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TMI Blog2022 (6) TMI 1332X X X X Extracts X X X X X X X X Extracts X X X X ..... 5001 having its registered office at K.M. Road, Chikmagalur - 577101, Karnataka. The Authorised Share Capital of the Respondent/Corporate Debtor is Rs. 2,35,48,60,635/- and the Paid-Up Share Capital is Rs. 19,15,00,000/-. 3. The amount claimed to be in default is Rs. 1,75,73,690/- (Rupees One Crore, Seventy Five Lakhs, Seventy Three Thousand, Six Hundred and Ninety only). 4. It is stated that the Corporate Debtor, Coffee Day Global Limited was intending to launch a digital application called the "CCD Mobile App" for its customers, and in this regard, had engaged the services of the Company known as Fourthlion Technologies Private Limited vide the Agreement for Digital Application Development Services dated 05.05.2016. On 4th June 2018, an Addendum was executed to the Digital Application Development Services Agreement dated 5th May 2016. This Addendum was however executed between the Corporate Debtor and the Operational Creditor First Walkin Technologies Pvt. Ltd., since the Operational Creditor is the assignee of the rights and liabilities of M/s. Fourthlion Technologies. Pvt. Ltd. under the Digital Application Development Services Agreement executed with the Corporate Debtor ("A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r/Operational Creditor in support of the C.P. averments has enclosed the following documents among other documents, to the C.P.: i. True Copy of the Agreement for Digital Application Development Services executed between the Corporate Debtor and Fourthlion Technologies Pvt. Ltd. dated 05.05.2016. ii. True copy of the Addendum dated 4.06.2018 to the Agreement for Digital Application Development Services executed between the Operational Creditor and Corporate Debtor iii. True copies of the Invoices for the period between 04.02.2019 to 10.02.2020 against payment owing to the Operational Creditor from Corporate Debtor. iv. Email Communications dated 19.03.2020 and 27.03.2020 in which the Corporate Debtor acknowledged that is liable to make payment to the Operational Creditor against the invoice. v. True copy of the legal notice dated 13.08.2020 issued on behalf of the Operational Creditor to the Corporate Debtor. vi. True copy of the demand notice dated 04.09.2020 issued by the Operational Creditor to the Corporate Debtor. vii. True copy of the reply dated 03.10.2020 issued by the Corporate Debtor to the demand notice. viii. True copy of the demand notice dated 05.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umer mobile application. In terms of the agreement, Fourthlion was to develop a digital application, the CCD Mobile App to provide better customers experience as well as digital wallet that would enhance the customers' payment experience. Fourthlion was to develop the CCD Mobile App within 18 months from 01.01.2016 i.e., on or before 01.07.2017. The CCD Mobile App was to be developed for use on all operating systems including Android and iOS (Apple Operating system) with a distinct sources code for both operating systems. iii. After execution of the agreement, Fourthlion claimed to have assigned all its rights and interests' under the agreement in favour of its subsidiary, the Petitioner. The Respondent does not have any knowledge or custody of the agreement/documents effecting such an assignment. However, at the request and insistence of Fourthlion that such assignment had taken place, the Respondent along with Fourthlion and the Petitioner executed the Amendatory Agreement dated 18.01.2017. iv. The Petitioner has suppressed the said Amendatory Agreement and as such has failed to demonstrate its locus standi to file this application. In terms of the Amendatory Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement and Amendatory Agreement were set to expire imminently, the Petitioner miserably failed to perform its obligations under the Agreement. The Petitioner's failure to adhere to the agreed upon timelines is evident from the various emails exchanged between the parties. In addition to the Petitioner's failures, the Petitioner also failed to adhere to or service the Respondent's requirements. Various essential features required by the Respondent and agreed to by the Petitioner, were either omitted without informing the Respondent or were otherwise incomplete and rendered unusable. By way of illustration, some of the various shortcomings in the CCD Mobile app, on account of the Petitioner's failure to adhere to the Respondent's specification are set-out at Page 8, Para 6.3 of the reply filed by the Respondent. ix. In light of the Petitioner's failure to adhere to the mutually agreed upon timelines, the Respondent was left with no alternative but to grant additional time well beyond what was initially agreed upon for the completion of the services. In this regard, the parties executed the Addendum to the Agreement dated 04.06.2018 by extending further per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d appropriate measure could be taken to compensate such users. Despite repeatedly being called upon to provide such details, the Petitioner failed and neglected to do so which severely affected the Corporate Debtor's market reputation and footfalls. xv. The Respondent was also constrained to approach third parties to setup and maintain the progressive web app thereby requiring the Respondent to incur an additional cost and resultant losses. The said facts clearly demonstrate the deficiency in the services rendered by the Petitioner and the dysfunctional application that was developed. The Petitioner and Fourthlion were focussed only on receiving payments and completely neglected the CCD Mobile App and the Progressive Web App including its functionality. xvi. Despite termination of the Agreements and arrangements between the parties, the Petitioner has illegally and contrary to the terms of the Agreements, refused to return the Respondent's Source Codes and valuable customer data contained in the CCD Mobile App and its Confidential Information. Further, the Petitioner cannot choose to rely on portions of the email that appear to suit its case while disregarding such port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel for the defendant, the present suit is used as a tool to escape from insolvency notice issued under Section 8 of IBC and to bring to the notice of the Hon'ble NCLT, that dispute is pending and therefore, the plaintiff company cannot be declared insolvent.... Further, the cause of action of filing the suit as shown in para No. 32 is that the despite, termination of the agreement the defendants shall failed to act in accordance with its obligation and fail to return/delivery/hand over all confidential information and source code contained in the CCD Mobile App and withholding confidential information and trying to arm twist the plaintiff etc., is only a created for the purpose of the present suit. Infact, having admitted the claim, having appreciated the service rendered by the defendants, conduct of the plaintiff has to be gathered from the entire client, which goes to the root of the case...." xix. After due deliberation the Ld. Commercial Court was pleased to grant interim order in terms of I.A. No. 1 & 2 and the Com. O.S. 299/2021 is currently pending before the Ld. Commercial Court, Bengaluru and have been framed including those regarding the financial liabilities o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- no further sums are either due or payable by the Respondent and any claims much less those alleged in this regard are false, vexatious and untenable. xxiv. The Respondent is a healthy going concern having monthly turnover of approximately INR 50 crore and over 7,000 employees across the country. As such, there exists no reason whatsoever to subject the Respondent to CIRP. Even otherwise, the application under reply, albeit clothed as an application to initiate CIRP, is nothing but a means to recover sums allegedly due to the Petitioner. 11. The Respondent/Corporate Debtor also filed the additional statement of objection stating that the Petitioner filed an I.A. in Com.O.S. No. 229 of 2021 on 29.10.2021 Under Order XIV Rule 5 of the Code of Civil Procedure, 1908 seeking striking out/deletion of Issue No. 6 framed by the Hon'ble Commercial Court. By order dated 14.01.2022 the Hon'ble Commercial Court dismissed the I.A. and held the following: "9. ...When, the Defendants contends in para 12 of the written statement that despite several reminders form the defendants requesting for payment, the Plaintiff is due a sum of Rs. 2,36,59,289/- and when, it is specific c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that by way of emails dated 06.04.2017, it was specifically agreed between the parties that the Operational Creditor will provide a timeline for completion of the Snack Vending Machine task based on the priority list shared by the Corporate Debtor. The priority list was only shared with the Operational Creditor by the Corporate Debtor vide email dated 06.04.2017 and the tasks were commenced on a immediate basis by the Operational Creditor and were completed in accordance with the time schedules agreed to for these tasks. Infact, Mr. Rahul Shetty had issued an email dated. 20.04.2017 informing the Corporate Debtor that substantial progress has been made regarding the Google analytics integration and the optimized feedback flow. Further, it is clarified that these items were worked on first by the Operational Creditor since the proactive specifications were received from the Corporate Debtor in respect of these two items. ii. Further, it is stated that the email dated 01.06.2020 issued by the Corporate Debtor's CEO on behalf of Corporate Debtor to the Operational Creditor make it clear that the Corporate Debtor terminated the agreements merely for convenience, and not for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is an acknowledgement of debt by the Corporate Debtor that payments are pending to the Operational Creditor and its parent entity. vii. It is stated that several other creditors of the corporate Debtor have also approached the Hon'ble Tribunal seeking to initiate insolvency proceedings against the Corporate Debtor is evident from its financial statements. The Operational Creditor has exercised its statutory right u/s. of the IBC and in respect of due and acknowledged outstanding payment under 12 invoices raised on the Corporate Debtor between 04.02.2019 and 10.02.2020 for an amount of Rs. 1,75,73,690/-. 14. Heard Shri Pramod K. Nair, Learned Senior Counsel with Ms. Dhwani Nagesh Learned Counsel for the Petitioner and Shri Manu Kulkarni with Ms. Ishi Prakash Learned Counsel for the Respondent and have also perused the pleadings carefully and Judgements relied on. 15. The Hon tale Supreme Court of India, in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited, observed as under: "25. Therefore, the Adjudicating Authority, when examining an application u/s. 9 of the Act will have to determine: (i) Whether there is an "operational debt" as def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020 reads as under: "9. Without prejudice to the aforesaid, the alleged amount claimed by your client, as an operational debt, is under a pre-existing dispute between our client and your client. Even otherwise, our client unequivocally denies that any amount of whatsoever quantum is due or payable to your client. In fact, our Client has, in the past, pointed out several deficiencies in the alleged services provided by your client. This has led to disputes between the parties, which are alive and subsisting. These disputes have existed much prior to September 4, 2020 and are outline below: 9.1. Some of the invoices, upon which your client's claims are based, were not accepted by our client. Emails evidencing the same as annexed herewith as Annexure A. 9.2. Our client has time and again raised issues regarding the deficient quality of the services provided by our client. These issues were also recorded in emails exchanged between the parties. Copies of these emails are annexed herewith Annexure-B. 9.3. Due the deficient services, our client had raised the issue with your client, and had arranged for a meeting on October 4, 2018, to review and suggest ways of improving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0, wherein categorically mentioned about the various disputes pending between the parties. Admittedly, the Petitioner having realized that Annexure-A8 demand notice dated 04.09.2020 was not in accordance with the facts and transactions occurred between the parties, issued a fresh Annexure-A10 notice dated 05.03.2021 again under Section 8 of the IBC, 2016. Further, admittedly the Petitioner in his final notice u/s. 8 of the IBC, 2016, vide Annexure-A10 dated 05.03.2021 has specifically discarded the earlier demand notice dated 04.09.2020. As a result, the date of the valid Demand notice issued by the Petitioner was on 05.03.2021 (Annexure-A10) and the Respondent/Corporate Debtor is able to show that there were disputes between the parties vide Annexure-A6 dated 27.03.2020 i.e., even prior to the issuance of the discarded demand notice dated 04.09.2020 and also from the reply dated 03.10.2020 of the Respondent/Corporate Debtor which was much prior to the date of issuance of the demand notice dated 05.03.2021. Hence, we are of the view that the Respondent/Corporate Debtor able to show the existence of the dispute between the parties prior to the relevant date i.e., prior to 05.03.2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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