Praxis Corporate Services Pvt. Ltd vs Powai Cubicles Pvt. Ltd

Praxis Corporate Services Pvt. Ltd. ...Appellant

Versus

Powai Cubicles Pvt. Ltd. ...Respondent

Present:

For Appellant: Mr. Deepak Biswas, Ms. Subhalaxmi Sen and Mr. Harish Pandya, Advocates

For Respondent: Ms. Akanksha Choudhary, Advocate

ORDER

27.08.2019 The Appellant - 'Praxis Corporate Services Private Limited'

(Operational Creditor) filed an application under Section 9 of the 'Insolvency and

Bankruptcy Code, 2016 (for short, the 'I&B Code') for initiation of 'Corporate

Insolvency Resolution Process' against 'Powai Cubicles Private Limited'

(Corporate Debtor). The Adjudicating Authority (National Company Law

Tribunal), Mumbai Bench by impugned order dated 18th February, 2018

dismissed the application on the ground that the 'Corporate Debtor' by reply

dated 17th May, 2018 denied the liability stating that there exists a bona fide

dispute concerning the services rendered by the Appellant and further stated

that the nature of dispute and claims arising out of the dispute were well

documented in their previous reply noticed dated 6th April, 2018. Learned

counsel appearing on behalf of the Appellant submitted that there is no evidence 2

to show that there is pre-existence dispute prior to the issuance of invoice or

Demand Notice u/s 8(1) of the I&B Code. It is informed that the 1st Demand

Notice u/s 8(1) was issued on 1st March, 2018 (which was not in form) followed

by subsequent Demand Notice on 7th May, 2018 (which was in form).

2. Learned counsel appearing on behalf of the Respondent submitted that

the Demand Notice issued on 1st March, 2018 was not in Form 3. From the plain

reading of the Demand Notice dated 1st March, 2018, we find that all the

averments required and substance of the Form 3 were mentioned in the Demand

Notice issued on 1st March, 2018. It is a settled law that the Form is prescribed

for the persons of understanding the material with which the notice is to be

served on the 'Corporate Debtor' so that the 'Corporate Debtor' understands the

seriousness of the Demand Notice so that, if the matter is settled or denied or no

subsequent reply is given then it may invite initiation of 'Corporate Insolvency

Resolution Process'. All such substance and requirements have been shown in

the Demand Notice dated 1st March, 2018. We reject the submission as made on

behalf of the 'Corporate Debtor' and in any case the subsequent notice dated 7th

May, 2018, in Form 3 was sent pursuant to which the reply was filed by the

'Corporate Debtor' on 17th May, 2018 wherein it denied the liability relying on

earlier reply dated 6th April, 2018 to claim that there is an existence of bona fide

dispute. It is a settled law that the dispute should be pre-existing and it should

be prior to issuance of the Demand Notice. There is nothing on record to suggest

that the 'Corporate Debtor' has raised any dispute prior to the Demand Notice

dated 1st March, 2018. The dispute raised on 6th April, 2018 cannot be relied on

to state that there is existence of bona fide prior dispute.

Company Appeal (AT) (Insolvency) No. 456 of 2019 3

3. The Adjudicating Authority having failed to notice the same, we set aside

the impugned order dated 18th February, 2018 and remit the case to the

Adjudicating Authority (National Company Law Tribunal), Mumbai Bench with

a direction to admit the application under Section 9 preferred by the Appellant

after notice to the 'Corporate Debtor' (to enable the 'Corporate Debtor' to settle

the matter prior to the admission of the application).

The appeal is allowed with aforesaid observations and directions. No

costs.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice A.I.S. Cheema ] Member (Judicial)

[ Kanthi Narahari ] Member (Technical) /ns/gc

Company Appeal (AT) (Insolvency) No. 456 of 2019