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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 ..... k & Learn Private Limited (hereinafter referred as 'Corporate Debtor'/Respondent) for a default of total outstanding amount of Rs. 1,58,90,92,400/- (Rupees One Hundred Fifty Eight Crore Ninety Lakhs, Ninety-Two Thousand Four Hundred). In Part IV of Form No.5 filed with the application, the following information is given: 2 AMOUNT CLAIMED TO BE IN DEFUALT AND THE DATE ON WHICH THE DEFAULT OCCURRED Amount in Default: Rs 1,58,90,92,400/- (Rupees One Hundred Fifty-Eight Crore Ninety Lakhs Ninety Two Thousand Four Hundred) excluding the Tax Deducted at Source deposited by the Corporate Debtor and applicable Interest. Date of Default: 21/08/2022 The Record of Default in Form D issued by NESL is annexed at Page 184, which reflects 21/08/2022 as the Date of Default. Affidavit U/s 9(3) (b) is placed at Page 55 of the Petition & Demand Notice under Section 8(1) of the Code, in Form 4 was attached at Page 154 onwards. 2. Brief facts of the case, which are relevant to the issue in question, and as narrated by the Petitioner in the Petition, Form No.5 and subsequent written submissions are as follows: i) The Operational Creditor and the Corporate Debtor entered into a 'Tea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce between the parties, the Corporate Debtor, vide its email dated 06/01/2023 gave its consent to the Petitioner to encash the Bank Guarantee of Rs 143,00,00,000/-for dues till ICC'WC 2022 which was encashed subsequently. However the amount was not sufficient to cover the entire amount, and this Bank guarantee was adjusted against Invoices No.1 to Invoice No.8 and Invoice No. 10,12 & 14 as explained in item 1 in part IV of Form No.5. Therefore, even after encashment of the Bank Guarantee, the following invoices aggregating to an amount of Rs. 1,58,90,92,400/- remained unpaid: Cricket series/Tour details Invoice Number Invoice Amount (in INR) TDS reflecting in Form 26 AS (in INR) Amount Unpaid (in INR) Date on which 50% amount was payable and default occurred Date of default for balance 50% amount payable South Africa, Australia, Srilanka, New Zealand Invoice 9 1,38,30,000 2,76,600 1,35,53,400 Aug 21, 2022 Sept 30, 2022 South Africa, Australia, Srilanka, New Zealand Invoice 11 1,38,30,000 2,76,600 1,35,53,400 Aug 29, 2022 Oct 9, 2022 South Africa, Australia, Srilanka, New Zealand Invoice 13 1,38,30,000 2,76,600 1,35,53,400 Sept 6, 2022 Oct 16, 2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... May 2023; contending that the payments to be made in May 2023 and June of 2023 would be made in the respective months. By another email dated 15/05/2023 the Corporate Debtor again requested the Operational Creditor for accepting the payment of its dues between June 12, 2023 to June 15, 2023, since the fund raising for the former had gotten delayed till June 2023. It is contented that these emails were the admission of the Debt owed by the Corporate Debtor and the default had occurred since there was request for extension of the time repeatedly. The Respondent never disputed the invoices raised during the F.Y 2022-23 which have been listed above, and in fact also duly paid the invoice no BCCI/22-23/008 dated 20/05/2022; in full amounting to Rs 25,35,50,000/-(Rupees Twenty Five Crore Thirty Five Lakh Fifty Thousand), pertaining to the Invoice of the India South Africa series. vii) On 19/07/2023, the Operational Creditor sent a 'Demand notice' under Rule 5 of the Insolvency & Bankruptcy (Application to Adjudicating Authority Rules), 2016 to the Corporate Debtor, calling upon the Corporate Debtor to pay Rs. 1,58,90,92,400/- (which excluded the TDS deducted) against the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service from the BCCI. iii. That Section 5(20) & (21) of the Code, an 'operational creditor' can file an application seeking initiation of the CIRP process against a corporate debtor on account of non-payment of any 'operational debt'. On account of the reciprocal rights and obligations between the parties, BCCI merely granted certain 'Rights' and no 'services' were ever provided to BYJU'S under the Agreement. Since no service has been provided by the BCCI, it cannot be termed as a service provider and further does not fall under the definition of "Operational Creditor." iv. Even assuming that the alleged Claim is due and payable, the right to issue a demand notice and initiate CIRP under Section 9 of the code vests only with an 'operational creditor' as defined under Section 5(21) of the Code, which limits it to being a claim in respect of i) provision of goods; ii) provision of services, including employment iii) Government dues. It is submitted the term 'goods or services' has not been specifically defined under the Code, however, the congruent term-'goods or services'- has also been used in the definition of 'T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt between the parties. Therefore, the alleged Operational Creditor has no right to claim that the purported invoices raised during the financial year 2022-23 were under the Agreement. x. The Respondent has relied on the following cases for the same; a. Stoughton Street Tech Labs Pvt Ltd v. Jet Skyesports Gaming Pvt Ltd[Appeal(L)No.16492 of 2022} b. Hardesh Ores Pvt v. Hede and Company, ( (2007) 5 SCC 61) c. Joshi Technologies International Inc. v. Union of India (UOI) and Ors. ( (2015) 7 SCC 728) etc Pre-existing Dispute between the parties xi. The Respondents contend that the since the negotiations of the Sponsorship was still in the process and the same was contended by the Respondents in reply to the Demand Notice dated 18/07/2023, despite the existence of a dispute, the Petitioner has filed the present Application. It is stated that the Respondent, in the said Reply, raised disputes with respect to (i) no contractual basis for the alleged claim, (ii) the alleged claim not being an 'Operational Claim' as per the provisions of the code. Despite the existence of a dispute on these aspects, the present Application (which is not maintainable) has been filed. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement stipulated that all disputes arising out of or in relation to the Agreement are mandatorily required to be adjudicated by way of Arbitration. Further it is also the contention of the Respondent that a number of substantial questions with respect to status of the alleged Creditor and legitimacy of contract etc have to be adjudicated upon, which cannot be undertaken in summary proceedings before the NCLT and must be relegated to Arbitration. 4. The Learned Counsel for the Petitioner have filed Rejoinder vide Diary No. 791 dated 05/02/2024, and Written Submissions vide Diary No. 2568 dated 30/04/2024 contending as hereunder: i. The term of the Agreement was originally till 31/03/2022, even after the said term of the Agreement, the Respondent availed the Services of the Petitioner including without demur up until March 2023. Further, the Respondent never disputed the invoices raised by the Petitioner for the Services provided and in fact paid one invoice issued on 20/05/2022 in full. For the subsequent invoices, the Respondent had kept requesting for more time to make the payments for the Invoices, without disputing any of the invoices. ii. That there were several instance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the definition of an 'Operational Debt' [Para 13 at page 6 of the judgment compilation filed by the Petitioner on March 11, 2024]. vi. Similarly, in Somesh Choudhary, Suspended Director at Global Fragrances Private Limited v. Knight Riders Sports Private Limited and Ors. MANU/NL/0619/2022 ("Somesh Choudhary"), the Hon'ble NCLAT, New Delhi held that as the corporate debtor was permitted to use the trademark 'KKR' in relation to the licensed products, it constitutes 'provision of service' and any amount due and payable arising out of such service is an Operational Debt. vii. In Chitra Publicity Company v. Sarkar Leisure Ltd., 2019 SCC OnLine NCLT 9905, the NCLT, Ahmedabad, recognized that the applicant providing hoarding space to the respondent company for advertising its water park/amusement park constituted a "service" and made the applicant an "operational creditor" under the IBC. viii. Claims arising in respect of advertising services by airing advertising campaign on television channels and agreement for display of hoardings have also been held to be an operational debt for the purposes of section 9 of the IBC [TV 18 Broadcast Limited v. Amra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation 7(2) of IBBI(Insolvency Resolution Process for Corporate Persons) Regulations, 2016 provides that the existence of debt due to the operational creditor under the said regulations may be proved on the basis of the records available with an information utility, if any, or other relevant documents, including a contract for the supply of goods and services with corporate debtor OR an invoice demanding payment for the goods and services supplied to the corporate debtor, among others. Thus, it is clear from the scheme of IBC that an operational debt can arise on the basis of the invoices alone and does not have to be pursuant to a written agreement. The Respondent in this case has not only accepted the invoices raised by the Petitioner without demur, but has also paid TDS against each of them. xiii. In the oral arguments, the Respondent sought to rely on its email dated 24/05/2022 in which the Respondent had stated that it was unable to process the invoice raised by the Petitioner for the forthcoming South Africa tour to India due to non-availability of the contract, to contend that the Operational Debt had been disputed before the Demand Notice was received. However, the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested on him to any officer(s) of the Petitioner. [Resolution of the Apex Council is produced at page 193 of the section 9 petition]. The Honorary Secretary vide authority letter dated October 27, 2022, further authorized Mr. Biswa Patnaik, General Counsel of BCCI and / or Ms. Melinda Colaco, Senior Manager (legal) of BCCI to execute all documents to make necessary filings in legal proceedings. [Authority letter is produced at page 192 of the section 9 petition]. As such, the authority given to Senior Manager (legal) to initiate all legal proceedings is proper and in accordance with the Bye-laws governing the Petitioner and the resolution of the Apex Council, the principal body of BCCI. The Petition has been duly instituted. xvii. Further, with respect to the IA 106/2024, it was contended that, it is settled law that reliefs in the nature of winding up / insolvency resolution being actions in rem cannot be granted by a contractually created adjudicating body such as an arbitral tribunal. The Hon'ble Supreme Court in Booz Allen & Hamilton Inc. v. SBJ Home Finance Ltd. (2011) 5 SCC 532 [Para 22 at page 49 of the judgment compilation filed by the Petitioner on March 11, 2024] an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; The main argument of the Respondents is that the 'Team Sponsor' Agreement between the parties was a mutual set-up for gains and that the Petitioner merely granted certain 'Rights' and no 'services' were ever provided to Respondent under the Agreement. In this regard it is essential to note the term 'Rights' as per clause 1.1 (xxvii) of the agreement: xxvii) "Rights" shall mean the advertising and promotional rights licensed to the Sponsor under this Agreement. Further, under Clause 3 "Rights granted under the Agreement" states various rights granted to the 'Sponsor' like i) right to have the Logo displayed on the Indian National Team Kit, right chest of the shirt, and leading arm sleeves, ii) the right to use BCCI Archive footage and stills of players for the promotional purposes, iii) right to feature a group of at least 3 players in connections with sponsor's promotional campaigns to promote association with the Team sports. The Corporate Debtor was liable to pay a sum agreed as the "Rights f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd, (2022) ibclaw.in 478 NCLAT. The Hon'ble NCLAT in these decisions has duly considered the implication of payment of GST; which is contemplated only for providing for 'goods' and 'services.' As per the Agreement, the payment of the fees was liable to levying of GST, hence it is implied that the Sponsor Agreement licensed is in respect of the 'services', and the 'rights fee' for which the Operational Creditor is liable to be paid by the Corporate Debtor does fall within the definition of 'Operational Debt' within the meaning of Section 5(21) of the Code. Accordingly, the Respondent's arguments in this regard are not legally tenable. 7.2 Whether there was any contractual arrangement/ agreement between the parties, evidencing the existence of Operational Debt: a) It is the argument of the Respondents that the Agreement came to an end on 31/03/2022 and since there was no functioning agreement/contract existing between the parties, the said petition is void of maintainability. In this connection, reliance is placed on the judgement of NCLAT in Manoj Stone Infra Pvt. Ltd. Vs. Railsys Engineers Pvt. Ltd, (2023) ibclaw.in 444 NCLAT, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 effect that the arrangement was to continue pending the execution of the formal document. b) Moreover, it is apparent from the admission of the Respondent that the even after the expiry of the agreement, the bank guarantee was amended to postpone the expiry date to 15/09/2023. A perusal of the Bank Guarantee given by the Corporate Debtor filed at page 97 of the objections reveals that it was duly extended on 16/09/2022 for a period upto 15/09/2023. The renewal of Bank Guarantee as late as 16/09/2022 for a further period of one year by the Corporate Debtor establishes it beyond doubt that the Sponsorship arrangement and related services were still in force; Further, the Respondent cannot contend the issue of lack of proper agreement, when the same was not raised during the time when such services were duly availed by the Respondent, and the benefits arising therefrom duly accrued to it. Hence, the objection raised in this regard is liable to be rejected c) This Tribunal also notes that the Parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pitality 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 of Daily Diary Essentials V. Goodhealth Industries Private Limited in CP (IB) No.628/(PB)/2023, order dated 02/04/2023, wherein it was held that, "16. In Part IV of the Form-5 as extracted above, the OC mentions the Date of Default as 05.03.2022 being the date of first defaulted invoice. In this regard it is pertinent to mention that there is no formal agreement between the parties. However, the business arrangement was carried based on mutual terms of the parties. Based on the mutual terms of the parties, the OC supplied the above mentioned goods to the CD, and thereby raised invoices for the same. It is stated that the invoices dated 05.03.2022 (partly paid) and 10.03.2022 are not paid. For the sake of issue at hand it is relevant to mention invoice dated 05.03.2022 which is annexed as Annexure A-5. 17. It is observed from the invoice annexed that there is no specific date mentioned, for the payment against the supply of goods. In this regard, it is pertinent to observe that the paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 correspondences pertaining to the invoices for which the payment remained outstanding inspite of multiple reminders by the Operational Creditor. These emails reflect that there was a clear cut acknowledgement of the debt along with part payment of the invoices raised after 31.03.2022, which are all related to the International cricket events which took place after 31.03.2022 only. We proceed to discuss the contents of the following emails, which would lead to the conclusive finding that the debt was duly acknowledged and only requests for extension of time for payment of the same was being made repeatedly by the Corporate Debtor. Several invoices were raised by the Operational Creditor, which became due and payable as per the clause 4 (c) of the Agreement i.e within period of 5 days from the last chargeable Match of each Chargeable Series/Event. In Part IV of the Form-5 as extracted above, the Operational Creditor mentions the Date of Default as 21/08/202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in May 2023. .... ... The agreed plan of releasing the balance payment is in line as per our understanding. May 2023 and June 2023 payouts will be done in the respective months. We are committed to close the entire payment before June 2023" [Emphasis Supplied] iii) Email dated 15/05/2023, from Atit (Byjus-Respondent) to Hemang (BCCI-Petitioner), (@Annexure 31 of the Petition) Dear Hemang As per the earlier email dated 17th April 2023, we were expecting our fund raise to happen in May 2023, however that has got extended to June 2023 and the funds will hit our accounts in the first week of June 2023. Requesting to accept payment between 12-15th June 2023. While the delay is unprecedented, we are committed to close all payouts as per our understanding. [Emphasis Supplied] d) Now we proceed to examine the factual position pertaining to the outstanding invoices, and the subsequent payment made by the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 'Default' for the purposes of Section 9 of the IBC is held to be satisfied. 7.4 Whether there was any pre-existing dispute between the parties: a) Another objection raised by the Corporate Debtor is there being a 'Preexisting dispute' in the matter. For this we have to examine whether there was any pre-existing dispute raised prior to issuance of Demand Notice as envisaged under Section 8 of the IBC, 2016. For the sake of convenience, Section 8 of the Code is reproduced below: 8.(1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debt or copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. (2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 tour of India due to non-availability of the contract. Request you to forward the contract extension documents for us to submit to our internal finance department and auditors to release payment." However, it is a matter of record that this invoice dated 20/05/2022 related to the South Africa tour, and was duly paid by the Corporate Debtor as discussed above at para 2(iv). Thus, this objection on the part of the Respondents is not tenable. In fact, this was the first invoice after the written agreement had come to an end on 31/03/2022, and for an event which took place after 31/03/2022; but was duly paid by the Corporate Debtor based on the mutual arrangement. Thus it cannot be accepted to be a reflection of any dispute. e) We have carefully considered the contents of the email dated 06/01/2023, which is discussed above at para 7.3. There was a clear cut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 to the notice the "existence of the dispute, record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;" as per Section 8(2)(a) of the IBC Code. Such notice has to be for a real dispute or a conflict or a controversy, and a conflict of claims or rights should be apparent from the reply as contemplated by Section 8(2). However, the Corporate Debtor failed to point out any such issue of the pre-existing dispute in the reply. The reply given by the Respondent herein is only in respect to maintainability of Demand Notice of the Petitioner and does not show any notice of pre-existing dispute. Such a reply cannot be considered to be in adherence to Section 8(2) of IBC. Hence, it is held that there was no pre-existing dispute between the parties at the time of receipt o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 other authority; b. Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein; c. Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; d. The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the Corporate Debtor; e. It is further directed that the supply of essential goods or services to the Corporate Debtor as may be specified, shall not be terminated or suspended or interrupted during the moratorium period; f. The provisions of Section 14(3) shall however, not apply to such trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 valid Arbitration clause under Section 19 of the Agreement the same ought to be referred to Arbitration by this Adjudicating Authority. 2. The Respondents to the present application have filed their reply vide Diary No. 1556 dated 11/03/2024 wherein it is stated that this Adjudicating Authority cannot refer the parties to the Arbitration. When a petition under Section 9 of the Code is present before the Adjudicating Authority, the Adjudicating Authority may either admit or dismiss the petition and that insolvency matters are not arbitral. The Respondent has relied on the following judgements for this effect: I. Sodexo India Services Pvt Ltd. v. Chemizol Additives Pvt.Ltd (MANU/NL/0055/2021) II. White Stock Limited v. Prajay Holdings Private Limited (MANU/NL/0677/2022) III. Indus Biotech Private Limited v. Kot ..... 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