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TMI Blog2024 (5) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Operational Creditor and we therefore find nothing wrong in this course of action. It is only at this stage when the Operational Creditor moved an application before the Adjudicating Authority under Section 9 that the Corporate Debtor has endeavoured to protect its interests and raised the issue of pre-existing disputes. In the present case, it is contended by the Corporate Debtor that there is no valid and legal claim to receive payment. The issue of proforma invoice in place of debit note has been voiced by the Corporate Debtor as tantamount to breach of contractual obligations and therefore held by the Adjudicating Authority to be yet another ground of dispute. Where operational creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which however is not so borne out by the facts of the present case. That pre-existing dispute was very much there is amply supported by material on the record. Such contractual disputes require further investigation and cannot be considered by the Adjudicating Authority in the exercise of their summary jurisdiction. And for such disputed amounts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant towards fees of the Appellant under the terms of the Mandate Letter being 1.5% of the sanctioned amount i.e. Rs.480 cr. The Appellant raised a partial invoice of Rs. 3.60 cr plus GST towards 50% of the fees. The Respondent/ Corporate Debtor made only partial payment of Rs.45 lakhs on 16.02.2022 which payment by itself constituted an admission of debt. The Appellant subsequently raised a full invoice of Rs.8.49 cr but the Corporate Debtor failed to make payment of the said amount. Thereafter, a Section 8 Demand Notice was issued on 12.07.2022 by the Appellant to the Respondent calling upon them to make payments of the outstanding amount of fees. As there was no response to the Demand Notice, the Appellant filed the Section 9 application of the IBC in August 2022. The Adjudicating Authority erroneously dismissed the same on 18.08.2023 on the ground of prior dispute in relation to existence of debt and assailing the said impugned order, the present appeal has been preferred. 3. It was strenuously contended by the Appellant that the Adjudicating Authority failed to notice that prior to the issue of demand notice, no disputes had been raised by the Corporate Debtor. No notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Corporate Debtor and the Appellant having failed to provide sufficient evidence thereof, the impugned order has been rightly passed by the Adjudicating Authority. It is also claimed by the Respondent that the Demand Notice under Section 8 was defective as no date of default was mentioned in the demand notice. No invoice is annexed to the demand notice to support the alleged debt due to the Appellant. It was also pointed out that the Demand Notice was not served at the correct address and online delivery status of the same from the courier agency has not been made available. 5. Submission was also made that there was a pre-existing dispute with regard to the amount of fees payable to the Appellant. The Appellant had raised incorrect amount in the proforma invoices contrary to the stipulations of the Mandate Letter. The Appellant was entitled to a fee of 1.5% of the processing charges imposed by the lending institution towards issuing the loan amount exclusive of GST and other taxes and not 1.5% of the facility as is being wrongly claimed by the Appellant. Hence, the amount of fees claimed by the Appellant for the loan amount released by the Canara Bank was a disputed amount. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Modelling. The said agreement is silent whether such services shall be for the purpose or benefit of group/associate companies or not. Even if the contention of the Operational Creditor is accepted that the agreement dated 14.07.2021 was a master agreement and contemplated raising of finance for different SPVs promoted by the Corporate Debtor, this bench feels that the obligation to pay the fee in terms of this agreement shall be on such associate/group company and not on the Corporate Debtor. It is not in dispute that the loan was sanctioned to VNMP10PL and it can only be made liable to pay the fees, if any to the Operational Creditor. Accordingly, this bench feels that the amount claimed by the Operational Creditor is not payable by the Corporate Debtor. This preposition holds good on another ground i.e. the failure of the Operational Creditor to raise debit note or final invoice as the said agreement specifically contemplates payment of fees within 7 days of raising of such debit note. 5.3.3. Further, the date of default is not mentioned in the said Demand Notice. This further fortifies our findings in the preceding para that the obligation to pay arises on raising of debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and not by raising proforma invoices. 10. We feel that at this stage it would be useful and constructive to peruse the relevant provisions of the Mandate Letter of 14.07.2021 as placed at page 79-83 of the Appeal paper Book ( APB in short) and the Offer Letter for Financial Advisory Services from Vadodara Mumbai Expressway Pkg 10 Private Limited to IDBI Capital as placed at pages 172-182 of APB. The relevant provisions of the Mandate Letter are as under : 14.07.2021 To Chartered Finance Management Limited 2nd Floor, Wakefield House, Sprott Road, Ballard Estate Mumbai-400 038 Dear Sir, Advisory services for raising credit facilities upto Rs.1750 crores Pursuant to our discussions, we are pleased to confirm our arrangements under which you (the Advisor ) are engaged by us (the Company ) to render advisory services for raising credit facilities upto Rs.1750 crpres. In terms of the above understanding, we wish to engage you in order to provide advisory services ( Engagement ) for 1. Project Advisory 1.1 Preparation of Information Memorandum . 1.2 Financial Modeling . 2. Co-ordination with the lenders . Fee structure a) Fees The gross fees payable to the Advisor for the Engagement sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia agreed that a fee of 1.5% on the sanctioned amount would be payable by the Company to the Operational Creditor and that 50% of the fee would be paid upon sanction and 50% of the fee would be paid upon disbursement to the SPV. However, while the Corporate Debtor has contended that the fee payable was 1.5% of the processing fee, the Appellant has contended that fees was 1.5% of the funds mobilised. In support of their contention, it was stated that fixation of fees on the basis of 1.5% of the processing fees is unrealistic as it would be an extremely negligible amount for the volume of effort and work undertaken for arranging the credit facility. Even when we see the agreement with IDBI, the fees payable is actually shown as percentage of the sanctioned amount and not of the processing fees but the percentage is pegged at 0.35% and not 1.5% as claimed by the Appellant. Seen from this perspective, the Adjudicating Authority did not commit any mistake in holding the calculation of quantum of fees to be a ground of existing dispute between the two parties. 12. There is also a difference of views between the Appellant and the Corporate Debtor on which entity is to pay the fees payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de a contract dated 20.07.2021 and hence the claim staked by the Operational Creditor for Package X is ill-founded. The contract for this purpose as signed between IDBI Capital and Package X SPV has been placed at page 172 of APB. Furthermore, the invoice dated 25.03.2022 raised by IDBI Capital seeking payment and the proof of payment made by Corporate Debtor to IDBI Capital on 31.03.2022 is also seen at pages 186-187 of APB shows that the facility agreement was mustered by their efforts. The Appellant has contended that even if it is accepted that IDBI Capital was also engaged for the same purpose, that cannot deny the Appellant from claiming its fees under the Mandate Letter for performing its services of securing funding for Package X Project. That the Corporate Debtor had engaged multiple agencies for the same project cannot become a ground for denying the Appellant of his fees. Viewed from this angle too, there is clearly a dispute as to which entity discharged the advisory role and can be held to be the rightful claimant of the fees, and to that extent the Adjudicating Authority cannot be faulted from holding this as a basis of dispute between the parties. 14. Yet another fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mobilox judgment is extracted hereunder which reads as follows: 56. Going by the aforesaid test of existence of a dispute , it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability. 16. If we apply the above-cited test laid down in Mobilox by the Hon ble Supreme Court to the facts of the present case, it is clear that the defence which was raised by the Corporate Debtor in their detailed reply filed in Section 9 Application cannot be said to be moonshine. Where operational creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which however is not so borne out by the facts of the present case. That pre-existing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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