NCLAT (21.06.2021) in Manipal Media Network Ltd. VS. Vishwakshara Media Pvt. Ltd. [Company Appeal (AT) (Insolvency) No. 369 of 2020] held that;
Thus even though there was no explicit written mutual agreement for the extension of the agreement, the conduct of both the parties shows that both the parties were working together even after 3.12.2017 as if the agreements continued to be in force.
So on one hand the respondent keeps on promising to make the payment, while on the other he raises the issue of existence of a dispute when the application under Section 9 of IBC is filed before the Adjudicating Authority. These actions raise doubt regarding the veracity of the dispute and its pre-existence.
The law is very clear that it is enough if under Section 4 of IBC the unpaid debt is more than the threshold value of Rs. One Lakh for acceptance of application under section 9 of IBC.
Excerpts of the order;
This appeal is against the order of Adjudicating Authority, (NCLT Bengaluru) dated 16.12.2019 in CP (IB) No. 327/BB/2019, qua which application under Section 9 of the Insolvency and Bankruptcy Code (hereafter called the IBC) filed by the Operational Creditor M/s. Manipal Media Network Limited was dismissed on the ground of pre-existing dispute.
# 2. While the precise amount of debt in default is disputed by the Respondent, he has not disputed that the amount in default is more than Rs. One lakh which is the threshold for maintainability when the application under Section 9 of IBC was filed by the Appellant before the Adjudicating Authority.
# 3. The facts of the case are as follows: –
The Appellant (Operational Creditor) Manipal Media Network Private Limited, and the Respondent (Corporate Debtor)Vishwakshara Media Private Limited, entered into three separate agreements wherein the Appellant became the printing partner of Corporate Debtor for printing of three newspaper editions and supplements of newspaper “Vishwavani” issued from Gulbarga, Hubli and Manipal. These three separate agreements, all signed on 4.12.2015, have been entered into between the Appellant and the Respondent – first one relating to the Gulbarga printing facility, the second one relating to the Hubli printing facility and the third one relating to the Manipal printing facility for Vishwavani newspaper and its supplements. The Appellant’s case is that the Respondent kept on making requests through emails for printing jobs even after the expiry of the term of the agreements on 3.12.2017 and the Appellant kept on raising invoices for printing charges every fortnight as was required under the agreement, and the Respondent continued to make payments till January 2018. On the other hand,the Respondent says that the agreements dated 4.12.2015 were for a period of two years, which expired on 4.12.2017, and thereafter they were not extended through written mutual agreement of both the parties. Therefore, Respondent claims the agreements were not in force for the period the dues are being claimed for payment by the Appellant and hence no payments are due to be made to the Appellant.
# 13. The issues that are germane to this appeal are:
(i) Whether the agreement that had allegedly lapsed on 3.12.2017 was extended by conduct, as has been claimed by the Appellant and whether the printing jobs carried out at the request of Corporate Debtor will be covered by the terms of the agreement
(ii) Whether the percentage of wastage of newsprint and the minimum number of chargeable copies are in consonance with the provisions in the agreement and is there a pre existing dispute regarding percentage as has been claimed by the Respondent,
(iii) Whether the Appellant can invoke provisions of IBC in view of Clause 24 of the agreements for printing, which relates to arbitration under Arbitration and Conciliation Act.
# 14. When we consider the conduct of the parties after the lapse of the said agreement on 3.12.2017, we find that the Respondent continued sending emails for printing to the Appellant and the Appellant was duly complying with these requests. Therefore, written communication between the two parties by giving orders on email for printing jobs for the newspaper editions and acceptance of those orders by the Appellant was in the nature of written mutual consent of both the parties and is tantamount to working according to the terms of the agreement even beyond the lapse of period mentioned in agreement. Thus even though there was no explicit written mutual agreement for the extension of the agreement, the conduct of both the parties shows that both the parties were working together even after 3.12.2017 as if the agreements continued to be in force. In support the Appellant has attached a list of 66 email communications wherein there are emails that show that the Appellant continued to receive orders for printing even after the said expiry of the agreements as per their original term, and that these orders were complied with and the Operational Creditor continued to raise invoices for the same and receive payments till January, 2018.
# 15. The Appellant issued Demand Notice dated 23.04.2019 which was not responded to by the Respondent. It is worth noting that the Demand Notice under Section 8 of the IBC is to afford the Corporate Debtor an opportunity to clarify his position regarding payment of debt that the Operational Creditor is claiming to be due. Sections 8 and 9 of IBC are reproduced below for ready reference: . . . .
# 16. The Demand Notice has to be responded to within 10 days, as required in Section 8(2) for the purpose of bringing to the notice of the operational creditor the existence of a dispute or evidence of repayment of operational debt. The Corporate Debtor has not done so, prompting the operational creditor to take action as per Section 9 (1). Later during hearing before the Adjudicating Authority, the Corporate Debtor raised the issue of the existence of a dispute. It appears to be a spurious dispute, raised to ward off the responsibility of repayment of debt as claimed by the operational debtor.
# 17. The doubtful nature of dispute can also be inferred from the fact that Ld. Counsel of Respondent (Corporate Debtor) has stated in arguments that he had sent emails regarding the high percentage of wastage of newsprint on 28.9.2016, 5.10.2016, 25.5.2017, 2.7.2018 and 9.8.2018. The first invoice that is included in the demand notice which is due for payment is of 22.2.2018. All the other invoices included in the demand notice are of dates later than 22.2.2018. Quite obviously the emails seeking clarification for high wastage of newsprint sent in 2016 and 2017 relate to invoices which are not included in the demand notice. In all probability payment against these invoices have been made despite the issue of newsprint wastage having been raised. It is not clear why the same issue is raised again by the corporate debtor for later invoices. It appears that this issue has been shown as a pre-existing dispute as an afterthought by the Respondent.
# 18. It is also noteworthy that the respondent has on various occasions vide emails dated 20/2/2019, 19/2/2019, 22/10/2018, 24/9/2018, 6/9/2018 and 5/9/2018 assured for making pending payments. So on one hand the respondent keeps on promising to make the payment, while on the other he raises the issue of existence of a dispute when the application under Section 9 of IBC is filed before the Adjudicating Authority. These actions raise doubt regarding the veracity of the dispute and its pre-existence. We find the dispute now raised regarding delay and wastage to be mere bluster considering the conduct of Respondent.
# 19. Paragraph 9 of the impugned order mentions that it is not for the Adjudicating Authority to do a roving enquiry to ascertain the exact amount of unpaid debt and makes it a ground for dismissing the application. The law is very clear that it is enough if under Section 4 of IBC the unpaid debt is more than the threshold value of Rs. One Lakh for acceptance of application under section 9 of IBC. While there is dispute about the rate of interest claimed by the Appellant it does not significantly alter the quantum of unpaid debt, which will remain to be above Rs. One Lakh. We, thus find, that the application is maintainable on account of the unpaid debt being more than Rs. One Lakh, the threshold amount.
# 20. Another issue raised by the Respondent relates to the Appellant not printing the newspaper for 16 days and the loss incurred by the Respondent on this account. The Clause 3 of the agreement stipulates that the responsibility of supplying newsprint lay with the Corporate Debtor. Hence this issue does not provide any help to the Respondent in his case.
# 21. Finally coming to the issue of high percentage of wastage of newsprint in printing, as alleged by the Corporate Debtor, we find that the said agreements make it very clear that the minimum number of chargeable copies will be 10,000. In addition, the said agreements also stipulate that the wastage will be less than 4%. This wastage, quite obviously, is in relation to printing of 10,000 copies. It is understood that in printing jobs as the number of copies increase the quantum of wastage decreases and, conversely, as the number of copies decrease the quantum of wastage increases. In the present case, the number of copies that were required by the Respondent to be printed were well below 10,000, and therefore the quantum of wastage was more than 4%. In any case the invoices raised before 22.2.2018 were settled even though corporate debtor had raised the issue of high wastage percentage. It is, therefore, logical to expect that the later invoices should also have been settled on the same principle. Hence, we find the insistence of the Respondent that the Appellant should provide clarification for higher wastage to be superfluous and according to us this dispute does not fall in the category of preexisting dispute.
# 22. Regarding submitting the dispute to arbitration, we find that the matter was not referred for arbitration by either of the parties. This issue of possibility of arbitration has been raised at the appeal for this tribunal to direct the parties to go for arbitration.
# 23. In the light of the discussion in the above paragraphs we are of the opinion that the Appellant and the Respondent continued in their relationship of Corporate Debtor and Operational Creditor even after 3.12.2017 and hence effectively the agreements continued to bind the parties. The Corporate Debtor accepted the invoices raised on and after 22.2.2018 and in various emails kept on promising to make payments and buying time for making payments. The issue of wastage of newsprint being more than the stipulated 4% would have been relevant only if the print orders were more than 10000. In view of the fact that print orders for various editions of the newspaper Vishwavani were substantially less than 10,000, the higher percentage of newsprint wastage can’t be ascribed to the Appellant. The Appellant is well within his right to raise invoices for the minimum chargeable copies of 10,000 as per clause 7A of the agreements.
# 24. Thus Appellant’s application under Section 9 of IBC satisfies all the ingredients as laid down in law. The same deserved to be admitted. Therefore the appeal succeeds and the Impugned order dated 16/12/2019 is set aside. The matter is remitted back to the Adjudicating Authority. The Adjudicating Authority will admit the application (unless parties settle dispute before such Order), and pass further consequential directions as per provisions of IBC.
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Blogger’s comments; In the above case question is; Why AA & Appellate Authority discussed in detail the matter regarding pre-existing dispute, in light of the fact that respondent CD failed to respond & bring to the notice of the applicant pre-existing dispute, within 10 days the demand notice sent by the applicant under the provisions of Section 8 of the Code.
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