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TMI Blog2020 (3) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be said that the right to payment or claim arising from this Agreement will acquire the meaning of Debt under the Code, or make the Respondent a Corporate Debtor. It cannot be said that the amounts claimed by the Petitioner from the Respondent on the basis of MMG, as mentioned in the unsigned Agreement not agreed to or accepted by the Respondent could be the basis of a valid right to payment, claim or debt - The position of law on the issue is clear that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified reasons as per the Code. Since there was no valid operational debt in the absence of an agreement being signed by both parties which was to be the basis of the payments due, the Respondent could not be termed as a Corporate Debtor within the meaning of the Code. Further, there was a pre-existing dispute between the parties over the basis of the payments sought. In both these circumstances, the provisions of Sections 8 and 9 of the Code cannot be invoked and the Application made under Section 9 of the Code has to be rejected - the Petitioner has attempted to use this forum for recovery of its due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions on the proposed commercial understanding viz., either higher of the Minimum Monthly Guarantee ("MMG")/Revenue Share basis or optionally Sales/Stock Margin basis. The Respondent chose the former option. (5) The terms and conditions of the said Agreement were mutually agreed to between the parties and they were accepted by the Respondent without any protest and/or demur. It was mutually agreed between the parties that the operation of the retail outlet will be carried out by the Petitioner on the Respondent's behalf. It was further mutually agreed that the products required to run the retail outlet will be supplied by the Respondent. The highlights of the commercial understanding which were mutually agreed between the parties under the said Agreement are described as under: (i) The Respondent agreed to reimburse the Petitioner the capital expenditure in 3 instalments. The total amount incurred being ₹ 19,00,000/- (Rupees Nineteen Lakh Only). (ii) The Respondent agreed to cover/pay 50% (fifty per cent) of the staff cost. (iii) The Petitioner, being the concessionaire and having executed the concession agreement with Mumbai International Airport Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the outstanding dues. In pursuance of this, the Petitioner, by their e-mail of 17.08.2016, without prejudice, provided the Respondent with the revised outstanding amounts payable to them. By the said e-mail of 17.08.2016, the Petitioner also explained to the Respondent that they, without prejudice, had relinquished their margins and are charging the amount which the Petitioner paid to MIAL and therefore, requested the Respondent to immediately clear the outstanding dues at the earliest. (11) However, by their e-mail of 23.08.2016, the Respondent vaguely and baselessly sought to allege certain oversights in calculation but failed to provide a specific timeline for payments of dues owed to the Petitioner. Subsequently, despite the Petitioner repeatedly substantiating the actual dues owed by the Respondent and offering certain discounts on a without prejudice basis and on the condition of immediate payment, the Respondent neglected and failed to pay the legitimate dues owed to the Petitioner citing one frivolous and baseless reason after another. (12) The Petitioner, therefore, was constrained to address the letter dated 07.09.2016; capturing the entire issue in dispute between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/Fixed Cost 6,93,304 99,871 7,93,175 Interest @ 18% on MMG and Additional Cost as of February, 2017 5,57,143 Interest @ 18% on Capex Amount as of February, 2017 2,57,025 Total Receivable as of February, 2017 93,52,343 (18) On Respondent's continuing failure to pay the dues, the Petitioner was constrained to issue notice on 17.04.2017 u/s 8 of the Code r/w Rule 5 of the I&B (Application to Adjudicating Authority) Rules, 2016, for which the Respondent has neither replied to the said notice nor paid the full dues owed to the Petitioner. (19) It is further submitted, without prejudice, that on 07.08.2017, the Respondent mischievously addressed an e-mail baselessly alleging a concluded settlement of ₹ 22,82,770/- and having made a payment of ₹ 5,00,000/- in furtherance thereof. The Petitioner, vide a response e-mail on 07.08.2017 itself, unequivocally denying any settlement alleged by the Respondent, putting him to strict proof of his baseless allegations and demanding the entire dues owed to the petitioner be paid. (20) The total outstanding, including interest calculated as of 14.12.2017, which is due and payable by the Respondent to the Petitioner, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or the other, the Petitioner hesitated to furnish that information to the Respondent. (7) Upon the Heads of Terms being finalised, when presented with the documents for signature, as the Petitioner had, till then, not furnished the details of the expected passenger traffic as represented by the MIAL to the Respondent, the Respondent informed the Petitioner that it will pay the fee only by way of revenue share. Hence, while signing the Heads of Terms, the Respondent did not sign the Annexure C, which reflected some numbers towards monthly minimum guaranteed amounts, but for which the Respondent had not furnished the required information to base the amounts on. (8) Accordingly, as captured in the Heads of Terms, dated 01.02.2016, the Respondent committed to pay the Petitioner the fee for the space in the Mumbai International Airport Terminal under the revenue share model. (9) Further, the Respondent intended to set up the space in accordance with its own standards and style. However, the Petitioner had earlier been negotiating to give the space to some other entity, for whom it had procured material worth a few lakhs of rupees. The Petitioner insisted that the Respondent shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. (15) Since the Petitioner remained adamant, during the discussion on July 29, 2016 the Respondent notified the Petitioner of its intent to terminate the arrangement, by an e-mail, dated August 24, 2016, addressed by the Petitioner to the Respondent, stating that it was only fair that the Respondent should serve one month notice period to which the Respondent graciously agreed. (16) However, since the Petitioner continued to insist on Payment of the fee as per the monthly MMG model, by an e-mail, dated August 29, 2016, addressed to the Petitioner, the Respondent set out some of the facts and suggested that both could meet to work things out. (17) Instead, the Petitioner by its letter continuing with baseless insistence on terms outside the agreed and binding arrangement with the Respondent and have, inexplicably, demanded payment of a sum of ₹ 72,27,810. 4. The Respondent has also filed written arguments dated 03.09.2019 by inter alia contending as follows: (1) In addition to the averments made in their statement of objections, it is further contended that the claim is in the nature of recovery of rent for sub-lease of the shop space leased by the Petitioner form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs Twenty-Seven Thousand Eight Hundred and Ten Only). (g) Thereafter, the Respondent met the Petitioner and attempted to resolve the matter. As the Petitioner was being quite aggressive and threatening, the Respondent even went to the extent of keeping aside its own claim and attempted to persuade the Petitioner to take some payment in settlement and close the matter. In this attempt, the Respondent did make some payment to the Petitioner. Be that as it may, the Respondent never admitted or acknowledged any liability to the Petitioner as claimed. (4) It is contended that as the claim is for recovery of rent, it is not maintainable under the provisions of the Code and further there is no operational debt, no unpaid Invoice, and no default within the meaning of these terms under the Code. 5. The MD of the Respondent has also submitted that it is a very much a solvent Company presently having an annual turnover of approximately ₹ 65 lakhs and that no other claimant or creditor has filed any legal proceedings against the Respondent Company for payment of any debt or claim. 6. Heard Shri P. Chinnappa along with Shri Sushil Tiwari, learned Counsel for the Petitioner and Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is defective to that extent. Due to the non-acceptance of the terms and details of payment by the Respondent, it cannot be said that the right to payment or claim arising from this Agreement will acquire the meaning of "Debt" under the Code, or make the Respondent a Corporate Debtor. It cannot be said that the amounts claimed by the Petitioner from the Respondent on the basis of MMG, as mentioned in the unsigned Agreement not agreed to or accepted by the Respondent could be the basis of a valid right to payment, claim or debt. 9. The Demand Notice sent by the Petitioner to the Respondent under Rule 5 of the Code in Form 3 is dated 17.04.2017. Even this was not accompanied by an Invoice, and debit notes were sent one mails. However, much prior to this there were several e-mails exchanged between the Petitioner and the Respondent, wherein the amounts claimed as due as also the calculation thereof has been discussed and disputed. While the demands were communicated vide e-mails dated 02.07.2016 and 13.07.2016, the parties had a meeting on 29.07.2016 wherein the Petitioner agreed to give some concession. This is indicative of the fact that the Respondent had not acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid?; (iii) Whether there is existence of dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before receipt of demand notice of the unpaid operational debt in relation to such dispute? If any one of aforesaid conditions is lacking, the application would have to be rejected. 11. Applying the tests laid down in the above judgments to the facts of the case narrated above, it is clear that since there was no valid operational debt in the absence of an agreement being signed by both parties which was to be the basis of the payments due, the Respondent could not be termed as a Corporate Debtor within the meaning of the Code. Further, there was a pre-existing dispute between the parties over the basis of the payments sought. In both these circumstances, the provisions of Sections 8 and 9 of the Code cannot be invoked and the Application made under Section 9 of the Code has to be rejected. Also, the Petitioner has attempted to use this forum for recovery of its dues by praying for ordering a CIRP against the Respondent, which is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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