds including private equity, unsecured loans etc. hence professional services of a Financial Consultant was necessitated. The terms of the remuneration were also depending upon the introduction of the investor and signing of the term sheet by the investors. Therefore, the Petitioner was under strict obligation to conclusively demonstrate the nature of services actually rendered in the benefit 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 Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sufficient material the absence of any liability toward the Petitioner since inception. So, it was held that the provisions of section 9(5) prohibits the Adjudicating Authority from proceeding further, if there is a genuine dispute raised. This is not a case where we can say that the Respondent Company had given a colour of a genuine dispute or the dispute is illusory. In addition to the placing reliance on the above decision, we further place reliance on the decision of M/s. MCL Global Steel Private Limited Vs. Essar Projects (India) Limited (supra). As a result, it is hereby concluded that due to two reasons first, existence of pretentious 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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