One 97 Communication Ltd. vs M/s. Goetc Pvt. Ltd.

The OC is engaged in digital marketing and value-added telecom services, operating platforms such as Paytm for advertising and promotional campaigns. The CD, engaged in professional car cleaning services, had approached the OC for advertising and campaigning its services through Paytm's platform.

Pursuant to negotiations, the parties had entered into three Purchase Orders - the first dated 03.01.2023 and second and third both dated 25.03.2023, which defined the scope, deliverables, and commercial terms. However, the third Purchase Order was not acted upon based on CD's instructions. The OC has rendered services including banner ads, scratch cards, and performance-based marketing with agreed milestones of clicks and scratches demised under the Purchase Orders. Accordingly, six invoices were raised for the services rendered during the period January to June 2023.

The CD availed and benefited from the said services without raising any dispute during the subsistence of the campaign or immediately thereafter. The OC achieved 6,32,492 clicks and 1,08,01,670 scratch cards, exceeding the agreed milestones. Despite several follow-ups and acknowledgment of dues via email, including a tabular proposal of payment timelines dated 26.06.2023 wherein the CD acknowledged the debt, the CD failed to make payment of total principal dues ₹1,23,90,000/- along with interest of ₹10,78,003/- computed at 18% p.a. as per the contractual terms in the Purchase Orders.

A demand notice under Section 8 was duly served on 08.07.2023, yet no payment was made. In response to the demand notice, the CD admitted the dues through email dated 22.02.2024, apologized for the delay in payment, and proposed a settlement plan. Instead, the CD subsequently issued a legal notice dated 03.08.2023, which, according to the OC, was an afterthought to fabricate a dispute in anticipation of IBC proceedings.

The OC submits that the alleged pre-existing disputes are baseless, unsupported by contemporaneous evidence, and have been raised only to evade the legitimate liability. The services were rendered as per contract, performance metrics were shared regularly, and the invoices remain unpaid. Hence, the present petition.

The OC failed to deliver services in accordance with the terms stipulated under the three purchase orders issued on 03.01.2023 and 25.03.2023. The number of clicks and scratches delivered by the OC fell significantly short of the minimum commitments, and the invoices raised were not consistent with the rates and metrics agreed under the purchase orders and the proposal..

The performance reports submitted by the OC were manipulated, showing sudden and exponential increases in clicks and impressions towards the end of each month, without a corresponding trend during the month. This, according to the CD, creates suspicion of artificial inflation to show compliance with targets. The CD independently verified the actual leads and performance using the BOT links shared by the OC, which stated that only about 6,000 leads were generated far below the claimed figures, though lead generation was not part of the contractual scope which was limited to clicks and scratches.

The campaign was run in unauthorized cities, such as Hyderabad, which was not part of the agreed target areas. This deviation, it claims, resulted in poor campaign outcomes and failed outreach. The CD has relied on WhatsApp communications and emails exchanged during the campaign period, in which they raised grievances about poor services and misdirected advertising. It is stated that these concerns were acknowledged by the OC but were never effectively addressed.

In support of its claim of a pre-existing dispute, the CD points to the legal notice dated 03.08.2023 sent to the OC after the issuance of the demand notice under Section 8. The notice recorded detailed objections regarding the services rendered and sought redress. The CD maintains that this establishes the existence of a genuine and ongoing dispute well before the initiation of insolvency proceedings.

The CD also raises doubt over the veracity of the campaign figures provided by the OC, citing that the OC claimed to have reached nearly 150 million users out of Paytm's total user base of 350 million, a claim that is implausible. It further points to an RBI press release which terminated certain accounts of Paytm Payments Bank Ltd. due to irregularities, suggesting that the campaign might have been shown to repeated or duplicate users, thereby not achieving its stated objective of outreach to unique, targeted customers, though Paytm Payments Bank Ltd. is a separate legal entity from One97 Communications Ltd.

The OC misled the CD into believing that the insolvency resolution process had already commenced and that a Resolution Professional had been appointed, which later turned out to be false. This misrepresentation, according to the CD, was made during private communications between the legal representatives of the OC and CD and was an act of bad faith.

Finally, the CD has placed reliance on binding judicial precedent including Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. Civil Appeal No. 9405 of 2017, Ahluwalia Contracts (India) Ltd. v. Raheja Developers Company Appeal (AT) (Insolvency) No. 703 of 2018, and Debabrata Ray Choudhri v. State Trading Corporation of India Ltd., Company Appeal (AT) (Insolvency) No. 1985 of 2024, to argue that a real and substantial dispute regarding the quality of services and correctness of the invoices exists. It is contended that the dispute is neither illusory nor concocted and, in such cases, the Authority is bound to reject the Section 9 application.

The contention of the CD that there is a pre-existing dispute is complete afterthought and raised only post the issuance of demand notice and in anticipation of filing of present Petition under Section 9. At no point during the subsistence of the services or upon issuance of invoices was any such dispute raised. The fact that the CD issued Purchase Orders No. 2 and 3 on 25.03.2023 for extended services evidences satisfaction with OC's performance and negates any claim of pre-existing dispute. It is only when the CD was called upon to make payment that a false and frivolous dispute has been manufactured to evade its liability. In fact, upon receipt of the demand notice, the CD admitted the dues, apologized for the delay in payment, and proposed a settlement plan. Such conduct clearly indicates that there was no genuine dispute.

The services were provided by the OC in accordance with the Purchase Orders dated 03.01.2023 and 25.03.2023. During the campaigns and even while the same were being stopped through emails and WhatsApp messages on 22.06.2023 and 22.07.2023 respectively, no dispute was raised with respect to the quality of services or the scope of the services. In the email dated 22.06.2023, the CD specifically stated "Relevant Finance team will look into this to clear your pending Bills at the earliest," thereby acknowledging liability. The CD repeatedly acknowledged its liability and assured payment. The OC also clarified that its scope of work was restricted to generating clicks and scratches as per the Purchase Orders and did not include generation of leads or actual conversions. The milestones agreed upon were clicks and scratch cards, and not leads or downloads or subscriptions. The OC met the agreed milestones of 6,32,492 clicks and 1,08,01,670 scratch cards. These were achieved, and detailed performance reports were shared from time to time with the CD, without any objection or dispute being raised at the relevant time.

Any conversation on WhatsApp or otherwise referred to by the CD were general discussions during the course of the campaign in May 2023 for service improvement and do not reflect any contemporaneous or genuine dispute with regard to the services rendered. These discussions occurred after the CD had already issued Purchase Orders No. 2 and 3, demonstrating continued satisfaction. The allegations regarding display of advertisements in cities such as Hyderabad or other unapproved cities are completely false. It is specifically denied that the campaign was run in any city not approved by the CD. The cities were pre-agreed and chosen from the 21-city plan as confirmed by OC's email dated 18.01.2023, and advertisements were shown only in those cities.

The lead quality is outside the scope of the services contracted. Moreover, CD's own app has extremely poor ratings and reviews from users, which is a probable cause for lack of conversion and not attributable to the services provided by the OC. It is also submitted that the attempt of the CD to rely on the Reserve Bank of India order with respect to Paytm Payments Bank Ltd. is entirely misplaced and misleading. Paytm Payments Bank is a separate legal entity and has no relation to the OC herein, which is One97 Communications Ltd.

The OC relied on email dated 28.04.2024 of the CD, acknowledging its liability and proposing a settlement plan. It is well settled that any dispute raised post the demand notice and after completion of services are not relevant for the purposes of Section 9 of the Code. In this regard, the OC has relied upon the decision in Devesh Saraf v. Rama Tent House Company Appeal (AT) (Insolvency) No. 51 of 2023, where the Hon'ble NCLAT held that disputes raised after service completion and filing of the petition are of no consequence. Lastly, it is submitted that the CD, in fact, contacted the OC to settle the matter upon receipt of the advance copy of the petition, which further confirms the absence of any genuine dispute.

The institution of suits or continuation of pending suits or proceedings against the Project of CD including execution of any judgment, decree or order in any Court of law, Tribunal, Arbitration Panel or other Authority;

Transferring, encumbering, alienating or disposing of by the CD any of its assets or any legal right or beneficial interest therein;

Any action to foreclose, recover or enforce any security interest created by the CD in respect of its property including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

The recovery of any property by an owner or lessor, where such property is occupied by or in the possession of the CD;

It is further directed that the supply of essential goods or services to the CD as may be specified, shall not be terminated or suspended or interrupted during the moratorium period;

The provisions of Section 14(3) shall however, not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator and to a surety in a contract of guarantee to a CD;

The order of moratorium shall have effect from the date of this order till completion of the Corporate Insolvency Resolution Process or until approval of the Resolution Plan under sub-section (1) of Section 31 or an order for liquidation of CD under Section 33, as the case may be;