TMI Blog2023 (1) TMI 1144X X X X Extracts X X X X X X X X Extracts X X X X ..... he work done by the Operational Creditor. The very fact that the Operational Creditor had issued a Legal Notice is suggestive of a pre-existing dispute between the two parties. That the contentions raised in the Legal Notice were countered by the Corporate Debtor reinforces the existence of dispute between the parties. It is also pertinent to note that the Legal Notice was issued much before the issue of Demand Notice. That the reply to Legal Notice clearly predates the Section 8 Demand Notice by nearly five months has somehow managed to escape the attention of the Adjudicating Authority. Thus to hold that the disputes raised in the reply to the Legal Notice is an after-thought is fallacious and hopelessly misplaced on the part of the Adjudicating Authority. It is well settled that in Section 9 proceeding, there is no need to enter into final adjudication with regard to existence of dispute between the parties regarding operational debt. What has to be looked into is whether the defence raises a dispute which needs further adjudication by a competent court. The Corporate Debtor having raised genuine disputes in their detailed replies to the Legal Notice and the Demand No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice delivered by them which included quality of printing job and lethargy in delivery of material which hampered the marketing of their film. That the Operational Creditor had illegally hijacked the login ID and password of the digital account of the Corporate Debtor was yet another cause of dispute with the Operational Creditor. Despite providing unsatisfactory services, the Operational Creditor continued to raise invoices and sought payments from the Corporate Debtor. The Learned Counsel for the Appellant submitted that the Corporate Debtor had contended that they were not liable to pay the claims made by the Operational Creditor. 4. The Learned Counsel for the Appellant also submitted that to begin with a Legal Notice dated 07.03.2018 was received from the Operational Creditor seeking payment of Rs.36,85,680.18. A reply was sent thereto by the Corporate Debtor on 17.03.2018 denying each and every allegation contained in the said Legal Notice and a counter claim was made against the Operational Creditor seeking payment of an amount of Rs.70,00,000/- for having failed to provide satisfactory services to the Corporate Debtor. It was asserted that this Legal Notice pre-dated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputes. 10. We find that the Operational Creditor has raised the issue of outstanding payment from the Corporate Debtor both in the Legal Notice dated 07.03.2018 and the Demand Notice dated 02.08.2018. In the Legal Notice, the demand raised is Rs. 36,75,680.18 while in the Demand Notice the demand raised is Rs. 55,38,347/-. On the additional expenditure incurred beyond the engagement terms of 28.08.2017, the Operational Creditor has claimed to have met all additional requirements placed by the Distributor after obtaining confirmation from the Corporate Debtor about the additional costs and expenditure thereto. It was also pointed out that the distributor of AA Films on 22.09.2017 had acknowledged receipt of all publicity materials as placed on record at Page 98 of Appeal Paper Book ( APB in short). The Learned Counsel for the Respondent No.1 submitted that the Operational Creditor had raised invoices for supply of different printing material to the Corporate Debtor and that there were outstanding payments due from them. On the contention raised by the Corporate Debtor that the demand notice under Section 8 of the IBC was defective in that it does not specify the date of defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for payment of any outstanding amount due to the Operational Creditor has also been taken note of by the Adjudicating Authority and the relevant excerpts of the impugned order is as extracted hereunder: - 7. After perusal of all the relevant documents, it is evident that the primary issue for consideration is whether a dispute existed prior to the issuance of the Demand Notice by the Operational Creditor. To examine this issue, the following communications are relevant. The Operational Creditor wrote to the Corporate Debtor on 7th March 2018 demanding payment of the amounts due against the 9 invoices raised totalling to a principal amount of Rs.36,75,680/- including interest at the rate of 18% per annum. The Corporate Debtor replied to this Notice vide Letter dated 17th March 2018 raising disputes regarding the quality of the work performed and other contentions relating to withholding of social media accounts belonging to the Corporate Debtor leading to financial losses and vehemently denied any obligation to pay pending dues to the Operational Creditor. On perusal of the e-mail communications between the parties, it is observed that there was no reference to any form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r an assertion of fact unsupported by evidence. It is important to separate the grain from the chaff and to reject a spurious defence which is mere bluster. However, in doing so, the Court does not need to be satisfied that the defence is likely to succeed. The Court does not at this stage examine the merits of the dispute except to the extent indicated above. So long as a dispute truly exists in fact and is not spurious, hypothetical or illusory, the adjudicating authority has to reject the application. ****** ***** ***** 56. Going by the aforesaid test of existence of a dispute , it is clear that without going into the merits of the dispute, the appellant has raised a plausible contention requiring further investigation which is not a patently feeble legal argument or an assertion of facts unsupported by evidence. The defense is not spurious, mere bluster, plainly frivolous or vexatious. A dispute does truly exist in fact between the parties, which may or may not ultimately succeed, and the Appellate Tribunal was wholly incorrect in characterizing the defense as vague, got-up and motivated to evade liability. 17. It is the case of the Operational Creditor that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 8.50 Lakhs (Eight Lakhs Fifty Thousand Only) previous paid amount will be deducted from this above mentioned agreed amount. Thanking you, For Swiss Entertainment Pvt. Ltd. Authorised Signatory I Hereby agree to the above For Epigram Place:- Mumbai Date: -28.08.2017 (Emphasis supplied) 19. It has been further contended by the Corporate Debtor that when the authorised signatories of the engagement letter were the Operational Creditor and the Corporate Debtor and there was no third party, it is absurd on the part of the Operational Creditor to rely on an appreciation letter from a third party to substitute the satisfaction of the Corporate Debtor. It was strenuously argued by the Learned Counsel for the Appellant that any comment made by the Distributor of A.A. Films, not being the signatory to the engagement agreement, therefore, needs to be disregarded. It is further pointed out that the appreciation letter from the third party also contain statements which reflect that there was heated exchange of words between the Producer and the Operational Creditor as well as between the Operational Creditor and Corporate Debtor. It was submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lients. It is emphasized that the said Engagement Letter requires the Producers i.e my Clients to be satisfied with the promotional work done by you. Thus, the present dispute, being based on the poor services provided by you, the present notice is not tenable. ***** ***** ****** 3. . That you had miserably failed to promote the said movie on the digital platform which was one of the services you were to provide to my Client as per the Engagement Letter dated 28.08.2017. Thereafter, my Clients sent repeated requests to you via several e-mails to release the passwords as my Clients were suffering from financial losses due to the same and were unable to promote their upcoming movies. However, you refused to do so. (Emphasis supplied) 22. We find that the very fact that the Operational Creditor had issued a Legal Notice is suggestive of a pre-existing dispute between the two parties. That the contentions raised in the Legal Notice were countered by the Corporate Debtor reinforces the existence of dispute between the parties. It is also pertinent to note that the Legal Notice was issued much before the issue of Demand Notice. That the reply to Legal Notice clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has been brought to our knowledge that on 19.09.2017 there is an email communication from the Corporate Debtor to the Operational Creditor stating that the printing material for the movie Haseena Parker has not been delivered on time thereby affecting movie publicity as at Page 31 of APB. It was also submitted that on 27.02.2018 the Corporate Debtor had requested the Operational Creditor to hand over the User ID and password of their YouTube/Twitter account to which the Operational Creditor replied on 28.02.2018 seeking clearance of their due payment. The Corporate Debtor on the same date has sent a reply denying any payment due from them in terms of their ledger accounts and reiterated their request for release of the User ID and password to which the Operational Creditor again replied that it would be released only on receipt of payments due to them. The entire set of related email communications relating to release of user ID and password of YouTube Channel, Twitter and Facebook account of the Corporate Debtor by the Operational Creditor have been placed at page 32-36 of the APB. The email dated 02.03.2018 therein also show that the Corporate Debtor had threatened to lodge a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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