National Company Law Appellate Tribunal, New Delhi: In a case related to pre-existing dispute, a bench comprising of Ashok Bhushan, J. and Ms. Shreesha Merla* (Technical Member) held that the Corporate Debtor is not prevented from establishing by way of a reply and relevant documents, any Pre-Existing Dispute.
Factual Matrix
In the present matter, the petitioner, Greymatter Entertainment Private Limited (Operational Creditor) had provided services of Live TV Production of Season-1, Season-2 and Season-3 of the Pro Wrestling League (‘PWL’) held in India in 2015 to the respondent, Corporate Debtor. The parties entered into the Live Production agreement for only Season-2 of the TV series PWL. It is alleged that entire consideration for the three Seasons was not paid and there is a ‘debt’ and ‘default’. In lieu of the default committed thereof, the appellant served a Demand Notice under S. 8 IBC but received no response in return. The appellant filed an application under S. 9 IBC before the Adjudicating Authority. The respondent in his reply pleaded that there was a “pre-existing dispute” between the parties. The Adjudicating Authority vide order dated 27-07-2021, dismissed the application in view of the “pre-existing dispute”. Aggrieved by the impugned order by the Adjudicating Authority, the appellant preferred the present appeal before this Tribunal challenging the same.
Moot Point
Whetherany provision under the IBC prevent the ‘Corporate Debtor’ from pleading issues of ‘Pre-Existing Dispute’ or that the ‘debt’ has been paid, in their reply to the petition filed under S. 9 IBC when S. 8 Notice is not replied?
Observation and Decision
The Tribunal relied on Brandy Realty Services Ltd. v. Sir John Bakeries India (P) Ltd., 2022 SCC OnLine NCLAT 290, where it was held that “…mere fact that Reply to notice under Section 8(1) having not been given within 10 days or no reply to demand notice having been filed by the Corporate Debtor does not preclude the Corporate Debtor to bring relevant materials before the Adjudicating Authority to establish that there are preexisting dispute which may lead to the rejection of Section 9 application.”
The Tribunal observed that neither S. 8 nor S. 9 IBC indicate that in the event when reply to Demand Notice was not filed within 10 days, the Corporate Debtor is precluded from raising the question of dispute or pleading that there is no amount due and payable. The Tribunal opined that the Corporate Debtor is not prevented from establishing by way of a reply and relevant documents, any Pre-Existing Dispute.
The Tribunal observed that failure to file rejoinder cannot be treated as admission of the pleadings in the written statement.
The Tribunal observed despite several emails and phone calls done by the appellant, the Corporate Debtor failed to pay the balance amounts, moreover, the Corporate Debtor failed to produce any evidence supporting their contention that the amount of Rs.1 crore was paid in full and final satisfaction.
The Tribunal also relied on Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353, and observed that in the present case there exist ‘Claims’ and ‘Counter Claims’ with respect to the amounts to be paid and the defense is not ‘spurious’ or ‘mere bluster’.
Dismissing the appeal, the Tribunal held that the appellant has failed to discharge its burden that there was indeed an ‘Operational Debt’ which was ‘due and payable’ as an agreement is only entered for Season 2 and no other agreement was made for other seasons.
[Greymatter Entertainment (P) Ltd. v. Pro Sportify (P) Ltd., 2023 SCC OnLine NCLAT 82, decided on 09-02-2023]
*Judgment by Ms. Shreesha Merla Member (T)
Advocates who appeared in this case :
Mr. Kuriakose Varghese, Ms. Aishwarya Hariharan and Mr. Akshat Gogna, Counsel for the Appellant;
Mr. Arvind Nayar (Senior Advocate,) Mr. Varun Tankha, Mr. Akshay Joshi and Mr. Prannoy Joe Sebastian, Counsel for the Respondent.
*Ritu Singh, Editorial Assistant has put this report together.