P J Networks Pvt Ltd vs Mr. Pardeep Kumar Lakhani

[Arising out of order dated 18.03.2021 in IA No. 5364/(ND)/2020 in Company Petition No. (IB)/2695/(ND)/2019 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench-IV.]

IN THE MATTER OF:

PJ Network Pvt. Ltd. B-106, 1st Floor, Mansarover Garden, New Delhi-110015 Contact No. :- 9266607073 E-mail:- bill@pjnetwork.com .... Appellant.

Versus

Mr. Pardeep Kumar Lakhani Resolution Professional of M/s. Dion Global Solutions Ltd. Resident Of:- Sector 40, Near Community Centre, Gurgaon, Haryana - 122012 E-mail:- pardeep.lakhani1967@gmail.com ....... Respondent.

Present: For Appellant: None. For Respondent: Mr. Kaushal Bansal, Advocate.

JUDGMENT

(9th December, 2021)

Justice Anant Bijay Singh;

This Appeal has been preferred by PJ Networks Pvt. Ltd. through its

Managing Director Mr. Sanjay Seth aggrieved and dissatisfied by the order

dated 18.03.2021 passed by the Ld. Adjudicating Authority (National 2

Company Law Tribunal), New Delhi Bench-IV in IA No. 5364/(ND)/2020 in

Company Petition No. (IB)/2695/(ND)/2019 whereby and where under the

Application filed by "Mr. Pardeep Kumar Lakhani, Resolution Professional of

M/s. Dion Global Solutions Ltd." (Respondent herein) was allowed with

directions the Respondent No. 1 to 5 herein to refund all payments received

by them on 19.08.2020 and 20.08.2020 respectively details of the order as

hereunder:

" a) Respondent No. 1 to refund an amount of Rs.

1,26,522/- in the account of corporate debtor under the

control of the applicant/RP.

b) Respondent No. 2 to refund an amount of Rs.

89,694/- in the account of corporate debtor under the

control of the applicant/RP.

c) Respondent No. 3 to refund an amount of Rs.

4,08,290/- in the account of corporate debtor under the

control of the applicant/RP.

d) Respondent No. 4 to refund an amount of Rs.

1,578/- in the account of corporate debtor under the

control of the applicant/RP.

e) Respondent No. 5 to refund an amount of Rs.

11,63,683/- in the account of corporate debtor under the

control of the applicant/RP.

9. In the above terms, application is allowed and

disposed off."

Company Appeal (AT) (Insolvency) No. 427 of 2021 3

2. The facts giving rise in the instant Appeal are as under:

i) The Company Petition No. IB-2695/ND/2019 was filed under Section 9

of the Insolvency and Bankruptcy Code, 2016 (for short IBC) by one M/s

Mykind Vacations Pvt. Ltd. (Operational Creditor) against the M/s Dion Global

Solutions Ltd. (Corporate Debtor) and the same was admitted by the Ld.

Adjudicating Authority on 18.08.2020 wherein Mr. Pardeep Kumar Lakhani

(Respondent herein) was appointed Interim Resolution Professional (for short

IRP).

ii) The Resolution Professional (Respondent herein) filed Application

under Section 60(5) of the IBC, 2016 bearing IA No. 5364/(ND)/2020 in

Company Petition No. (IB)/2695/(ND)/2019 with the following prayers:

" a) Pass an order to declare the transaction of payment

on 19.08.2020 made by Corporate Debtor to Respondent

No. 1 as non-est in law and direct Respondent No 1 to pay

to the Corporate Debtor a sum of Rs. 1,26,522/- in the

Bank Account bearing No. 00030340025085 in HDFC

Bank, Sector 125 Noida Branch;

b) Pass an order to declare the transaction of payment

on 20.08.2020 made by Corporate Debtor to Respondent

No. 2 as non-est in law and direct Respondent No 2 to pay

to the Corporate Debtor a sum of Rs. 89,694/- in the Bank

Account bearing No. 00030340025085 in HDFC Bank,

Sector 125 Noida Branch;

Company Appeal (AT) (Insolvency) No. 427 of 2021 4

c) Pass an order to declare the transaction of payment

on 20.08.2020 made by Corporate Debtor to Respondent

No. 3 as non-est in law and direct Respondent No 3 to pay

to the Corporate Debtor a sum of Rs. 4,08,290/- in the

Bank Account bearing No. 00030340025085 in HDFC

Bank, Sector 125 Noida Branch;

d) Pass an order to declare the transaction of payment

on 20.08.2020 made by Corporate Debtor to Respondent

No. 4 as non-est in law and direct Respondent No 4 to pay

to the Corporate Debtor a sum of Rs. 1,578/- in the Bank

Account bearing No. 00030340025085 in HDFC Bank,

Sector 125 Noida Branch;

e) Pass an order to declare the transaction of payment

on 20.08.2020 made by Corporate Debtor to Respondent

No. 5 as non-est in law and direct Respondent No 5 to pay

to the Corporate Debtor a sum of Rs. 11,63,683/- in the

Bank Account bearing No. 00030340025085 in HDFC

Bank, Sector 125 Noida Branch;"

iii) The Respondent herein took over the affairs of the Corporate Debtor in

terms of Section 17 of the IBC and CIRP Regulations on 27.08.2020. In the

1st CoC meeting the Respondent herein was confirmed as the Resolution

Professional of the Corporate Debtor.

Company Appeal (AT) (Insolvency) No. 427 of 2021 5

iv) Further, the Respondent herein perused the Bank Account bearing No.

00030340025085 in HDFC Bank, Sector 125 Noida Branch of the Corporate

debtor, it was found that payments to the tune of Rs. 17,89,767/- have been

made by employees on 19.08.2020 and 20.08.2020 to the creditors of the

Corporate Debtor (being the vendors and the Government Authorities). The

details transactions are as under:

Date Amount Paid Description of Payment

19.08.2020 1,26,522 Payment to PJ Networks for the period of 15- 08-2020 to 16-08-2021

20.08.2020 4,08,290 Payment to PF Department : (Employer and

Employee contribution) for the month of July 2020

20.08.2020 1,578 Employee State Insurance Department:

Employer and Employee Contribution for the month of July 2020

20.08.2020 89,694 Adernalin eSystems Limited: Monthly Subscription for Cloud HR platform

20.08.2020 11,63,683 GST Department: Goods and service Tax for the month of July 2020

v) Further case is that the said payments had been made even before the

Respondent herein took charge of the Corporate Debtor and the payments

were made for the services availed by the Corporate Debtor prior to the CIRP

period. The copy of Bank statements for the month of August 2020 and copy

of invoices, challanas and payment proofs have been annexed. The

Respondent (RP) immediately, in order to recover the said amount transferred

illegally to vendors of Corporate Debtor, filed the application and after hearing Company Appeal (AT) (Insolvency) No. 427 of 2021 6

the parties the Ld. Adjudicating Authority vide order 18.03.2021 allowed the

Application filed by the Resolution Profession (Respondent herein) and hence

this Appeal.

Submissions on behalf of the Appellant

3. The Learned Counsel for the Appellant in his memo of Appeal along with

Written Submissions submitted that the Appellant is rendering essential

services i.e. "Information Technology Services" as envisaged under Section

14(2) of the IBC, 2016 read with Regulation 32 of the Insolvency and

Bankruptcy (Insolvency Resolution Process for Corporate Persons),

Regulations, 2016 (CIRP Regulations).

4. The Learned Counsel for the Appellant further submitted that the

Corporate Debtor claims that it provides technology solutions for wealth

managers, brokers, banks and financial institutions etc. The Appellant claim's

that for protecting Corporate debtor's financial / consultation transactions etc.

requires it requires "Firewall services" which is an "Information Technology

Service".

5. it is further submitted that these essential services being rendered by

the Appellant are subscription based and were sold to the Corporate Debtor

after a purchase order dated 11.08.2020 (at page 33 of the Appeal Paper Book)

was issued. The services were made available to the Corporate Debtor on

15.08.2020 and were subscribed for till 16.08.2021 (at page 63 of the Appeal

Paper Book) which is admitted by the Resolution Professional (Respondent

herein), are being used by Corporate Debtor even as on date.

Company Appeal (AT) (Insolvency) No. 427 of 2021 7

6. It is further submitted that the IRP was appointed vide order dated

18.08.2020 passed while deciding application in terms of Section 9(5) of the

IBC, 2016, the copy of which at page 70 to 82 of the Appeal Paper Book.

7. The Learned Counsel for the Appellant further submitted that in terms

of the aforesaid order, the payments for essential services were an exception

to the general moratorium as they fell under Section 14(2) of IBC, 2016.

Section 14 (2) & (3) of IBC, 2016 reads as under:

"14(2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.

(3) The provisions of sub-section (1) shall not apply to-

(a) such transaction as may be notified by the Central Government in consultation with any financial regulator;

(b) a surety in a contract of guarantee to a corporate debtor."

8. The Learned Counsel for the Appellant while referring on Judgment

passed by this Appellate Tribunal in Company Appeal (AT) (Insolvency) No.

334 of 2017 " Dakshin Gujarat VIJ Company Ltd. Vs. M/s. ABG Shipyard

Ltd. & Anr. dated 08.02.2018 wherein Hon'ble Bench of this Tribunal held

as under:

" 13. However, from the provisions of 'I&B Code' and

Regulations, we find that no prohibition has been made or

Company Appeal (AT) (Insolvency) No. 427 of 2021 8

bar imposed towards payment of current charges of

essential services. Such payment is not covered by the order

of 'Moratorium'. Regulation 31 cannot override the

substantive provisions of Section 14; therefore, if any cost

is incurred towards supply of the essential services during

the period of 'Moratorium', it may be accounted towards

'Insolvency Resolution Process Costs', but law does not

stipulate that the suppliers of essential goods including, the

electricity or water to be supplied free of cost, till completion

of the period of 'Moratorium'. Payment if made towards

essential goods to ensure that the Company remains on-

going as made in the present case for the month of

December, 2017, such amount can be accounted towards

'Insolvency Resolution Process Costs', but it does not mean

that supply of essential goods such as electricity to be

supplied free of cost and the 'Corporate Debtor' is not liable

to pay the amount till the completion of the period of

'Moratorium'. If the 'Corporate Debtor' has no fund even to

pay for supply of essential goods and services, in such case,

the 'Resolution Professional' cannot keep the Company on-

going just to put additional cost towards supply of

electricity, water etc. In case the 'Corporate Debtor'

(Company) is non-functional due to paucity of fund, and has

become sick the question of keeping it on going does not

arise."

Company Appeal (AT) (Insolvency) No. 427 of 2021 9

9. It is further submitted that the Ld. Adjudicating Authority while passing

the impugned order as in this matter which is not accordance with law. So,

based on these submissions the impugned order is fit to be set aside and the

Appeal be allowed.

Submissions on behalf of the Respondent

10. The Learned Counsel for the Respondent during the course of argument

and his Reply Affidavit submitted that the payment to the tune of Rs.

17,89,767/- was made by employees of the Corporate Debtor after the CIRP

order was passed by the Ld. Adjudicating Authority imposing moratorium on

the Corporate Debtor but before the Respondent received the communication

from the Hon'ble NCLT regarding his appointment as the IRP in the CIRP of

Corporate Debtor on 24.08.2020.

11. It is further submitted that the act of transfer of the amount of Rs.

17,89,767/- was during the effect of Section 14 of IBC, it is synonymous to

alienation of assets of the Corporate Debtor. Thus, the Respondent filed an

application bearing I.A. No. 5364/2020 ("Reversal Application") before the ld.

Adjudicating Authority and the Ld. Adjudicating Authority after hearing the

parties allowed the said Application on 18.03.2021.

12. It is further submitted that the instant Appeal filed by the Appellant is

based on the presumption that the services being provided by it are "essential

services" under Regulation 32 of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons) Regulations,

2016. For convenience, this regulation is reproduced below:

Company Appeal (AT) (Insolvency) No. 427 of 2021 10

"The essential goods and services referred in Section 14(2) shall mean:

1. Electricity

2. Water

3. Telecommunication Services

4. Information Technology Services

To the extent, these are not a direct input to the output produced or supplied by the corporate debtor Section 14(2)"

However, the Appellant has conveniently ignored that any of the services

mentioned in Regulation shall only mean to be an essential service if such

service is a not direct input towards the output produced/supplied by the

Corporate Debtor. The Appellant falls under this category of essential services

which have a direct bearing on the operation of the Corporate Debtor's output.

13. It is further submitted that it is a settled law established and laid down

in Company Appeal (AT) (Insolvency) No. 331 of 2019 "M. Ravindranath

Reddy v. G. Kishan and Ors." that a service cannot deemed to be essential

if they are direct input to the output produced or supplied by the Corporate

Debtor. In fact, such a service can only fit in the category of an "Operational

Debt". The relevant extract of the judgment is reproduced below:

"Further, from the usage of the term "goods or services" as given under Section 14(2) of the Code, provides that "essential goods or services", of the corporate debtor shall not be terminated or suspended or interrupted during the moratorium. What constitute essential goods and services are provided under Regulation 32 (Insolvency Resolution

Company Appeal (AT) (Insolvency) No. 427 of 2021 11

Process for corporate persons) Regulation 2016 wherein it is provided that;

The essential goods and services referred to in Sec 14(2) shall mean:

1 Electricity

2 Water

3 Telecommunication Services

4 Information Technology Services

To the extent, these are not a direct input to the output produced or supplied by the corporate debtor.

Thus, any debt arising without nexus to the direct input to the output produced or supplied by the corporate debtor, cannot, in the context of Code, be considered as an operational debt, even though it is a claim amounting to debt."

Therefore, the Appellant has a case only as an Operational Creditor at

best and cannot presume that the services provided by it are "essential

services" under Regulation 32 of the CIRP Regulations and hence, there is no

reason for the Appellant to comply with the impugned order.

14. It is further submitted that the Ld. Adjudicating Authority has

considered all these aspects of the matter and rightly passed the impugned

order. So, based on these submissions there is no merit in the instant Appeal,

the Appeal is fit to be dismissed.

Company Appeal (AT) (Insolvency) No. 427 of 2021 12

FINDINGS

15. After hearing the parties and having gone through the pleadings made

on behalf of the parties. From the perusal of the Reply Affidavit filed by the

Respondent/ Resolution Professional shows that the Appellant herein have

not taken the plea of Section 14(2) of the IBC before the Ld. Adjudicating

Authority which he has taken valid service which was rendered by the

Appellant fall within the definition of essential services. The Ld. Adjudicating

Authority in the impugned order which is at page 20 to 27 of the Appeal Paper

Book have not discussed the matter.

16. Further, From the perusal of the paragraph 4 of the impugned order at

page 24 of the Appeal Paper Book (supra), all payments were made after the

CIRP in the matter (M/s Mykind Vacations Pvt. Ltd. (Operational Creditor) Vs.

M/s Dion Global Solutions Ltd. (Corporate Debtor) vide order dated

18.08.2020. Therefore, the Ld. Adjudicating Authority has rightly passed the

impugned order to refund all payments received by them on 19.08.2020 and

20.08.2020 respectively.

17. In view of the above, we are of the considered view that there is no

illegality committed by the Ld. Adjudicating Authority while passing the

impugned order therefore, we do not need to interfere in the impugned order.

The impugned order dated 18.03.2021 passed by the Ld. Adjudicating

Authority (National Company Law Tribunal), New Delhi Bench-IV in IA No.

5364/(ND)/2020 in Company Petition No. (IB)/2695/(ND)/2019 is hereby

affirmed. There is no merit in the Appeal. The Appeal is hereby dismissed.

Company Appeal (AT) (Insolvency) No. 427 of 2021 13

18. Registry to upload the Judgment on the website of this Appellate

Tribunal and send the copy of this Judgment to the Ld. Adjudicating Authority

(National Company Law Tribunal), New Delhi Bench-IV forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 9th December, 2021 R. Nath.

Company Appeal (AT) (Insolvency) No. 427 of 2021