12/1/22, 11:45 PM Ivalue Advisors Pvt.

Ltd vs Srinagar Banihal Expressway Ltd on 13 January, 2020

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The Foreigners Law (Application And Amendment) Act, 1962
Section 18 in The Indian Evidence Act, 1872
Section 5 in The Indian Evidence Act, 1872
Section 25 in The Indian Evidence Act, 1872
Section 17 in The Indian Evidence Act, 1872

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National Company Law Appellate Tribunal

Ivalue Advisors Pvt. Ltd vs Srinagar Banihal Expressway Ltd on 13 January, 2020
Bench: A.I.S. Cheema, Kanthi Narahari, V. P. Singh

NATIONAL COMPANY LAW APPELLATE TRIBUNAL

NEW DELHI

Company Appeal (AT) (Ins) No.1142 of 2019

IN THE MATTER OF:

iValue Advisors Pvt. Ltd. ...Appellant

Versus

Srinagar Banihal Expressway Ltd. ...Respondent

For Appellant: Shri Sameer Rastogi, Advocate

For Respondent: Shri Mahfooz Nazki and Shri Zain Maqbool,

Advocates

ORDER

13.01.2020 Heard Counsel for the Appellant - Operational Creditor as

well as the learned Counsel for
the Respondent - Corporate Debtor.

2. The Appellant is an MSME (Micro, Small and Medium Enterprise) and

filed Section 9 Application
under Insolvency and Bankruptcy Code, 2016 (IBC

- in short) against the Respondent. The Appellant claimed in the Application

that the Corporate Debtor
is a special purpose vehicle company incorporated
for execution of project, that is, rehabilitation,
strengthening and four laning
of Srinagar to Banihal section in the State of J&K. The Appellant
claimed that
in 2014, an engagement letter dated 21st November, 2014 was signed between
the
Operational Creditor and the Corporate Debtor and fee was fixed at Rs.22
Lakhs for availing project
monitoring services, which were to be rendered by
the Appellant. The Appellant raised invoices
between 24.11.2014 till 16th
February, 2017 and the Corporate Debtor had released payments up to 6th
October, 2016. The Appellant claimed that part payment was due and the
Appellant sent Notice under
Section 8 of IBC on 21st January, 2019 (Page -

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12/1/22, 11:45 PM Ivalue Advisors Pvt. Ltd vs Srinagar Banihal Expressway Ltd on 13 January, 2020

94) referring to the invoices due and outstanding and sought to recover the
dues for services rendered.
In spite of the Notice, the Respondent did not pay
and thus, Section 9 Application was moved under
IBC.

3. The learned Counsel for the Respondent refers to the Reply which was
filed by the Respondent
before the Adjudicating Authority (National Company
Law Tribunal, Hyderabad Bench, Hyderabad).
According to the Counsel, the
Appellant had approached Delhi MSME Facilitation Council for the
same
purpose for which Section 9 Application was moved. The Respondent -
Corporate Debtor
claimed that the Corporate Debtor had been instructed by
the MSME to conciliate the alleged dispute
with the Operational Creditor and
Corporate Debtor had sent Reply dated 4th March, 2019 (Page - 90)
and
refuted all the allegations made by the Operational Creditor. According to the
Respondent, when
reference was made by the Appellant to MSME Council,
that itself showed that there was dispute and
the arbitration proceedings
under the MSME Council are to be initiated and thus the Application under
Section 9 was liable to be rejected.

4. The Adjudicating Authority heard the parties and rejected the Section
9 Application observing in
para - 5 of the Impugned Order as under:-

"5. It is the case of petitioner that various invoices

were raised from 24.11.2014 till
16.02.2017 and the
Corporate Debtor has released payments for the
services in full up to
06.10.2016 and there was a
substantial delay in making part payment and the
amount in
default is Rs.73,52,122.92/-. On perusal of
Company Appeal (AT) (Ins) No.1142 of 2019
record by this Adjudicating Authority, it is observed that
the Petitioner themselves in the
petition has stated that
the subject matter has already been taken to the MSME
facilitation
council for redressal in terms of MSME
Development Act, 2016 and Arbitration
proceedings
between the Operational Creditor and Corporate Debtor
have been
commenced with the failure of conciliation
between the parties as per section 18(3) of the
MSME
Development Act, 2006. Furthermore, the Corporate
Debtor has also sent a reply
on 07.02.2019, to the
demand notice dated 21.01.2019, sent by the
Operational Creditor
raising the pre-existing dispute
with regards to the amount claimed to the demand
notice.
The Adjudicating Authority has already held that
the pendency of the Application before
MSME
establishes pre-existing dispute as long as the dispute
is not spurious, hypothetical
or illusory but an admitted
fact on record. (Shrishti Electromech Pvt. Ltd. Vs Vijay
Home
Appliances Pvt Ltd in CP(IB)
No.396/9/HDB/2018). In the case in hand, the
Petitioner
Company itself had admitted to the fact that
the matter is seized of by MSME council and
the
adjudication by the said council is pending Arbitration
proceedings between the parties
have been commenced
which clearly establishes that there is a pre-existing
dispute
between the parties."

5. We have heard the learned counsel for the Appellant and learned
Counsel for the Respondent. The
learned Counsel for the Appellant submits
that the Appellant had no doubt moved the MSME Council
as the Appellant
was having a source of relief under the Micro, Small and Medium Enterprise
Development Act, 2006 (MSME Act - in short). It is argued that the amounts
were due under the
invoices as at Page - 54 to 57 dated 2nd January, 2017
for periods as specified in the invoices. The
amounts were not paid and hence
the Appellant had sought relief from MSME and according to the
Counsel, the
observation of the Adjudicating Authority in the Impugned Order, which is
reproduced
above, was apparently wrong because the Counsel was yet to take
up the proceeding which was filed
by the Appellant for getting relief which is
Company Appeal (AT) (Ins) No.1142 of 2019
clear from
the letter dated 15th October, 2019 sent by the MSME Council (Page

89). The Counsel states that though this was after the Impugned Order, it
clearly shows the Authority
informing that no conciliation proceedings had
started or Arbitrator was appointed. It is argued that
even if the arbitration is
pending that by itself is no bar to move an Application under Section 9. The
Counsel referred to engagement letter (Page - 48 at Page - 53) to state that
when the invoices were
raised in 2017, no disputes were ever raised by the
Respondent even till the Notice dated 21st January,
2019 sent under Section
8 of IBC. The Counsel states that the Adjudicating Authority has gravely erred

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in rejecting the Application as there was no pre-existing dispute as

contemplated under Section 5(6) of
IBC.

6. The learned Counsel further pointed out that for the invoices which
were raised on 2nd January,
2017 (copies of which have been filed at Pages -
54 to 57), the Respondent - Corporate Debtor had
deducted TDS from the
amounts payable to the Appellant under the invoices but the dues of the
Appellant were not paid for the same invoices.

7. The learned Counsel for the Respondent submitted that engagement

letter showed that the project
was to be completed by 31st December, 2015
and referring to Section 18 of MSME Act, it is stated
that when the Appellant
made reference to the Council, that itself has been referred in the Act as
"dispute" and thus when MSME Council had been moved before sending
Section 8 Notice, there was
an existing dispute. It is further argued that as
per the engagement letter, the Appellant was entitled to
Rs.22 Lakhs per
month for the services but surprisingly, invoices raised were for lesser amount
Company Appeal (AT) (Ins) No.1142 of 2019
without specifying any reason. It is further argued that
merely because TDS
was deducted does not mean that there is admission of liability. Learned
Counsel
for Respondent relied on the Judgements in the matter of "S.P.
Brothers, a partnership firm Vs. Biren
Ramesh Kadakia" reported as
MANU/MH/0279/2008. He referred to portion from the para - 8 of the
Judgement as under:-

"The issuance of TDS certificates does not amount to an

acknowledgement of defendant
within the meaning of
Section 25 of the Indian Evidence Act and the Full
Bench judgement
of this Court in the case of Jyotsna
(supra) puts the matter beyond doubt. This certificate is
primarily to acknowledge the deduction of tax at source.
The certificate does not refer to
any amount of loan or
even the rate of interest which is payable on the said
principal
amount. It does not refer to any contract
between the parties and even a transaction."

The Counsel further relied on Judgement in the matter of "Utility

Powertech Limited Vs. Amit
Traders" reported as MANU/DE/1872/2018
and referred to para 19 for the following observations:-

"19. On the issue of TDS deduction, the Trial Court

may have erred as the settled position
is that deduction
of TDS does not constitute an admission of liability. The
Trial Court may
be wrong in holding that the TDS
certificate by itself constitutes an admission of liability.
This is not so, inasmuch as the TDS can be deducted
even on the expectation of estimated
liability."

8. It is further argued that in the subsequent financial statements of the

Appellant, the Appellant has not
shown these amounts claimed in the
proceeding under Section 9 in its record as outstanding dues.

Company Appeal (AT) (Ins) No.1142 of 2019

9. We have heard Counsel for both sides and going through the matter,
we find that the Adjudicating
Authority erred in concluding that because
Operational Creditor had moved the MSME Authorities, it
showed pre-existing
dispute. The Appellant had a relief open under the MSME Act and only
because
the Appellant moved the Authority under MSME Act, it does not
mean that there is a pre-existing
dispute. The dispute raised by the Appellant
before the MSME was that it had dues to recover and that
the Respondent
has not paid. This by itself does not mean that there is pre-existing dispute
as far as the
Respondent is concerned. Under the IBC Section 5 Sub-Section
(6), the dispute is defined as under:-

"(6) "dispute" includes a suit or arbitration proceedings

relating to--

(a) the existence of the amount of debt;

(b) the quality of goods or service; or

(c) the breach of a representation or warranty"

10. Section 17 of MSME Act reads as under:-

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"17. Recovery of amount due.--For any goods

supplied or services rendered by the
supplier, the buyer
shall be liable to pay the amount with interest thereon
as provided under
section 16"

Sub-Section (1) of Section 18 of that Act reads as under:-

"(1) Notwithstanding anything contained in any other

law for the time being in force, any
party to a dispute
may, with regard to any amount due under section 17,
make a reference
to the Micro and Small Enterprise
Facilitation Council."

Company Appeal (AT) (Ins) No.1142 of 2019

Thus the context of the word "dispute" in
Section 18 takes colour from
Section 17 of MSME Act. It is different from context of
Section 5(6) read with
Section 8 of IBC.

11. At present, nothing is shown that there was any pre-existing dispute
raised by the Respondent with
regard to the services rendered by the
Appellant. When this is so, only because the Appellant went to
the MSME
Authorities was no ground for the Adjudicating Authority to reject the
Application under
Section 9. A further communication from the Authority has
been placed on record by the Appellant at
Page - 89. Although the subsequent
letter shows that the conciliation proceedings had yet to start. We
will go a
little ahead so that even if the conciliation proceeding was to start, if the
Respondent did not
raise dispute regarding the supply of goods or quality of
services, still it would be open for the
Adjudicating Authority to look into the
question whether or not dispute as covered under the IBC, is
attracted.

12. We have seen the Judgements relied on by the learned Counsel for the
Respondent. Appellant is not
relying merely on TDS deducted to make claim.
The liability is claimed on the basis of invoices raised
and permitted by Section
9(3) of IBC. Reliance is placed on invoices and documents relied on in
Section
9 Application.

13. We do not find that there was any pre-existing dispute raised by
Respondent and we hold that the
Section 9 Application was wrongly rejected.

14. No other shortcoming in the Section 9 Application has been pointed out
in the Impugned Order. As
such, Impugned Order is set aside. Appeal is
Company Appeal (AT) (Ins) No.1142 of 2019
allowed.
We remit back the matter to the Adjudicating Authority. The parties
are directed to appear before the
Adjudicating Authority on 3rd February,
2020. The Adjudicating Authority will admit the Section 9
Application and
pass further necessary orders under the provisions of IBC. Before the
Adjudicating
Authority passes order of admission, if the Respondent settles
the dispute with the Appellant, the
Adjudicating Authority in that case may
pass suitable orders accordingly.

Appeal is disposed accordingly. No costs.

[Justice A.I.S. Cheema]

Member (Judicial)
[Kanthi Narahari]
Member (Technical)
[V.P. Singh]
Member (Technical)
/rs/md
Company Appeal (AT) (Ins) No.1142 of 2019

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