Ashwani Atrish vs Paras Art Studio & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI COMPANY APPEAL (AT) (INSOLVENCY) No.352 of 2022 (Arising out of Order dated 15.02.2022, passed by National Company Law Tribunal, New Delhi Bench, Court - III in C.P. (IB)No.953/ND/2020)

IN THE MATTER OF:

Ashwani Atrish [Ex-Director, M/s. Grades Entertainments Pvt. Ltd.] Correspondence Address: 304, Competent House, F-14, Middle Circle, Connaught Place, New Delhi - 110001 Email Id: vipingarg@vgnc.in ...Appellant

Versus

1. M/s. Paras Art Studio Block A-52/7, Middle Circle, Connaught Place, New Delhi - 110001. Email: accounts2@parasartstudio.com ...Respondent No. 1

2. Mr. Nimit Soni s/o Vijay Soni Partner of Paras Art Studio Block A-52/7, Middle Circle, Connaught Place, New Delhi - 110001. Email: accounts2@parasartstudio.com ...Respondent No. 2

3. Mr. Rajan Soni s/o Late Prem Soni Partner of Paras Art Studio Block A-52/7, Middle Circle, Connaught Place, New Delhi - 110001. Email: accounts2@parasartstudio.com ...Respondent No. 3

4. Mr. Vijay Soni s/o Late Prem Soni Partner of Paras Art Studio Block A-52/7, Middle Circle, Connaught Place, New Delhi - 110001. Email: accounts2@parasartstudio.com ...Respondent No. 4

5. M/s. Cox & Kings Ltd. (In Liquidation) Through Liquidator Ashutosh Agarwala D-1005, Ashok Towers, Dr. S.S. Rao Road, -2-

Parel, Mumbai - 400012 Email: ip.coxandkings@duffandphelps.com, compliance@coxandkings.com ...Respondent No. 5

6. M/s. Grades Entertainments Pvt. Ltd. (Under CIRP) Through Mr. Nitish Kumar Chugh - [IRP] A-802, Dharam CGHS, Plot No. 18, Sector - 18A, Dwarka, New Delhi - 110075 Email: cirp.grades@gmail.com, ca.nitis@gmail.com ...Respondent No. 6

For Appellant: Mr. Akhilesh Kumar, Mr. Vipin Garg, Mr. Arjun Agarwal & Mr. Krishna Goel, Advocates.

For Respondent No. 5: Mr.Pulkitesh Tiwari, Ms. Bency Ramakrishnan & Mr. Akash Menon, Advocates for R-5.

For Respondent No. 6: Mr. Rajat Chaudhary, Advocate for R-6.

JUDGEMENT

(Per: Shreesha Merla, Member (T))

1. This Appeal is filed by the Suspended Director of M/s. Grades

Entertainment Private Limited/ the 'Corporate Debtor' under Section 61 of

the Insolvency and Bankruptcy Code, 2016, (hereinafter referred to as 'The

Code'), being aggrieved by the Impugned Order dated 15/02/2022 passed by

the Learned Adjudicating Authority (National Company Law Tribunal, New

Delhi Bench) in C.P. (IB) No. 953/ND/2020, wherein the Learned

Adjudicating Authority has admitted the Section 9 Application filed by M/s.

Paras Art Studio/ the 'Operational Creditor'.

2. Succinctly put, the facts in brief are that M/s. Cox & Kings, (which is

in liquidation), was given the contract to organise a mega event called

Company Appeal (AT) (Insolvency) No.352 of 2022 -3-

Petrotech, 2019 held by the Ministry of Petroleum and Natural Gas,

Government of India. M/s. Cox & Kings engaged M/s. Grades

Entertainment Private Limited/the 'Corporate Debtor' which in term

engaged M/s. Paras Art Studio/the 'Operational Creditor' to provide the

designing and fabrication services and other assistance for the said event.

3. It is the case of the Appellant that they were engaged by M/s. Cox &

Kings as their authorised agent only to release the payments to the various

Vendors/Sub-Contractors appointed by M/s. Cox & Kings, for which the

'Corporate Debtor' was paid a fixed charge of Rs.20,00,000/-. Learned

Counsel for the Appellant submitted that the 'Corporate Debtor' was

instructed by M/s. Cox & Kings to submit a Performa Invoice on the lines of

the Invoice dated 21/01/2019 raised by the 'Operational Creditor' for the

consolidated estimated sum of Rs.5,00,00,000/- + GST, on 31/01/2019 and

the purchase of the Order of the same account was issued by M/s. Cox &

Kings to the 'Corporate Debtor' for the aforesaid estimated sum of payments

to be released by the 'Corporate Debtor' to the Vendors/Sub-Contractors.

The Learned Counsel strenuously contended that the Vendors/Sub-

Contractors appointed by M/s. Cox & Kings included the 'Operational

Creditor' who was providing services directly to M/s. Cox & Kings and their

role was only of an accounting and payment mechanism to raise Invoices in

the name of the 'Corporate Debtor' and therefore never incurred any 'debt',

in terms of the provisions of Section 3(11) of the Code. Learned Counsel

drew our attention to the purchase Order dated 15/01/2019 issued by M/s.

Cox & Kings. Thereafter on 31/01/2019, M/s. Cox & Kings appointed the

Company Appeal (AT) (Insolvency) No.352 of 2022 -4-

'Corporate Debtor' as its authorised payment agent to receive and disburse

the amounts, as per instructions, the 'Corporate Debtor had released four

payments.

4. Learned Counsel argued that the 'Operational Creditor is a direct

service provider to M/s. Cox & Kings and also filed its claim with the IRP on

17/01/2020. It is also submitted that the 'Corporate Debtor' itself has filed

their claim before the RP of M/s. Cox & Kings for an amount of

Rs.2,85,00,000/- pertaining to the event Petrotech 2019 and it was during

the course of discussion with IRP that the 'Corporate Debtor' came to know

about the claim filed by the 'Operational Creditor'. It is contended that the

'Corporate Debtor' is not a sister concern of M/s. Cox & Kings and both are

independent Companies and therefore, there is no 'debt' payable by the

'Corporate Debtor'. There was also a dispute which is raised about the

liability of the claim raised by the 'Operational Creditor' and therefore this

Application under Section 9 is not maintainable. It is also contended that

M/s. Cox & Kings was a necessary party as the claim for the same amount

has been made by the 'Corporate Debtor' and the first Respondent before the

Liquidator of M/s. Cox & Kings.

5. The main point which falls for consideration in this Appeal is whether

the Adjudicating Authority was justified in admitting the Application filed by

the 'Operational Creditor' under Section 9 of the Code.

6. It is an admitted fact that the 'Corporate Debtor' was engaged by M/s.

Cox & Kings for providing services for the event Petrotech 2019 and the

'Corporate Debtor' acted as an intermediary. In the meantime, CIRP Process

was initiated against M/s. Cox & Kings vide Order dated 22/10/2019,

Company Appeal (AT) (Insolvency) No.352 of 2022 -5-

pursuant to which, the 'Corporate Debtor' filed a Claim as an 'Operational

Creditor' with the Liquidator of M/s. Cox & Kings. For better understanding

of the role of the Appellant and the first Respondent, the Tax Invoice dated

21/01/2019 is reproduced as hereunder:

Company Appeal (AT) (Insolvency) No.352 of 2022 -6-

7. The aforenoted Tax Invoice shows that the payment was made to the

account of the 'Operational Creditor' by the 'Corporate Debtor'. The material

on record evidences that the 'Corporate Debtor' deposited TDS of

Rs.4,12,000/- which is the TDS on the entire amount of the Invoice of

Rs.2,06,00,000/-. It is not disputed that the 'Operational Creditor' deposited

the GST of Rs.37,08,000/- on the entire amount of the Invoice in favour of

the 'Corporate Debtor' and the benefit of the said amount as input amount

has been taken by the 'Corporate Debtor'. A perusal of the Invoices

evidences that the Tax Invoice was raised in favour of the 'Corporate Debtor'

and not on M/s. Cox & Kings. It is significant to mention that the part

payment was also made by the 'Corporate Debtor' and not by M/s. Cox &

Kings. This Tribunal is of the considered view that the privity of contract is

between the 'Operational Creditor' and the 'Corporate Debtor' and therefore

the amount which is in default is 'due and payable'. In so far as Pre-

Existence of Dispute warranting rejection of Application of triggering of CIRP

under Section 9 of the Code is concerned, a bare perusal of the material on

record filed by the 'Corporate Debtor' does not evidence any dispute which is

not spurious or illusory and requires investigation. Having regard to the

evidence on record, we have no hesitation in holding that the Appellant has

hired the services of the Respondent for executing the event and owes an

obligation to pay for the same, thereby bringing it within the fold of

'Operational Debt' and therefore the first Respondent holds the

status of an 'Operational Creditor' qua the Appellant.

Having held so, we observe that there is no infirmity in the Order of

Company Appeal (AT) (Insolvency) No.352 of 2022 -7-

the Adjudicating Authority in holding that there is an 'Operational Debt' in

respect of the 'default' which is alleged and is therefore payable in law.

8. The finding is perfectly justified in the facts and circumstances of the

case and therefore we are of the considered view that the Impugned Order

does not suffer from any factual frailty. Hence, this Appeal fails and is

dismissed accordingly. No Order as to costs.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Ms Shreesha Merla] Member (Technical) New Delhi 11th April, 2022

himanshu

Company Appeal (AT) (Insolvency) No.352 of 2022