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Judgment
ORDER
Balraj Joshi, Member (Technical):
This Court convened through hybrid mode.
This is a Company Petition filed under section 9 of the Insolvency and Bankruptcy Code, 2016 (the Code) by Jai Matadi Incorporation Private limited (Operational Creditor), seeking to initiate Corporate Insolvency Resolution Process (“CIRP”) against Dr. Paul’s Multi Speciality Clinic Private Limited (“Corporate Debtor”).
The Corporate Debtor is a public company incorporated on 06.04.2011. The authorized share capital of the company is ₹1,00,00,000/- and the paid-up share- capital of the company is ₹95,47,000/-.
The total amount claimed by the Operational Creditor is ₹1,62,05,256/-. The Demand notice under section 8 of the Code was issued by the Operational Creditor on 05.11.2019. Thereafter, the Operational Creditor issued a corrigendum dated 20.12.2019 to the same. Reply to the demand notice was issued by the Corporate Debtor on 13.11.2019.
11.5 Submissions on behalf of the Operational Creditor:
The case of the Operational Creditor is that the Corporate Debtor being engaged in the business of running multi-specialty clinics under the trade name of DR Paul's Multispecialty Clinics was in requirement of spaces in Delhi and NCR region. As such, the Operational Creditor and Corporate Debtor entered into a Franchisee Agreement1 dated 15.02.2013 for setting up of business of four (4) multispecialty Clinics of Corporate Debtor, in Delhi and NCR.
Subsequently, another Business Agreement2 dated 27.11.2014 was entered into by and between the parties, by which, the earlier Franchisee agreement dated 15.02.2013 stood superseded.
Subsequently, in January 2018, since the Operational Creditor was no longer desirous of continuing in the business anymore, a fresh memorandum of Understanding3 (MOU) dated 15.01.2018 was entered into by and between the parties whereby the Corporate Debtor agreed to take over the entire business of all four existing multi-speciality clinics by terminating of all earlier agreements between Operational Creditor and Corporate Debtor), i.e dated 15.02.2013 and 27.11.2014, as per the terms contained therein. According to the said MOU, the Corporate Debtor agreed to pay to the Operational Creditor a sum of ₹1.31 Crore within a period of one year from the date of MOU, towards the initial investment made by the Operational Creditor for the same along with interest as mentioned therein.
In acknowledgment of the said MOU, the Corporate Debtor had paid from time to time a sum of ₹20,03,044/- to the Operational Creditor till 20.03.2019 and thereafter the Corporate Debtor failed to pay the due amounts within the stipulated time frame. The last payment for a sum of ₹25,000/- was made on 20.03.2019.
Despite several reminders the Corporate Debtor failed to pay such sum to the Operational Creditor. As such the Operational Creditor issued a demand notice4 upon the Corporate Debtor dated 05.11.2019 by the registered post. Afterwards, a corrigendum5 dated 20 December 2019 was issued by the Operational Creditor upon the Corporate Debtor correcting errors regarding dates and particulars of the payments and calculation.
The Corporate Debtor issued a reply dated 13 November 2019 to the aforementioned notice dated 05 November 2019. The said letters dated 13 November 2019 and 27 November 2019 are annexed to the petition and collectively marked with letter “G”.
The total amount due from the Corporate Debtor to the Operational Creditor is ₹1,62,05,256/- out of which, a sum of ₹1,31,00,000/- is due as the principal amount and the interest thereon is 1% simple interest every month from 01 February 2018 to 30 April 2018 and thereafter 2% simple interest every month till 30 October 2019. No dispute exists between the parties herein in relation to the aforesaid debt.
6 Submissions on behalf of the Corporate Debtor:
The points of defence taken by the Corporate Debtor in its reply affidavit are summarized as follows:
The original demand notice dated 05 November 2019 is defective as admitted by the Operational Creditor and as such, the instant petition filed on the basis of such demand notice is not maintainable;
The Operational Creditor has filed criminal cases with respect to the same transaction. In the said criminal case, it was submitted by the Corporate Debtor that the actions of the Operational Creditor a particular transaction has been undermined by fraud then any claim thereunder has to be adjudicated before a Civil Court and not before any Tribunal.;
The operational creditor with respect to the same transaction has filed criminal cases, wherein it has been pleaded that the actions of the operational creditor have an element of criminal conspiracy amongst its board members along with cheating/ fraud. Since the said transaction has been underscored by fraud, any claim thereunder needs to be adjudicated before a Civil Court and not before this Adjudicating Authority;
The basis of the petitioner's claim is the agreement dated January 15, 2018. The said agreement is not executable as against the Corporate Debtor since the Operational Creditor has not fulfilled the obligations imposed on it thereunder. The Operational Creditor was under a binding obligation to first provide and facilitate the handing over of four outlets prior to receiving any money from the corporate debtor. However, no such action has been taken by the Operational Creditor. As such, the Corporate Debtor is under no obligation to make any payment till such handing over of the four outlets is effected by the Operational Creditor;
The claim of interest is illegal inasmuch as the rates are prohibited and in contravention to applicable law and more particularly, the provisions of Bengal Money Lenders Act, 1940;
The monies amounting to ₹20,03,044/- were paid in good faith and more so to help the Operational Creditor to effect payments of rents, taxes and electricity bills as also workers’ salaries which were pending. The said monies were part of the consideration which had been transferred in good faith with a clear understanding that the four units/outlets would be transferred immediately;
Almost two years have elapsed since the signing of this agreement and the Operational Creditor has failed to transfer the lease/ tenancy of the said four outlets to the Corporate Debtor. It has also failed and/or neglected to hand over physical possession and/or operational control of the said four units/outlets to the Corporate Debtor. The said agreement has reciprocal obligation and till the obligations of the Operational Creditor are satisfied as per the said agreement, no monies are payable to such Operational Creditor. In fact, the Operational Creditor is liable to return ₹20,03,044/- to the Corporate Debtor as the Operational Creditor failed to give effect to the said agreement within a period of one year which lapsed on February 15, 2019;
There is a pre-existing dispute between the parties in regards to the alleged debt. Various applications were filed in the Criminal Court by the Corporate Debtor as early as June 25, 2019 disputing the claim of the Operational Creditor. Further applications were filed before the Hon'ble High Court at Patna on October 24, 2019 disputing all the claims with regard to the agreement dated February 15, 2018. A copy of the said petition is annexed to the reply-affidavit and marked as Annexure "A". As such, the instant petition is liable to be dismissed.
The Account Statements as annexed to the said petition are not certified under the Banker's Books of Evidence Act and as such, are not admissible in evidence. Further, no proper certification has been given with regard to the electronic documents which have been used in the said petition and the same are not admissible in law as evidence.
7 Rejoinder on behalf of the Operational Creditor:
The Operational Creditor has denied the submissions made by the Corporate Debtor. Further, the Operational Creditor has stated that by the corrigendum dated 20 December 2019the Operational Creditor has amended its claim by reducing the amount which shows that the operational Creditor has come to this Ld. Tribunal with clean hand. The Operational Creditor has denied that agreement dated 15 January 2018 is not executable against the corporate debtor.
The Operational Creditor has further denied that the Operational Creditor is under any obligation to make payment for only a sum of Rs. 20,03,044/- to the Corporate Debtor.
The Operational Creditor has denied that the Operational Creditor was supposed to transfer any leasehold interest or tenancy prior to commencement of any payment. According to the operational Creditor, at no point of time the corporate debtor has demanded or asked for such transfer prior to the notice dated 5th November 2019.
The Operational Creditor has stated that the criminal case was filed for the separate cause of action. In terms of the agreement the payment was to be made in lieu of initial investment on infrastructure and security deposit made by the Operational Creditor.
The payment made by the corporate debtor as shown in the notice is an admission and acknowledgement of the agreement dated 15 February 2018 and part payment thereto.
The payment as stated in the petition was an admission and in part payment of the said agreement. The Operational Creditor has stated that in terms of the agreement the payment was to be made in lieu of initial investment on infrastructure and security deposit made by the Operational Creditor. Further, the agreement does not contain any clause for reciprocal obligation.
8 Supplementary Affidavit on behalf of the Operational Creditor:
The instant supplementary affidavit is prepared by virtue of leave granted by this Adjudicating Authority in its order dated 4th November 2020.
It is submitted that by virtue of Memorandum of Understanding (MOU) dated 15th January 2018, the Corporate Debtor had already taken over the operational charge of the units as specified in the said MOU dated 15th January 2018.
On 7th May 2018, the Operational Creditor had received a notice bearing reference No. LN/2018/101, demanding the pending rent and incidental charges thereto, from the Landlord of one clinic. In view of the said MOU dated 15 January 2018, the Operational Creditor had made over the said notice to the corporate debtor, having already taken over the operational charge of the units in terms of the said MOU.
It is further submitted that the Corporate debtor upon receiving the said demand notice dated 7thMay 2018, had duly replied by a letter dated 24th May 2018, a copy whereof is annexed hereto and marked with letter "B". The said reply itself contained and self-explanatory.
9 Reply to the Supplementary Affidavit:
The Corporate Debtor has denied that it had taken over the operational charge of the unit as specified in the Memorandum of Understanding (MOU) dated 15 January 2018.
The Corporate Debtor has further submitted that it had never received any notice dated 07 May 2018 and that the said notice was addressed to the Operational Creditor itself and not to the Corporate. As such the question of replying to the said notice dated 07 May 2018 does not arise.
It has also been submitted that after receiving the supplementary affidavit dated 24 November 2020, a FIR was lodged with the Dum Dum Police Station 39, Mandir Road, Gora Bazar, Sector – I, Dum Dum, Kolkata – 700028 regarding the letter dated 24 May 2018 annexed to the said supplementary affidavit since the said letter is a forged document.
It has further been submitted that the Operational Creditor has failed to obtain necessary permission from the landlord in terms of Paragraph 3 of the MOU dated 15 January 2018. As such, the said landlord has filed a suit being C.S. (O.S) No. 318 of 2021 against the Operational Creditor as well as the Corporate Debtor.
clause 6 of the MOU is clear that upon taking over of the units, the Corporate Debtor will pay to the Operational Creditor the amount as mentioned in the MOU. It is evident from the plaint that the landlord has not given any permission to the Operational Creditor to sublet the said units in favour of the Corporate Debtor.
The Operational Creditor has made a false statement in the rejoinder that the criminal case was filed for the separate cause of action. The criminal case has been filed by the Operational Creditor against the Corporate Debtor and its directors in respect of the MOU dated 15th January, 2018 and the same would be evident from the FIR. The said criminal case has been filed on frivolous allegations and some of the directors had to obtain anticipatory bail. The frivolous criminal cases have been filed against the Corporate Debtor and the directors of the Corporate Debtor and in order to show bonafide the Corporate Debtor had also made payment of a sum of Rs.21 lakhs.
10 Rejoinder to the Supplementary Affidavit:
The reply dated 26th July 2021 to the Supplementary Affidavit which has been filed after 8 months from the date of filing of the supplementary affidavit and is intended to be used as manufactured and afterthought. The Corporate Debtor has already foregone the right to use any reply to the supplementary affidavit, as is clearly evident from the order passed by this Adjudicating Authority dated 12th January 2021.
Be that as it may by virtue the order passed dated 22nd September 2021 in the instant matter this Adjudicating Authority gave the Corporate Debtor liberty to file a reply in the specific terms on the said order. The Operational Creditor has been granted a liberty to file a rejoinder to the said reply but being restricted only to the new documents which may have been disclosed in the reply to the supplementary affidavit.
It is denied that the corporate debtor has not received the notice dated 7th May 2018, as alleged or at all. The Corporate Debtor has proceeded in gross suppression of material facts and document while making the instant false assertion in the instant reply to the supplementary affidavit. The letter dated 7th May 2018 was received by the corporate debtor from the Operational Creditor in the fact and situation as already stated in the supplementary affidavit which is not repeated hereto, to avoid prolixity and repetition. However, letter dated 7th May 2018 received by the Operational Creditor was given to the corporate debtor, as it appears from the fact that Corporate Debtor upon receiving the same had replied thereto by issuing a reply dated 24th May 2018. The corporate debtor to avoid the payment of the dues of the Operational Creditor and to create and raise the cosmetic dispute before the Adjudicating Authority for the purpose of such avoidance has also proceeded to purportedly lodge a complaint before the Police and cause the lodgment of FIR and the Operational Creditor will deal with the said purported FIR canvassing the falsity and the purported conduct of Corporate Debtor in accordance with law at appropriate time and at the appropriate stage, before the appropriate authority.
The suit filed by the landlord against the Corporate Debtor and Operational Creditor has no bearing with/in the present proceeding which is relating to the claim on account nonpayment of consideration price for transfer of infrastructure and set up and all rights relating thereto which is clearly admitted by entering into agreement as detailed and substantiated in the instant proceeding being the C.P. (IB) /335(KB)/2020.
That the supplementary affidavit was received on 13th November 2020 by the Corporate Debtor and thereafter matter appeared on many occasion while Corporate Debtor had remained silent before the Adjudicating Authority relating to any of those allegation which are now trying to be banged on by the instant reply after almost a period of one year. In any event the scope of the proceeding being C.P. (IB) /335(KB)/2020 and the subject matter thereof has no bearing with the subject matter of the suit proceeding in any manner whatsoever.
The said suit in any event has been filed in District Court of Saket at New Delhi which being separate issue will be separately taken care of in accordance with law at the appropriate stage and time.
11 Analysis and Findings:
11 Analysis and Findings:
Heard the Ld. Counsel on behalf of the Operational Creditor and the Ld. Counsel on behalf of the Corporate Debtor and perused the record. Both parties have filed written notes of submission after the hearing on 03.05.2023.
The Corporate Debtor has contended that there are pre-existing disputes between the parties herein and the Corporate Debtor, in its reply dated 13.11.2019 to the demand notice had highlighted the same. According to the Corporate Debtor, the Operational Creditor was to delegate, handover and transfer all the rights to the premises and obtain necessary permission from the Landlord/ Owner in favour of the Corporate Debtor. The same is mentioned in clause 3 on pages 61 and 62 of the MOU signed between the parties on 15.01.2018. It is further seen from clause 6 of the same MOU that only subsequent to the takeover of the aforementioned units by the Corporate Debtor, the initial investment made by the Operational Creditor on infrastructure and security deposit made to the landlord amounting to Rs. 1.31 Crore would have to be returned to the Operational Creditor.
The Corporate Debtor, in its reply dated 13.11.2019 to the demand notice has further mentioned that the Operational Creditor, on 20.05.2019, had filed criminal complaint against the Corporate Debtor and its directors prior to the service on the demand notice dated 05.11.2019. The Corporate Debtor in turn had filed Cr. Misc. No. 80357 of 2019 before the Hon’ble High Court at Patna on 24.10.2019.
The Operational Creditor, vide supplementary affidavit dated 24.11.2020, has claimed that the Corporate Debtor has taken over of the aforesaid units and in order to support this claim, the Operational Creditor has produced two letters, one is a legal notice sent on behalf of the landlord of one of the units to the Operational Creditor demanding the pending rent along with other charges and the second being a letter dated 24.05.2018 purportedly issued by the Corporate Debtor admitting to the same. However, the Corporate Debtor, claiming the said letter dated 24.11.2018 to be a forged document, had lodged a FIR with the Dum Dum Police Station in Kolkata on 05.12.2020.
The question of sanguinity of the said letter can only be determined in a Court of Law having the jurisdiction to lead evidence and this Adjudicating Authority, with its powers under the Code, is unable to adjudicate upon the same. However, it is clear that the disputes regarding the taking over of the units by the Corporate Debtor and the subsequent release of the investment made by the Operational Creditor came into existence before the demand notice dated 05.11.2019 was issued by the Operational Creditor. While considering a petition filed under section 9 of the Code, the Adjudicating Authority needs to only be satisfied that there are pre-existing disputes between the parties and it is not needed to delve into the merits of such disputes.
In regards to the same, we would like to refer to the decision of the Hon’ble Supreme Court in the matter of Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited6wherein it was held that:
“The scheme of Section 7 stands in contrast with the scheme Under Section9where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in Sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is pre-existing - i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.” (Para 29) The Apex Court, in Mobilox Innovations Private Limited(Supra) further held that:
“…Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application.” (Para 40)
Also, in M/s S.S. Engineers vs. Hindustan Petroleum Corporation Ltd. &Ors7, the Hon’ble Supreme Court again held that:
“15.In our considered view, the Adjudicating Authority (NCLT) committed a grave error of law by admitting the application of the Operational Creditor, even though there was a pre-existing dispute as noted by the Adjudicating Authority.
16.When examining an application under Section 9 of the IBC, the Adjudicating Authority would have to examine (i) whether there was an operational debt exceeding Rupees 1,00,000/( Rupees One Lac); (ii) whether the evidence furnished with the application showed that debt exceeding Rupees one lac was due and payable and had not till then been paid; and (ii) whether there was existence of any dispute between the parties or the record of pendency of a suit or arbitration proceedings filed before the receipt of demand notice in relation to such dispute. If any one of the aforesaid conditions was not fulfilled, the application of the Operational Creditor would have to be rejected”
In the present matter, it is clear to us that there are pre-existing disputes between the parties herein. And the said disputes are not mere feeble arguments without basis.
It is also pertinent to note that no affidavit under section 9(3)(b) of the Code has been filed by the Operational Creditor indicating that the Operational Creditor had notice of the said pre-existing disputes.
In light of the aforementioned judgment, the facts and circumstances of the matter, we are of the considered opinion that this petition under section 9 of the Code is liable to be rejected by the Adjudicating Authority.
Consequently, C.P.(IB) No. 335/KB/2020 shall stand rejected. The operational creditor shall be however at liberty to seek other remedies that may be available to it under any other law.
The registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.
Certified Copy of this order may be issues, if applied for, upon compliance of all requisite formalities.