Ashwani Atrish vs Paras Art Studio & Ors

Shreesha Merla, Member (T)

This Appeal is filed by the Suspended Director of M/s. Grades Entertainment Private Limited/ the ‘Corporate Debtor’ under Section 61 of the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as ‘The Code’), being aggrieved by the Impugned Order dated 15/02/2022 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi Bench) in C.P. (IB) No. 953/ND/2020, wherein the Learned Adjudicating Authority has admitted the Section 9 Application filed by M/s. Paras Art Studio/ the ‘Operational Creditor’.

Succinctly put, the facts in brief are that M/s. Cox & Kings, (which is in liquidation), was given the contract to organise a mega event called Petrotech, 2019 held by the Ministry of Petroleum and Natural Gas, Government of India. M/s. Cox & Kings engaged M/s. Grades Entertainment Private Limited/the ‘Corporate Debtor’ which in term engaged M/s. Paras Art Studio/the ‘Operational Creditor’ to provide the designing and fabrication services and other assistance for the said event.

It is the case of the Appellant that they were engaged by M/s. Cox & Kings as their authorised agent only to release the payments to the various Vendors/Sub-Contractors appointed by M/s. Cox & Kings, for which the ‘Corporate Debtor’ was paid a fixed charge of Rs.20,00,000/-. Learned Counsel for the Appellant submitted that the ‘Corporate Debtor’ was instructed by M/s. Cox & Kings to submit a Performa Invoice on the lines of the Invoice dated 21/01/2019 raised by the ‘Operational Creditor’ for the consolidated estimated sum of Rs.5,00,00,000/- + GST, on 31/01/2019 and the purchase of the Order of the same account was issued by M/s. Cox & Kings to the ‘Corporate Debtor’ for the aforesaid estimated sum of payments to be released by the ‘Corporate Debtor’ to the Vendors/Sub-Contractors. The Learned Counsel strenuously contended that the Vendors/Sub-Contractors appointed by M/s. Cox & Kings included the ‘Operational Creditor’ who was providing services directly to M/s. Cox & Kings and their role was only of an accounting and payment mechanism to raise Invoices in the name of the ‘Corporate Debtor’ and therefore never incurred any ‘debt’, in terms of the provisions of Section 3(11) of the Code. Learned Counsel drew our attention to the purchase Order dated 15/01/2019 issued by M/s. Cox & Kings. Thereafter on 31/01/2019, M/s. Cox & Kings appointed the ‘Corporate Debtor’ as its authorised payment agent to receive and disburse the amounts, as per instructions, the ‘Corporate Debtor had released four payments.

Learned  Counsel  argued  that  the  ‘Operational  Creditor  is  a  direct service provider to M/s. Cox & Kings and also filed its claim with the IRP on 17/01/2020. It is also submitted that the ‘Corporate Debtor’ itself has filed their claim before the RP of M/s. Cox & Kings for an amount of Rs.2,85,00,000/- pertaining to the event Petrotech 2019 and it was during the course of discussion with IRP that the ‘Corporate Debtor’ came to know about the claim filed by the ‘Operational Creditor’. It is contended that the ‘Corporate Debtor’ is not a sister concern of M/s. Cox & Kings and both are independent Companies and therefore, there is no ‘debt’ payable by the ‘Corporate Debtor’. There was also a dispute which is raised about the liability of the claim raised by the ‘Operational Creditor’ and therefore this Application under Section 9 is not maintainable. It is also contended that M/s. Cox & Kings was a necessary party as the claim for the same amount has been made by the ‘Corporate Debtor’ and the first Respondent before the Liquidator of M/s. Cox & Kings.

The main point which falls for consideration in this Appeal is whether the Adjudicating Authority was justified in admitting the Application filed by the ‘Operational Creditor’ under Section 9 of the Code.

It is an admitted fact that the ‘Corporate Debtor’ was engaged by M/s. Cox & Kings for providing services for the event Petrotech 2019 and the ‘Corporate Debtor’ acted as an intermediary. In the meantime, CIRP Process was initiated against M/s. Cox & Kings vide Order dated 22/10/2019, pursuant to which, the ‘Corporate Debtor’ filed a Claim as an ‘Operational Creditor’ with the Liquidator of M/s. Cox & Kings. For better understanding of the role of the Appellant and the first Respondent, the Tax Invoice dated 21/01/2019 is reproduced as hereunder:

The aforenoted Tax Invoice shows that the payment was made to the account of the ‘Operational Creditor’ by the ‘Corporate Debtor’. The material on record evidences that the ‘Corporate Debtor’ deposited TDS of Rs.4,12,000/- which is the TDS on the entire amount of the Invoice of Rs.2,06,00,000/-. It is not disputed that the ‘Operational Creditor’ deposited the GST of Rs.37,08,000/- on the entire amount of the Invoice in favour of the ‘Corporate Debtor’ and the benefit of the said amount as input amount has been taken by the ‘Corporate Debtor’. A perusal of the Invoices evidences that the Tax Invoice was raised in favour of the ‘Corporate Debtor’ and not on M/s. Cox & Kings. It is significant to mention that the part payment was also made by the ‘Corporate Debtor’ and not by M/s. Cox & Kings. This Tribunal is of the considered view that the privity of contract is between the ‘Operational Creditor’ and the ‘Corporate Debtor’ and therefore the amount which is in default is ‘due and payable’. In so far as Pre-Existence of Dispute warranting rejection of Application of triggering of CIRP under Section 9 of the Code is concerned, a bare perusal of the material on record filed by the ‘Corporate Debtor’ does not evidence any dispute which is not spurious or illusory and requires investigation. Having regard to the evidence on record, we have no hesitation in holding that the Appellant has hired the services of the Respondent for executing the event and owes an obligation to pay for the same, thereby bringing it within the fold of ‘Operational Debt’ and therefore the first Respondent holds the status of an ‘Operational Creditor’ qua the Appellant. Having held so, we observe that there is no infirmity in the Order of the Adjudicating Authority in holding that there is an ‘Operational Debt’ in respect of the ‘default’ which is alleged and is therefore payable in law.

The finding is perfectly justified in the facts and circumstances of the case and therefore we are of the considered view that the Impugned Order does not suffer from any factual frailty. Hence, this Appeal fails and is dismissed accordingly. No Order as to costs.