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TMI Blog2020 (10) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was a pre-existing dispute which the Corporate Debtor raised prior to the receipt of the demand notice by sending the legal notice on 14th March, 2018 and 25th April 2018 which th(sic) Corporate Debtor claimed that no reply had been given by the Operational Creditor till date - when we shall consider the case of the Operational Creditor then we find, in the reply of the demand notice, it is specifically mentioned that a legal notices were sent to the Operational Creditor by the Corporate Debtor on 14th March 2018 and 25th April, 2018 and also claimed that no reply was given by the Operational Creditor to that notice. Even no averment was made either in the main application filed by the Operational Creditor or in the rejoinder filed by him, in response to the reply filed by the Corporate Debtor. Therefore, we are of the considered view that the Operational Creditor has not reverted the averment made in the legal notice dated 14th March, 2018 and 25th April 2018 and on the basis of that, we find that these two notices were sent by the Corporate Debtor prior to the receiving of the demand notice and by sending these legal notices, the Corporate Debtor raised certain issues e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of non-payment of pending bills and breach of trust by the Corporate Debtor. 3. It is submitted by the Operational Creditor that work was started as job work basis which was ₹ 1,00,000/- per month. The payment schedule continued to be same till the discontinuation of work with Corporate Debtor and in fact it made regular payments till June 2017 and thereafter in parts, in terms of the said agreement and the Corporate Debtor never objected or changed the same. 4. It is further submitted that the Operational Creditor insisted upon the Corporate Debtor to execute an agreement so that mutually agreed terms and conditions of work could be properly defined and marked. It is submitted that after verbal discussions with the Corporate Debtor, the Operational Creditor vide email dated 13.08.2017 sent proposed terms and conditions from its side and also invited opinion of the Corporate Debtor on the works of sources but Corporate Debtor did not respond to the same. 5. Further, the Corporate Debtor sent a draft of Contract for GST compliance software development vide email dated 05.10.2017. It is pertinent to mention herein that the agreement was to be effective from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork and withdraw all its support. The Operational Creditor vide email 03.11.2017 and 07.11.2017 communicated the detail of outstanding amount once again demanded the outstanding amount to which the Corporate Debtor responded vide email of same date and sought amicable settlement but there was no commitment with regard to payment. In the said email the Corporate Debtor neither disputed the amount nor gave any schedule for payment. It is stated that the Operational Creditor once again vide email dated 09.11.2017 asked the Corporate Debtor for payment of outstanding and also brought issue of poaching of employees by the Corporate Debtor. However no response was ever received from the Corporate Debtor. It is further stated that outstanding amount against the Corporate Debtor is an undisputed amount. 9. The Corporate Debtor instead of making payment of the admitted outstanding amount, sent a legal notice dated 25.04.2018 to the Operational Creditor but in the said legal notice also there was no denial of liability by the Corporate Debtor. 10. Further, since the Corporate Debtor failed to make the payment of outstanding from October 2017 onwards., therefore, upon default of making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraudulently and annexed that document with the application. Further, by sending the legal notice dated 14th March, 2018 and 25th April, 2018, the Corporate Debtor has raised the pre-existing disputes and also demanded the refund or reimburse the excess payment made by the Corporate Debtor to the Operational Creditor. 19. The Operational Creditor filed the rejoinder to the reply filed on behalf of the Corporate Debtor. The facts of the rejoinder, in short, is that the Corporate Debtor had agreed to pay ₹ 01 lakh per month per person and actually paid the same regularly till June 2017 and in part till October 2017 and during that period, Corporate Debtor has not raised any dispute. The Operational Creditor vide email dated 13th August, 2017, formerly, asked the Corporate Debtor for execution of an agreement and also sent certain terms and conditions but no response was received by the Corporate Debtor, thereafter, by email dated 15th August, 2017, the Operational Creditor insisted the Corporate Debtor to sign the agreement and again sent proposed terms and conditions for incorporation in the agreement. The Corporate Debtor though consented for sending draft of agreement bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further, submitted that the Operational Creditor continued working for the Corporate Debtor till 3rd November, 2017 and the Operational Creditor due to non-payment of outstanding amount of ₹ 88,37,700/- despite repeated demand stopped working on the project of Corporate Debtor. He further submitted that the Operational Creditor formerly asked the Corporate Debtor for execution of an agreement and also sent certain terms and conditions on its behalf to which no response was received and that has never been signed by the Corporate Debtor. He further submitted that the contention of the Corporate Debtor that there was non-delivery of software, non-functionality of software, quality of employees, payment mode to employee, charge of excess amount etc. is false and never been raised by Corporate Debtor earlier. Rather, the Corporate Debtor was going on to make the payment. He further submitted that the two undated notices after about six months of breaking the business relations, however, now claimed to be dated 14th March, 2018 and 25th April, 2018 are nothing but the concocted submissions without having a truth. 28. He further submitted that the Corporate Debtor has filed list ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat has also been admitted by the Operational Creditor that the said agreement has never been signed by the Corporate Debtor. He further submitted that although no software is delivered till today but the Corporate Debtor has paid a huge amount of ₹ 1,40,57,310/- 33. Now, in the light of the submissions raised on behalf of the parties, we have gone through the averments made in the application, reply and rejoinder as well as documents enclosed with the application and we find, it is the admitted case of the parties that the agreement which Operational Creditor has enclosed with the application has never been signed by the parties. It is also admitted case that the draft agreement which was sent by the Corporate Debtor was changed by the Operational Creditor and which was never been signed by the Corporate Debtor. 34. Therefore, on the basis of aforesaid admitted facts, it can be said that there is no agreement in between the parties because the proposal which was made by the Corporate Debtor was according to the case of Operational Creditor was modified but the same was not accepted by the Corporate Debtor. Therefore, on the basis of that, it can be said that the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the application furnish- (a) A copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor; (b) An affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt; (c) a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt/by the corporate debtor, if available;] 2[(d) a copy of any record with information utility confirming that there is no payment of an unpaid operational debt by the corporate debtor, if available; and (e) Any other proof confirming that there is no payment of any unpaid operational debt by the corporate debtor or such other information, as may be prescribed.] (4) An operational creditor initiating a corporate insolvency resolution process under this section may propose a resolution professional to act as an interim resolution professional. (5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order- (i) Admit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional Creditor, therefore, at this juncture, we would like to go through the reply to the demand notice. We have gone through the reply filed by the Corporate Debtor in response to the demand notice and we find that the Corporate Debtor at internal page of reply to the demand notice, which is at page 161 of the paper book, clearly, mentions that the legal notice through its Advocate on 25th April, 2018 has already been sent to the Operational Creditor and same was duly received by the Operational Creditor but no reply was given. 39. We further find, the Corporate Debtor also raised the issue of employment of the engagement of the employee and completion of the contract within the agreed period and also admitted that advance payment was made and whenever the status of the project was asked by the Operational Creditor then no proper reply was given by the Operational Creditor. 40. It is also claimed that the project was not completed within the time and due to that a great financial loss was caused to the Corporate Debtor. It is also claimed that the work was stopped unilaterally by the Operational Creditor without giving prior information to the Corporate Debtor causing loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount claimed by the Operational Creditor, since all these are done by sending the legal notices as well as the exchanging the emails between the two, prior to the delivery of demand notice, therefore, we are of the considered view that there is a pre-existing dispute regarding the terms and conditions of the agreement on the basis of which the Operational Creditor claimed the amount. There is also dispute regarding the engagement of the employee. 44. Therefore, in view of Section 8(2) of the IBC, 2016, the Corporate Debtor, after receiving the demand notice is required to bring to the notice of the Operational Creditor, the existence of disputes or record of pendency of the suit or arbitration proceedings before the receipt of the notice or produce the document to show that the payment of non-operational debt has been made. In view of that provision of law, when we shall consider the case in hand then we find, admittedly, in the case in hand, the Corporate Debtor has raised the dispute prior to the receipt of the demand notice and the facts which the Corporate Debtor has raised some of the facts has also been admitted by the Operational Creditor that is the agreement is not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the Act. 45. Therefore, if we shall consider the case in hand in the light of the aforesaid decision then we find that in the case in hand also there is a pre-existing dispute between the parties regarding the terms and conditions of the agreements, payments of the salaries, engagement of the employees and other issues. Hence in view of Section 9(5)(2) of IBC, 2016, if notice of disputes has been received by the Operational Creditor or there is a record of disputes in the information utility in that case the adjudicating authority has no option but to reject the application. 46. Here, in the case in hand, as we have already stated that there is an existence of disputes raised by the Corporate Debtor prior to the issuance of the demand notice, of course, by filing section 9(3) (b), the Operational Creditor claimed that no notice of disputes has been raised by the Corporate Debtor but for the reasons discussed abov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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