Gagan Chhabra vs Sms Vishwa Jv

[Arising out of order dated 14.05.2024 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court - IV) in C.P. (IB) No. 538/ND/2023]

IN THE MATTER OF: Gagan Chhabra ...Appellant Versus SMS Vishwa JV ...Respondent

Present: For Appellant : Mr. Nizam Pasha, Ms. Awstika Das and Ms. Riya Dhawan, Advocates.

For Respondent : Mr. Abhishek Anand, Mr. Karan Kohli and Ms. Palak Kalra, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

This appeal has been filed by the appellant challenging the order dated

14.05.2024 passed by the adjudicating authority (National Company Law

Tribunal, New Delhi Bench, Court IV), rejecting a Section 9 application filed

by the appellant.

2. Brief facts of the case necessary to be noticed for deciding the appeal

are:

i. The appellant, a lawyer by profession provided legal services to the

respondent - SMS Vishwa JV in arbitration proceeding which took place

between the respondent and Thane Municipal Corporation. ii. A Joint Venture Agreement dated 28.08.2008 was entered between SMS

Paryavaran Limited, M/s. Vishwa Infrastructures & Services Private

Limited and M/s. GSJ Envo Limited. On 20.08.2008 mutual agreement

among the parties was that they would jointly prepare and submit the

tender in the name of joint venture namely; SMS Vishwa JV. SMS

Paryavaran Limited was appointed as lead member. Joint Venture, i.e.,

SMS Vishwa JV submitted tender with Thane Municipal Corporation.

iii. Arbitration dispute arose between the SMS Vishwa JV and Thane

Municipal Corporation in which arbitration proceeding, appellant

provided his professional services to SMS Vishwa JV.

iv. SREI Equipment Finance Limited filed a Section 7 application against

M/s. SMS Vishwa Infrastructures and Services Private Limited, one of

the members of SMS Vishwa JV before the NCLT Hyderabad, which was

admitted on 31.08.2018.

v. A Section 7 petition was filed before the NCLT Delhi against SMS

Paryavaran Limited, which was admitted vide order dated 03.01.2020.

vi. The appellant filed a claim in 'Form-C' as financial creditor for an

amount of ₹2,49,00,000/- in the Corporate Insolvency Resolution

Process (CIRP) of the SMS Paryavaran Limited dated 05.08.2020, which

claim was not admitted by the Resolution Professional (RP).

Communication dated 26.09.2020 was sent to the appellant by the RP.

Rejection of claim was not further agitated by the appellant. Appellant

thereafter filed its claim as an operational creditor in 'Form-B' dated

Comp. App. (AT) (Ins.) No. 1749 of 2024 2 of 12 05.10.2020 for an amount of ₹13,07,060/- to the RP of SMS Paryavaran

Limited, which claim was admitted.

vii. Liquidation proceeding of the corporate debtor M/s. Vishwa

Infrastructures and Services Private Limited was completed and was

allowed by order dated 01.07.2022 by the NCLT Hyderabad.

viii. In the CIRP of the SMS Paryavaran Limited, resolution plan was

approved in which appellant was also proposed certain payment as an

operational creditor.

ix. A demand notice dated 12.06.2023 has been issued by the appellant to

the SMS Vishwa JV claiming a debt of ₹2,49,00,000/-. The SMS Vishwa

JV replied the demand notice vide letter dated 11.07.2023. The claim

of ₹2,49,00,000/- raised by the appellant was refuted and was stated

to be frivolous and malicious.

x. The details of CIRP of the M/s. Vishwa Infrastructures and Services

Private Ltd. and SMS Paryavaran Limited was stated in the reply, the

appellant filed Section 9 application before the NCLT, New Delhi on

18.07.2023.

xi. Adjudicating authority passed an order on 06.10.2023 requiring the

appellant to file an affidavit on the maintainability of the application.

Appellant filed an affidavit dated 26.10.2023 titled as "affidavit on the

maintainability'. The adjudicating authority heard the arguments of

the appellant on the maintainability of the Section 9 application and by

impugned order rejected the application as non-maintainable. Comp. App. (AT) (Ins.) No. 1749 of 2024 3 of 12 xii. Aggrieved by the order of the NCLT dated 14.05.2024, this appeal has

been filed.

xiii. In the present appeal, notices were issued on 22.11.2024. The

respondent appeared and prayed time to file reply on 22.11.2024. Reply

has been filed by the respondent. The respondent in the reply, has

questioned the very maintainability of the application against SMS

Vishwa JV.

3. We have heard learned Counsel Mr. Nizam Pasha appearing for the

appellant and learned counsel Mr. Abhishek Anand appearing for the

respondent.

4. Learned counsel for the appellant submits that adjudicating authority

committed error in rejecting Section 9 application holding that application

which has been filed on the strength of Memorandum of Understanding (MoU)

having been filed for recovery of settled amount which is governed by the MoU

dated 09.06.2018, hence the outstanding debt is not an operational debt. It

is submitted that the ground given by the adjudicating authority for rejecting

Section 9 application is misplaced. The appellant has provided professional

services to the respondent SMS Vishwa JV and has issued two invoices and

the MoU dated 09.06.2018 was only manner of agreement between the parties

for payment of only one of the bills of ₹2.5 crore, hence the nature of debt was

never changed and the debt was operational debt arising from invoices issued

for professional services provided by the appellant. It is submitted that

Comp. App. (AT) (Ins.) No. 1749 of 2024 4 of 12 rendering legal services is an operational debt within meaning of Section 5(21)

of the Code.

5. Mr. Abhishek Anand learned counsel appearing for the respondent

submits that application filed by the appellant was not maintainable against

SMS Vishwa JV, which was a joint venture. SMS Vishwa JV was never

incorporated as a corporate entity, and it was joint venture as per agreement

dated 20.08.2008. Joint Venture Agreement was entered between SMS

Paryavaran Limited, SMS Vishwa Infrastructures and Services Private Limited

and M/s. GSJ Envo Limited. SMS Vishwa JV is not a corporate person within

meaning of the IBC. Proceeding under Section 9 can be initiated only against

the corporate debtor, who is a corporate person who owes a debt to any

person. SMS Vishwa JV not being corporate person no application under

Section 7 was maintainable. It is submitted that the said objection was raised

by the SMS Vishwa JV in the reply to demand notice. Adjudicating authority

conscious of the maintainability issued had directed appellant to file affidavit

on maintainability. Adjudicating authority, however, did not deal with the

said maintainability issue and rejected application on other ground. However,

the application filed by the appellant not being against the corporate person

was clearly not maintainable and was liable to be thrown on this ground

alone. It is further submitted that against two Members of joint venture i.e.,

SMS Paryavaran Limited and M/s. Vishwa Infrastructures and Services

Private Limited, CIRP has already been completed. In the CIRP of M/s. SMS

Paryavaran Limited, appellant has also filed its claim of for same amount for

₹2,49,00,000/- which was not admitted by the RP and issue was not further Comp. App. (AT) (Ins.) No. 1749 of 2024 5 of 12 agitated. Demand notice as well as the filing of Section 9 application was

clearly without jurisdiction and contrary to the IBC.

6. We have heard counsel for the parties and perused the records.

7. Learned counsel for the respondent at very outset having raised the

question of maintainability of Section 9 application by the appellant, we first

proceed to examine the objection raised by the respondent regarding

maintainability of Section 9 application. The appellant has issued a demand

notice dated 12.06.2023 claiming an operational debt of ₹2,49,00,000/-

arising out of MoU dated 09.06.2018 entered between appellant and SMS

Vishwa JV. The demand notice was replied by the SMS Vishwa JV refuting

the claim raised by the appellant. At very outset the reply stated that notice

is issued to unincorporated joint venture and notice is not served under the

terms of the IBC Code 2016. At very outset in the reply following was pleaded

by the respondent:

"To, Gagan Chhabra, 6116, Green Meadows, DLF City, DLF Phase --IV, Gurugram 122 002 (Haryana, India) Ref. : Your Notice dated 12.06.2023 Sub. : Reply to the Notice on behalf of SMS Vishwa JV. Sir, At the outset, we would like to bring to your kind attention that the notice sent by you is firstly not only untenable in law but is also frivolous and maliciously issued. In the notice under reply you have claimed payment in respect of unpaid operation debt (Professional Fees) due Comp. App. (AT) (Ins.) No. 1749 of 2024 6 of 12 from M/s. SMS Vishwa JV. It is imperative to make it abundantly clear to you at the outset that the notice is issued to an unincorporated Joint Venture and the notice is not served independently to the Companies registered under the Companies Act, 1956 or Companies Act, 2013. The notice in terms of the Insolvency & Bankruptcy Code, 2016 is thus itself not tenable and deserves no cognizance..."

8. The reply to demand notice has further pleaded that the CIRP against

two Members of the joint venture, namely SMS Paryavaran Limited and SMS

Vishwa Infrastructures and Services Private Limited have been held and

completed and the claim of ₹2,49,00,000/- was raised by the appellant in the

CIRP of SMS Paryavaran Limited. It is useful to extract following part of the

reply to the demand notice:

"...It is also relevant to note that the two entities in the Joint Venture namely SMS Paryavaran Ltd. & Vishwa Infrastructures & Services Pvt. Ltd. have both undergone the CIRP process and the details thereof are as under:

A. SMS PARYAVARAN LTD

1. CIRP commenced on 03.01.2020.

2. Resolution Plan approved on 21.02.2023. B. VISHWA INFRASTRUCTURES & SERVICES PVT LTD

1. CIRP Commenced on 31.08.2018

2. Liquidation process commenced on 14.06.2019

3. Resolution Approved vide order dated 30.06.2021.

4. Liquidation process closed on 01.7.2022.

In this backdrop itself it is necessary to note that the claim as raised by you is not maintainable against the Corporate Entities which have undergone the resolution process and the claim is thus not tenable in law.

At the same time, it is also necessary to bring to your kind attention that the same claim of Ra 2,49,00,000.00, insofar as SMS Paryavaran Ltd is concerned was raised by your goodself during the CIRP process and was dealt with by the Resolution Professional before acceptance of the Resolution Plan.

Comp. App. (AT) (Ins.) No. 1749 of 2024 7 of 12 Even under the Resolution Plan the amount of claim admitted and the payments made pursuant thereto to your goodself are already accepted by you and the instant claim now raised is nothing but an extortionate attempt on your part.

An amount of Rs. 28,393/- was paid to your goodself under the Resolution Plan towards your claims of Rs 13,07,060. At the same time insofar as Vishwa Infrastructures & Services Pvt. Ltd. is concerned, there has never been raised any claim by your goodself throughout the CTRP process or then the Liquidation proceedings and your claim at this belated stage is not maintainable..."

9. Section 3(7) & Section 3(8) defines corporate person and corporate

debtor. Section 3(7) & Section 3(8) are as follows:

"3. Definitions In this Code, unless the context otherwise requires,-- (7) "corporate person" means a company as defined in clause (20) of section 2 of the Companies Act, 2013, a limited liability partnership, as defined in clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider; (8) "corporate debtor" means a corporate person who owes a debt to any person;"

10. The proceeding under Section 9 can be initiated against the corporate

debtor who owes a debt to any person. Definition under Section 3(8) provides

that corporate debtor means a corporate person, thus precondition of entity

to be treated as corporate debtor within the meaning of IBC is that it should

be a corporate person. Corporate person has been defined in Section 3(7)

which means a company defines under Clause 2 of the Companies Act 2013,

limited liability partnership or any other person incorporated with limited

liability under any law. It is the case of the appellant itself that respondent

SMS Vishwa JV is a joint venture. The first item of the list of date refers to

Comp. App. (AT) (Ins.) No. 1749 of 2024 8 of 12 Joint Venture Agreement dated 20.08.2008 in Section 9 application, which is

as follows:

"20.08.2008 : The Corporate Debtor is a Joint Venture emanating from Joint Venture Agreement dated 20.08.2008 between three Companies namely "SMS Paryavaran Limited, M/s Vishwa Infrastructures & Services Private Limited and MIs GSJ Envo Limited". Under this Joint Venture Agreement M/s SMS Paryavaran Limited was the Lead Company out of the Three legal entities."

11. The above indicates that a Joint Venture Agreement was entered on

20.08.2008 between the three companies, namely; (i) SMS Paryavaran Limited

(ii) M/s. Vishwa Infrastructure and Services Private Limited and (iii) M/s. GSJ

Envo Limited. Joint venture known as SMS Vishwa JV is not an incorporated

entity. As noted above in the reply to the demand notice the issue of non-

maintainability of the demand notice against the SMS Vishwa JV was raised

by the respondent at very outset as noted above. Appellant in the appeal has

brought the copy of the affidavit on maintainability as Annexure-3 to the

appeal which indicates that adjudicating authority vide its order dated

06.10.2023, directed the appellant to explain the maintainability of the

application. Paragraph 15 of the affidavit sought to deal with the objection of

unincorporated joint venture. Paragraph 15 of the affidavit is as follows:

"15. That the Operational Creditor is dealing with the contentions objections of the Corporate Debtor in seriatim as follows;

REPLY TO THE OBJECTION OF UN-INCORPORATED JOINT VENTURE-

Comp. App. (AT) (Ins.) No. 1749 of 2024 9 of 12 a. The Corporate Debtor/Respondent has taken an Objection that the Joint Venture is an Un-Incorporated Entity and the present Application filed by Operational Creditor is therefore, not maintainable. The Operational Creditor contends that such an objection is against the settled principles of law and is therefore, liable to be rejected.

The operational Creditor places reliance on the Judgement of the Hon'ble NCLAT wherein, it has been held that section 69 (2) of the Partnership Act is not attracted where an Application u/s 9 IBC is filed since, Application Under Section 9 of IBC, 2016 is not a Suit so as to apply Section 69(2) of the Partnership Act. Thus, this Application under BC Code, 2016 is maintainable in law.

The Operational Creditor further relies on the Judgement of the Hon'ble NCLT, New Delhi Bench-VI in CP(IB)- 300/ND)/2021 titled as "Preet Shuttering Store versus M/s. M.I Buildtech Private Limited" wherein it has been held that "10. Section 69(2) of the Indian Partnership Act, 1932, reads as follows: -

"No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm."

11. It is clear from the above that the provision would apply only to a 'suit' and not to proceedings.

Applications filed under IBC are not 'suits' but only proceedings, and therefore, we hold that the bar in terms of Section 69(2) of the Indian Partnership Act, 1932, would not apply to applications filed under the IBC."

b. Additionally, the Operational Creditor relies on the judgement of the Hon'ble High Court of Delhi in OMP(Enf.) (Comm.) 188/2021, CCP(0) 46/2022 titled as "ITD Cementation India Limited versus SSJV-ZVS Joint Venture & Ors." wherein it has been held that the Petitioner/aggrieved party is entitled in law to proceed against the Respondents jointly and severally. The Operational Creditor has an MOU with the Corporate Debtor/Respondent, which has made Part Payment to the Operational Creditor against its Admitted Debt. The Operational Creditor therefore, need not implead all three Companies separately in the Application (Refer Judgement passed by the Hon'ble NCLAT, New Delhi in Company Appeal (AT) (Insolvency) No. 155/2018 titled Comp. App. (AT) (Ins.) No. 1749 of 2024 10 of 12 as "Mrs. Mamatha versus AMB Bulldtech Pvt. Ltd. & Ors.) Copies of the Judgements relied upon by the Operational Creditor are annexed as ANNEXURE-2 ,3 & 4 respectively."

12. The above affidavit of the appellant filed by the appellant replying the

objection regarding maintainability of the application under Section 9 against

SMS Vishwa JV clearly admits that SMS Vishwa JV is not an incorporated

entity and it was only unincorporated joint venture, which came together for

a purpose and is not an incorporated entity. The three companies which came

together to enter into agreement on 20.08.2008 to form a joint venture are not

the party to Section 9 application. SMS Vishwa JV being not incorporated

entity, application under Section 9 was clearly not maintainable.

13. It is also relevant to notice that with respect to 2 companies of the joint

venture, i.e., SMS Paryavaran Limited and M/s. Vishwa Infrastructures and

Services Private Limited, CIRP had already been initiated which had come to

an end. In CIRP of SMS Paryavaran Limited, which was lead Member of the

joint venture. Appellant has filed its claim on 05.08.2020 in 'Form-C' for the

same amount of ₹2,49,00,000/- relying on the MoU dated 09.06.2018, which

claim was not admitted by RP. Appellant in the appeal itself has brought on

record the copy of claim form in 'Form-C' at page 343 of the paper book which

claim was not admitted by the RP on 26.09.2020 which by email dated

26.09.2020 which is at page 349 of the paper book. The rejection of the claim

of same amount against the lead member was not even pursued by the

appellant and the appellant in the CIRP of SMS Paryavaran Limited filed

Comp. App. (AT) (Ins.) No. 1749 of 2024 11 of 12 another claim in 'Form-B' for amount of ₹13,00,000/- which was admitted

and has been dealt in the resolution plan.

14. We, thus find sufficient substance in the objection raised by the

respondent regarding very maintainability of Section 9 application. The issue

of maintainability before the adjudicating authority against unincorporated

joint venture was very much there which is reflected from the affidavit of

maintainability filed by the appellant itself as noted above. However,

adjudicating authority without adverting to the said objection rejected Section

9 application on different grounds. We, however, are satisfied that application

under Section 9 was not maintainable against the SMS Vishwa JV which is

not a corporate person.

15. We, thus sustain the objection raised by the respondent hold that

Section 9 application filed by the appellant was not maintainable against SMS

Vishwa JV. We dismiss the appeal upholding the order of the adjudicating

authority, although on the grounds as noted above.

Parties shall bear their own costs.

[Justice Ashok Bhushan] Chairperson

[Arun Baroka] Member (Technical)

NEW DELHI

30th June, 2025

himanshu

Comp. App. (AT) (Ins.) No. 1749 of 2024 12 of 12