Gupshup Technology India Pvt. Ltd vs Zopsmart Technology Pvt. Ltd

[Arising out of Order dated 5th October, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench, Bengaluru in CP(IB)NO.12/BB/2018]

IN THE MATTER OF:

M/s Gupshup Technology India Pvt. Ltd. 101, 1st Floor, Silver Metropolis, Western Express Highway, Goregaon (East), Mumbai - 400 063.

...Appellant

Vs

M/s Zopsmart Technology Pvt. Ltd. 1502, 19th Main Road, Sector - 1, HSR Layout, Bengaluru, Bengaluru - 560 102.

...Respondent

Present:

For Appellant: Mr. Ashok Kriplani, Mr. Baijnath Patel and Mr. Hitesh, Advocates.

For Respondent: Mr. Sanjib K. Mohanty, Mr. Awanish Sinha, Ms. Shweta Kumari and Mr. Amit Acharya, Adcovates. -2-

SUDHANSU JYOTI MUKHOPADHAYA, J.

M/s Gupshup Technology India Pvt. Ltd. (Operational Creditor) filed

application under Section 9 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as 'I&B Code') against 'M/s Zopsmart Technology Pvt.

Ltd.' (Corporate Debtor) which having rejected by Adjudicating Authority

(National Company Law Tribunal), Bengaluru Bench, Bengaluru by order

dated 5th October, 2018, the present appeal has been preferred by the

Appellant.

2. According to Appellant two purchase orders dated 21st April, 2015 and

23rd April, 2015 were placed by the Corporate Debtor for availing promotional

Short Messaging Services (SMS) from the 'Operational Creditor' for text SMS's.

Accordingly, the Appellant delivered the required number of SMS's pursuant

to two purchase orders. The Respondent has not raised any objection or

demur as to the work executed by the 'Operational Creditor' in respect of the

services provided. The Appellant raised invoices totaling to Rs.14,54,569/-

which were duly accepted and acknowledged by the Corporate Debtor.

Further case of Appellant is that pursuant to its claim the Corporate Debtor

made part payment of Rs.2,95,359/- leaving balance amount of

Rs.11,59,230/- along with interest of Rs.4,27,746/-. Inspite of demand

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notice made by the Appellant, the Corporate Debtor failed to pay the rest of

the amount.

3. The Respondent opposed the prayer on the ground that the claim of

the Appellant is frivolous, vexatious and not maintainable either in law or on

facts. It is alleged that the application has been filed for harassment and

coercion of the Respondent. Lack of bonafide was also raised. The

Respondent further took plea that it has come to know about the Appellant

and his services through internet and there was no written contract between

the Appellant and the Respondent.

4. The Respondent has not disputed that the Appellant provided text SMS

services to the Respondent through internet. The Respondent has taken such

services in absense of any written contract. It has not disputed, on the other

hand accepted that Respondent placed two purchase orders dated 21st April,

2015 and 23rd April, 2015 to the Appellant for availing promotional short

messaging services (SMS) for text SMD services from the Appellant. The

amount of Rs.2,95,339/- has been paid by the Respondent to Appellant has

not been disputed. It was contended on behalf of the Respondent that three

more invoices were issued on 15-16 June, 15-16 July and 15-16 August. Out

of the total amount paid to the Appellant, a sum of Rs.23,178/- was paid

towards the purchase orders placed by the Respondent to the Appellant and

thereafter owing to telephonic request of the officials of the Appellant, the

Respondent made further payment of Rs.2,72,161/- to the Appellant in good

faith for extra invoices. It was contended that the Respondent has made

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payment for purchase orders placed by them including two more invoices upto

31st July 2015, as a matter of trust.

5. It was submitted, in respect to purchase orders placed by the

Respondent, on its own huge jump in the SMS quantity which were beyond

the capacity of the Respondent was made. On 30th July, 2015, the Appellant

sent SMS worth Rs.1,58,454/-, On 30th September, 2015, the Appellant sent

SMS worth Rs.9,11,856/- and on 31st October, 2015, the Appellant sent SMS

worth Rs.1,08,935/-. Contrarily, the Appellant has raised bill for SMS on 31st

December, 2015 though it was beyond the capacity of the Respondent to

comply with this huge number of SMS.

6. The Adjudicating Authority on hearing the parties observed as follows:-

"7. It is not in dispute there is no contract between the

parties except two purchase orders for which due payment

released and admittedly only emails being exchanged to

continue passing on some e-mail correspondence between

the parties. It is true that the Tribunal cannot take judicial

notice of exchange of email correspondence regarding to

disputes in question. It is also to be noted that the learned

counsel for the respondent submits that in pursuant they

have already paid taken into consideration to the extent that

amount is due for the service rendered by the Petitioner.

Therefore, this passing on the SMS exchange for the services

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rendered cannot be treated as debt and default. Therefore,

it is not possible for the Tribunal to verify the veracity of the

SMS exchanged by the parties. Therefore, we are not in a

position to accept the debt and default and we are

convinced that the amount due to be paid was duly paid

and we cannot enter into this issue. CP(IB)No.12/BB/2018

is rejected. No order as to costs."

7. On hearing learned counsel for the parties and the judgment, we find

that the Adjudicating Authority has not applied its mind nor gone through the

application under Section 9 (Form 6) to find out whether there is debt payable

or not. It has simply rejected the application on the ground that there is no

contract between the parties which cannot be a ground.

8. In "Innoventive Industries Ltd. Vs. ICICI Bank and Ors. - (2018) 1

SCC 407", the Hon'ble Supreme Court observed and held as follows:-

"27. The scheme of the Code is to ensure that when a

default takes place, in the sense that a debt becomes due

and is not paid, the insolvency resolution process begins.

Default is defined in Section 3(12) in very wide terms as

meaning non-payment of a debt once it becomes due and

payable, which includes non-payment of even part thereof

or an instalment amount. For the meaning of "debt", we

have to go to Section 3(11), which in turn tells us that a debt

Company Appeal (AT) (Insolvency) No. 22 of 2019 -6-

means a liability of obligation in respect of a "claim" and for

the meaning of "claim", we have to go back to Section 3(6)

which defines "claim" to mean a right to payment

even if it is disputed. The Code gets triggered the moment

default is of rupees one lakh or more (Section 4). The

corporate insolvency resolution process may be triggered by

the corporate debtor itself or a financial creditor or

operational creditor. A distinction is made by the Code

between debts owed to financial creditors and operational

creditors. A financial creditor has been defined under

Section 5(7) as a person to whom a financial debt is owed

and a financial debt is defined in Section 5(8) to mean a debt

which is disbursed against consideration for the time value

of money. As opposed to this, an operational creditor means

a person to whom an operational debt is owed and an

operational debt under Section 5(21) means a claim in

respect of provision of goods or services.

28. When it comes to a financial creditor triggering the

process, Section 7 becomes relevant. Under the explanation to

Section 7(1), a default is in respect of a financial debt owed to

any financial creditor of the corporate debtor - it need not be a

debt owed to the applicant financial creditor. Under Section

7(2), an application is to be made under sub-section (1) in such

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form and manner as is prescribed, which takes us to the

Insolvency and Bankruptcy (Application to Adjudicating

Authority) Rules, 2016. Under Rule 4, the application is made

by a financial creditor in Form 1 accompanied by documents

and records required therein. Form 1 is a detailed form in 5

parts, which requires particulars of the applicant in Part I,

particulars of the corporate debtor in Part II, particulars of the

proposed interim resolution professional in part III, particulars

of the financial debt in part IV and documents, records and

evidence of default in part V. Under Rule 4(3), the applicant is

to dispatch a copy of the application filed with the

adjudicating authority by registered post or speed post to the

registered office of the corporate debtor. The speed, within

which the adjudicating authority is to ascertain the existence

of a default from the records of the information utility or on the

basis of evidence furnished by the financial creditor, is

important. This it must do within 14 days of the receipt of the

application. It is at the stage of Section 7(5), where the

adjudicating authority is to be satisfied that a default has

occurred, that the corporate debtor is entitled to point out that

a default has not occurred in the sense that the "debt", which

may also include a disputed claim, is not due. A debt may not

be due if it is not payable in law or in fact. The moment the

adjudicating authority is satisfied that a default has occurred,

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the application must be admitted unless it is incomplete, in

which case it may give notice to the applicant to rectify the

defect within 7 days of receipt of a notice from the

adjudicating authority. Under sub-section (7), the adjudicating

authority shall then communicate the order passed to the

financial creditor and corporate debtor within 7 days of

admission or rejection of such application, as the case may

be.

29. The scheme of Section 7 stands in contrast with the

scheme under Section 8 where an operational creditor is, on

the occurrence of a default, to first deliver a demand notice of

the unpaid debt to the operational debtor in the manner

provided in Section 8(1) of the Code. Under Section 8(2), the

corporate debtor can, within a period of 10 days of receipt of

the demand notice or copy of the invoice mentioned in sub-

section (1), bring to the notice of the operational creditor the

existence of a dispute or the record of the pendency of a suit

or arbitration proceedings, which is pre-existing--i.e. before

such notice or invoice was received by the corporate debtor.

The moment there is existence of such a dispute, the

operational creditor gets out of the clutches of the Code.

30. On the other hand, as we have seen, in the case of a

corporate debtor who commits a default of a financial debt,

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the adjudicating authority has merely to see the records of the

information utility or other evidence produced by the financial

creditor to satisfy itself that a default has occurred. It is of no

matter that the debt is disputed so long as the debt is "due"

i.e. payable unless interdicted by some law or has not yet

become due in the sense that it is payable at some future date.

It is only when this is proved to the satisfaction of the

adjudicating authority that the adjudicating authority may

reject an application and not otherwise."

9. From the decision of the Hon'ble Supreme Court it is clear that the

Adjudicating Authority is only required to notice as to whether there is a debt

and default or not. It was open to the Respondent (Corporate Debtor) to take

plea that there was no debt payable in law or in fact but no such plea was

taken. Therefore, as per decision of the Hon'ble Supreme Court, if the record

is complete and debt is payable, it was duty of the Adjudicating Authority to

admit the application.

10. It is not the case of the Respondent that there is a pre-existing dispute.

The Respondent has not pleaded and nor the Adjudicating Authority held that

there is no record of debt or default. In this background, merely on the ground

that there is no agreement reached between the parties, it was not open to the

Adjudicating Authority to reject application under Section 9 preferred by the

Appellant.

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11. For the reasons aforesaid, we set aside the impugned order dated 5th

October, 2018 and remit the case to the Adjudicating Authority for passing

appropriate order taking into consideration the record submitted by the

Appellant in the light of decision of Hon'ble Supreme Court in "Innoventive

Industries Ltd. Vs. ICICI Bank and Ors.", after notice and hearing the

Respondent. In the meantime, it will be open to the Respondent (Corporate

Debtor) to settle the claim with the Appellant. Appeal is allowed with aforesaid

observations and actions. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

(Justice A.I.S. Cheema) (Kanthi Narahari) Member (Judicial) Member (Technical)

NEW DELHI

2nd July, 2019

AM

Company Appeal (AT) (Insolvency) No. 22 of 2019