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TMI Blog2019 (12) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Code is no exception for the same, in the normal course. Moreover, the facts and circumstances of the case would justify for the Petitioner to invoke Arbitration Clause since several issues to be resolved. Time Limitation - HELD THAT:- The impugned claim relates to the period for 2015-16, 2016-17 and 2017-18, totalling for an amount of ₹ 1,75,16,250/-. For all these years, the Petitioner got issued the Statutory Demand Notice in question only on 11.10.2018. The Petitioner has not explained to the satisfaction of Adjudicating Authority as to how he is entitled for the amount, as per Agreement in question, since the Petitioner is entitled for payment in proportion to amount received by the Respondent and for the delay-in initiating recovery proceedings before these proceedings. The Petitioner has failed to make out any case so as to initiate CIRP against the Corporate Debtor and thus the Petition is liable to be dismissed. - C. P. ( IB ) No. 36/BB/2019 - - - Dated:- 17-12-2019 - Rajeswara Rao Vittanala , Member ( J ) And Ashutosh Chandra , Member ( T ) For the Appellant : Vyshak For the Respondents : Shyam Sundar ORDER Rajeswara Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or; ii. To pay the Operational Creditor, agency commission at the rates specified against each product in Annexure-1 of the Agreement and the Service Tax, if any, on the agency commission; iii. To reimburse promotional expenses incurred by the Operational Creditor; iv. To reimburse the Operational Creditor for charges actually incurred towards transportation of the products from the godown of the Corporate Debtor to retailers' premises subject to ceilings specified in the Agreement; v. Reimbursements were to be made after submission of documentary evidence of expenses actually incurred. (4) Post execution of the Agreement, the Operational Creditor commenced the work towards securing licence in the name of the Corporate Debtor and fulfilment of other requisite formalities for marketing/selling the products in the State of Haryana. Pursuant to the above, the Excise and Taxation Department, Haryana, vide its letter dated 18.02.2016 had issued licence in the name of the Corporate Debtor permitting it to sell 3 brands of IMFL in the State of Haryana for the year 2015-16. The said license was subject to payment of all levies to be paid by the Licensee i.e. th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount (Rs.) 1. Sale Commission Debit Note 1 1,13,500/- 2. Loading/Unloading Debit Note 2 59,500/- 3. Office Expense Debit Note 3 1,90,000/- 4. Trade Scheme Debit Note 4 3,65,000/- 5. 2015-16 Investment Req. No. 6 15,85,340/- 6. Special Scheme (ledger entries) 73,000/- 7. License Duty (ledger entries) 6,17,534/- Total (A) 30,03,874/- 2016-17 S. No. Particulars Amount (Rs.) 1. License Fees and Label Registrations for the FY 2016-17 Debit Note 57 18,05,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Commission for the year 2017-18 Debit Note 11 2,19,066/- 5. Stock Lifting for Personal used taken by Company 2017-18 24,200/- 6. Discount on Maqintosh Super 375 ML Debit Note 9 5,25,906/- 7. Godown Rent for the year of 2017-18 Debit Note 8 6,00,000/- 8. Agency Freight Charges for the year of 2017-18 Debit Note 7 1,19,330/- 9. Misc. Expense for the year of 2017-18 Debit Note 6 3,20,000/- 10. Branding Spirit Magazine Debit Note 5 23,856/- 11. Label Registration Fees Excise Fees Debit Note 4 3,45,000/- 12. License Fees Investment Excise Debit Note 3 30,00,000/- 13. Reimbursement pending for the year 2016-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n proceedings. The Corporate Debtor has raised contradictory pleas, which are totally contrary to the records of the case. On one hand, the Corporate Debtor states that the contractual relationship between the parties expired during 2016-17, and on the other hand, it has relied on emails addressed by it in the month of August 2017 to the Operational Creditor in relation to determination of sales targets. The said emails clearly disclose that the Operational Creditor was acting as the marketing agent of the Corporate Debtor. (11) The Corporate Debtor in the reply, clearly as an afterthought has averred that it shall institutes civil and criminal proceedings against the Operational Creditor, which itself establishes that no such proceeding was pending, prior to the issuance of Demand Notice for any alleged act/omission of the Operational Creditor. Further, bald averments have been made in the reply that dues have been reimbursed in the bank account of the Operational Creditor, however no documentary evidence has been placed on record by the Corporate Debtor. Therefore, the reply in question is clearly an attempt to create a dispute, which otherwise neither exists nor is supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settled amicably by the parties. In case the parties are unable to settle the dispute, they shall refer the dispute to Arbitration under the provisions of Arbitration Conciliation Act, 1996 or any statutory modification or re-enactment thereof for the time being in force. The language used in the Arbitration proceedings shall be English. The venue of Arbitration shall be Bangalore. (3) The instant claim is also barred by laches and limitation. As per Section 238A of the Code, the provisions of the Limitation Act, 1963 is applicable to proceedings before the Adjudicating Authority. Under the Limitation Act, Article 137 is attracted to applications filed u/s 9 of the Code. Article 137 of the Limitation Act, period of limitation is 3 years from the date on which the right to apply accrues. The Respondent has relied upon the judgment of Hon'ble Supreme Court in the case of BK Educational Services Private Limited v. Parag Gupta (2018 SCC OnLine SC 1921). (4) In the instant case, a substantial part of the claim/costs incurred accrued in the year 2015 and the present Insolvency Petition was filed in January 2019. Accordingly, a substantial part of the claim has to be prima f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure -1 (Clause 4 (e)); vi. Payment specified for licence fee and brand registration, agency commission, transportation expenses, promotional expenses shall be made in respect of quantity of Respondent's products actually sold and invoiced from Respondent's godown after full proceeds in respect of the corresponding invoices has been received by the Respondent and in cases for transportation charges and promotional charges actually incurred, payment by Respondent shall be further subject to submission of documentary proof of expenses actually incurred (Clause 4(f)). (6) It is contended that the Petitioner was also authorized by the Respondent to represent the Respondent and invoice retailers and wholesalers on behalf of the Respondent. It is contended that for the year 2015-16, the Petitioner requested for 460 cases. The Respondent supplied the requested amount of cases. Upon supplying the cases, the Respondent invoiced for the supply of the cases at the agreed rates. The Petitioner managed to sell all the cases it requested for in the year 2015-16. Upon selling all the cases, as per the terms of the Marketing and Promoter Agency Agreement, the Petitioner coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enteen Only). Accordingly, the averment stating that the Respondent has not made any payment to the Petitioner is false and made with the sole intention to mislead the Adjudicating Authority. (10) It is alleged that since the Petitioner had consistently failed to promote and market the Respondent's products effectively, the Respondent discontinued its relationship with the Petitioner. Accordingly, it did not ask the Petitioner to renew the Respondent's licence for the year 2017-18. However, the Petitioner on his own accord, without seeking the consent of the Respondent, renewed the licence for the year 2017-18. The Respondent did not supply any fresh stock for the year 2017-18 and the Petitioner managed to sell only some of the remaining stock left over from the previous year. The Petitioner could only sell 310 cases out of the remaining 1570 cases. Accordingly, 1260 cases of stock were still left unsold. The Petitioner applied for return of the stock and managed to retrieve a portion of the unsold stock. However, the Respondent was forced to handover/surrender some of the cases of stock to the excise department, thereby causing financial loss to the Respondent. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opposed the Petition on various grounds, which are briefly stated supra. He has submitted that the Company is a solvent Company having more than 700 employees and its turnover for the Year 2018-19 is ₹ 275,65,65,778/- (Rupees Two Hundred and Seventy Five Crore Sixty Five Lakh Sixty Five Thousand Seven Hundred and Seventy Eight Only) and the provisions of the Code cannot be invoked for recovery of the dues, without exhausting the remedies available under the Agreement dated Nil. The Respondent expressed its willingness to submit to Arbitration, if the Petitioner invokes the issue for arbitration, in order to resolve the issue once for all. He has insisted that the facts and circumstances establishes that there is pre-existing dispute for the belated claim made on frivolous grounds. He therefore, has urged the Adjudicating Authority to dismiss the petition. 7. Though the case was filed in the Tribunal on 3rd January 2019 and started listing it before the Tribunal starting from 23.01.2019, the case was adjourned on several occasions at the request of parties, on ground or the other and to also afford opportunity for the parties to explore the possibility of settlement of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Crore Seventy Five Lakh Sixteen Thousand Two Hundred and Fifty Only). For all these years, the Petitioner got issued the Statutory Demand Notice in question only on 11.10.2018. The Petitioner has not explained to the satisfaction of Adjudicating Authority as to how he is entitled for the amount, as per Agreement in question, since the Petitioner is entitled for payment in proportion to amount received by the Respondent and for the delay-in initiating recovery proceedings before these proceedings. As stated supra, in pursuance to statutory Demand Notice dated 11.10.2018 issued by the Petitioner, the Respondent, in turn, has issued a detailed reply by inter alia contending as follows: (1) The Agreement in question was for fixed period of 2015-16 and 2016-17 and the amounts due as per Agreement were duly reimbursed into the Account of Petitioner under his acknowledgement. And subsequent to period of 2016-17, he was not having authority to deposit any amount and then claim on it. In fact, the Respondent is entitled for an amount of ₹ 82,08,389.88/- for failure to achieve targets fixed through email dated 28.03.2017 wherein targets were reduced from 26,000 cases to 20,000 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epending on it for their livelihood. 12. It is a settled position of law that the provisions of the Code cannot be invoked to recover the alleged outstanding amount, and more so when there is dispute. The Hon'ble Supreme Court in the case of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited (2018) 1 SCC 353, has inter alia held that IBC, 2016 is not intended to be substitute to a recovery forum. In another latest judgement rendered in Transmission Corporation of A.P. Ltd. Vs. Equipment Conductors and Cables Ltd., (CA No. 9597 of 2018) dated 23rd October, 2018, (2018) 147 CLA 112 (SC) Hon'ble Supreme Court of India, has inter alia held that existence of undisputed debt is sine qua non of initiating CIRP. As per para 34 of judgement, it is stated that Adjudicating Authority, while examining an application filed under Section 9 of Code, will have to determine: i. Whether there is an 'operational debt' as defined exceeding ₹ 1 Lakh? ii. Whether documentary evidence 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 partie ..... 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