In the matter of Roshan Space Brand Com Private Limited

IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 the invoice ledger amounts on April 1, 2018, and made payments toward TDS under those invoices even before the services stipulated in the advertising agreement by the petitioner were rendered. 12. It is the case of the respondent, that since the period for displaying the Respondent's advertisements had lapsed and the Petitioner had not communicated regarding proof of display, on 15.05.2018, the Respondent sent a letter to the Petitioner, inter-alia, stating that it had withheld payment, since the same would be due post work is done to its satisfaction and sought confirmation as to completion of the advertised work. However, as there was no response by the Petitioner for a considerable time, on 20.01.2019, the Respondent sent another letter as a final reminder to communicate regarding the advertisement work assigned to the petitioner failing which the respondent would be forced to cancel the advertisement agreement. 13. It is submitted by the Respondent that as the Petitioner did not reply to the above letter and failed to render service under the advertisement agreement and since there was no formal contract between the parties, on 05.04.2019, the Respondent sent a letter to the Petitioner cancelling the advertisement agreement, and stated that it had reversed the transaction in its books of accounts and accordingly sought credit note to that effect from the IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P.

No. 697/MB/2020 Petitioner. Till date, the Petitioner has not replied to the said Letter. In furtherance of the above, the Respondent reversed the transaction in relation to the advertising agreement in its books of accounts along with the GST credit and accordingly the Respondent was not liable to the Petitioner, for any amounts, whatsoever. 14. It is further submitted that on September 19, 2019, the Ministry of Finance, in conjunction with the Mumbai Zonal Unit of the Directorate General of GST Intelligence (DGGI-MZU), issued a press release via the Press Information Bureau. Among other points, it was noted that the Petitioner had purportedly utilized counterfeit Input Tax Credit amounting to Rs. 77 crores, based on invoices valued at Rs. 420 crores. Subsequent to this notification, the Petitioner promptly dispatched a Demand Notice under the Code to the Respondent, urging the initiation of Corporate Insolvency Resolution Process against the Respondent. Notably, the Notice inaccurately claimed that an alleged debt of Rs. 94,00,000/- became due on March 30, 2018, contradicting the terms of the advertisement agreement.

Furthermore, it neglected to provide specific particulars or disclose any disputes raised by the Respondent.

IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 Findings/Conclusion

Upon thorough consideration of the arguments presented by both the Operational Creditor and the Corporate Debtor, as well as a review of the provided records, the following key points have emerged:

15. It is evident that the Operational Creditor and Respondent were involved in understanding wherein the advertisement of the Respondent was to be displayed on petitioner’s billboard against which the respondent was to pay Rs. 1,16,00,000/- out of which Rs. 22,00,000/-was paid as advance by the Respondent and the balance amount of 94,00,000/- was to be paid on providing the proof of display of the advertisement by the petitioner. Demand Notice dated 17.10.2019 was sent by the Petitioner and the same was replied by the Respondent denying the liability on 25.10. 2019.

16. On March 30th, 2018, the Petitioner invoiced the Respondent for Rs. 1,00,00,000/- as part of an advertisement agreement, which included a 24% penal interest rate on overdue amounts. However, payment was conditional upon the Petitioner/Operational Creditor providing satisfactory proof of advertisement display, a requirement which the Operational Creditor failed to meet. Despite multiple correspondences from the IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 Respondent/ Corporate Debtor seeking proof of advertisement work vide letters dated 15.05.2018 and 20.01.2019, the Operational Creditor failed to provide the proof. The relevant part of the above stated letters are reproduced as under-

Letter Dated 15.05.2018 “Dear Sir, With regards to the above subject we are yet to receive the confirmation from your end as to when the assigned work will get completed by your office. We have held the payment as a policy and it is paid post work is completed to our satisfaction, Do let us know on priority.

Regards, For Roshan and Space Brandcom Pvt. Ltd.”

IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 Letter Dated 20.01.2019 “Dear Sir, This is to inform you that we have not yet received any communication from your end with regards to the status of work assigned to you. Please consider this as a final communication, post which we will be forced to cancel the work from our end. Regards, For Roshan Space Brandcom Pvt. Ltd”.

Further, the Petitioner did not respond and breached the agreement by not providing the agreed services or any proof thereof. Consequently, the Respondent terminated the agreement on April 5.04.2019 and reversed the transaction in its books, supported by debit notes dated 01.06.2019. Despite requests, the Petitioner did not issue a credit note. The Respondent's ledger reflects the reversal of the transaction. Therefore, having accepted the termination and transaction reversal on 01.06.2019, the Petitioner is estopped from disputing these actions in the Petition. The fact that the reversal was done much prior to the issuance of Demand notice dated 17.10.2019 in itself establishes that there existed a dispute with regards to the services having been rendered by the IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 petitioner. On this account there cannot be stated to be a crystalized debt due on the part of the Corporate Debtor to be paid to the Operational Creditor.

17. During arguments, this Hon'ble Tribunal enquired from the Petitioner's counsel whether it had any documents to demonstrate that the Petitioner had rendered and completed the services for which amounts are sought in the present Petition. The Petitioner's counsel conceded that it had no document on record to demonstrate the same and merely relied upon the ledger confirmation to substantiate its alleged claims. A ledger (particularly one that is subsequently reversed) without proof of having rendered the services cannot tantamount to operational debt, which is being sought in the present Petition. The Petitioner has not placed any document in the Petition or any correspondence on record evidencing proof of advertisement work carried out by it. Hence, the lack of material particulars and /or documents on record breached the contention of the Petitioner seeking balance amounts for advertisement work done by it.

18. Thus in the view of the above stated fact, the bench is of the opinion that as per provisions of Section 5(6) read with Section 8(2) of the Code, there is an existence of a dispute between the Petitioner and the Respondent, prior

IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 to the issuance of Demand notice with regards to carrying out of the assigned work. In view of the same there is no crystallized debt due towards the Operational Creditor. In this context, the Bench relies on the judgment of the Hon’ble Apex Court in Mobilox Innovations Private Limited Vs. Kirusa Software Private Limited AIR 2017 SC 4532 wherein the Hon’ble Supreme Court observed that what 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.

19. Further, in Kay Bouvet Engg. Ltd. v. Overseas Infrastructure Alliance (India) (P) Ltd., (2021) 10 SCC it was held as under-

IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 “It is thus clear that once the operational creditor has filed an application which is otherwise complete, the adjudicating authority has to reject the application under Section (9)(5)(ii)(d) IBC, if a notice has been received by operational creditor or if there is a record of dispute in the information utility. What is required is that the notice by the corporate debtor must bring to the notice of operational creditor the existence of a dispute or the fact that a suit or arbitration proceedings relating to a dispute is pending between the parties. All that the Adjudicating authority is required to see at this stage is, whether there is a plausible contention which requires further investigation and that the dispute is not a penalty feeble legal argument or an assertion of fact unsupported by evidence”.

Therefore, applying the above analogy laid down by the Hon’ble Supreme Court to the present case on hand, this Bench has no option except to hold that there are “pre-existing disputes” between the parties. There is no merit in the above Company Petition and thus above Company Petition deserves to be ‘dismissed’.

20. Further it is evident that the falsity in the Petitioner's case of amounts being due and payable towards alleged

IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH -V C.P. No. 697/MB/2020 advertisement work is evident from the fact that the Petitioner has contended two dates of default for the basis of its alleged claims. In the Petition, the Petitioner has contended the date of default as "19.04.2018 and in the demand notice, the Petitioner has contended the date of default as '30.03.2018'. Hence the petitioners case is inconsistent stand and deserve dismissal on this ground too.

21. In view of the foregoing, inter-alia including ‘Pre-existing disputes between the parties’ ‘Not Crystallized Debt’ and ‘Not coming to the court with clean hands’ the above petition merits no consideration. Hence dismissed.

SD/- SD/- MADHU SINHA REETA KOHLI MEMBER (TECHNICAL) MEMBER (JUDICIAL) /Aakansha/