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2019 (11) TMI 422

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..... red. - C.P. (IB) NO. 260/BB/2019 - Dated:- 24-10-2019 - RAJESWARA RAO VITTANALA, JUDICIAL MEMBER For the Petitioner : Ajit Anekar and Ms. Urvi Vaidya. For the Respondent : Dhyan Chinnappa, Sr. Counsel, Chinmay. J. Mirji and Ms. Charitha. V. ORDER Per: Rajeswara Rao Vittanala, Member (J) 1. The Company Petition bearing is filed by M/ s. CloudWalker Streaming Technologies Pvt. Ltd ('Petitioner/ Operational Creditor') U/ s 9 of the IBC, 2016 R/ w 6 of the (Application to Adjudicating Authority) Rules, 2016 by inter alia seeking to initiate Corporate Insolvency Resolution Process (CIRP) in respect of M/S. Flipkart India Private Limited ('Respondent/ Corporate Debtor) on the ground that it has committed default for an amount of -(Rupees Twenty Six Crore and Ninety Five Lakhs Only). 2. Brief facts of the case, as mentioned in the instant Company Petition, which are relevant to the issue in question as follows: (1) M/S. CloudWalker Streaming Technologies Private Limited ('Petitioner/ Operational Creditor) is a Private Limited Company, incorporated under the Companies Act, 1956 and it is engaged in the business of import and supply of LED TVs and is having its registered of .....

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..... and a liquidity crunch agreed to offer the said discount on the condition that the Corporate Debtor forthwith take delivery of the remaining LED TVs purchased by him and make payment for the same. The Operational Creditor has paid excess customs and duties beyond the NLC since the LED TVs were still in the customs warehouse, as the Corporate Debtor delayed in providing a delivery schedule and sent several emails, demand for payment for the aforesaid LED TVs procured and imported for the Corporate Debtor from 1 Ith October, 2017 to 1st December, 2017, were raised by the Operational Creditor pursuant to import of the LED TVs based on the Purchase Order Emails but to no avail. As of March, 2018, the Corporate Debtor had failed to collect more than 70% of the stock as ordered by them. Pursuant to the purchases as on 8th December, 2017, the Corporate Debtor was behind payments to the tune of₹ 55.06 Crores. (5) It is stated that the Operational Creditor facing heavy financial losses issued a notice and invoked the Arbitration Clause of the Supply Agreement. The Corporate Debtor on receipt of the Arbitration Notice threatened to withdraw from the deal entirely and not collect any o .....

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..... its debts. The Corporate Debtor Company is not economically viable and poses a threat to commercially morality. In such circumstances, it is prayed that the Adjudicating Authority may be pleased to permit the Operational Creditor to proceed against the Corporate Debtor Company in Insolvency Resolution proceedings. 3. The Respondent/ Corporate Debtor has opposed the instant Company Petition, by way of filing Statement of Objections dated 25.09.2019, by inter alia contending as follows: (1) The Company Petition is not maintainable either in law or on facts and it is liable to be rejected with exemplary costs. (2) It is submitted that the Respondent through its hard work and dedication, has established its goodwill in the Indian Market and has maintained such name by sheer dint of its business plans and professionalism, the Respondent maintains amiable relationship with its customers, vendors and service providers. The Respondent is a profit making Company with sufficient financial strength and is actively doing business in the wholesale B2B (Business to Business) sales. There is no admitted debt or liability in the present instance. The Respondent has already paid an amount of ͅ .....

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..... ates as follows: "2. Ordering, Planning and Delivery Schedule (g) Unless othenvise agreed by the Flipkart in writing, deliveries to the place of destination until their formal acceptance by Flipkart shall be made at the risk and costs of the Supplier, including all expenses of packaging, storage and transportation of products i.e. deliveries shall be from ramp duty and tax paid. Further, supplier shall provide for sufficient shipment insurance at its costs untit due delivery. To the extent not otherwise agreed in writing, the Products shall be delivered at the unloading ramp of Flipkart. Flipkart shall have no obligation to pay for or return packing cases, skids, drums or other articles used for packing the Products whether or not reusable. If the Products are to be delivered in installments the Agreement shall be treated as a single contract and not severable". As detailed above Respondent is not obligated to indemnify the Petitioner against any risks or costs incurred by the Applicant. Further, it is agreed that the Petitioner shall bear all the expenses of packaging, storage and transportation of the Products. i.e., all deliveries made to Flipkart shall be free ramp, d .....

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..... as the tool to abuse and threaten bona fide Companies such as the Respondent. The very initiation of the present petition by the Petitioner is with the sole motive of making illegal gains by suppressing material facts and playing fraud upon this Tribunal. (6) It is submitted that the Respondent has without prejudice to its rights and contentions chosen to not initiate any legal action against the Petitioner due to the deficiency in service and has chosen to withhold payments that was not due as a result of such deficiency in services. (7) It is stated that, upon delivery of the Products, the Respondent reserves the right to verify and determine whether the products supplied by the Petitioner are in accordance with the PO and the Invoice raised by the Petitioner. In the event, the Respondent determines that the Products received are (i) in a damaged condition, (ii) not in accordance with the Supply Agreement, the Purchase order and/or in the Invoice raised by the Petitioner, and/or (iii) defective or deficient, it shall notify the same to the Petitioner. If there is a difference in the number of Products received by Respondent, the same shall be recorded by the Respondent at the bo .....

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..... tor is incurring huge losses and thus statement that it is profit making Company is ex facie false to their own knowledge. Though the Petitioner is not denying that it has received some amounts from the Corporate Debtor for supply of LED TVs, the instant petition is filed for the defaults arise out of non-payment of balance dues, which the Corporate Debtor admitted to have withheld without any justifiable reason. (3) The Corporate Debtor at no point Of time denied about the quantities ordered by them or disputing the invoices raised by the Operational Creditor. As against the admitted amount of Rs. invoices, the Corporate Debtor admitted to have paid only 85,57,00,664. Therefore, even as per own admission of Corporate Debtor, 18,04,99,336 is still outstanding from and out of total invoice amount. Therefore, the Petition deserves to be admitted on this sole ground. (4) The Corporate Debtor though in receipt of reply failed reply to it and pay outstanding amount and did not raise any pre- existing dispute as prescribed under the Code in order to avoid initiation of CIRP. And merely alluding to some form of without there being any deficiency in service, contemporaneous evidence at thi .....

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..... has also submitted that even though the basic document ie the Supply Agreement dated 29th December, 2016 is not in dispute, several terms of the Agreement are not complied with by the Operational Creditor in order to claim the amount. He has relied upon the following judgements rendered in the following cases: • Greenhills Exports (Private) Limited, Mangalore and Ors Vs. Coffee Board, Bangalore, 2001(4) KarlJ 158 at Paras 14, 15 and 16 • Ramgad Minerals and Mining Pvt. Ltd and Ors. , Vs. Vectra Advanced Engineering Pvt. Ltd., MANU/KA/6261/2018 at Paras 35, 36, 37 & 38 • Parmod Yadav and Ors., Vs. Divine Infracon Pvt. Ltd., MANU/NL/0136/2018 atparas 10 and 11. In fact the instant case is filed to claim alleged damages rather than to initiate CIRP basing on invoices and purchase orders, the issue of damages/ disputes cannot be decided under the provisions of Code and Civil Court is competent to decide those issues and in support of his contentions, he has relied upon the judgments as cited supra. At the end of his argument, the Learned Senior Counsel expressed his readiness to pay the outstanding amount, if the Adjudicating Authority determines the outstanding amou .....

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..... o the shortage of slot, the Corporate Debtor could not lifting the stock. It is relevant to point out here that one email dated 16.10.2017, sent by Shri Jagdish Rajpurohit from M/S. CloudWalker Streaming Technologies Private Limited (Petitioner) to the Shri Santosh U Kamath (CCC-VS) and to Ms. Sakshi Khandelwal (Senior Manager - Business Development) of Flipkart India Pvt. Ltd. (Respondent), which reads as under: "Dear Santosh, As discussed during our last meeting with Abhinav,. we are awaiting the PO's for 39 and 50 inch models which have arrived last week and are waiting in Customs. We won't be able to hold beyond 1 more day as it would then start attracting demurrage charges. Kindly send the PO's today and oblige. Regards, Jagdish Rajpurohit Cloud Walker". Thereafter, an email reply was also given by Ms. Sita Subramanian from M/S. Flipkart India Pvt. Ltd. (Respondent) dated 06.11.2017 @12.45 P.M, to the CloudWa1ker Logistics, which reads as under: "Hi Sushma, As discussed With Ankur, please raise slot requests for the following quantities at the earliest. Hi Ankur - As discussed, owing to capacity constraints at out end, we wilt pick up the following o .....

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..... requests you to please support in this by including the shortfall also in December so we come on track. We are now facing a an acute situation of full inventory and no cash flow for the past 2 months due to the non-pick up which is also raising concerns from out bank with whom we have shared your pickup plan and have to ensure this is achieved to avoid problems with them besides lowering our interest payouts on the inventory which is now breaking our backs and is giving us tremendous problems. We also faced issues to execute the November order with PO's and slots being difficult to get where it took more than a week only to normalize the process. In view of this I suggest that December orders be processed and informed at the start itself so we can plan the month right now and be able to execute the orders in time and efficiently". Warm regards and awaiting your kind reply. The above correspondence, clearly established that the Petitioner imported goods in question as per purchase orders made by the Corporate Debtor and it is the Corporate Debtor, who has committed default to take some of goods due to its inability to lift them and thus committed default. 12. As stated supr .....

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..... demand notice. Furthermore, the Respondent/ Corporate Debtor has failed to repay the unpaid operational debt as specified in the Demand Notice sent by the Petitioner/ Operational Creditor. Another supporting affidavit dated 8th July, 2019 confirming the same. The Operational Creditor has claimed for total of amount of ₹ 26.95 Cr. Consisting of ₹ 13.95 Cr. towards goods, ₹ 5.25 Cr. towards customer charges, ₹ 7.75 cr. towards interest @ 12.65 % on delayed payment till 31st March, 2019. A copy of Ledger Account (Customs duty) for the period 15th December, 2017 to 18th April, 2019 is filed in support of payment said customs duty. The Respondent cannot simply deny the payment of customs duty for the goods imported for it by the Petitioner. 14. It is also relevant to point out here that some of the cases similar to the instant case was dealt with by this Adjudicating Authority and those judgements were questioned before the Hon'ble NCLAT, as per Section 61 of Code. One of the case is filed by filed by M/S. Next Education India Pvt. Ltd. Vs. M/S. K12 Techno Services Pvt. Ltd., vide CP (1B)No.114/BB/2017, which was dismissed by this Adjudicating Authority, vide .....

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..... ptember 2017 to the Demand Notice noticed that several disputes had been raised. They have also annexed several correspondences about the defective services provided by the Appellant. However, when we asked, the learned Counsel for the Respondent could not lay hand on any of the correspondence to show that prior to Section 8 notice, the Respondent (Corporate Debtor) intimated that there were defective services provided by the Appellant. It is a settled law that if any dispute is raised prior to the issuances of the invoices or Demand Notice U/s. 8 (1) of the Code with regard to quality of services or goods or pendency of the suit or arbitration, in such case one may take the plea that there is an 'existence of dispute' but if any dispute is raised after issuance of Demand Notice U/ s. 8 (I) that cannot be tenned to be a 'pre-existing dispute'. We find that the Adjudicating Authority has failed to notice the aforesaid issue and observed that 'debt' in question is not only serious dispute but also barred by limitation and laches and not discussed under which provision the 'Master Service Agreement' with 'Sri Gowtham Academy of General and Technical .....

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..... pellant would send monthly invoices to the Respondent for the fees accrued in the previous month in accordance with the terms set out in Schedule 3. Thereafter, the Respondent would verify the invoices from the Appellant and thereafter pay such valid invoices within 15 business days. Further, as per Clause 4.5 of the Agreement, the Respondent was liable to pay interest at the rate of I. per month on any sums overdue after a period of 15 business days from the receipt of a valid invoice. 3. In between 2014-2015, the Appellant provided the said services to the Respondent from time to time for which the Appellant raised invoices at the end of every month towards the consumption of the said service in terms of the aforesaid Clause. The Appellant continued to provide services to the satisfaction of the Respondent and the Respondent did not raise any complaints about the services rendered by the Appellant or about the invoices raised by the Appellant in the years 2014, 2015 and 2016. 4. It is stated that for the first time Respondent defaulted in making the payment towards the invoices on 16th June, 2015 and had not made any payment towards the debt since then, as a result of which its s .....

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..... he facts and erroneously held that there is a pre-existing dispute and the claim is barred by limitation. For the reasons aforesaid, we set aside the impugned order dated 8th November, 2018 and remit the case to the Adjudicating Authority for passing appropriate order taking into consideration the records submitted by the Appellant in the light of decision of Hon'ble Supreme Court in "Innoventive Industries Ltd. Vs. ICICI Bank and Ors. after notice and hearing the Respondent. In the meantime, it will be open to the Respondent ('Corporate Debtor') to settle the claim with the Appellant. Appeal is allowed with aforesaid observations and directions. No costs. 16. In another case, filed by M/S. Pedersen Consultants India Pvt. Ltd. Vs. M/S. Nitesh Estates Limited, this Adjudicating Authority has dismissed the Company Petition (1B)No.35/BB/2018 vide Order dated 05.10.2018, with the following reasons: "Hence, by exercising powers conferred on the Adjudicating Authority UIs. of IBC, 2016, is hereby rejected. However this order will not come in the way of Petitioner filing appropriate proceedings before Appropriate Court, having jurisdiction over the matter". And .....

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..... aken plea that it has informed the Appellant by e-mail dated 27th February, 2017 that there are serious issues with respect to the engagement with the Appellant, but such e-mail does not relate to any pre-existing dispute. VWtatever the stand taken by the 'Corporate Debtor' before the Adjudicating Authority, are afterthought which is after receipt of Demand Notice under Section 8(1) of the 'I&B Code' issued on 14th July, 2017. 3. The Adjudicating Authority has not rejected Section 9 application on the ground of pre-existing dispute, but rejected it on the ground that it, cannot enter into enquiry with regard to the disputed claim. 4. The Learned Counsel for the Respondent has disputed the contention of the Petitioner and the debt in question is a disputed and has pointed the averments stated in additional Statement of Objections as briefly stated above. The case is covered by the Apex Court judgement rendered in the Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited case. Therefore, this C.P.(IB) No.35/BB/2018 is liable to be dismissed. " 5. In an application under Section 9, it is always open to the 'Corporate Debtor' to point .....

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..... authority under Sections 9(1) and 9(2). This application is to be filed under Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with documents and records that are required under the said form. Under Rule 6(2), the applicant is to dispatch by registered post or speed post, a copy of the application to the registered office of the corporate debtor. Under Section 9(3), along with the application, the statutory requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the 9 unpaid operational debt and a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor. Apart from this inforrnation, the other information required under Form 5 is also to be given. Once this is done, the adjudicating authority may either admit the application or reject it. If the application made under subsection (2) is incomplete, the adjudicating authority, under the proviso to sub-section 5, may give .....

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..... it or arbitration proceeding filed before the receipt of the demand notice of the unpaid 'operational debt', the application under Section 9 cannot be rejected and is required to be admitted. 9. In "Innoventive Industries Ltd. v. ICICI Bank and Ann- (2018) 1 SCC 407", the Hon'ble Supreme Court while explaining the provisions of Section 9 observed and held: "27. 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 "debt", we have to go to Section 3(11), which in turn tells us that a debt means a liability of obligation in respect of a "claim" and for the meaning of "claim", we 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 lakh or more (Section 4). The corporate insolvency resolutio .....

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..... not payable in law or in fact. The moment the adjudicating authority is satisfied that a default has occurred, the application must be admitted unless it is incomplete, in which case it may give notice to the applicant to rectify the defect within 7 days of receipt of a notice from the adjudicating authority. Under sub-section (7), the adjudicating authority shall then communicate the order passed to the financial creditor and corporate debtor within 7 days of admission or rejection of such application, as the case may be. 29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where 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 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 ou .....

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..... mpany and initiating CIRP against it, would have serious devastating effect on its operations. The Code, under provisions of section 9, inter-alia prescribes time lines for either for admission or rejection of case for 14/7 days, as the case may, therefore, the Adjudicating Authority cannot keep the case pending for the that purpose. 18. The above facts and circumstances of the case, when examined in the light of extant provisions of Code and the law, as discussed supra, leaves no iota of doubt that the Corporate Debtor has comrnitted Debt and default in question, which is established by the Petitioner. And there is neither pre-existing nor post-existing dispute made out by the Corporate Debtor. The Adjudicating Authority is satisfied that the instant Application/ petition is complete proviso 2 of Section 9 of the Code ; there is no payment of operational debt; the demand notice in question is delivered and no notice of dispute was received by the Petitioner; a qualified Resolution Professional by name Mr. Deepak Saruparia, bearing IP Regn. No. IBB1/1PA-001/1P-P00660/2017-18/ 11689, is suggested as Interim Resolution Professional to conduct the CIRP in respect of Corporate Debtor. .....

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