Virtuaal Retail Pvt Ltd vs Bmi Wholesale Trading Pvt Ltd

IN THE MATTER OF: Virtuaal Retail Pvt. Ltd. ....Appellant

Vs.

BMI Wholesale Trading Pvt. Ltd. ....Respondents

Present: For Appellant: Mr. MKS Menon, Mr. Vikash Verma and Ms. Avi Leuna, Advocates For Respondents: Mr. Rohan Thawani, Advocate

ORDER

03.01.2023: Heard Learned Counsel for the Appellant as well as Learned

Counsel appearing for the Respondent.

2. This appeal has been filed against the order dated 04.10.2022 passed by

National Company Law Tribunal, Mumbai Bench, Court-III in

C.P. No. 3677/IBC/MB/2018 by which order the application filed under

Section 9 of the Insolvency & Bankruptcy Code, 2016 by the appellant has

been rejected. There was a franchisee agreement entered between the appellant

and BMI Wholesale Trading Pvt. Ltd. on 05.11.2012. A dispute arose between

the parties in the year 2014. Thereafter, in the year 2017, legal notice was

issued by the Appellant to the Respondent praying for making payment of

Rs. 1,10,38,999.24. Legal notice contained following prayer:

"You are hereby called upon to pay the amount of Rs. 1,10,38,999.24

INR, alongwith the interest @ of 15% to my client, within one month from

the receipt of the present notice, failing which my client shall lodge a 2

complaint under Section 420 of Indian Penal Code and further shall

take other necessary legal action against you at your risk and cost."

3. Subsequently, a notice under Section 8 of the Insolvency & Bankruptcy

Code, 2016 was issued on 16.08.2018 claiming an amount of Rs. 94,44,041/-

as total amount of debt. The demand notice was replied by letter dated

07.09.2018 by the respondent refuting the claim. In the reply notice detailed

facts have been pleaded refuting the claim and it was categorically mentioned

that the respondent do not owe any amount of debt to the appellant.

4. Subsequently, the appellant filed Section 9 application on 25.08.2018

which was also replied by the respondent and Adjudicating Authority after

hearing the parties rejected the application on two grounds: (i) there has been

pre-existing dispute between the parties since 2014 (ii) the application is

barred by limitation.

5. Learned Counsel for the appellant challenging the order of the

Adjudicating Authority contends that the Adjudicating Authority committed

error in recording the finding that there was pre-existing dispute. It is

submitted that there was pre-deposit which was never returned nor at any

point of time any communication has been received from the respondent as to

what is the amount which is due.

6. It is submitted that the dispute which was raised by the respondent in

reply notice as well as reply affidavit of section 9 application was not genuine

dispute and application ought not to be rejected. He further submits that the

Adjudicating Authority committed error in rejecting application on the ground

of limitation whereas the limitation is mixed question of law and facts and Company Appeal (AT) (Ins.) No. 1498 of 2022 3

there has to be appropriate opportunity given for deciding the issue of

limitation.

7. Learned Counsel for the respondent refuting the submission of the

counsel for the appellant contends that as per the clause V the agreement lease

stood terminated and in the reply notice which was filed by the respondent

details facts were mentioned which clearly indicates that there was a pre-

existing dispute between the parties and respondent did not owe any debt to

the appellant. It is submitted that according to own pleadings of the appellant,

the possession of store was taken on 21.09.2014 and the legal notice for the

first time was issued through advocate on 18.09.2017 which itself speaks that

owing to dispute no claim was ever raised by the appellant. He further submits

that the cause of action according to own showing of the appellant arose on

21.09.2014 and application having filed more than three years was clearly

barred by time.

8. Learned Counsel for the appellant in the rejoinder submitted that there

has been acknowledgement in the year 2017 and 2019 by the respondent,

hence, the application was not barred by time.

9. We have considered the submission of the counsel for the parties and

perused the record.

10. When demand notice was issued by the operational creditor dated

16.08.2018 which was replied on 07.09.2018 where it was categorically

mentioned that the respondent do not owe any debt to the appellant, details of

franchisee agreement and subsequent events were mentioned and in

paragraphs 10 and 11, following was specifically stated:-

Company Appeal (AT) (Ins.) No. 1498 of 2022 4

"10. Our client states that till date, our client is not in possession

of any inventory, furniture and fixtures etc. since you prevented our

client from taking possession by confiscating the keys to the said

premises as stated above and your claim for payment for inventory

taken by our client in your notice under reply is completely false,

fabricated, malafide and is denied by our client.

11. Our client states that on termination of the said lease deed, the

Franchise Agreement was terminated on 20th September 2014 as per

Clause 5.1 of the Franchise Agreement. Our client states that to our

client's surprise, almost 3 years after the termination of the Franchise

Agreement, you addressed a legal notice dated 18 th September 2017

through your erstwhile advocates to our client allegedly calling upon

our client to pay an amount of Rs.1,10,38,999.24 (Rupees One Crore

Ten Lacs Thirty Eight Thousand Nine Hundred and Ninety Nine and

24 paise only) along with an interest at 15% p.a. towards inventory

deposit, investment in fixed assets etc."

11. The reply notice clearly amounted to the notice of dispute. After filing of

section 9 application the reply affidavit was also filed elaborating the pleas

which have been taken in the reply notice. The Adjudicating Authority has

rightly come to the conclusion that there was a pre-existing dispute between

the parties since 2014 which finding is based on the materials on record.

According to own pleading of the appellant, the possession of the store was

taken on 21.09.2014, hence, the dispute had arisen between the parties at

least from 21.09.2014. We thus are of the view that Adjudicating Authority has

rightly held that the application is liable to be dismissed on the ground of pre-

existing dispute.

Company Appeal (AT) (Ins.) No. 1498 of 2022 5

12. Now coming to the submission on question of limitation when the the

Adjudicating Authority was satisfied that application is liable to be dismissed

on account of the pre-existing dispute it was not necessary to enter into the

issue.

13. In view of the aforesaid, we observe that in event the appellant seeks

remedy before the appropriate forum, it shall be open for the appellant to raise

all pleas as permissible in law.

14. With these observations, the appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Mr. Barun Mitra] Member (Technical)

sa/nn

Company Appeal (AT) (Ins.) No. 1498 of 2022