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Judgment
Per: Rajeswara Rao Vittanala, Member (J)
C.P.(IB) No.153/BB/2017 is filed by M/s. Dimension Data India Private Limited('Petitioner/Operational Creditor') U/s 9 of the IBC, 2016 R/w 6 of the I&B (Application to Adjudicating Authority) Rules, 2016, by inter alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of M/s.NxtGen Datacenter and Cloud Technologies Private Limited ('Respondent/Corporate Debtor') that it has committed a default for total outstanding amount of Rs.3,89,45,190/- (Rs.3,24,23,489/- + Rs.65,21,701/- as interest calculated on Rs.3,24,23,489/- due under the Cloud Service Agreement @ 18% p.a. till 31.10.2017.
Brief facts of the case, as mentioned in the Company Petition, are as follows:
M/s.Dimension Data India Pvt. Ltd. (herein after referred to as 'Petitioner/Operational Creditor') is a Private Limited Company incorporated on 13.12.1994 under the provisions of Companies Act, 1956 with CIN: U72200MH1994PTC083713 and having its registered office at Plot No.1701-1704, B-Wing, One BKC, G-Block, Bandra Kurla Complex, Bandra(East), Mumbai-400051.
M/s.NxtGen Datacenter and Cloud Technologies Private Limited (herein after referred to as 'Respondent/Corporate Debtor') is a Private Limited Company incorporated on 21.03.2012, under the provisions of Companies Act, 1956 with CIN: U72200KA2012PTC063135 and having its registered office at Plot No.72 & 73, EPIP Area, Hoodi Village, K.R. Puram, Hobli, Whitefield, and Bengaluru-560066. Its Authorised Share Capital is Rs.10,00,00,000/- (Rupees Ten Crores Only) and Paid-up Share Capital of the Company is Rs.6,38,10,000/- (Rupees Six Crores Thirty Eight Lakhs Ten Thousand Only). It is inter alia engaged in the business of cloud computing, cloud technologies, building and managing datacentres and related information technology services in India, the Middle East and Singapore.
It is stated that there is an agreement known as 'Service Provider Compute-As A service; Terms of Service Agreement was entered into by Operational Creditor with the Corporate Debtor on 29,04,2016 for providing services as set out under the Service Provider Compute-As A service; Terms of Service Agreement and for the purposes of moving customers on Dimension Data's cloud server to NxtGen's cloud server.
In pursuance to the said services rendered under the Service Provider Compute-As A service; Terms of Service Agreement, the Operational Creditor has issued invoices on various dated 31.08.2016, 15.09.2016, 15.10.2016, 15.11.2016, 15.12.2016, 16.01.2017, 31.01.2017, 15.02.2017, 15.03.2017, 17.04.2017 and 01.11.2017 to the Corporate Debtor by claiming a sum of Rs.3,24,23,489/- as per the terms of the Service Provider Compute-As A service; Terms of Service Agreement. However, Corporate Debtor has defaulted to make payment of the above sum.
It is stated that the debt has become under the Sale of Goods Act, 1930 and the Indian Contract Act, 1872, as well as the Cloud Services Agreement entered into by the Operational Creditor with Corporate Debtor for providing services as set out under the Agreement and for the purposes of moving customers on Operational Creditor's Cloud Server to Corporate Debtor's Cloud Server. The Cloud Service Agreement set out two categories of work orders: (a) An initial order, which was valid for a non-cancellable fixed period of 4 months and continues to be valid on same terms, until terminated, subject to written notice of 90 days by Corporate Debtor, placed upon Operational Creditor; and (b) Subsequent Orders, which were orders to be placed by Corporate Debtor after the Initial Order.
Clause 5 of the Service Provider Compute-As A service; Terms of Service Agreement contemplated the following types of charges to be paid by Corporate Debtor to Operational Creditor and the mechanism for payment as well:
a. Fixed fees of Rs.24 Lakhs shall be payable by NxtGen each month in advance for the Initial Order. The fixed fee for any Subsequent Order would be described in the applicable subsequent order. Invoices would be raised monthly in advance and would be paid by Corporate Debtor within 10 days of submission of invoice by Operational Creditor.
b. Monthly variable fees amounting to 45% of the revenue (out of the initial order and or any additional subsequent orders given by Corporate Debtor to Operational Creditor) earned by Corporate Debtor for the month. The invoices in this regard would be raised by Operational Creditor within 15 days of the end of the month and the same would be payable by service provider within 10 days of submission of invoices by Operational Creditor.
It is stated that during November 2016-February 2017, e-mail communications were exchanged between Operational Creditor and Corporate Debtor, wherein, Corporate Debtor admits to debts owed to Operational Creditor. Subsequently, post-dated cheques were issued on 24.02.2017 by Corporate Debtor to the Operational Creditor towards part satisfaction of debts owed.
On failure to honour cheques issued, the Operational Creditor has filed two separate Criminal Complaints, being SS/1145/2017 and SS/1143/2017, both filed under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against Corporate Debtor and its Directors, before the Ld. Additional Chief Metropolitan Magistrate at Esplanade, Mumbai. The Ld. Additional Chief Metropolitan Magistrate vide its order dated 06.11.2017 issued summons to the Directors of Corporate Debtor.
In the circumstances, a statutory demand notice dated 13th November, 2017 Under Rule 5 of I & B(AAA) Rules, 2016 of Code was issued to the Respondent by inter alia demanding to pay outstanding amount of Rs.3,89,45,190/- (Rs.3,24,23,489/- + Rs.65,21,701/- as interest calculated on Rs.3,24,23,489/- within 10 days from the date of receipt of notice failing which they would initiate proceedings under the Code. And it was responded by reply dated 25th November, 2017 by denying the outstanding amount on untenable grounds. Hence, this application.
The Respondent has opposed the Company petition firstly by filing IA No. 18 of 2018, U/s 8 of the Arbitration and Conciliation Act, 1996 by seeking to refer the matter to arbitration as per clause 11(b) of the Cloud Agreement and subsequently filed statement of objections dated 09.03.2018 and Additional Affidavit dated 27th September 2018. The following are various contentions raised by the Respondents as per the above statement of objections and Addl. Affidavit:
In the light of the Arbitration Clause in the Cloud Agreement, the disputes between the parties ought to be referred to arbitration in terms of the Cloud Agreement and separate application has also filed U/S 8 of the Arbitration and Conciliation Act, 1996.
It is denied that Dimension Data India Private Limited is an "Operational Creditor" and that Nxtgen Data centre and Cloud Technologies Pvt. Ltd, is a "Corporate Debtor" within the meaning of the IBC. Therefore the very premise on which the Application has been field in false, and mischievous, and as such the application merits to be dismissed.
DDIPL has suppressed material facts and information in the application. DDIPL has suppressed the fact that the Nxtgen has seriously disputed that it is liable to make any payments to the DDIPL. Several communications have been addressed by Nxtgen in this regard wherein Nxtgen has seriously disputed the alleged claims of DDIPL. The contemporaneous records and communications would clearly indicate the existence of a dispute between the parties pertaining to the rights and obligations of the parties under the Cloud Agreement, which can only be adjudicated after a detailed trial before a duly constituted arbitral Tribunal. The application is misconceived in law and on facts of the case.
M/s.Nxtgen is Company incorporated under the provisions of the Companies Act, 1956, inter alia engaged in the business of cloud computing, cloud technologies, building and managing datacentres and related information technology services in India, the Middle East and Singapore. Nxtgen enjoys an enviable reputation in the market for the quality of its services and has built immense goodwill over the years.
It is submitted that without prejudice that the Cloud Agreement had lapsed and terminated by efflux of time four months from the date of the Service Provider Compute-As A service; Terms of Service Agreement. No payments are due beyond August 2016, after taking into account the four months validity of the Cloud Services Agreement. Arguendo, assuming for the sake of argument that even the 90 days termination period has to be taken into account, the Cloud Agreement expired by efflux of time as on December 2016. DDIPL failed to provide proper service even for the period when the Cloud Agreement was subsisting and even on this ground is not entitled to be paid any monies pursuant to the Cloud Agreement. Indeed, the very fact that DDIPL has continued to arbitrarily raise invoices on the Nxtgen, despite the expiry of the Cloud Agreement, only shows the mala fides of the DDIPL to make illegal gains. There is no rationale or basis for the DDIPL to continuously raise invoices under the Cloud Agreement. Nxtgen has also disputed the arbitrary billing of the DDIPL on several occasions. Nxtgen pointed out that there were disputes on the billing as per the initial order and variable billing under the Cloud Agreement. The alleged entitlements of DDIPL is therefore seriously disputed by Nxtgen and such questions cannot be decided summarily before this Tribunal. It requires detailed and meticulous evidence and documents to be led by both parties and the veracity of the claims can be tested only after an opportunity to cross examine the relevant witnesses. Therefore, there are serious disputes involving the very manner in which DDIPL has sought to fasten the liability on Nxtgen, all of which cannot be adjudicated in IBC Proceedings.
(6)Since DDIPL persisted with its threats of keeping the cloud services suspended unless payments were made and considering that this would have meant severe and adverse consequences for Nxtgen and its client sand expose Nxtgen to possible claims from its own clients for disruption of essential services; Nxtgen was thus coerced into handling over the following cheques to DDIPL (a) Cheque No.10286863 dated 04.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000 (b) Cheque No.10286864 dated 11.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000 (c) Cheque No.10286865 dated 18.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000 (d) Cheque No.10286866 dated 25.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000, even though such payments were not due to the DDIPL. As contemporaneous correspondence would show, Nxtgen handed over the said Cheques under threat and coercion, only with a view to ensure that the customers do not get affected as any further disruption in cloud services would have a severe effect on the business operations of the clients and that would further expose the Nxtgen to potential claims for damages from the customers. Nxtgen was servicing important clients such as ECI that performed functions of great public importance, and if there was any interruption in their services, it would have had a catastrophic impact on the recent election results that were conducted in Uttar Pradesh and others states. Nxtgen was left with no choice but to hand over the said Cheques since DDIPL and its officials made it very clear that they would take law into their owns hands if the alleged payments are not done. This was nothing but blackmail and coercion for which Nxtgen reserves its rights and remedies in law to take appropriate action against the DDIPL and its directors and officers. Therefore, as on the date of the said cheques, there was no debt outstanding in favour of the DDIPL. The reliance on these cheques to show any debt was due and outstanding is totally false and baseless. Nxtgen has recorded its objections with regard to these aspects as early as March 2017 itself. The fact that the DDIPL has chosen to initiate the proceedings after a delay of several months, only goes to show that the DDIPL is not seriously contesting its so-called claims under the Service Provider Compute-As A service; Terms of Service Agreement.
(7)Thereafter, at Nxtgen's request, Cheque No.286863 dated 04.03.2017 was returned and a sum of INR 2,00,00,000/- was transferred via RTGS transfer to DDIPL. Over the above the said INR 2,00,00,000/- no other amount was due and payable to DDIPL. Since no payments were due to DDIPL at all and apprehending that DDIPL would seek to deposit the two cheques (i.e cheque No.10286864 dated 11.03.2017 and Cheque No.10286866 dated 25.03.2017) to unjustly enrich itself, the Nxtgen gave instructions to stop payments on the above cheques. As pointed out above, the acts of DDIPL in unilaterally disconnecting the cloud services caused severe prejudice and loss to Nxtgen, and after considering the same, there is nothing payable by Nxtgen to DDIPL. On the contrary, it is DDIPL that is liable to make payments to Nxtgen.
(8)On 07.04.2017, DDIPL issued two false, frivolous and baseless notices U/S 138 of the Negotiable Instruments Act, 1881, alleging dishonour of Cheque No.10286864 dated 11.03.2017 and cheque No.10286866 dated 25.03.2017. Thereafter, Nxtgen issued response to both of the DDIPL's notices dated 07.04.2017 through its advocates on 17.04.2017, denying that the cheques were issued towards the discharge of any debt and clarified that the same were issued under coercion and threat of disruption of services by the DDIPL.
(9)DDIPL responded to the Nxtgen's notice dated 03.05.2017, agreeing to explore the possibility of settlement. Thereafter, various correspondences were exchanged between the parties to decide the venue and particulars of settlement. Without prejudice settlement talks failed solely on account on the malicious, inflated and arbitrary demand of the DDIPL. Having realised that the Nxtgen would not succumb to the arbitrary and unconscionable demands of the DDIPL, after a delay of several months, DDIPL issued the Demand Notice to further to its illegal and mala fide intentions of extorting monies from Nxtgen.
(10)In fact, it has suffered losses at least to the extent of INR 10 Crores and reserved its right to sue DDIPL, in accordance with law, including but not limited to agitating its grievance before the duly constituted Arbitral Tribunal. DDIPL has selectively produced documents in order to give a false impression as if the amounts have been admitted by Nxtgen. DDIPL has failed to record the fact that each of the said communications (to the extent admitted as regards the receipt of the documents) have been responded by Nxtgen in various communications pointing out the true purport in each of the said communications.
(11)DDIPL has further failed to disclose the pendency of cheque bounces cases viz. SS Nos.1143 and 1145/2017 filed by before the Magistrate Court of Mumbai, in its Affidavit under Section 9(3) (b) of the IBC for sums allegedly due under the APA. The cheque bounce cases filed before the Magistrate Court at Mumbai clearly constitute a dispute in connection with the subject matter of these proceedings, which ought to have been disclosed in its affidavit as per the mandate Under Section 9(3) (b) of the IBC. This clearly goes on to show the mala fides of the DDIPL. In the light of the pending proceedings before the Magistrate Court, that were admittedly initiated prior to the present proceedings, the application is not at all maintainable under the IBC.
(12)The jurisdiction before the Tribunal cannot be converted by litigants such as DDIPL to coerce Nxtgen into making payments despite their own breaches of the Cloud Agreement and mala fide conduct. Nxtgen is one of the leading companies in its filed and has enjoyed tremendous growth over the past few years. Nxtgen has been recognized with the CIO Choice 2016 Honor & Recognition title in the hyper convergence category at the exclusive Red Carpet Night, the only independent ICT vendor Recognition platform – Voice of CIOs in India. NxtGen is among the six who have been certified in the world and first in India. This certification covers the infrastructure and operations required for running SAP on its infrastructure including its cloud services. Nxtgen is one of the 16 worldwide, working with Intel on cloud technologies. NxtGen pioneered cloud architecture, dramatically impacting storage & processor performance. NxtGen has been certified by “Great Place of Work”. NxtGen employs more than 250 employees and operates business in excess of INR 106 Crores. They have equity support from Intel Capital and International Finance Corporation (the World Bank Group). They partnered with the OEM such as VMWare, Openstack, Dell, HPE, Intel, Arista, Mellanox, Hitachi, Commvault, Zerto etc. Therefore, any adverse orders of this Tribunal would severely prejudice NxtGen.
(13)Nxtgen is on the path of being a pioneer in its field and possesses immense potential, manpower and resources to tap into this market. The management team of Nxtgen includes several top persons who have had significant experience in this industry. The management team, has ensured that proper guidance and direction is given to Nxtgen so as to shape its path of growth. It is stated that any adverse orders from this Tribunal on the basis of a false and baseless petition filed by Dimension Data would cause immense prejudice and hardship to Nxtgen.
(14)Nxtgen has various firm contracts and many future projects for FY 2019 and is currently servicing such prestigious and important project and if any adverse order is passed in the present proceedings it would prejudice not only Nxtgen but also important client and project including that of the Government of India, therefore, there is a larger public interest involved and the ability of Nxtgen to render full and proper service to such important client and project should not be hampered.
It is stated that the Financial Statements of Nxtgen would also clearly show its excellent financial health. The provisional revenue for FY 2017-18 is Rs.118 Crores with the earnings before interest tax depreciation and amortization of RS.13 crores. The revenue target for FY 2018-19 is Rs.201 Crores with the EBITDA of Rs.59 Crores. The average monthly recurring revenue is RS.12 Crores as against the recurring expense of RS.7 Crores. The financial Statements also show that the revenues of NxtGen has substantially increased over the years. Nxtgen also has a health cash balance as well as current assets enabling it to meet any liability from its creditors. That apart, it is submitted without prejudice, from the financials and business prospects of Nxtgen, it is evidence that Nxtgen would be in a position to obtain large sums of money to repay any creditor at a very short notice. Therefore, the so called claims of DDIPL amounting to INR 3,89,45,190/- as claimed in the Petition is merely a fragment of the cash and current assets of Nxtgen.
The case is listed for admission on various dates viz. 13.12.2017, 20.12.2017, 03.01.2018, 30.01.2018, 16.02.2018, 09.03.2018, 27.03.2018, 10.04.2018, 29.05.2019, 14.06.2018, 25.07.2018, 20.08.2018, 10.09.2018, 27.09.2018, 24.10.2018, 29.11.2018, 21.12.2018, 24.01.2019, 21.02.2019, 15.03.2019, 09.04.2019, 26.04.2019, & 04.06.2019, and it was adjourned on these dates at the request of parties on one ground and the other. The parties have kept the matter pending on pretext of settlement of outstanding and Respondent, though apprehending that admission of the case would have devastating effect on the Company, it has failed to avail the opportunity given by the Adjudicating Authority to settle the issue. As case is pending since December, 2017. It has only paid part payment for Rs.1,37,82,676/ during pendency of the case. Therefore, there is no other alternative for the Adjudicating Authority to decide the case as per merits
Heard Shri Dore Raj, learned Counsel for the Petitioner and Shri V.Srinivasa Raghavan, learned Senior Counsel for the Respondent. We have carefully perused the pleadings of the parties and also the extant provisions of the Code and the law on the issue
Shri Dore Raj, learned Counsel for Petitioner, while pointing out various averments made in the petition, has also filed Written arguments dated 14.06.2019, by inter alia contending as follows:
1)The escalation of the matter post suspension of services due to failure to pay long overdue amount and consequent agreement by Corporate Debtor to pay Operational Creditor for an amount of Rs.8 Crores, but Corporate Debtor failed to honour the payment and consequently the services were disconnected. Till suspension of Services on 23rd February, 2017, the Corporate Debtor only paid Rs.41 lakhs as against the admitted and non-disputed amount of more than Rs.4 crores.
2)So far as the Contentions of the Respondent that dispute can be resolved through Arbitration, it is stated that there are no dispute at all and the debt is admitted and Insolvency cannot be initiated by the Arbitration. They are relying upon the following judgments: - Harayana Telecom Ltd. V/s. Sterlite Industries (India) Limited 1993(3) SCR 861 - Hewlett Packard India Limited V/s. BPL NeT Com Limited (2002) Kar Comp. Cases 575.
3)The Corporate Debtor, who denied as to any claim of the Operational Creditor, has voluntarily filed a Memo dated 10.04.2018 in the open Court by submitting a DD bearing No.349797 dated 26.03.2018 for an amount of Rs.1,37,82,676/- in favour the Operational Creditor admitting that the said amount is shown in the books of Corporate Debtor as payable to Operational Creditor. This itself proves that the claim of the Operational Creditor is bona fide and the corporate debtor had a liability to pay the debt to the Operational Creditor, which was defaulted by the Corporate Debtor until it filed the memo, Thus, makes it absolutely clear that the alleged dispute is nothing but a spurious defense, which is mere bluster.
4)The Hon'ble Apex Court in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited, has inter alia held that 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 - debts, they have to go to Section 3(11), which is turn tells them that a debt means a liability of obligation in respect of a claim and for the meaning of - claim, they 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 Lakhs or more (Section 4). The Apex Court holds that while determining "existence of a dispute", all that the NCLT is to see is whether there is "a plausible contention which requires further investigation and that "dispute", is not a patently feeble legal argument or an assertion of fact unsupported by evidence". While opining that "a spurious defense which is mere bluster" should be rejected, the Supreme Court adds a word of caution - while determining whether dispute exists or not, the NCLT is not required to satisfy itself that the defense is likely to succeed or to examine the merits of the dispute. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the application of an operational Creditor must be rejected by the NCLT. In the current matter it is evidence that the Corporate Debtor is only raising spurious defense is mere bluster as the Corporate Debtor made payments to the Operational Creditor.
5)He has also relief upon the Hon'ble Apex Court Judgement in Swiss Ribbons Private Limited and Anr. V/s. Union of India & others.
6)As far as the "Disputes" are concerned, the Operational Creditor states that the Corporate Debtor has admitted the debts and Operational Creditor produces proof of the same. Nevertheless the dispute raised by the Corporate Debtor is not genuine and is raised with mala fide intention to stall the insolvency resolution Process. The dispute under Section 8 and 9 of the IBC would mean any proceedings initiated or pending before any consumer Court, Tribunal, Labour Court, Mediation or Conciliation including action taken by the Corporate Debtor under any act or law such as replying to a notice under Section 80 of the Code of the Civil Procedure 1908, or an action under Section 59 of the Sale of Goods Act, 1930 or an action regarding quality of Goods provided by an Operational Creditor. The dispute should be genuine dispute not one that was raised with mala fides to stall the Insolvency Resolution Process. Section 5(6) of IBC defines "dispute" as
"...(6) 'dispute' includes suit of arbitration proceedings relating to
- (a) The existence of amount of debt; - (b) The quality of goods or service and - (c) The breach of representation and warranty
7)In the instant case, the debt is admitted and there is no dispute as alleged by the Corporate Debtor. Further as per the Code, the Corporate Debtor has not filed any suit or Arbitration proceedings before the demand notice was issued. The dispute raised by the Corporate Debtor in its reply notice dated 25th November, 2017 is not genuine and it is only with mala fide intention to stall the proceedings of the Insolvency Resolution Process.
8)It is submitted that the Operational Creditor has given services under the Service Provider Compute-As A service; Terms of Service Agreement to the Corporate Debtor against the same invoices were raised and the same is not disputed by the Corporate Debtor. The Operational Creditor had provided services under the Service Provider Compute-As A service; Terms of Service Agreement to the Corporate Debtor, and against which invoices were raised, Corporate Debtor has failed to make the admitted payments thus the debts have become due. Thus, 'debt' is created within the meaning of Section 3(11) of the Code. Further as per Section 5(20) of the Code, the Operational Creditor is entitled to a claim created with respect to services provided under the Service Provider Compute-As A service; Terms of Service Agreement thus becoming an Operational Creditor and NxtGen Data Centre and Cloud Technologies Private Limited fairly and squarely failing within the definition of Section 3(8) of the Code becomes the Corporate Debtor.
Shri V.Srinivasa Raghavan, learned Senior Counsel for the Respondent, while pointing out various averments made in the their statement of objections, as briefly stated supra, has also filed Written Arguments dated 14.06.2019 by inter alia contending are as follows:
1)In order to initiate the CIRP, under Section 9 of the IBC, the Apex Court has very clearly set down in Mobilox Innovations Private Limited Vs. Kirusa Software Pvt. Ltd. Reported as (2018) 1 SCC 353 and various judgments thereafter, including Transmission Corporation of Andhra Pradesh Limited Vs. Equipment Conductors and Cables Limited, reported as (2019) 1 Comp. L.J. 74 (SC) that an application under Section 9 of the IBC, cannot be allowed if the Operational Creditor fails to first prove the debt that is payable by the Corporate Debtor.
2)In the event, that the Corporate Debtor is in position to show the existence of a dispute prior to the initiation of the IBC proceedings then an application under Section 9 of the IBC will not be maintainable. The material on record would show that there was in fact an existence of a dispute much prior to the issuance of Form 3 by DDIPL. The Respondent has paid an amount of Rs.1,37,82,676/- to DDIPL vide a Memo dated 10.04.2018, as per the amount shown in the books of NxtGen as payable to DDIPL, without taking into account the counter claim for damages the NxtGen has against DDIPL on account of illegal actions of DDIPL in disconnecting the cloud services and if such damages are taken into account, in fact nothing will be payable on the contrary, NxtGen would have to recover sums from DDIPL. The Financial Statement of Corporate Debtor clearly shows that its excellent financial health and the provisional revenue for FY 2017-18 is Rs.118 Crores with the earning before the interest tax depreciation and amortization("EBITDA") of Rs.13 Crores. The revenue target for FY 2018-19 is Rs.201 Crores with the EBITDA of Rs.59 Crores. The average monthly recurring revenue of Nxtgen is Rs.14 Crores.
M/s.Nxtgen is a solvent Company and is capable of discharging its liabilities. Nxtgen is running the process to raise US$200mn for future expansion for setting up Data Center in 14 cities in India. It is stated that with support from Intel, Nxtgen is working on KNL Platform offering resources for running AI workloads, parallel it is also booking to work with NVIDIA to launch NVIDIA GPU accelerated cloud aspiring to become one of the leading infrastructure provider in the Country. Presently, Nxtgen's total asset value per market assessment is about of Rs.645 Crores. From the financial statements it is evident that the fixed assets are as of 31.03.2017 are about 1,74,70,00,000 lakhs and the cash equivalence itself is about INR 5,30,00,000 this is far in excess of the alleged claims of DDIPL.
In order to initiate proceedings U/s 9 of the Code, the first thing to do by Operational Creditor is to deliver a demand notice, occurrence of default, of un paid Operational debt a copy of invoice demoing payment of the amount involved in the default to the Corporate in a prescribed form and manner, granting 10 days' time to the Corporate Debtor either to pay outstanding amount or to bring to notice of existence of dispute. On failure to pay outstanding amount or to raise existing dispute, an application/Petition can be filed U/s 9 of the Code in a prescribed form by enclosing the requisite documents. And thereafter, the Adjudicating Authority by an order, can admit the case, if the application is complete, there is no payment of operational debt, notice is delivered and no dispute raised etc.
In the instant case, the application/petition is filed in accordance with law, demand notice is issued and a Certificate from the Bank of Operational Creditor is produced certifying the outstanding amount was not received. So far as the dispute as raised by the Respondent is concerned, admittedly, the Respondent has issued four cheques to DDIPL viz. (a) Cheque No.10286863 dated 04.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000 (b) Cheque No.10286864 dated 11.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000 (c) Cheque No.10286865 dated 18.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000 (d) Cheque No.10286866 dated 25.03.2017 drawn on Federal Bank for a sum of INR 2,00,00,000. The Petitioner has issued a Statutory Legal Notice dated 07.04.2017, under Section 138 of the Negotiable Instruments Act, 1881, for failure the honour cheque No.286866 dated 25.03.2017. The instant Petition is filed in accordance with law and also suggested a qualified IP namely Shri Srinivas Thatikonda, is named as IRP with Registration No. IBBI/IPA-002/IP-N00631-2018-19/11886, who has also filed Form No.2 dated 23.07.2019. Therefore, the IRP is prima facie eligible to be appointed as IRP, as he is not facing any disciplinary proceedings. Hence, we are of the considered opinion that it is a fit case to admit and appoint said Insolvency Professional as IRP.
In pursuant to the statutory Demand notice, under the Code, dated 13.11.2017 issued by the Petitioner, the Respondent has issued a reply dated 25.11.2017, by inter alia contending, that the Corporate Debtor was coerced into handing over the cheques in question even though there is no due to the petitioner. It is also relevant to point out here while the cheques in question were given under coercion, has again made part payment as stated supra. Admittedly, the cheques in question were dishonoured at the instance of Respondent to stop payment. The other contention that the Petitioner has filed cases U/s 138 of Negotiable Instrument Act and thus it is dispute and the same was not disclosed by the Petitioner in the instant petition is not tenable and liable to be rejected. It is the petitioner, who has filed the cases and not by the Respondent to contend it as dispute. Therefore, the defence made by the Respondent is without any basis and the same is not tenable.
The contention of the Respondent that it has made payment, as per its Books of Accounts, during the pendency of case, and thus no amounts remains to be paid is not tenable since the petitioner has established for total default of Rs. 389,45,190/. The other contention that the Respondent is financially in sound position so as to pay its debts and thus CIRP cannot be initiated cannot be accepted since admission or otherwise of the application depends on fulfilling the requisite conditions as mentioned U/s 8 & 9 of Code and the law on the issue as detailed supra. It is also on record that another C.P(IB) No 120/BB/2018 is filed, by M/s.Dimension Data India Private Limited against Corporate Debtor claiming Rs.10,89,10,293/- and the same is also pending and the Respondent has raised similar contentions.
In view of the above facts and circumstances of the case, and by exercising powers conferred on this Adjudicating Authority, U/s 9(5)(i) and other extant provisions of the IBC, 2016, the following orders are passed:
CP(IB)No.153/BB/2017 is hereby admitted by initiating Corporate Insolvency Resolution Process (CIRP) in respect of M/s.Nxtgen DataCenter and Cloud Technologies Pvt. Ltd, Corporate Debtor;
We hereby appointed Shri Srinivas Thatikonda, Registration No: IBBI/IPA-002/IP-N00631-2018-19/11886, as Interim Resolution Professional, in respect of the Corporate Debtor to carry on the functions as per provisions of Code and various rules issued by IBBI from time to time.
The following moratorium is declared prohibiting all of the following, namely:
a. the institution of suits or continuation of pending suits or proceedings against the 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. the supply of essential goods and services to the Corporate Debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period;
f. the provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government
g. The order of moratorium shall have effect from the date of such order till the completion of the Corporate Insolvency Resolution Process;
The IRP should follow all extant provisions of IBC, 2016 and the rules including fees rules as framed by IBBI. The IRP is hereby directed to file progress reports to the Tribunal from time to time.
The Board of Directors and all the staff of the Corporate Debtor are hereby directed to extend full co-operation to the IRP, in carrying out her functions as such, under the Code and Rules made by IBBI.
Post the case for report of the IRP on 26.08.2019