Back
SUPREME COURT OF INDIA
R.F. Nariman, Sanjay Kishan Kaul, JJ.
Mobilox Innovations Private Limited – Appellant
Versus
Kirusa Software Private Limited – Respondent
Civil Appeal No. 9405 of 2017
Decided On : 21-09-2017
Civil Appeal Nos.8337-8338 of 2017 – Relied upon
(1972) 2 SCR 201 – Referred
(b) Words and Phrases – ‘And’ and ‘also’ – ‘And’ may be read as ‘or’ to further object of the statute. (Para
(1998) 7 SCC 59; (2008) 4 SCC 755; (2013) 15 SCC 677 – Relied upon
(c) Companies Act, 2013 – Section 271 – Inability of a company to pay debts – No more a ground for winding up. (Para 34)
(d) Insolvency and Bankruptcy Code, 2016 – Section 8(2)(a) – Existence of a dispute – Dispute need not be bona fide for its existence. (Para 35)
(e) Insolvency and Bankruptcy Code, 2016 – Section 9(5)(2) – Notice of existing dispute received by operational creditor – Application of operational creditor u/s 9(5)(2) must be rejected – Adjudicating authority only to see existence of plausible dispute requiring investigation – At this stage it does not examine merits of the dispute. (Para 40)
[1997] FCA 681; (2014) EWHC 2694 (Ch); (1999) 1 WLR 157 – Referred
(f) Insolvency and Bankruptcy Code, 2016 – Section 9 – Objection raised before supreme Court that IDBI did not give certificate in time – Tribunal not dismissing the application on this ground – Application cannot be dismissed on this ground at this stage. (Para 41)
(g) Insolvency and Bankruptcy Code, 2016 – Section 9 – Dispute existing – Application u/s 9 ought to be dismissed. (Para 42)
(h) Section 5(6) and 9 – Appellant alleging breach of NDA – Withholding payments till resolution of the matter – Held appellant successfully raising plausible contention requiring investigation and a dispute does exist – Tribunal wrongly allowing the application. (Para 45)
(i) Limitation – Limitation for filing proceedings for claiming liquidated damages not yet elapsing – Further the dispute continuing – The matter should be investigated. (Para 46)
Facts of the case:
The appellant was engaged by Star TV for conducting tele-voting for the "Nach Baliye" program on Star TV. The appellant in turn subcontracted the work to the respondent and issued purchase orders between October and December, 2013 in favour of the respondent.
The respondent provided the requisite services and raised monthly invoices between December, 2013 and November, 2014 - the invoices were payable within 30 days from the date on which they were received. The respondent followed up with the appellant for payment of pending invoices through e-mails sent between April and October, 2014.
The appellant, on 30th January, 2015, wrote to the respondent that they were withholding payments against invoices raised by the respondent, as the respondent had disclosed on their webpage that they had worked for the "Nach Baliye" program run by Star TV, and had thus breached the NDA. The correspondence between the parties finally culminated in a notice dated 12th December, 2016 sent under Section 271 of the Companies Act, 2013.
A demand notice dated 23rd December, 2016 was sent for a total of Rs. 20,08,202.55 under Section 8 of the new Insolvency and Bankruptcy Code, 2016. Appellant refused to pay.
An application was then filed on 30th December, 2016 before the National Company Law Tribunal under Sections 8 and 9 of the new Code stating that an operational debt of Rs. 20,08,202.55 was owed to the respondent.
The Tribunal dismissed the aforesaid application
An appeal was then filed before the National Company Law Appellate Tribunal which was allowed.
Finding of the Court:
Tribunal wrongly allowed the application u/s 9.
Result: Appeal allowed.
JUDGMENT
R.F. Nariman, J.
The present appeal raises questions as to the triggering of the Insolvency and Bankruptcy Code, 2016 when it comes to operational debts owed to operational creditors. The appellant was engaged by Star TV for conducting tele-voting for the "Nach Baliye" program on Star TV. The appellant in turn subcontracted the work to the respondent and issued purchase orders between October and December, 2013 in favour of the respondent. In the "Nach Baliye" program, the successful dancer was to be selected on various bases, including viewers' votes. For this purpose, the respondent was to provide toll free telephone numbers across India, through which the viewers of the program could cast their votes in favour of one or more participants. For this purpose, a software was customized by the respondent, who then coordinated the results and provided them to the appellant. Since the respondent obtained toll free numbers from telephone operators in terms of the purchase orders, the appellant was liable to make payment of rentals for the toll free numbers, as well as primary rate interface rental to the telecom operators. The respondent provided the requisite services and raised monthly invoices between December, 2013 and November, 2014 - the invoices were payable within 30 days from the date on which they were received. The respondent followed up with the appellant for payment of pending invoices through e-mails sent between April and October, 2014. It is also important to note that a non-disclosure agreement (hereinafter referred to as the NDA) was executed between the parties on 26th December, 2014 with effect from 1st November, 2013.
2. More than a month after execution of the aforesaid agreement, the appellant, on 30th January, 2015, wrote to the respondent that they were withholding payments against invoices raised by the respondent, as the respondent had disclosed on their webpage that they had worked for the "Nach Baliye" program run by Star TV, and had thus breached the NDA. The correspondence between the parties finally culminated in a notice dated 12th December, 2016 sent under Section 271 of the Companies Act, 2013. Presumably because winding up on the ground of being unable to pay one's debts was no longer a ground to wind up a company under the said Act, a demand notice dated 23rd December, 2016 was sent for a total of Rs. 20,08,202.55 under Section 8 of the new Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code). By an e-mail dated 27th December, 2016, the appellant responded to the aforesaid notice stating that there exists serious and bona fide disputes between the parties, that the notice issued was a pressure tactic, and that nothing was payable inasmuch as the respondent had been told way back on 30th January, 2015 that no amount will be paid to the respondent since it had breached the NDA.
3. An application was then filed on 30th December, 2016 before the National Company Law Tribunal under Sections 8 and 9 of the new Code stating that an operational debt of Rs. 20,08,202.55 was owed to the respondent.
4. On 19th January, 2017, the respondent was orally intimated to remove a defect in the application, in that it did not contain the appellant's notice of dispute. This was rectified by an affidavit in compliance dated 24th January, 2017, by which various other documents were also supplied by the respondent to the Tribunal. On 27th January, 2017, the Tribunal dismissed the aforesaid application in the following terms:
"On perusal of this notice dated 27.12.2016 disputing the debt allegedly owed to the petitioner, this Bench, looking at the Corporate Debtor disputing the claim raised by the Petitioner in this CP, hereby holds that the default payment being disputed by the Corporate Debtor, for the petitioner has admitted that the notice of dispute dated 27th December 2016 has been rec
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
