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TMI Blog2024 (11) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... s Appeal are : i. A Master Service Agreement was executed on 27.01.2020 effective from 01.05.2019 between Amazon Seller Services Private Ltd. and Multiplier Brand Solutions Private Limited, the Appellant herein. ii. The Agreement mentioned that Agreement is entered into between the Amazon Seller Services Private Limited and any of its affiliates domicile in India that issue Work Orders under this Agreement, collectively Amazon of the first part and Multiplier Brand Solutions Private Limited for service provider as second part. iii. The Agreement provided that service provider will provide services to Amazon on non-exclusive basis in accordance with the terms and conditions of the Agreement. iv. A Novation and Substitution Agreement was entered on 01.04.2021 between Amazon Seller Services Private Limited, Transferor, Amazon Wholesale (India) Private Limited, Transferee and Multiplier Brand Solutions Private Limited for replacing the Transferee with Transferor in relation to under the Principal Agreement. v. The Agreement provided that Transferor will relinquish and waive of all its rights, interest, liabilities and obligations under the Principal Agreement and Transferee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Reply to Demand Notice, the Corporate Debtor has detailed the correspondence between the Parties prior to issuance of Demand Notice where the Corporate Debtor has disputed the claim of the Appellant. xiv. Section 9 Application was filed by the Appellant on 29.11.2023. Appellant also on 01.12.2023 issued an Arbitration Notice for an amount of Rs.3,18,13,923/- which Arbitration Notice was also responded by Corporate Debtor. Respondent filed Reply to Section 9 Application to which Rejoinder was filed. Adjudicating Authority heard the Parties and by Order dated 05.03.2024, dismissed Section 9 Application on the ground that there are Pre-Existing Dispute between the Parties, hence the CIRP against the Corporate Debtor cannot be commenced. xv. Challenging the Order impugned, this Appeal has been filed. 3. We have heard Learned Sr. Counsel Mr. Neeraj Malhotra appearing for the Appellant and Learned Sr. Counsel Mr. Krishnendu Dutta appearing for the Respondent. 4. Learned Sr. Counsel for the Appellant challenging the Order contends that dispute with regard to fake invoices issued by employees and staff of the Appellant relate to another project i.e. Vodafone, and the Appellant itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant had Suo Motu taken cognizance of the allegation and engage Ernst and Young to conduct fact finding in the said matter. Investigation undertaken by Ernst and Young pertains to Vodafone Project which project was being undertaken by the Appellant with Amazon Seller Services Private Ltd. and not with the Corporate Debtor. 5. Learned Sr. Counsel Mr. Krishnendu Dutta appearing for the Corporate Debtor refuting the submissions of the Counsel for the Appellant contends that by Novation Agreement dated 01.04.2021, all the liabilities/rights, interest entitlement obligations inter see between Amazon Seller Services Private Ltd. and Amazon Wholesale (India) Private Ltd. have been taken over by the Corporate Debtor. Transaction between the Appellant and Amazon Seller Services Private Ltd. cannot be said to be alien to the transaction between the Appellant and Corporate Debtor. Corporate Debtor has taken liabilities under the Master Service Agreement. Corporate Debtor is entitled to review the earlier transaction though done much prior to issuance of Demand Notice by Operational Creditor. Corporate Debtor has brought into the notice of the Appellant, its objections and the payment to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, "Amazon"), of the First Part; AND Multiplier Brand Solutions Private Limited (formerly known as Multipliermudra Brand Solutions Private Limited) a company registered under Companies Act, 2013 with PAN No. AAKCM7037Q and having its registered office at B-1/G-3 2nd Floor, Mohan Co-op. Industrial Estate, Main Mathura Road Delhi - 110044 (hereinafter referred to as "MBSPL" or "Service Provider" which expression shall unless repugnant to the subject or context shall mean and include its successors, permitted assigns, and administrators) of the other Second Part. For the purpose of this Agreement, the term "Affiliate" shall mean "any entity in which Amazon or its group companies have directly or indirectly, certain economic interest". For avoidance of doubt, any reference to an Affiliate of Amazon under this Agreement shall mean "an Affliate domiciled in India". Amazon and the Service Provider are hereinafter individually referred to as a "Party" and collectively referred to as "Parties"." 8. Clause 1.1 to 1.4 deals with the services and payment, are as follows: "1. SERVICES, WORK ORDERS. 1.1. Services. Service Provider will provide services to Amazon on non-exclusive bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ensure that its Personnel will: (a) abide by all Amazon's rules, policies, and procedures regarding such matters as safety, security, health, environmental and hazardous material management, misconduct, physical aggression harassment and theft (collectively, "Rules"); and (b) at Amazon's request, remove and promptly replace any Personnel (defined in Section 6 below) performing Services who behaves in a manner that is unlawful or inconsistent with any Rules. 1.4. Payment / Records. Amazon will pay Service Provider as provided in the Work Order. Service Provider is entitled to no other compensation or reimbursement for the Services. The Service Provider shall be solely responsible for all other compensation to its Personnel, including any statutory contributions that are required and maintain all other compliances that may be required under applicable Laws in respect of its Personnel. In the event Amazon is required to make any payments in respect of any Personnel or any Claims, Amazon shall have the right amongst others, to adjust the same against any sum payable to the Service Provider under this Agreement. Service Provider will, in accordance with generally accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Road, New Delhi - 110044 (hereinafter referred to as the "Company" which expression will unless / repugnant to the meaning or context thereof, be deemed to mean and include successors and permitted assigns). In this Agreement, Transferor, Transferee, and Company are collectively referred to as the "Parties" and individually as the "Party" Any capitalized term and expression used in this Agreement but not specifically defined herein, will have the same meaning and construction as defined or construed in the Principal Agreement (as defined below), unless the subject or context is repugnant thereto." 10. Clause 1 of the Agreement provides as follows: "NOW THIS AGREEMENT WITNESSETH THAT: 1. From and after the Effective Date: 1.1. The Parties hereby agree that Transferee will replace Transferor in relation to and under the Principal Agreement. All references to Transferor under the Principal Agreement will be construed to be references to Transferee and the Principal Agreement vis-à-vis Transferor will stand novated and transferred in favour of Transferee. 1.2. Notwithstanding anything contained in the Principal Agreement, Transferor will relinquish and waive a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales figures for the services it provided under the MSA. 5. As on date, Amazon's review based on limited information indicates that its entities have been defrauded in excess of USD 16.37 MM |~ INR 136,00,00,000/- (Rupees One hundred thirty-six crores only) on account of wrongful payouts towards sales incentives, asset management, service fee etc., under the MSA. This is still being investigated, despite Multiplier's refusal to provide information, though contractually obliged to do so, as well as Multiplier's failure to share its own finding into the fraud by its employees, despite repeatedly admitting that its employees were involved in fraudulent conduct. Multiplier's behavior is indicative of not just a contractual breach but also discloses a dishonest intention, as the withholding of information gives rise to the presumption that the information disclosed would establish the fraud already brought to Multiplier's attention. 6. It has emerged that the services provided by Multiplier under the MSA and the purported sales facilitated by the employees deployed by Multiplier were illegally and intentionally misrepresented and inflated on the basis of fals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificial and inflated invoicing" has been dealt in Paragraphs 19 & 20, which is as follows: "Discovery of Multiplier's artificial and inflated invoicing 19. Around the end of December 2022, Amazon grew suspicious about certain deficiencies and malpractices in the services provided by Multiplier under the MSA. Amazon observed high abuse of sales figures upon reviewing the sales data submitted by Multiplier for December 2022. Amazon informed Multiplier by an email dated February 09. 2023 about the possibility of high discrepancy in sales figures (of more than 99%. The deficiencies indicated the existence of a fraudulent design and put all the services provided by Multiplier into scrutiny. 20. The exact loss suffered by A WIPL cannot be quantified at this stage since the review and investigation is still ongoing and the documents requested from Multiplier are still pending. However, it cannot be doubted after reviewing the complete background that there is a pre-existing dispute under the MSA." 14. Under the heading "Pre-Existing Dispute as disclosed in correspondence with Multiplier". In Paragraphs 21 to 25, following is pleaded: "Pre-existing dispute as disclosed in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the concerns regarding inflated invoices and phantom services infected all services provided by Multiplier, including the invoices being demanded by Multiplier in the Demand Notice. These included services provided to AWIPL as well as services issued under the MSA, which was subsequently assigned to AWIPL. Therefore, AWIPL had a claim under the MSA as a counter-party to Multiplier both prior to the assignment as well as post assignment till the termination of MSA." 15. When we look into the Reply given by the Corporate Debtor to the Demand Notice, the Reply Notice clearly indicates that Notice of dispute was issued by Corporate Debtor, raising several issues, including the Pre-Existing Dispute. 16. Learned Counsel for the Appellant has contended that issue of fake invoices which has been raised by the Corporate Debtor for which documents and data has been called for from the Appellant relate to different project i.e. Vodafone Project, whereas invoices which are subject matter of Section 9 Application relates to different project, i.e. Amazon Devices, hence, any issue pertaining to fake/inflated invoices are with respect to different Project and cannot be a reason to conclude t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted: "Suspected Fraud related details; A couple of months back we had replaced handsets at these 400 outlets pan India in which, we replaced the Demo handsets with the new ones in each of these 400 Stores. During this coordination and replacement of Handsets from the Vodafone stores, in one of the courier assignments of old Demo Handsets, we found that 43 numbers of handsets worth approximately Rs. 9 Lacs (Nine Lacs) were missing which was sent from Bangalore Multiplier office on 28* July 2022 to Delhi Multiplier office by one of the team leader Mr. Deepak Kharakia. We immediately enquired about the missing mobile handsets and on our repeated questioning to the employee, himself i.e Deepak Kharakia and the other 15 handsets were possibly taken out by courier company guys which till date are not traced. In this incident prime accused Deepak Kharakia was terminated from company on his acceptance of theft as he agreed to refund the amount of the aggregate value of 28 nos of handsets to the company and pleased not to initiate any action as it would ruin his career. But while enquiring with Deepak Kharakia and conducting further fact finding, we realized that there could be a bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subject : Privileged and confidential_Data needed Dear Sameer and Rupinder, This is in reference to our meeting today. As discussed, request if you could share the following data at the earliest : # Particulars 1 Demo data since program initiation i.e. Q4 2017 till date 2 Records maintained, if any to follow up with customer 3 Sales data since program initiation i.e. Q4 2017 till date 4 Incentive paid to promoters, cluster managers and program head, etc. - detailed break up with computation 5 List of all the stores along with the start date of the operations 6 List of all the employees working on the program along with their date of joining compensation details, designation, contact number, address and details of store associated 7 List of all devices purchased, leased under the program along with date of purchase, device id, store association details etc. 8 All the invoices raised under the program along with underlying supporting documents such as: i) Invoices for salary payments along with employee wise payment breakup, proof of payments such as salary slips, pf returns. ii) Invoices for mobile devices/lease reimbursement along with ..... 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We request that on the basis the information shared with you, our due payments for (Amazon Device, Amazon Global, Amazon Design team) be released which as of now are kept on hold by your team, this is required your urgent attention !
Needless to say, we shall be pleased to provide our best at all times.
Best regards,
Praveen Choudhary"
21. The above email which was sent by the Appellant relates to the claim of Appellant for payment for Amazon Device, i.e. subject matter of Section 9 Application. The email itself mentions that the amount has been of now are kept on hold. The aforesaid email was immediately replied by the Amazon on 16.06.2023, where it was again reiterated that decision regarding the payment hold can only be taken when all data requested are provided. The email dated 16.06.2023 is as follows:
"From: RUHIL, DEVENDER
Sent: Friday, June 16, 2023 6:17 PM
To: Praveen Choudhary
[email protected]
Cc: Sameer Mehta [email protected]; Rupinder Singh [email protected]; Reema Arora [email protected]; Ajmani, Gaurav X X X X Extracts X X X X X X X X Extracts X X X X
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