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2024 Supreme(Online)(NCLAT) 941

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Justice Ashok Bhushan (Chairperson) , Hon'ble Mr. Arun Baroka (Member (Technical)) , Hon'ble Mr. Barun Mitra (Member (Technical)) ,
MULTIPLIER BRAND SOLUTIONS PRIVATE LIMITED – Appellant
Versus
AMAZON WHOLESALE (INDIA) PRIVATE LIMITED – Respondent
746/ND/2024 COMPANY APPEAL(AT)(INS)

Mr. Neeraj Malhotra, Sr. Advocate with Mr. Lakshmeesh S. Kamath, Mr. Rajesh Khandelwal, Ms. Samriti Ahuja, Ms. Aditi Prakash, Mr. Rohit Patil and Mr. Nimish Gupta, Advocates; Mr. Krishnendu Datta, Sr. Advocate with Mr. Vijayendra Pratap Singh, Mr. Raghav Seth, Mr. Ankitesh Ojha, Mr. Arnab Ray and Mr. Akhil Nene, Advocates.

A pre-existing dispute regarding the authenticity of invoices bars the initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 9 - Appeal against rejection of application for initiation of Corporate Insolvency Resolution Process (CIRP) - The Adjudicating Authority dismissed the application on grounds of pre-existing disputes regarding invoices between the parties - The dispute arose from allegations of inflated invoices related to a different project, which the appellant contended was not relevant to the claim at hand. (Paras 1, 24)

(B) Legal Principles - The existence of a pre-existing dispute bars the initiation of CIRP under Section 9 - The court emphasized that disputes concerning invoices must be resolved before proceeding with insolvency applications. (Paras 24, 25)

Facts of the case:
The appellant, an operational creditor, filed a Section 9 application for unpaid invoices totalling ₹3,69,57,379/- for services rendered under a Master Service Agreement with the corporate debtor. The corporate debtor raised concerns about inflated invoices and ongoing investigations into fraud involving the appellant's employees. (Paras 1, 2, 12, 24)

Findings of Court:
The court upheld the Adjudicating Authority's decision, confirming that there were pre-existing disputes regarding the invoices, and thus, the CIRP could not be initiated. (Paras 24, 25)

Issues: The main issue addressed was whether the disputes regarding invoices constituted pre-existing disputes that barred the initiation of CIRP. (Paras 24, 25)

Ratio Decidendi: The court reasoned that the disputes raised by the corporate debtor regarding the authenticity of invoices were significant enough to establish a pre-existing dispute, which precluded the initiation of CIRP under Section 9. (Paras 24, 25)

Result: Appeal dismissed.

JUDGEMENT

ASHOK BHUSHAN, J. This Appeal by an Operational Creditor has been filed challenging the Order dated 05.03.2024 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court – II), rejecting a Section 9 Application filed by the Appellant.

2. Brief facts of the case giving rise to this Appeal are:

i. A Master Service Agreement was executed on 27.01.2020 effective from 01.05.2019 between Amazon Seller Services Private Ltd. and Multiplier Brand Solutions Private Limited, the Appellant herein.

ii. The Agreement mentioned that Agreement is entered into between the Amazon Seller Services Private Limited and any of its affiliates domicile in India that issue Work Orders under this Agreement, collectively Amazon of the first part and Multiplier Brand Solutions Private Limited for service provider as second part.

iii. The Agreement provided that service provider will provide services to Amazon on non-exclusive basis in accordance with the terms and conditions of the Agreement.

iv. A Novation and Substitution Agreement was entered on 01.04.2021 between Amazon Seller Services Private Limited, Transferor, Amazon Wholesale (India) Private Limited, Transferee and Multiplier Brand Solutions Private Limited for replacing the Transferee with Transferor in relation to under the Principal Agreement.

3 of 25 v. The Agreement provided that Transferor will relinquish and waive of all its rights, interest, liabilities and obligations under the Principal Agreement and Transferee will entitled to all such rights, interests and will discharge all such liabilities/obligations of Transferor under the Principal Agreement.

vi. Master Service Agreement was renewed with effect from 01.05.2021, which was executed between Amazon Wholesale (India) Private Ltd. and Multiplier Brand Solutions Private Limited.

vii. The Amazon Wholesale (India) Private Limited issued Purchase Order from 06.10.2022 to 04.05.2023, pursuant to Purchase Order, Operational Creditor, rendered deployment of manpower and related services for Amazon Device Project and raised invoices totalling to ₹3,69,57,379/-. Invoices were between 30.03.2023 to 26.05.2023.

viii. Appellant requested the Respondent seeking approval of the invoices.

Appellant received the response that invoices are approved for processing. Email dated 02.05.2023 was also received from the Corporate Debtor that 2 invoices are ready for payment but delayed for Settlement. Appellant sent various reminders to the Respondent requesting for clearing the outstanding dues.

ix. The Corporate Debtor wrote to the Operational Creditor, vide email dated 02.06.2023, the Corporate Debtor has asked the Operational Creditor to share several data. There being allegations of fake data submitted by Operational Creditor with regard to its Amazon other 4 of 25 project with regard to which investigation had commenced by the Appellant itself several documents was called by Corporate Debtor. The Corporate Debtor also asked for supplying the findings relation to investigation carried on by the Multiplier Brand Solutions Private Limited with regard to fake data.

x. There was email correspondence between the Parties. The Operational Creditor had wrote email dated 12.06.2023 to the Corporate Debtor, informing that on the basis of information shared due payment for Amazon Device be released which is kept on hold.

xi. The Corporate Debtor replied vide email dated 16.06.2023, that data is ready for internal investigation and the decision shall be taken regarding payment hold, only after the Corporate Debtor has completed the review.

xii. The Operational Creditor sent a Demand Notice dated 06.11.2023, demanding an amount of ₹3,69,57,379/- as on 03.11.2023, with interest of 18%.

xiii. Demand Notice was replied by the Corporate Debtor vide email dated 18.11.2023 refuting the claim of the Appellant for payment of the amount. In the Reply to Demand Notice, the Corporate Debtor has detailed the correspondence between the Parties p

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