Mr. Harrish Khurana vs M/S One World Realtech Private Limited

MR. HARRISH KHURANA ....Appellant M/s Harrish Khurana & Associates Having its registered office at G-1 /208-209, 2nd Floor, Sector16, Rohini, New Delhi-110089.

Vs.

M/s One World Realtech Private Limited ....Respondent Registered Office: 107, 1st Floor, Khasra No. 369-370, Centrum Mall, MG Road, Sultanpur, New Delhi-110030.

Present:-

For Appellant:- Mr. Ashish Middha, Advocate. For Respondent:- Mr. Amandeep Singh and Ms. Sulakshana Yadav, Advocates

JUDGMENT

(Date: 30.11.2021) (Virtual Mode)

[Per: Dr. Alok Srivastava, Member (Technical)]

1. This appeal has been filed under Section 61 of the

Insolvency and Bankruptcy Code, 2016 (hereinafter called IBC) by

the Appellant, who is aggrieved by the order of the Adjudicating

Authority in Company Petition No. (IB) - 1197/ND/2018 passed by

Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 1 of 10 the Adjudicating Authority (National Company Law Tribunal, New

Delhi) on 6.9.2019. The Adjudicating Authority has held in the

order that there was no privity of contract between the Appellant

Harrish Khurana and Respondent M/s One World Realtech Private

Limited (Corporate Debtor) and, therefore, their relationship as

Operational Creditor and Corporate Debtor is not established as is

required under Section 9 of IBC.

2. The Appellant has stated and argued that he was engaged by

the Corporate Debtor through its Statutory Auditor for rendering

professional services with regard to matters pertaining to the

Companies Act, 2013 and conversion of financials into Extensible

Business Reporting Language (XRBL) and Delhi Stamp Act and

had raised four bills/tax invoices to the Corporate Debtor for the

professional services so rendered from 11.5.2017 to 5.1.2018

amounting to total Rs. 1,81,000/-(Rupees One Lakh and Eighty

One Thousand Only). These invoices were not paid by the

Corporate Debtor and therefore, he served notice under section 8

of the IBC upon him. Since the Corporate Debtor did not reply to

the said demand notice nor paid any amount towards the said

outstanding debt, he filed application under section 9 of IBC before

the Adjudicating Authority. This application was dismissed

without consideration of law and facts, and hence aggrieved by the

Impugned Order he has filed this application. Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 2 of 10

3. In his arguments, the Learned Counsel for Appellant has

referred to e-mail dated 21.4.2021 (attached at pp. 54-55 of the

Appeal Paperbook) sent by the Appellant to Arjun Rishi, Director of

the Corporate Debtor stating that he was engaged by the Auditor of

the Corporate Debtor Mr. Arun Kishore to provide services relating

to resolution of some compliance issues and defect in finalizing

balance sheets for financial years 2012-2013 and 2013-2014. He,

therefore, engaged with Mr. Arun Kishore and another team and

made some suggestions for resolving the compliance issues

relating to Corporate Debtor. He has claimed that four invoices

dated 11.5.2017 of amount Rs. 69,000/-, dated 17.10.2017 for

47,200/-, dated 23.10.2017 for Rs.35,400/- and dated 5.1.2018

for Rs. 29,500/-, totaling Rs. 1,81,000/- were sent by him to the

Corporate Debtor vide e-mail dated 21.4.2018, and he sought

payment for pending invoices. The Learned Counsel for Appellant

has further stated that details of the pending invoices were

annexed with the demand notice as Annexure 1 in column 2 of the

demand notice (attached at pp.68-71 of Appeal Paperbook). As a

proof of providing services to the Corporate Debtor, the Learned

Counsel for Appellant has shown letter dated 15.5.2017 of the

Corporate Debtor addressed to the Chief Controlling Revenue

Authority, Delhi and letter dated 23.7.2017 addressed to

Secretary, Ministry of Corporate Affairs (attached at pp.72-73 and

Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 3 of 10 76-77 respectively in the Appeal Paperbook) to show that he was

authorized by Arjun Rishi, Director of the Corporate Debtor to

appear before concerned authorities on behalf of the Company in

related matters for providing explanation etc. The Learned

Counsel for Appellant has also referred to the affidavit of Arun

Kishore, partner of Arun Kishore and Company, Chartered

Accountant, who is the Statutory Auditor of the Corporate Debtor

to show that he was engaged by Arun Kishore to execute the said

assignment (attached at pp 88-89 of Appeal Paperbook).

4. The Learned Counsel for Respondent has argued that there

was no privity of the contract of the Respondent with the Appellant

and claimed that the appeal has been filed on the basis of

fabricated invoices which were neither received nor acknowledged

by the Respondent. He has further stated that the Respondent

never engaged the Appellant for rendering any service and even if

in any circumstance, the Appellant was engaged by Mr. Arun

Kishore, the Statutory Auditor for Corporate Debtor for any work,

advice or consultancy, the same does not mean his engagement by

the Corporate Debtor and does not create any privity of contract

between the Appellant and the Respondent. He has further argued

that apparently there was a dispute between Arun Kishore and the

Appellant. The Respondent has submitted an affidavit regarding

Mr. Arun Kishore's relationship with the Appellant (pp. 84-89 of Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 4 of 10 Appeal Paperbook) and the work done by him and therefore, the

liability, if any, fell on Arun Kishore. The Learned Counsel for

Respondent has therefore urged that the appeal be dismissed

looking to the circumstances of the case.

5. We have perused the pleadings of the parties and the

documents submitted therein and considered oral arguments

advanced by the parties.

6. The findings recorded in the Impugned Order are as follows:-

"11. Hence, in view of the aforesaid facts and on hearing the Learned Counsels of both the sides and on perusal of the record, a conclusion can be drawn that the statements of the applicant is self-contradictory as in the application by the applicant it has been averred that the applicant was engaged by statutory auditor whereas in the affidavit, the applicant has claimed to render the services upon the request of corporate debtor. Further, the statutory auditor on affidavit has admitted that the applicant was personally engaged by statutory auditor and was never engaged directly by the corporate debtor. Therefore, it can be inferred that there was no privity of contract between applicant and respondent. Further the corporate debtor has dispute of locus of the applicant.

12. In view of the above discussion the present application is dismissed. It is very essential to understand that the intent of the legislature is to be kept mind that this CIRP can be triggered only where the prima facie debt is payable and default has occurred. In the application under section 9 the „existence of dispute‟ has to be developed and in and only on satisfaction that corporate debtor is unable to pay debt, then the CIRP can be trigged and not that simply any amount being crystallized as payable. Therefore, in the present case there is no recovery proceeding payable and cannot be

Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 5 of 10 used as debt and brought under umbrella of this Code. Hence the application is rejected and dismissed."

7. The four invoices are supposed to have been raised by the

Appellant, mentioned hereinbefore, amounting to Rs. 1,81,000/-,

whose receipt has been denied by the Respondent in his reply. Be

that as it may, and assuming such invoices were indeed sent by

the Appellant to the Respondent, it is necessary for us to examine

whether there exists a relationship between the Appellant and the

Respondent as that of Operational Creditor with the Corporate

Debtor. It is also necessary to see whether the debt pending for

payment according to the Appellant falls in the category of

operational debt.

8. Some relevant definitions of 'Corporate Debtor', 'Operational

Creditor' and 'Debt' and 'Operational Debt' appear in the IBC

which are as follows:-

Section 3(8) "corporate debtor" means a corporate person who owes a debt to any person.

Section 3(11)"debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt.

Section 5(20)"operational creditor" means a person to whom an operational debt is owed and includes any person to

Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 6 of 10 whom such debt has been legally assigned or transferred.

Section 5(21)"operational debt" means a claim in respect of the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority.

9. A reading of the definition of 'operational debt' makes it clear

that it is a claim in respect of provision of goods or services

including employment. This should be based on a contract duly

entered between the Corporate Debtor and the Operational

Creditor and Operational Creditor is a person to whom an

operational debt is owned. Therefore, for a relationship of

Operational Creditor and Corporate Debtor to exist between two

parties under the IBC, the Operational debt must be owed to the

Operational Creditor by the Corporate Debtor.

10. We now turn our attention to examine whether the Appellant

and Respondent are connected with each other in the relationship

of Operational Creditor and Corporate Debtor. The Appellant has

produced no document in the form of a contract to establish such

a relationship. An e-mail dated 21.4.2018 is the first such

communication sent by the Appellant to the Respondent, which

the Appellant has used to show such a relationship with the

Corporate Debtor. This e-mail contains the claim of Appellant that Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 7 of 10 he was engaged to provide services by the Statutory Auditor of

Corporate Debtor Mr. Arun Kishore, and on such a request he

agreed to provide requisite services to the Corporate Debtor. He

has further explained in this email the work carried out by him for

the Corporate Debtor and also mentioned raising of four invoices

amounting to Rs. 1,81,000/- to the Corporate Debtor on account

of services rendered by him. The affidavit of Mr. Arun Kishore,

owner of Arun Kishore Company, Chartered Account, who are

statutory auditor of One World Realtech Private Limited (Corporate

Debtor) dated 22.01.2019 (pp.88-89 Appeal paperbook) mentions

in, para 2 that Mr. Arun Kishore was assigned the work of 'filing of

annual record with Registrar of Companies, EBRL form of Annual

Accounts, filing application with RoC seeking condonation of delay,

if any, in filing annual returns and getting the amount of stamp

duty for allotment of equity shares adjudicated' by the Corporate

Debtor. In the affidavit (supra), Mr. Arun Kishore further states in

para 3 'that in order to execute the above said assignment I had

engaged in the Applicant herein to execute the above said

assignment in my personal capacity as principal and invoices, if

any, were required to be raised only after the professional fees was

agreed between me and the Applicant.' Mr. Arun Kishore has

further stated in the affidavit that the Applicant raised direct bills

on the Respondent which was without his consent and knowledge

Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 8 of 10 and not in keeping with what was decided earlier that the invoices,

if any, were to be raised only after the professional fees was agreed

between him and Appellant.

11. On juxtaposing the definition of 'Operational Creditor' and

'Operational Debt' as included in IBC with the work relationship as

is evidenced in the e-mail dated 21.4.2018 (supra) sent by the

Appellant to the Respondent and the affidavit of Arun Kishore

(supra), we find that the Applicant was employed by Mr. Arun

Kishore, Statutory Auditor of Corporate Debtor to provide certain

services. Therefore, the Appellant did not have the relationship of

Operational Creditor with the Corporate Debtor for provision of any

services. The Adjudicating Authority has thus found absence of

privity of contract between the Applicant and the Respondent in

the Impugned Order. This is also supported by the fact mentioned

in para 3 of affidavit of Mr. Arun Kishore, wherein he has stated

that 'I had engaged the Applicant herein to execute the above said

assignment in my personal capacity as principal and invoices, if

any, were required to be raised only after the professional fees was

agreed between me and the Applicant'.

12. Thus the Appellant has not been able to establish or show

evidence of his engagement or employment by the Corporate

Debtor. We are therefore, unable to accept the plea of the

Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 9 of 10 Appellant that he provided services to the Corporate Debtor and so

the debt with respect of invoices pending for payment cannot be

defined as operational debt under the IBC which should be paid by

the Corporate Debtor. In the result, we do not find any reason to

interfere with the Impugned Order. The appeal is, therefore,

dismissed. No order as to costs.

(Justice Ashok Bhushan) Chairperson

(Justice Jarat Kumar Jain) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) New Delhi 30th November, 2021

/aks/

Company Appeal (AT) (Ins.) No. 1100 of 2019 Page 10 of 10