Rajasthan Patrika Private Limited vs Topaki Media Private Limited

Per: Hon’ble Ms. Madhu Sinha, Member (Technical)

This Company petition is filed by Rajasthan Patrika Private Limited (hereinafter called “Petitioner”) seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Topaki Media Private Limited (hereinafter called “Corporate Debtor”) by invoking the provisions of Section 9 of Insolvency and Bankruptcy Code, 2016 (hereinafter called “Code”) read with Rule 6 of Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

The present Petition is filed before this Adjudicating Authority claiming an “Operational Debt” of Rs. 2,16,57,227/-(Rs.1,36,81,274/- towards principal plus Rs. 79,75,953/- towards interest @ 18% per annum).

This Company Petition is duly signed by Mr. Mahaveer Singh Chauhan who is a Chief Manager of the Applicant and is duly authorized to present and contest the present Petition in terms of Board Resolution and submits that the Applicant is a private limited company incorporated under the provisions of the Companies Act, 1956 and having its registered office at the address mentioned in the cause title. The Applicant/ Operational Creditor is inter-alia engaged in the business of printing and publishing of Hindi daily newspaper publication. The Respondent/ Corporate Debtor is engaged in the business of advertisement agency. The Operational Creditor and Corporate Debtor have business relationship for last few years.

It is stated that during the course of business their transactions, the Corporate Debtor used to place Purchase Orders/Release Orders ("POS") from time to time with the Operational Creditor.

In pursuance of the above POs, the Operational Creditor published the advertisements in its newspaper "Rajasthan Patrika" and accordingly raised Invoices from time to time which were duly sent to the Corporate Debtor. All the unpaid invoices aggregates to Rs. 1,36,81,274/-.

That the said advertisements as per the instructions and approval of the Corporate Debtor used to be published in the Operational Creditors newspaper Rajasthan Patrika.

In the instant case, the fact of advertisement being actually published is duly acknowledged by the Corporate Debtor. This fact may be corroborated from the copy of actual advertisement so published against each invoice.

It is pertinent to mention here that the Applicant/ Operational Creditor was consistently following up with the Respondent/ Corporate Debtor with respect to the payments of the unpaid operational debt. The said follow- up was by way of e-mails and orally also.

At some occasions, the Respondent/Corporate Debtor kept acknowledging the invoices vide e-mails and assured the Applicant that the accounts would be soon settled, however the accounts were never actually settled in-spite of repeated assurances by the Respondent/ Corporate Debtor.

The Respondent/ Corporate Debtor at one part even offered to settle the accounts through barter mode instead of upfront payment, however the same could not be done due to the legal impediments imposed on account of implementation of new Goods and Service Tax (GST) regime.

That despite issuance of the above reminder emails and acknowledgement of Operational Debt, the Respondent/ Corporate Debtor failed to make any payments to the Operational Creditor, towards the unpaid Operational Debt, the Respondent/ Operational Creditor accordingly was constrained to issue Demand Notice dated 31.07.2018 under Section 8 of the Code, in terms of Clause (a) of Sub-Rule (1) of Rule 5 of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority) Rules, 2016 claiming an amount of Rs. 1,87,52,874/- as on 31.07.2018. The said Demand Notice was duly received by the Corporate Debtor.

That the details of invoices which have remained unpaid/due are as follows:

It is pertinent to mention here that following Invoices have been partly paid, the details of which are as follows:-

The Applicant has not filed any other proceedings under the Insolvency and Bankruptcy Code, 2016 or under any other law for winding up of the Corporate Debtor.

The affidavit of Reply dated 22.12.2023 is filed by the Authorized Signatory of Corporate Debtor, Mr. Deepak Kathar and submits that the present Affidavit is being filed to oppose admission of the Petition and to place on record the facts as well as the grounds that which would warrant rejection of the said Petition.

At the outset, that the Respondent deny each and every averment, allegation and/ or contention contained in the present Petition and also deny that any amounts are payable by the Corporate Debtor to the Operational Creditor, as sought to be claimed in the present Petition. The Respondent respectfully submit that the present Petition is completely false, baseless and misconceived in law and has been filed with the sole intention of harassing the Corporate Debtor and forcing the Corporate Debtor to concede to its exorbitant claims. The present Petition has not been filed with the genuine objective of initiating insolvency proceedings. For this reason alone, the Petition deserves to be dismissed in limine.

The Respondent submit that nothing contained in the present Petition shall be deemed to be admitted by the Corporate Debtor for want of specific traverse.

It is submitted that the Petitioner's claim that the Respondent owes it an amount of Rs. 2,16,57,227 (Rs. 1,36,81,274/- towards principal plus Rs. 79,75,953 towards interest at the rate of 18% pa. as on 30 September 2019) is completely false and untrue. The Respondent is solely an advertising company which makes an earning/profit basis commission/fee that it receives from its clients by acting as a middle man between the client and the newspaper. One such client of the Respondent was the Videocon group which used to routinely place advertisements through the Respondent. The Respondent in turn used to approach companies such as the Petitioner Company for publication of the advertisements in newspapers. The only limited monitory incentive for the Respondent for acting as a middle man in such a transaction would be the commission/ fee that it would receive from the client i.e., the Videocon group in this case. The money received by the Respondent from the Videocon group towards the advertisements would be forwarded to the Petitioner Company after deducting the fee/commission of the Respondent.

On account of its failing financial position the Videocon group was unable to make payments towards its outstanding dues. On account of its mounting outstanding dues, it was agreed between the Petitioner and the Videocon group that the amounts due from the Videocon group shall be paid directly to the Petitioner by the Videocon group. These payments were to be made by providing to the Petitioner appliances/products such as washing machines, refrigerators, LED TVs, coolers, etc. that were manufactured by the Videocon group. After such agreement, the Petitioner started directly dealing with the Videocon group for its outstanding dues and the Respondent was moved completely out of the picture with respect to the outstanding amounts due from the Videocon group. As such, no demands were being made by the Petitioner from the Respondent with respect to the monies owed to it by the Videocon group. The same is evident from the various emails admitted to and brought on record by the Petitioner in its Petition at pages 90 to 96 of the Petition, which clearly establish that:

A. The Petitioner was receiving payments directly from the Videocon group in the form of appliances/products being supplied directly by the Videocon group:

B. The Petitioner was directly dealing with the Videocon group for its outstanding dues and was not making demands for outstanding dues from the Respondent.

It was only after 6^th June 2018 after the Hon'ble NCLT Mumbai admitted insolvency proceedings against Videocon Industries Limited, did the Petitioner, for the first time after its agreement with Videocon group, raise demands against the Respondent by allegedly issuing a demand notice dated 31^st July 2018. It is evident, that once the Respondent realised that it may not be in a position to recover its dues from the Videocon group, in the form of appliances, on account of insolvency proceedings of Videocon Industries Limited, did the Petitioner raise demands against the Respondent by allegedly issuing a demand notice dated 31^st July 2018.

The Respondent submits, that it is not liable to pay the amounts due from the Videocon group to the Petitioner, since the parties had already come to an agreement that the payments towards Videocon group's outstanding dues will be made directly by the Videocon group by supplying appliances to the Petitioner. Therefore, the Petitioner's claim that the Respondent owes it an amount of Rs. 2.16.57.227 is belied by its own actions, as well as correspondence admitted by it and brought on record in the Petition at pages 90 to 96 of the Petition.

In light of what is stated hereinabove, it is humbly submitted that the present Petition is thoroughly misconceived, an abuse of law, malicious, misguided and liable to be dismissed in limine.

Heard the learned counsels appearing for both the sides and perused the written submissions, additional affidavit and documents available on record.

The Ld. Counsel appearing for the Operational Creditor invited the attention of this Bench to the various purchase orders/release orders and E-Way Bills annexed to the Company Petition based on which the above Company Petition was filed. The Operational Creditor also invited the attention of this Bench to the Demand Notice dated 31.07.2018 annexed at page no.97 of the Petition and the postal receipt and the track report issued by the Postal Authority in support of proof of delivery of demand notice. However, the Corporate Debtor failed to reply to the said Demand Notice.

On perusal of the records, it is found that there was a mutual understanding initiated between the Operational Creditor and Videocon Group (the Client) for whom the Operational Creditor’s Company provided services of advertisement through Topaki Media Private Limited (Corporate Debtor) wherein the Petitioner to recover its outstanding dues agreed the payment in the form of Barter System such as accepting the repayment of outstanding dues in way of appliances washing machines, refrigerators, LED TVs, coolers, etc. that were manufactured by the Videocon group.

The Corporate Debtor has contested that notably, the correspondences exchanged between the parties which is annexed at page No. 92 to 96 indicates that, the Corporate Debtor was excluded from the above arrangement of payment. Consequently, the onus and liability to settle the outstanding debts were explicitly placed upon the Videocon Group, imposing the responsibility for repayment in the form of a barter system.

Countering the above argument, the Operational Creditor has stated that the Corporate Debtor or its Client Videocon failed to fulfill the demand of the agreed understanding of barter due to the New GST Regime and only few outstanding dues were paid under the arrangement. Having carefully examined the presented correspondence and owing to the facts, the only issue of consideration before the Adjudicating Authority is:

It is pertinent to note that the Release Orders raised for procurement of services from the Operational Creditor were issued by Topaki Media Private Limited as it is on the Letter Head of the Topaki Media Private Limited and the invoices for receiving the payments were raised by the Petitioner to only Topaki Media Private Limited and not to Videocon Group. Even if there was a mutual understanding at one point of time between Videocon Group and the Operational Creditor that a barter would take place against all the outstanding dues, the arrangement could not reach its finality. Further, from the correspondences annexed at page 92 to 96, it is observed that Topaki Media Private Limited was involved in the transaction. Thus, from the perusal of the Release Order and Invoices, Topaki Media Private Limited remains the Corporate Debtor who is liable to pay the outstanding dues.

Furthermore, it is noteworthy to mention that the NCLT of Mumbai Bench vide an Order dated 11th April 2023 admitted of Videocon Industries Limited into CIRP. The Counsel for the Corporate Debtor has brought the attention of this Bench through additional affidavit dated 28th April 2023 that the Corporate Debtor herein has filed a claim of Rs. 233,598,606/- as an Operational Creditor before the IRP of Videocon Industries Limited and the same has been fully admitted by the Resolution Professional of Videocon Industries Limited.

Owing to the above circumstances, the Corporate Debtor cannot shift their liability on the Videocon Company since all the Release Orders were raised by the Corporate Debtor for procuring services from Operational Creditor, thus making themselves liable to pay the outstanding payments to the Operational Creditor. It is very clear from the above referred documents that the plea of shifting the liability on Videocon group raised by the Corporate Debtor is not legally sustainable and is liable to be rejected as it is only an afterthought.

The Operational Creditor has drawn the attention of the Bench to the following e-mail dated 18.09.2017 addressed by Corporate Debtor to Operational Creditor which is reproduced hereinafter for ready reference:

Therefore it is very clear from the abovementioned e-mail that the Corporate debtor has accepted the liability while giving the reference of the Barter Agreement dated 12.01.2017 stating that post GST, the Barter was not possible and can be done only against the old outstanding dues. Further, the Operational Creditor has drawn the attention of the Bench to the e-mail dated 21.07.2017 wherein once again the Corporate Debtor stated that due to logistic and GST issue they are trying their best to get the delivery done under Barter Arrangement in week.

Further, it is observed that as per the records, the Date of Default is 12.12.2015 and the Corporate Debtor has acknowledged the debt and paid certain invoices in a barter arrangement in the year 2017. However, since the Corporate Debtor had issued several unequivocal admission of its liability by way of e-mails dated on 21.07.2017 and again on 18.09.2017 with the Operational Creditor, it amounts to admission of liability. The bench notes that it is established rule that when a party acknowledges its liability in writing the period of limitation starts afresh from that date. Therefore, the Bench has no hesitation in holding that the claim is not time barred in view of the acknowledgment of liability by the Corporate Debtor.

In view of this, the Bench is of clear view that there is a “debt” in terms of Section 5(21) of Code and there is a “default” in terms of Section 3(12) of Code are clearly established and the debt is also within period of limitation. Thus, the present Company Petition satisfies all the necessary requirement for admission.

Under these circumstances, this tribunal is of the considered opinion that the above company petition is liable to be admitted and accordingly the same is admitted by passing the following:

a. The above Company Petition No. (IB) 4278 (MB)/2019 is hereby allowed and initiation of Corporate Insolvency Resolution Process (CIRP) is ordered against Topaki Media Private Limited.

b. Since the Operational Creditor has not suggested the name of IRP to perform the duties of the Interim Resolution Professional (IRP) in the petition, this Bench is appointing the IRP from the list furnished by the Insolvency and Bankruptcy Board of India (IBBI). This Bench hereby appoints Mr. Shyamsunder Dhanuka, having Contact Info: 9967622435, E-mail Id :[email protected], Registration No. IBBI/IPA-002/IP-N01104/2021-2022/13641, as the interim resolution professional to carry out the functions as mentioned under the Insolvency & Bankruptcy Code, 2016.

c. The Financial Creditor shall deposit an amount of Rs.5 Lakhs towards the initial CIRP costs by way of a Demand Draft drawn in favour of the Interim Resolution Professional appointed herein, immediately upon communication of this Order. The IRP shall spend the above amount only towards expenses and not towards his fee till his fee is decided by COC.

d. That this Bench hereby prohibits 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; transferring, encumbering, alienating or disposing of by the corporate debtor 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 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; 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. That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period.

f. That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

g. That the order of moratorium shall have effect from the date of pronouncement of this order till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, as the case may be.

h. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of the Code.

j. Registry shall send a copy of this order to the Registrar of Companies, Mumbai, for updating the Master Data of the Corporate Debtor.

Accordingly, this Petition is admitted.

The Registry is hereby directed to communicate this order to both the parties and to IRP immediately.