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TMI Blog2024 (9) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... hat since the claims of BCCI arise out of a purported Agreement and the said Agreement consists of a valid Arbitration clause under Section 19 of the Agreement the same ought to be referred to Arbitration by this Adjudicating Authority - HELD THAT:- The Adjudicating Authority has to either reject or Admit the Application and cannot postulate a third option. In this matter, the application U/s 9 of the IBC has been admitted by the Order passed today, therefore, the application for referring the matter for Arbitration is not maintainable - application dismissed. - Hon ble Shri. K. Biswal , Member ( Judicial ) And Hon ble Shri. Manoj Kumar Dubey , Member ( Technical ) For the Petitioner : Shri C.K. Nandakumar, Sr. Adv, Adv. Bhavya Mohan Adv. Ann Pereira For the Respondent : Shri Pramod Nair, Sr. Adv, Adv. Waseem Pangarkar, Adv. Nadiya Sarguroh, Adv. Yashowardhan Dixit, Adv. Aditi Tiwari, Adv. Arunima Kumari i/b MZM Legal LLP ORDER Per: Manoj Kumar Dubey Member (Technical) 1. The present petition is filed on 23/09/2023 under section 9 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'IBC'/Code), r/w. Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner (collectively, the Services ). As consideration, the Corporate Debtor was required to pay a fee to the Operational Creditor. The Corporate Debtor was the Sponsor of the Indian cricket team as per the above arrangements and availed the Services for a period up until 31/03/2023. ii) The term of the Agreement dated 25/07/2019 was till 31/03/2022; however, even after 31/03/2022, pending execution of formal document, the Corporate Debtor and Operational Creditor agreed to continue the arrangement in relation to Services. The Corporate Debtor was the Sponsor of the Indian cricket teams as per the above arrangement and availed the Services for a period up until 31/03/2023. iii) The Corporate Debtor was required to pay a sum equivalent to 50% of aggregate Fee pertaining to a series, not later than 30 days prior to the first scheduled match of such series; and the balance 50% was to be paid within a period of 5 days of the last match of such series. iv) After 31/03/2022, the Corporate Debtor has made payment in full only against one invoice for the year 2022-2023, i.e for India - South Africa cricket series held in June 2022 amounting to Rs 25,35,50,000/- vide invoice No BCCI/22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,92,400/- (Rupees One Hundred Fifty-Eight Crore Ninety Lakhs Ninety Two Thousand Four Hundred) related to the above listed twelve invoices, has been reflected in Part IV of Form No.5 as the amount claimed to be in Default. The Corporate Debtor has also deducted TDS with respect to the amounts owed to the Operational Creditor under the above referred to invoices raised for the financial year 2022-2023. v) It cannot be disputed that the Corporate Debtor has availed the services of Operational Creditor. By an email dated 11/06/2022, the Corporate Debtor wrote to the Operational Creditor directing the latter to handover all the march tickets to an authorised person, evidencing that the Corporate Debtor was actively availing the services of the Operational Creditor. vi) Corporate Debtor had never disputed the fact that it was required to pay the agreed Fee as per the arrangement between the parties. However, despite having acknowledged the dues, the Corporate Debtor has failed to pay and instead, the Corporate Debtor repeatedly kept requesting the Operational Creditor for extension of time for payment as evidenced by the email dated 17/04/2023, wherein the Corporate Debtor requested ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding preparing advertisement content for the promotional activities and seeking approval of BCCI on same as per clause 3(1)(k) of the Agreement. ii. In terms of reciprocal obligations, the Respondent was obligated to make payment of the 'Rights Fees' (as agreed under Schedule VI of the Agreement) (Clause 4.1 (a)) and furnish an irrevocable and unconditional bank guarantee (Clause 4.2). Under the Agreement, the alleged Operational Creditor obtained sponsorship rights from the Respondent, which financially facilitated various national and international tours of the national cricket team; thereby enabling (i) higher revenue for BCCI, (ii) promotion of sports, (iii) national and international tours of the National Cricket Team, and (iv) representation of India across international cricket circuits for almost 3 (three) years (i.e., from 25.07.2019 to 31.03.2022). A Mere grant of rights to the Respondent pertaining to a Sponsorship cannot be said to be the provision of a 'service' from the BCCI to the Respondent. No service was ever provided by the BCCI which was not a 'service provider' and the Respondent is not a 'service receiver' or recipient of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsorship is not the principle activity of BYJU'S, the claim of the Petitioner is purported and not maintainable. No contractual Arrangement between the parties vii. That soon after entering into the Agreement, the COVID-19 pandemic outbreak was announced and due to which the Respondent lost the ability to monetize on the rights granted under the Agreement and suffered heavy commercial and business loss. viii. Thus due to inability to fully benefit from the Agreement, the Respondent through email 23/11/2021, requested BCCI for an extension of the Agreement (which was due to expire on 31/03/2022) till 2025. The parties began negotiating the terms of the Draft Amendment Agreement and obligation of payment of right fee (Clause 4 of the Agreement). In this regard there were multiple rounds of discussions, in which the Respondents herein proposed extensions and various deals several times all of which was denied by the Operational Creditor. ix. It is pertinent that the proposed extension agreement was never finalised and consequently never executed. Therefore, it is an admitted position that as of 31/03/2022 and till date there exists no formal written agreement between the parties. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e BCCI.' Subsequently, the aforesaid MOA, 2018 of BCCI was amended pursuant to the Hon'ble Supreme Court's order dated 14/09/2022. The prevailing 2022 MOA amended the above Clause 15 to provide a specific obligation on the Apex Council to 'institute or defend, through the Secretary, any action or proceedings for or against the BCCI or against any Office-Bearer or employee of the BCCI.' In view of the above, the amendment carried out in 2022 under Clause 15(4)(d) of the MOA was with the sole aim of delegating a specific function to the Secretary in the context of filling and/or defending legal matters on or against BCCI, with no power to either the Apex Council or the Secretary to sub-delegate such specific functionality. Therefore, the present Petition filed by a legal manager of BCCI, without any specific authority permitting the same, is not maintainable under the law and is hence liable to be dismissed. xiv. Further the Respondent herein has filed IA 106/2024 seeking directing under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the parties to arbitration proceedings, since the Clause 19 of the Agreement stipulated that all disputes arising ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Expocentre Private Limited v. Metro Jet Airways Training Private Limited 2022 SCC OnLine NCLAT 263 [at Paras 41 and 42 page 39 of judgment compilation filed by the Petitioner on March 11, 2024]. iv. Secondly, under the Agreement, the Petitioner licensed to the Respondent advertising and promotional rights [Clause 1.1 (a) (xxvii) of the Agreement at page 67 of the section 9 petition defines 'Rights'] for which the Respondent was required to pay a 'Rights Fee' [Clause 1.1 (a) (xxviii) of the Agreement at page 67 defines 'Rights Fee']. v. Several judicial precedents have held that advertising and promotional rights /services similar to the Services availed by the Respondent from the Petitioner are 'services' for the purposes of IBC. In Rapid Metro Rail Gurgaon Limited v. Icons Project India Private Limited MANU/NC/6200/2022, the NCLT, New Delhi held that an outstanding payment / debt pertaining to an outdoor advertisement right agreement wherein the sole and exclusive advertising rights for outdoor advertisements work on Rapid Metrorail Gurgaon line was granted to the corporate debtor falls within the definition of an 'Operational Debt' [Para 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of 'services' and the definition of 'service' under the Central Goods and Services Tax Act, 2017 is applicable to IBC proceedings. xi. Further, it is submitted that the Respondents continues to avail the Services from the Petitioner up until March 2023, and for which the Petitioner raised invoices which were never disputed by the Respondent. It is also undisputed that the Respondent advertised its logo in the cricket matches held up until March 2023 as provided in the Agreement. Moreover, a written contract is not sine qua non for an operational debt and consequently for initiating a proceeding under Section 9 of the IBC. The fact that the (a) Respondent never disputed having availed Services from the Petitioner or its liability to pay when the invoices were being sent by the Petitioner and (b) Respondent has admitted its liability to pay and sought extension of time to make payment towards the pending invoices raised post March 2022 and paid TDS against the invoices, clearly demonstrates that there was a mutually recognized and subsisting arrangement between the Parties. xii. That Regulation 7(2) of IBBI(Insolvency Resolution Process for Corporate Persons) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fend, through the Secretary, any action or proceedings for or against the Petitioner or against any office-bearer or employee of the Petitioner [Rule 15(4)(d) at page 713 of the compendium filed by the Respondent on March 13, 2024]. Further, the Secretary of the Petitioner has the power to delegate any work to the Honorary Joint Secretary or any person in management [Rule 7(3)(f) at page 699 of the compendium filed by the Respondent on March 13, 2024]. Thus, it is clear from rule 7 (3) (f) that the Secretary / Honorary Secretary of the Petitioner [Rule 1(A)(bb) at page 681 of the compendium filed by the Respondent on March 13, 2024] has the power to delegate / sub-delegate any work, including the institution of proceedings for the Petitioner, under its Bye-laws xvi. In accordance with the Petitioner's Bye-laws, the Apex Council vide resolution dated October 27, 2022, appointed Mr. Jay Shah, Honorary Secretary of BCCI, as the authorized representative of the Petitioner inter alia to institute all legal proceedings. The resolution further authorized the Honorary Secretary to delegate the powers vested on him to any officer(s) of the Petitioner. [Resolution of the Apex Council is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Diary No.1557 dated 11/03/2024 and the same is taken on record. 6. The Ld. Counsel for the Respondent has filed Written Submissions vide Diary No.2576 dated 30/04/2024, in which the Objections filed earlier were reiterated. Further the compilation of Judgments was filed vide Diary No 2573 dated 30/04/2024 and the same are taken on record. 7. We have pursued the records available and also heard the Learned Counsels. ANALYSIS DECISION: On a careful perusal of the Objections raised by the Respondent Corporate Debtor and the pleadings on record, we proceed to analyse the following issues emerging in this case: 7.1. Whether the Petitioner herein is an Operational Creditor ? a) The paramount question which arises in the present Petition is whether there is an 'Operational Debt' to be claimed as defined under the Code. Section 5(21) of the Code defines 'Operational Debt' as follows: 5 Definitions (1)*** (2)*** .. .. (21) operational debt means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icense to the 'Corporate Debtor', to use manufacture, sell, distribute and advertise the licensed products and to use the trademark in association with the licensed products as well as on packaging, promotional advertising material has a direct nexus with the business operations and sales and also with the actual product supplied by the 'Corporate Debtor.' Hence, we hold that the 'Claim' in respect of such provisions of 'goods and services', under the terms of the Agreement, fall within the ambit of the definition of 'Operational Debt' as defined under Section 5(21) of the Code. b) Hence, in the present case also an exclusive Sponsorship Right was licensed to the Respondents for a 'Rights fee' to be paid to the Petitioner. Moreover, the invoices raised against the Corporate Debtor also contemplate the due payment of GST for the services rendered. We have considered the principles laid down in Somesh Choudhary, (supra) and Jaipur Trades Export Centre Pvt Ltd v M/s. Metro Jet Airways Training Pvt Ltd, (2022) ibclaw.in 478 NCLAT. The Hon'ble NCLAT in these decisions has duly considered the implication of payment of GST; which is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Persons) Regulations 2016 is reproduced here: 7.Claims by operational creditors. (1)*** (2) The existence of debt due to the operational creditor under this Regulation may be proved on the basis of- (a) the records available with an information utility, if any; or (b) other relevant documents, including - (i) a contract for the supply of goods and services with corporate debtor; (ii) an invoice demanding payment for the goods and services supplied to the corporate debtor; .. It is a settled principle under Section 9(3) read with Regulation 7(2)(b)(i) and (ii) of the Regulations 2016, that the Operational Creditor can substantiate its claim either with contracts or invoices. Further, it is not in dispute that the Respondent itself has duly availed the Rights granted under the Agreement even after the date of expiry of the Agreement and the Respondent has availed the entire benefits of the Rights provided under the same agreement and owing to such benefits availed, the Petitioner has raised invoices in pursuant to the same Rights Fees . In fact, even after the original agreement coming to an end on 31/03/2022; BCCI and the Corporate Debtor exchanged correspondences to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the previous Sponsorship Agreement until the conclusion of the negotiations between them. Even during the period when the said agreement had come to an end, the Corporate Debtor herein continued to avail all the services/rights of being a sponsor like (a) marketing related services by way of the exclusive right to be the team sponsor of the Indian cricket teams and to display the Respondent's trademarks / brand names on the specified portion of the team kit worn by the Indian cricket teams; (b) advertising related services by way of a platform to display its brand through the use of video footage from cricket series and events organized and administered by the Petitioner; (c) promotional services by way of the network to engage with players of the Indian cricket teams for and in connection with advertising campaigns of the Respondent; (d) the permission to use the intellectual property of the Petitioner such as its logo and other official trademarks in its marketing materials; and (e) hospitality and non-hospitality tickets for every ticketed match organized by the Petitioner. d) In this regard, it is pertinent to refer to the Order of NCLT, Delhi, Principal Bench in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code; which is as under: 3. Definitions (1)*** (2)*** .. .. (12) default means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not [paid] by the debtor or the corporate debtor, as the case may be; The Hon'ble Supreme Court in the case of Innoventive Industries Ltd. b. ICICI Bank (2018) 1 SCC 407 has held as under: 27. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the insolvency resolution process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or an instalment amount. For the meaning of debt , we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a claim and for the meaning of claim , we have to go back to Section 3(6) which defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default is of rupees one lakh or more (Section 4) [Emphasis Supplied] b) Now, it is relevant to refer to the email correspondence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing dues after adjusting the payment received pursuant to the BG. 3. After adjusting the payment from encashing the BG, any remaining dues till ICC WC'2022 and additional dues until 31st March'2023 would be paid by BYJU'S between 1st April'2023 and 30th June'2023. We reiterate that the above proposal to extend the deal period till March'2023 is subject to BCCI accepting the above mentioned payment schedule which allows BYJU'S to clear all the dues by making payments during the period 1st April'23 till 30' June'2023. This decision has been difficult for us but we acknowledge your request and appreciate the contribution of the BCCI to our growth story and we intend to conclude our partnership on amicable terms that are mutually satisfactory. Look forward to hearing from you on the way forward on the above. [Emphasis Supplied] ii) Email dated 17/04/2023, from Atit (Byjus-Respondent) to Hemang (BCCI-Petitioner) (@Annexure 30 of the Petition) Dear Hemang, As discussed over the call today, we are expecting a few weeks delay in our fund raise. Our April 2023 payout to BCCI is running behind schedule and we anticipate April 2023 payout to be released ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reproduced in this order at Para 2.iv), the total outstanding amount of Rs.158,90,92,400/- was duly reflected in the Form-5 as the 'amount in default'. In the same email dated 06.01.2023, there is a commitment from the Corporate Debtor that after the adjustment of encashment of Bank Guarantee, the remaining outstanding dues until 31.03.2023 would be paid by Byjus between 01.04.2023 and 30.06.2023. This commitment was reiterated by the Corporate Debtor in the email dated 17.04.2023 and 15.05.2023, reproduced above. The contents of these email therefore clearly establish that there is an outstanding debt owed to the Operational creditor and there is a default on the part of the Corporate Debtor as provided under Section 3 (12) of the Code; which the Corporate Debtor has duly acknowledged by way of these three emails. The contents and the veracity of these email communications have not been disputed by the Respondent Corporate Debtor in this case. f) Thus since, the Respondent herein has time and again acknowledged and duly planned a repayment schedule for the outstanding dues by sending the above mentioned emails; the condition of there being a 'Debt' and a 'Def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that under Section 8(2), for a pre-existing dispute to be the ground for dismissal of section 9, the same must exist before the receipt of the Demand notice, or the Invoice, as the case may be. The same was further reiterated by the Hon'ble NCLAT in the case of Mr. Rajpal Singh Solanki, Ex-Director of Minarch Overseas Pvt. Ltd. Vs. M/s. Quazar Infrastructure Pvt. Ltd. (2021) ibclaw.in 297 NCLAT, order dated 02/07/2021; as under 15. The judgments of the Hon'ble Apex Court in Mobilox Innovations Private Limited and Innovative Industries Limited civil appeals are basically about pre-existing dispute and that the Adjudicating Authority should be prima facie convinced about the pre-existence of a dispute before notice under Section 8 was sent, and not involve itself into examining the pre-existing dispute on merits d) It is seen that the Respondents herein has relied upon the email dated 24/05/2022 to support the contention of pre-existing dispute. We refer to the contents of the said email, which is reproduced below: {From Atit (Byjus-Respondent) to Anmol BCCI-Petitioner), dated 24/05/2022} Hi Anmol We will not be able to process the invoice for the forthcoming South Africa to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts even after 31/03/2022 and has also availed several benefits of being a Sponsor under the Agreement. Further, while from 24/05/2022 onwards the Petitioner have raised several invoices, the Respondent did not raise any specific disputes in respect of any particular invoice. The pre-existing dispute which may be the ground to reject an Application under Section 9 has to be a real dispute or a conflict or a controversy, a conflict of claims or rights should be apparent from the reply as contemplated under Section 8(2) of IBC, 2016. We do not find any document furnished by the Respondent that might show that there was any controversy/conflict between the parties so as to show the existence of dispute prior to the receipt of the demand notice/invoice in so far as the payment of the claims raised by the invoices are concerned. Therefore, the requirement of Section 8(2)(a) of IBC is not fulfilled. h) Further, in their reply to the Demand Notice dated 29/07/2023 the Respondent has not contested the existence of Debt or raised any dispute on the particular amount of the invoices, which is mandatory in accordance with the provisions of Section 8(2)(a) of the Code. The reply ought to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation given by the Petitioner that the authority letter dated 27/10/2022, authorising the General Counsel of BCCI and Senior manager (Legal) to execute all the documents and initiate the present proceedings is proper and in accordance with the Bye-laws. Thus the objection in this regard is not acceptable. 8. Accordingly, this Adjudicating Authority is of the considered opinion that there is no reason to deny the petition filed under section 9 of the IBC, 2016 by the Operational Creditor to initiate CIRP against the Corporate Debtor, since the existence of a debt and a default in the payment of debt is clearly established. Therefore, the instant Company Petition bearing CP (IB) No. 149/2023 is admitted against the Corporate Debtor and moratorium is declared in terms of Section 14 of the Code. 9. As a necessary consequences of the moratorium in terms of Section 14 of the Code, the following prohibitions are imposed, which must be followed by all and sundry: a. The institution of suits or continuation of pending suits or proceedings against the Project of Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate Debtor constitute a Committee of Creditors and shall file a report, certifying constitution of the Committee to this Tribunal on or before the expiry of thirty days from the date of his appointment, and shall convene first meeting of the Committee within seven days for filing the report of Constitution of the Committee. The Interim Resolution Professional is further directed to send regular progress reports to this Tribunal every fortnight. 13. A copy of the order shall be communicated to both the parties. The learned Counsel for the Petitioner shall deliver copy of this order to the Interim Resolution Professional forthwith. The Registry is also directed to send the copy of this order to the Interim Resolution Professional at his e-mail address forthwith. I.A 106/2024 1. The Corporate Debtor herein has filed IA.106/2024 on 18/01/2024 against the Operational Creditor inter alia praying this Tribunal to pass directions under Section 8 of the Arbitration and Conciliation Act, 1996 to refer the Parties in the present dispute to arbitration. It is the contention of the Applicant that since the claims of BCCI arise out of a purported Agreement and the said Agreement consists of a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a corporate debtor by raising moonshine defence only to delay the process. In that view, even if an application under Section 8 of the Act, 1996 is filed, the Adjudicating Authority has a duty to advert to contentions put forth on the application filed under Section 7 of IB Code, examine the material placed before it by the financial creditor and record a satisfaction as to whether there is default or not. While doing so the contention put forth by the corporate debtor shall also be noted to determine as to whether there is substance in the defence and to arrive at the conclusion whether there is default. If the irresistible conclusion by the Adjudicating Authority is that there is default and the debt is payable, the bogey of arbitration to delay the process would not arise despite the position that the agreement between the parties indisputably contains an arbitration clause. Hence, it is abundantly clear as laid down by the Hon'ble Apex Court that the Adjudicating Authority has to either reject or Admit the Application and cannot postulate a third option. In this matter, the application U/s 9 of the IBC has been admitted by the Order passed today, therefore, the application ..... X X X X Extracts X X X X X X X X Extracts X X X X
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