National Company Law Appellate Tribunal
Devesh Saraf Suspended Director Of M/S ... vs Rama Tent House And Anr on 11 October, 2023
Author: Ashok Bhushan
Bench: Ashok Bhushan
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT)(Insolvency) No. 51 of 2023
[Arising out of order dated 22.12.2022 passed by the Adjudicating
Authority, National Company Law Tribunal, New Delhi Bench VI in CP(IB)
No.596/(ND)/2020]
IN THE MATTER OF:
Devesh Saraf
Suspended Director of
M/s Unison Hotels Private Limited
Plot No.2, Nelson Mandela Marg,
Vasant Kunj, Phase-II, New Delhi - 110 070 ...Appellant
Versus
Rama Tent House
5, hospital Road, Bhogal,
Jangpura, New Delhi - 110 014 ...Respondent No.1
Mr. Krit Narayan Mishra,
Interim Resolution Professional,
M/s Unison Hotels Private limited,
29A, DDA SFS Flats, Pocket 1, Dwarka,
New Delhi - 110 075 ...Respondent No.2
Present:
Appellant: Mr. Arun Kathpalia, Sr. Advocate, Mr. Harshit
Ratra, Ms. Diksha Gupta, Ms. Priyanka Gupta,
Advocates
For Respondents: Mr. Vishwa Bhushan Arya, Mr. Atul Agarwal, Mr.
Amit Chauhan, Mr. Harsh Khatana, Advocates for
R-1
Mr. Milan Singh Negi, Mr. Nikhil Jha, Advocates
for R-2/RP
Company Appeal (AT) (Ins.) No. 51 of 2023
1
JUDGMENT
[Per: Barun Mitra, Member (Technical)] The present appeal filed under Section 61 of Insolvency and Bankruptcy Code, 2016 ("IBC" in short) by the Appellant arises out of the Order dated 22.12.2022 (hereinafter referred to as "Impugned Order") passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench- VI) in CP (IB) No.596/(ND)/2020. By the impugned order, the Adjudicating Authority has admitted the application under Section 9 of the IBC filed by M/s Rama Tent House-present Respondent No.1 and initiated Corporate Insolvency Resolution Process ("CIRP" in short) of the Corporate Debtor - M/s Unison Hotels Private Limited. Aggrieved by this impugned order, the present appeal has been filed by Shri Devesh Saraf, Suspended Director of the Corporate Debtor.
2. The brief facts of the case which are necessary for deciding this appeal are as outlined below: -
The Corporate Debtor had entered into a business agreement with the Operational Creditor - Respondent No.1 for tent house services to be provided in respect of a hotel managed by the Corporate Debtor. The agreement was for the period 01.09.2015 to 31.08.2017 which was further extended up to 31.08.2018.
The Operational Creditor raised invoices in the name of the Corporate Debtor and had claimed an operational debt of Rs.1,10,05,215/-. Since the amount had purportedly remained unpaid, the Operational Creditor had issued a demand notice under Section 8 of IBC on 08.05.2019 on Company Appeal (AT) (Ins.) No. 51 of 2023 2 the Corporate Debtor. The Corporate Debtor had replied to the demand notice on 23.05.2019.
As the payment remained outstanding, the Respondent No.1 filed a Section 9 application on 11.02.2020. The Adjudicating Authority having considered the matter passed the impugned order admitting the Section 9 application against which the present appeal has been preferred.
3. The Learned Senior Counsel for the Appellant contended that the Corporate Debtor had denied the demand raised by the Operational Creditor in their reply to the Section 8 demand notice. Further the debt is barred by limitation because the outstanding amount claimed in the demand notice is outstanding since 22.01.2017. It was also contended that the Adjudicating Authority committed the error of relying solely on the email dated 22.01.2018 to hold that the Corporate Debtor had admitted the debt without taking cognizance of the email dated 22.03.2018 wherein it was stated by the Corporate Debtor that the account was under reconciliation. It was also added that the Operational Creditor had not submitted statement of account of the relevant period in support of their contention of outstanding operational debt. On the contrary, the audited statement of accounts of the Corporate Debtor which has also been relied upon by the Respondent No.1 shows that there was an outstanding amount of Rs. 7,71,434/- which was receivable from Respondent No.1. The impugned order has also been assailed on the ground that the Adjudicating Authority has not taken due note of the fact that there was a long-standing pre-existing dispute of deficient and incomplete services which constituted sufficient ground for rejection of the Section 9 application.
Company Appeal (AT) (Ins.) No. 51 of 2023 3
4. The Learned Counsel for the Respondent No.1 refuting the arguments of the Appellant forcefully contended that the Corporate Debtor by their own email dated 22.01.2018 had clearly admitted the outstanding debt. It was also contended that since the payments were made in a running account by the Corporate Debtor and the last such payment was made in March/April 2017, the debt was very much within the limitation period. As no payments were forthcoming from the Corporate Debtor, a Section 8 demand notice was sent to the Corporate Debtor claiming an operational debt of Rs.1,10,05,215/- which was above the threshold limit. Denying that there was any pre-existing dispute, it was submitted that the Corporate Debtor failed to show the existence of any suit or arbitration which had been filed before the receipt of the demand notice. Further the reply notice of the Corporate Debtor does not make any reference to the emails basis which pre-existing disputes have been allegedly raised. It was also asserted that they had chosen to terminate the contract to which the Corporate Debtor responded on 22.03.2018 by stating that they respect their decision of contract termination and assured to give a payment plan soon without making reference to any dispute or deficiency in service.
5. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records carefully.
6. Submission was pressed by the Corporate Debtor that the claim of the Operational Creditor was barred by limitation since the purported invoices relied upon by the Operational Creditor were beyond the period of limitation. It has also been submitted that the Operational Creditor failed to disclose as to which invoice is paid and which are payable. It was also pointed out that Company Appeal (AT) (Ins.) No. 51 of 2023 4 the Operational Creditor had claimed operational debt without specifying the date when the debt had become due and payable which was a pre-requisite for maintainability of a Section 9 application.
7. On the issue whether the petition is barred by limitation, the Adjudicating Authority has recorded its findings in the negative by giving the following reasoning in the impugned order which is to the effect:
"7. The contention of the Corporate Debtor that the present petition is barred by limitation does not suffice as the Hon'ble Supreme Court has in the case of Asset Reconstruction Company (India) Limited v Bishal Jaiswal (2021) 6 SCC 366, held that Section 18 of the Limitation Act, 1963 which extends the period of limitation depending upon an acknowledgement of debt made in writing and signed by the Corporate Debtor, is applicable to proceedings under the IBC. The Supreme Court further held that entries in the Balance Sheet would amount to acknowledgment of debt for the purpose of extension of limitation under Section 18 of the Limitation Act. In the present case, the Corporate Debtor has acknowledged the debt in the E-mail dated 22.01.2018, thereby giving a fresh lease of limitation. Therefore, the present petition is not barred by limitation."
8. The Learned Senior Counsel for the Appellant further submitted that reliance which has been placed by the Adjudicating Authority on the judgment of the Hon'ble Supreme Court in the matter of Asset Reconstruction Company (India) Limited v. Bishal Jaiswal (2021) 6 SCC 366 in the context of the email of 22.01.2018 is misplaced. Questioning the authenticity and genuineness of the email of 22.01.2018 and the ledger attached thereto, reference was adverted to the judgment of this Tribunal in the matter of GL Shoes v. M/s. Action Udyog Pvt. Ltd. in CA(AT) (Ins.) 846/2022 and contended that an unsigned document sent electronically does not constitute a valid acknowledgment for the purpose of extending the period of limitation. Company Appeal (AT) (Ins.) No. 51 of 2023 5 It was also argued that the body of the forwarding email also does not indicate that the debt was acknowledged by the Corporate Debtor.
9. It is the counter contention of the Operational Creditor that limitation runs from the date of default and not from the date when the debt becomes due. It was asserted that the accounts statement filed by the Corporate Debtor shows that the payment was being made in a running account by the Corporate Debtor and several entries show that payments were made in March/April 2017 as placed at page 210-211 of Appeal Paper Book ("APB" in short). We are therefore inclined to agree with the Respondent No. 1 that since the Section 9 petition was filed on 15.02.2020, it fell very much within the limitation period independent of even the acknowledgment of debt in the email of 22.01.2018.
10. We now come to the contention of the Corporate Debtor that the alleged dues of the Operational Creditor were not payable as there existed a dispute with respect to the quality and nature of services offered by the Operational Creditor which had led to loss of customers and consequential damages to the Corporate Debtor. It was also contended that the financial health of the Corporate Debtor was never in question being a well-established and solvent company. Thus, the question of default because of financial incapacity does not arise. Moreover, the Corporate Debtor relied upon bills issued from time to time and placed on record statement of accounts certified by the Chartered Accountant as per which Respondent No.1 was liable to pay Rs.7,71,434/- to the Corporate Debtor.
11. The findings on pre-existing disputes have been recorded in the negative by the Adjudicating Authority as reproduced below:
Company Appeal (AT) (Ins.) No. 51 of 2023 6 "6. The Corporate Debtor has stated in his reply that there were pre-existing disputes between the parties and he has also contended that the petition is barred by Limitation. The disputes w.r.t the quality of work were raised by the Corporate Debtor in its emails sent in the year 2017. However, in the e-mail dated 22.01.2018, the Corporate Debtor has acknowledged the debt.
The Corporate Debtor while acknowledging the debt in the said e-mail has nowhere mentioned about the existence of any disputes between the parties. The e-mail dated 22.01.2018 clearly acknowledges the outstanding amount of Rs. 1,10,05,215 due as on 22.01.2017.
7.....
8. In the light of the above said facts and after giving careful consideration to the entire matter, hearing the arguments of the learned counsel for the Operational Creditor as well as the Learned Counsel for the Corporate Debtor and upon appreciation of the documents placed on record to substantiate their respective claims, this Adjudicating Authority is of the view that there is an operational debt which is due from the Corporate Debtor and the Corporate Debtor has defaulted in making payment of the amount due and accepted the said default. The Corporate Debtor has defaulted in making payment of the amount due and along with that, in the absence of any preexistence of dispute this tribunal admits this application and initiates CIRP on the Corporate Debtor with immediate effect."
(Emphasis supplied)
12. We would like to be guided by the principles laid down by the Hon'ble Supreme Court in the matter of Mobilox Innovations Private Limited v. Kirusa Software Private Limited, Civil Appeal No. 9405 of 2017 dated 21.09.2017 ('Mobilox' in short), which is as extracted below, to find out whether any genuine and real pre-existing dispute is discernible in the facts of the present case:
"40. It is clear, therefore, that once the operational creditor has filed an application, which is otherwise complete, the adjudicating authority must reject the application under Section 9(5)(2)(d) if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. It Company Appeal (AT) (Ins.) No. 51 of 2023 7 is clear that such notice must bring to the notice of the operational creditor the "existence" of a dispute or the fact that a suit or arbitration proceeding relating to a dispute is pending between the parties. Therefore, all that the adjudicating authority is to see at this stage is whether there is a plausible contention which requires further investigation and that the "dispute" is not a patently feeble legal argument or 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."
(Emphasis Supplied)
13. This brings us to the stand taken by the Appellant that in their email dated 22.03.2018 they had requested for reconciliation of account and this substantiates that they had disputed the outstanding amount. To examine the credulity of their contention, it would be useful at this stage to reproduce the said email which is as follows: -
"On 22 March 2018 at 18:00, Jayant Jain sdol@thegrandnewdelhi com> wrote Dear Mr Batra, We respect your decision of not renewing the contract with Grand anymore.
We are in the process of reconciliation of accounts and once it is completed will let you know the suitable payment plan, and the date for the removal of the material.
Regards"
The wordings of the above email do not show that the Corporate Debtor had denied or disputed the existence of outstanding debt qua the Operational Creditor. All that can be inferred from a plain reading of this letter is that they were in the process of reconciliation of accounts on completion of which they Company Appeal (AT) (Ins.) No. 51 of 2023 8 were to determine the payment plan. By no stretch of extrapolation can it be concluded that any dispute qua the debt was raised in the said email or the payment was denied by the Corporate Debtor therein.
14. Even after the Corporate Debtor mentioned about reconciliation of accounts in their email, the Operational Creditor again sent an email on 19.05.2018 seeking a confirmation reply from the Corporate Debtor with regard to the outstanding balance payable to them towards services rendered. The said email is extracted below for easy reference: -
"On Sat. 19 May 2018 at 14:17, Rama Tent House <[email protected]> wrote. Dear Sir, This is reference to our meeting dated 3rd May, 2018 in lobby of the hotel. Sir, we await your reply on the following points as discussed in the meeting.
1. Confirmation of outstanding balance of Rama Tent House towards services rendered at Grand Greens marquee.
2. Approval of terms as verbally discussed towards renovation of marquee erected at Grand Greens.
Sir, kindly reply & confirm on both points so we can move forward towards redrafting of contract & further perusal of renovation of marquee.
Awaiting response.
Thanks & regards, Yash Batra RAMA TENT HOUSE"
15. This email was again followed up a day later on 20.06.2018 by the Operational Creditor seeking release of outstanding payment and the schedule of payment as is placed at page 114 of APB. This shows that the Operational Creditor had been consistently pressing for release of their outstanding amount while there is nothing on record to show that the Corporate Debtor objected to the claims raised by the Operational Creditor or Company Appeal (AT) (Ins.) No. 51 of 2023 9 disputed the issue of outstanding payment raised by the Operational Creditor. We also do not find any material having been placed on record to show that the Corporate Debtor had claimed an amount of Rs.7,71,434/- as receivable from the Operational Creditor prior to the issue of demand notice.
16. Furthermore, we find that even in their emails raising the issue of snags in the performance of services by the Operational Creditor, we do not find any material which shows that the Corporate Debtor linked the performance issues with the payment of outstanding debts. On the other hand, we notice that the Operational Creditor in their reply to these emails of the Corporate Debtor, consistently and unfailingly raised the issue of outstanding payments. The existence of debt, due and payable, has not been controverted by the Corporate Debtor in the emails exchanged by them with the Operational Creditor.
17. Given this backdrop, we find that the Adjudicating Authority in the present case has duly considered the reply and submissions made by the Corporate Debtor and correctly come to the conclusion that there is no ground to establish any real and substantial pre-existing dispute which can thwart the admission of Section 9 application against the Corporate Debtor. We find no persuasive reasons to be convinced that there was any pre-existing dispute.
18. For the foregoing reasons, we are of the view that the Adjudicating Authority has rightly admitted the application of the Operational Creditor filed under Section 9 of IBC. We are satisfied that the impugned order does not warrant any interference. There is no merit in the Appeal. The Appeal is dismissed. The Registry is directed to take appropriate action without any Company Appeal (AT) (Ins.) No. 51 of 2023 10 delay to refund the amount of Rs.1,10,05,215/-which was deposited by the Appellant in pursuance of interim order of this Tribunal dated 16.01.2023. IRP may proceed with the CIRP of the Corporate Debtor as per law. No order as to costs.
[Justice Ashok Bhushan] Chairperson [Barun Mitra] Member (Technical) Place: New Delhi Date: 11.10.2023 PKM Company Appeal (AT) (Ins.) No. 51 of 2023 11