TMI Blog2024 (2) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... elivery of the product and services, in the form of e-wallet, which is part of the Software Development Agreement - In the meantime, the Appellant raised a consolidated invoice of Rs 1,46,32,000/- dated 21.07.2021 for all the remaining 11 milestones under schedule III of the agreement. Since there was no delivery of the services beyond milestone 4, it is difficult to comprehend the issuance of this invoice and also adds to another dimension of the pre-existing dispute. Later on, ignoring all the emails exchanged between the Appellant, Respondent and the End Client, which was clear evidence of the poor quality of the software programming and also the non-delivery of the product and dis-satisfaction of the End Client, for which the product was being made, which is much more than a feeble dispute, still the Appellant proceeded against the provisions of Section 8(2)(a) of the IBC and sent a demand notice to the Respondent on 08.10.2021 - It is worth noting that the Respondent had also sent an indemnity notice dated 29.10.2021 to the Applicant, mentioning about the ongoing dispute for faulty services, with payment platform programming code being defective and highly risky to go live ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority has dismissed the Application filed by the Appellant under Section 9 of the IBC, 2016 on the ground that there is a pre-existing dispute between the parties. 2. Heard the Counsels for both the parties and perused the documents placed before us. Case of the Appellant viz. M/s Kellton Tech Solutions Limited 3. The Appellant is an IT company providing IT services such as development of software, technology consulting, outsourced product development etc. The Appellant had entered into a Software Development and Service Agreement (Agreement) dated 17.09.2020 with the Respondent namely, M/s Actas Technologies Private Limited for the development of customized e-wallet platform. 4. The Appellant submits that it provided the services as per the agreement and after the completion of the work, up to the User Acceptance Testing (UAT) stage, it duly raised the invoices for said services. Out of the total invoices raised by the Appellant, the Respondent failed to make the payment for the last two invoices of Rs 29,50,000 dated 11.12.2020 and Rs 1,46,32,000 dated 21.07.2021, even though it paid earlier three invoices dated 24.09.2020, 28.09.2029 and 29.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -existing dispute was raised after the issuance and receipt of Section 8 notice. Otherwise, also no mediation proceedings in terms of Section 12A of Commercial Courts Act, 2015 has been initiated or at least no proof of the same has been brought on record. 9. Appellant further submits that no suit could have been instituted as Section 12A is applicable in respect of Commercial Suits whereas in the present case Agreement contains Arbitration Clause and accordingly there was no need for mediation between the parties as envisaged under Section 12A of the Commercial Courts Act, 2015. 10. Appellant further submits that the product has been duly delivered and the no dispute about the quality of the product has ever been raised. Otherwise, also in case of software development, no product is final at the delivery itself, its working testing and commissioning always requires technical support and working on the software and this a reason that the entire amount was not claimed by the Appellant. 11. Appellant further submits that the issue regarding the quality of the product was raised by the Respondent after raising of the invoices. The same could have been raised when the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Centre as per Section 12A of the Commercial Courts Act, 2015. This clearly shows that there is a pre-existing dispute between the parties with respect to the claims and invoices of the Appellant. 16. Respondent submits that the Appellant has not made complete delivery of the services as per the software development agreement, which included ewallet platform for the end client of the respondent i.e. THIMAR AL ARABIYA. The Services were to be completed in three phases, which were further divided into total of 15 (fifteen) milestones. 17. Respondent submits that on the one hand Appellant rejects pendency of any pre-existing dispute, while on the other hand they have accepted their participation in the pre-institution mediation proceedings under Section 12A of the Act. 18. Respondent further submits that there was no provision in the agreement to raise any invoices without approval and acceptance of corresponding work by the Respondent or to raise any consolidated invoice of all phases their milestones as per Schedule III. In pursuance to Clause 3.2 of the Agreement, the Appellant followed the process of requesting the signing of the acceptance form from the Respondent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent. In order to circumvent this and to increase the size of the claims above Rs. 1 crore at one go, the Appellant issued invalid consolidated invoice dated 21.07.2021, totally inconsistent with provisions of Agreement. Apparently, sole intention of Appellant was to harass and extort undue amounts from the Respondent through filing of bogus insolvency petition against the Respondent. Records clearly show that the monthly invoices were being raised between 24.09.2020 -11.12.2020 but thereafter the Appellant did not raise any invoice as the work was left incomplete after the 4th Milestone. The said act of the Appellant clearly establishes the fact that it did not raise any invoice until 21.07.2021 as there was no provision agreed under the Agreement for sending a consolidated invoice. Issue before us 24. The short issue before this Tribunal is whether in the facts of this case, there is a pre-existing dispute or not and whether this Appeal can be allowed or not. Findings and Conclusions 25. Appellant has claimed total outstanding unpaid balance to be Rs.1,82,36,619/- comprising of two invoices of Rs.29,50,000/- which was raised on 11.12.2020 and next one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement were not achieved by the Appellant and also the delivery of the product and service was not effected till that date. vii. Applicant sent a demand notice under Section 8 of IBC Code on 11.10.2021. viii. Respondent sent reply to the demand notice on 21.10.2021 in which it disputed the debt as extracted herein ..We hereby strongly deny the existence of any 'Operational Debt' and several 'Disputes' have been raised from our end to your Client, which your Client is fully aware of. The payment platform programming code that was developed by your client was defective and highly risky to go live as a payment business platform, which can lead to withdrawal of a payment license of the payment platform programming code user. This was apparent from the code quality report that was shared with your client's employee's executive (Gaurav) through WhatsApp communication dated 21/06/21 ix. Indemnity notice dated 29.10.2021 from the Corporate Debtor/ Respondent was sent, seeking indemnity for failure to perform obligations as per the agreement. Before Delhi High Court Mediation Centre, mandatory pre-institution mediation proceedings under Section 12A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noting that the Respondent had also sent an indemnity notice dated 29.10.2021 to the Applicant, mentioning about the ongoing dispute for faulty services, with payment platform programming code being defective and highly risky to go live as a payment platform. Further, Respondent had initiated the process for filing a claim petition before the Delhi High Court Mediation Centre as per Section 12A of the Commercial Courts Act, 2015. This fact is part of the record before the Adjudicating Authority. Even the Appellant has accepted its participation in the mandatory pre-institution mediation proceedings under Section 12A of the Commercial Courts Act, 2015. This is also an evidence that the Appellant accepts the indemnity claims and is willing to mutually settle the disputes and the claims. And the indemnity notice is relying mainly on the same events which have been noted in aforesaid paragraphs. And all this is emanating from the events prior to the issue of Demand Notice u/s 8 of IBC, 2016. Therefore, on this count also pre-existing dispute cannot be denied. 31. Adjudicating Authority in this case tested Appellant s case as per the judgment of the Hon ble Apex Court in Mobilox Inn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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