TMI Blog2020 (3) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Respondent a Corporate Debtor. It cannot be said that the amounts claimed by the Petitioner from the Respondent on the basis of MMG, as mentioned in the unsigned Agreement not agreed to or accepted by the Respondent could be the basis of a valid right to payment, claim or debt - The position of law on the issue is clear that the provisions of Code cannot be invoked for recovery of outstanding amount but it can be invoked to initiate CIRP for justified reasons as per the Code. Since there was no valid operational debt in the absence of an agreement being signed by both parties which was to be the basis of the payments due, the Respondent could not be termed as a Corporate Debtor within the meaning of the Code. Further, there was a pre-existing dispute between the parties over the basis of the payments sought. In both these circumstances, the provisions of Sections 8 and 9 of the Code cannot be invoked and the Application made under Section 9 of the Code has to be rejected - the Petitioner has attempted to use this forum for recovery of its dues by praying for ordering a CIRP against the Respondent, which is not the purpose for which the Code was enacted. Petition dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Minimum Monthly Guarantee ( MMG )/Revenue Share basis or optionally Sales/Stock Margin basis. The Respondent chose the former option. (5) The terms and conditions of the said Agreement were mutually agreed to between the parties and they were accepted by the Respondent without any protest and/or demur. It was mutually agreed between the parties that the operation of the retail outlet will be carried out by the Petitioner on the Respondent's behalf. It was further mutually agreed that the products required to run the retail outlet will be supplied by the Respondent. The highlights of the commercial understanding which were mutually agreed between the parties under the said Agreement are described as under: (i) The Respondent agreed to reimburse the Petitioner the capital expenditure in 3 instalments. The total amount incurred being ₹ 19,00,000/- (Rupees Nineteen Lakh Only). (ii) The Respondent agreed to cover/pay 50% (fifty per cent) of the staff cost. (iii) The Petitioner, being the concessionaire and having executed the concession agreement with Mumbai International Airport Limited ( MIAL ), agreed to make direct payment of the concession fee to MIAL as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 17.08.2016, without prejudice, provided the Respondent with the revised outstanding amounts payable to them. By the said e-mail of 17.08.2016, the Petitioner also explained to the Respondent that they, without prejudice, had relinquished their margins and are charging the amount which the Petitioner paid to MIAL and therefore, requested the Respondent to immediately clear the outstanding dues at the earliest. (11) However, by their e-mail of 23.08.2016, the Respondent vaguely and baselessly sought to allege certain oversights in calculation but failed to provide a specific timeline for payments of dues owed to the Petitioner. Subsequently, despite the Petitioner repeatedly substantiating the actual dues owed by the Respondent and offering certain discounts on a without prejudice basis and on the condition of immediate payment, the Respondent neglected and failed to pay the legitimate dues owed to the Petitioner citing one frivolous and baseless reason after another. (12) The Petitioner, therefore, was constrained to address the letter dated 07.09.2016; capturing the entire issue in dispute between the parties and calling upon the Respondent to make payment of ₹ 72,27, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Capex 19,00,000 2,85,000 21,85,000 Additional Cost/Fixed Cost 6,93,304 99,871 7,93,175 Interest @ 18% on MMG and Additional Cost as of February, 2017 5,57,143 Interest @ 18% on Capex Amount as of February, 2017 2,57,025 Total Receivable as of February, 2017 93,52,343 (18) On Respondent's continuing failure to pay the dues, the Petitioner was constrained to issue notice on 17.04.2017 u/s 8 of the Code r/w Rule 5 of the I B (Application to Adjudicating Authority) Rules, 2016, for which the Respondent has neither replied to the said notice nor paid the full dues owed to the Petitioner. (19) It is further submitted, without prejudice, that on 07.08.2017, the Respondent mischievously addressed an e-mail baselessly alleging a concluded settlement of ₹ 22,82,770/- and having made a payment of ₹ 5,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned by Respondent from actual sales of its products. (6) The Respondent was not comfortable with the monthly MMG form of fee as the Petitioner was not permitting the Respondent to sell its jewellery products. The Respondent requested the Petitioner to furnish the details of the expected passenger traffic as represented by the Mumbai International Airport Limited (MIAL) to the Petitioners. However, for some reason or the other, the Petitioner hesitated to furnish that information to the Respondent. (7) Upon the Heads of Terms being finalised, when presented with the documents for signature, as the Petitioner had, till then, not furnished the details of the expected passenger traffic as represented by the MIAL to the Respondent, the Respondent informed the Petitioner that it will pay the fee only by way of revenue share. Hence, while signing the Heads of Terms, the Respondent did not sign the Annexure C, which reflected some numbers towards monthly minimum guaranteed amounts, but for which the Respondent had not furnished the required information to base the amounts on. (8) Accordingly, as captured in the Heads of Terms, dated 01.02.2016, the Respondent committed to pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent took a decision to terminate the arrangement and in that regard held discussions and exchanged e-mails with the Petitioner. The Respondent was surprised at the Petitioner's demand, raised for the first time only in July, 2016, for payment of the fee as per the monthly MMG model. The Respondent met the Petitioner on July 29, 2016 to sort out issues and to clarify the confusion that the Petitioner was labouring under. (15) Since the Petitioner remained adamant, during the discussion on July 29, 2016 the Respondent notified the Petitioner of its intent to terminate the arrangement, by an e-mail, dated August 24, 2016, addressed by the Petitioner to the Respondent, stating that it was only fair that the Respondent should serve one month notice period to which the Respondent graciously agreed. (16) However, since the Petitioner continued to insist on Payment of the fee as per the monthly MMG model, by an e-mail, dated August 29, 2016, addressed to the Petitioner, the Respondent set out some of the facts and suggested that both could meet to work things out. (17) Instead, the Petitioner by its letter continuing with baseless insistence on terms outside the agreed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under the monthly minimum guarantee model, due to which the Respondent terminated the arrangement in August, 2016 itself. (f) Instead of calmly responding to the Respondents points, by its letter, dated September 7, 2016, the Petitioner continued with its baseless insistence on terms outside the agreed and binding arrangement with the Respondent and, inexplicably, demanded payment of a sum of ₹ 72,27,810/- (Rupees Seventy-Two Lakhs Twenty-Seven Thousand Eight Hundred and Ten Only). (g) Thereafter, the Respondent met the Petitioner and attempted to resolve the matter. As the Petitioner was being quite aggressive and threatening, the Respondent even went to the extent of keeping aside its own claim and attempted to persuade the Petitioner to take some payment in settlement and close the matter. In this attempt, the Respondent did make some payment to the Petitioner. Be that as it may, the Respondent never admitted or acknowledged any liability to the Petitioner as claimed. (4) It is contended that as the claim is for recovery of rent, it is not maintainable under the provisions of the Code and further there is no operational debt, no unpaid Invoice, and no default wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, it is seen that at the bottom of this Annexure while the Petitioner has signed the same as Agreed and accepted on behalf of Flemingo , this Annexure does not bear the signature of the Respondent under Agreed and accepted on behalf of the Brand (i.e. the Respondent). Thus, as far as the very important issue of basis of payment between the two parties is concerned, the same is not signed by one party, the Respondent, and the same is defective to that extent. Due to the non-acceptance of the terms and details of payment by the Respondent, it cannot be said that the right to payment or claim arising from this Agreement will acquire the meaning of Debt under the Code, or make the Respondent a Corporate Debtor. It cannot be said that the amounts claimed by the Petitioner from the Respondent on the basis of MMG, as mentioned in the unsigned Agreement not agreed to or accepted by the Respondent could be the basis of a valid right to payment, claim or debt. 9. The Demand Notice sent by the Petitioner to the Respondent under Rule 5 of the Code in Form 3 is dated 17.04.2017. Even this was not accompanied by an Invoice, and debit notes were sent one mails. However, much prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9597 of 2018, dated 23-10-218] the Hon'ble Supreme Court of India, held that existence of undisputed debt is sine qua non of initiating CIRP. As per para 34 of this judgment, it is stated that the Adjudicating Authority, while examining an application filed under Section 9 of Code, will have to determine: (i) Whether there is an 'operational debt' as defined exceeding ₹ 1 Lakh?; (ii) Whether documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been paid?; (iii) Whether there is existence of dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before receipt of demand notice of the unpaid operational debt in relation to such dispute? If any one of aforesaid conditions is lacking, the application would have to be rejected. 11. Applying the tests laid down in the above judgments to the facts of the case narrated above, it is clear that since there was no valid operational debt in the absence of an agreement being signed by both parties which was to be the basis of the payments due, the Respondent could not be termed as a Corporate Debtor within the meani ..... X X X X Extracts X X X X X X X X Extracts X X X X
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