Sobha Limited vs Pancard Clubs Ltd

Sobha Limited ... Appellant

Versus

Pancard Clubs Ltd. ... Respondent

Present: For Appellant: Mr. Basav Prabhu S. Patel, Senior Advocate with Mr. Shailesh Madiyal and Mr. Mrigank Prabhakar, Shri Geet and Ms. Shivani Srivastava, Advocates.

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by Appellant- Sobha Limited

('Operational Creditor') against the order dated 29th July, 2017 passed

by Adjudicating Authority (National Company Law Tribunal), Mumbai

Bench, Mumbai in Company Petition Nos. 593 & 1085/

I&BP/NCLT/MAH/2017 whereby and whereunder the application

preferred by the Appellant under Section 9 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred to as "I&B Code") against

the Respondent- 'Corporate Debtor' namely 'Pancard Clubs Limited' has

Company Appeal (AT) (Insolvency) No. 162 of 2017 2

been rejected on the ground of 'existence of a dispute' and in view of

action taken by the Securities and Exchange Board of India (hereinafter

referred to as "SEBI") against the 'Operational Creditor'.

2. The brief facts of the case are that the Appellant- 'Operational

Creditor' entered into an agreement with the Respondent-'Corporate

Debtor' on 1st November, 2012 for RCC construction of additional three

floors and extension of the existing floors and allied development work

at its club at Baner, Pune, known as 'Pan Card Club Ltd', for a contract

price of Rs.10,81,31,099/-. Thereafter, further agreements were entered

into between the parties on 18th December 2013, 18th March 2013, 30th

April 2013, 19th June 2013 and 23rd September, 2013 for the projects at

Baner, Pune and Durgapur, West Bengal. Since construction work had

been taken up, the 'Operational Creditor' raised invoices on the

'Corporate Debtor' and forwarded them time to time in regard to both

the projects.

3. The Respondent-'Corporate Debtor' having failed to pay the dues

of Pune project, the 'Operational Creditor' issued notice under Section

434 of the Companies Act, 1956.

4. According to Appellant, the Respondent-'Corporate Debtor' had

admitted the debt of Rs. 1,26,91,809/- and Rs. 73,24,160/- aggregating

to Rs. 2,00,15,969/- as regards work at Baner, by endorsing the ledger

Company Appeal (AT) (Insolvency) No. 162 of 2017 3

extracts and furnishing the same to the 'Operational Creditor'. After

notice under Section 434 of the Companies Act, 1956, the 'Corporate

Debtor' also admitted the due amount Rs. 2,84,48,027/-, as regards to

work at Durgapur, West Bengal, but no payment was made.

5. From the record we find that the 'Operational Creditor' initially

issued notice dated 25th January, 2017 under sub-section (1) of Section

8 of the 'I&B Code' on the 'Corporate Debtor' demanding payment of Rs.

6,25,42,007.04/- as due on 19th January, 2017. It followed by an

application under Section 9. However, as the Appellant-'Operational

Creditor' failed to enclose a financial certificate, the 'Operational

Creditor' withdrew the application filed under Section 9 of the 'I&B

Code' and subsequently filed another application under Section 9 of the

'I&B Code' after serving another notice under Section 8 of the 'I&B

Code'.

6. On notice, the 'Corporate Debtor' appeared before the

Adjudicating Authority and brought on record that an Arbitration

Proceedings under Section 11 of the Arbitration and Conciliation Act,

1996 has been filed by parties before the Hon'ble High Court much

prior to service of notice under sub-section (1) of Section 8 of the 'I&B

Code' and thereby, there is an 'existence of dispute'. Prayer was made to

dismiss the application.

Company Appeal (AT) (Insolvency) No. 162 of 2017 4

7. Taking into account the fact that there is an 'existence of a

dispute' the Adjudicating Authority refused to entertain the application

under Section 9 of the 'I&B Code'.

8. It is desirable to state that apart from aforesaid ground recorded

in the impugned order, the Adjudicating Authority also noticed the

activities of the 'Corporate Debtor'.

9. Learned Counsel appearing on behalf of the Appellant-

'Operational Creditor' submitted that the 'Corporate Debtor' having

failed to pay the dues for the work carried out, the Adjudicating

Authority cannot reject the application referring to an order dated 29th

February, 2016 passed by SEBI. It was submitted that SEBI has passed

an order, inter alia, directing the 'Corporate Debtor' not to alienate,

dispose or sell any of the assets of the Company except for the purpose

of making refunds to its investors and the Ministry of Corporate Affairs

and to initiate the process of winding up of the Respondent.

10. In spite of service of notice, Corporate Debtor' has not appeared

nor filed any counter affidavit.

11. Having heard learned counsel for the appellant, while we agree

that initiation of 'Corporate Insolvency Resolution Process' under 'I&B Company Appeal (AT) (Insolvency) No. 162 of 2017 5

Code' cannot be nullified by any order passed by SEBI nor can be a

ground to reject an application under Section 9 of the 'I&B Code' but as

there is an 'existence of dispute' with regard to the invoices raised by

the Appellant-'Operational Creditor', we hold that the application under

Section 9 of the 'I&B Code' was not maintainable.

12. We find no merit in this appeal. It is accordingly dismissed.

However, in the facts and circumstances of the case, there shall be no

order as to costs.

(Justice S.J. Mukhopadhaya) Chairperson

(Justice A.I.S. Cheema) (Balvinder Singh) Member (Judicial) Member(Technical)

NEW DELHI 04,December, 2017 AR

Company Appeal (AT) (Insolvency) No. 162 of 2017