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C VIJAYKUMAR V.SAHAJ BHARTI TRAVELS: WHETHER THE IBC PROCEEDINGS CAN BE CONVERTED INTO DEBT RECOVER?

Author: Sonali Khandelwal, IV year of B.A.,LL.B. from Bharati Vidyapeeth University, New Law College, Pune


FACTUAL MATRIX

The Petitioner: Mr. C Vijaykumar (Suspended Director of HCL Technologies Ltd.)

The Respondents:

1. M/s. Sahaj Bharti Travels

2. HCL Technologies Ltd.


Court: National Company Law Appellate Tribunal, Principle Bench, New Delhi

Coram: HON’BLE Mr. Justice Ashok Bhushan

Pronounced on: 26.05.2022


In the Present Case (C. VijayKumar V. Bharti Travels), HCL (Corporate Debtor) entered into an agreement with Sahaj Bharti Travels (Operational Creditor) on 19th November 2015 for provisions of pick-up and drop cabs for its personnel. The same agreement was extended by the HCL till 2018. As per the terms of the agreement, the invoices were required to be raised by the Operational Creditor within 60 days of services delivered or billed. As per Schedule A of the Agreement, if eligible by meeting the pre-conditionsa Minimum Guarantee Amount would be given in the event that cabs do not run for a minimum of 7000 kilo metres. As per the agreement between the parties, all the invoices raised by the Operational Creditor was duly paid by the Corporate Debtor.


Thereafter, Operational Creditor vide its email dated 25.05.2018 requested payment on Minimum Guarantee Amount. By email of the same date, Corporate Debtor called Operational Creditor for a discussion and a meeting dated 28.05.2018 held between both the parties. The Corporate Debtor vide its email dated 29.05.2018 informed the Operational Debtor that no amount is payable on the account of Minimum Guarantee Amount but emphasising over the cordial relationship between both the parties, in good faithHCL proposed to pay a sum of Rs. 20.58 lakh to Operational Debtor as one time full and final settlement. Operational Creditor relied on the same and requested Corporate Debtor to make a payment of Rs. 81.96 Lakh which was ultimately denied by the Corporate Debtor.


Subsequently, Operational Debtor sent a demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 for an amount of Rs. 3.54 Crores and thereafter filed an application under Section 9 of the Code for the same amount which was admitted by the adjudicating authority NCLT vide its order dated 07.01.2022.


The Adjudicating Authority vide order dated 07.01.2022 held that under the Agreement, the Operational Creditor was not obliged to raise invoices towards the minimum guarantee clause and the pre-existing dispute raised by the Corporate Debtor was also rejected The Adjudicating Authority held that the Operational Creditor was entitled to claim minimum guarantee amount till 30.04.2018.


Hence, aggrieved by the impugned order, this appeal was filed by the suspended Director of the Corporate Debtor (HCL).


ISSUE

  • Whether the Application filed by the Operational Creditor was an application as a debt enforcement measures against the solvent company for recovery of debt and not an Application for any Insolvency Resolution for the Corporate Debtor?


CASES REFERRED BY THE COURT

The NCLAT while deciding on the present case took into consideration and made a reference to the following case:


Mobilox Innovations Private Limited vs. Kirusa Software Private Limited

  • In the Above case, the Apex court had interpreted Section 8 and 9 of the code. It was laid down that the dispute must exist before the receipt of Demand Notice or invoices.

  • Additionally, the Apex Court held that existence of an undisputed debt is Sine Qua Non of initiating Corporate Insolvency Resolution Process (CIRP). It also follows that the adjudicating authority shall satisfy itself that there is a debt payable and there is Operational Debt and the Corporate Debtor has not repaid the same.


JUDGEMENT

The NCLAT has allowed the appeal filed by the suspended director of HCL Technologies and set aside the Corporate Insolvency Resolution Process initiated by the Operational Creditor against the HCL Technologies.


RATIO DECIDENDI (REASONING)

The Court held that in the present case, all the invoices held by the Operational Creditor was duly paid by the Corporate Debtor and the offer made by the Corporate Debtor of Rs. 20.58 Lakh was only in good faith and cannot be termed as an admission of any debt. Additionally, the court noted that the HCL is a renowned business entity reflecting a turnover of Rs. 61.78 Crores and a profit of Rs. 8772 Crores for the financial year ending on 31.12.2018.


NCLAT ruled that the proceeding under IBC were only initiated by the Operational Creditor for virtually establishing its claim of the Minimum Guarantee Amount which was never accepted or admitted by the HCL, and therefore the present were initiated as aa bedt enforcement measure. Conclusively, NCLAT held that IBC proceedings should not be converted into debt recovery proceedings. Hence, the court accepted the appeal filed by the suspended Director of the HCL Technologies and has set aside the insolvency admission order against the Corporate Debtor.