IN THE NATIONAL COMPANY LAW TRIBUNAL, MUMBAI BENCH - V

CP No. 775/(IB)-MB-V/2021

Under Section 9 of the Insolvency and

Bankruptcy Code, 2016 read with Rule 6
of the Insolvency and Bankruptcy
(Application to Adjudication Authority)
Rule 2016)

In the matter of
Piyush Jani, Resolution Professional for
Reward Business Solutions Private
Limited
……Petitioner/Operational Creditor

Vs

Sporta Technologies Private Limited

..…..Corporate Debtor

Order Dated: 09.02.2024

Coram:
Reeta Kohli, Hon’ble Member (Judicial)
Madhu Sinha, Hon’ble Member(Technical)

Appearances in Hybrid Mode:

For the Petitioner:

For the Corporate Debtor: Adv. Dhruva Gandhi a/w Ms. Anuja
Jhunjhulwala i/b M. Mullah Associates (PH)

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ORDER

Per: Reeta Kohli, Member (Judicial)

This Company Petition is filed by Piyush Jani, Resolution Professional

of Reward Solutions Private Limited (hereinafter referred as “the
Petitioner/Operational Creditor”) on 22.06.2021 seeking to initiate
Corporate Insolvency Resolution Process (hereinafter referred as
“CIRP”) against Sporta Technologies Private Limited (hereinafter
called “Corporate Debtor”) by invoking the provisions of Section 9 of
the Insolvency and Bankruptcy Code, 2016 (hereinafter called “Code”)
read with Rule 6 of Insolvency & Bankruptcy (Application to
Adjudicating Authority) Rules, 2016, for an Operational Debt of Rs.
7,61,08,246/-. The default occurred since March 2020.

Brief Facts and Submission by the Petitioner:-

1. Reward Business Solutions Private Limited being the owner of

Unit Nos. 801 and 802, Tower B, Peninsula Business Park,
Ganpatrao Kadam Marg, Lower Parel Mumbai 400013 entered
into Lease and License Agreement dated 27.12.2019 with the
Respondent granting lease of the property on certain terms and
conditions.
2. In terms of the agreement, the Respondent was granted license
for a period of 5 years with a monthly license fee of Rs.
49,83,636/- (Rupees Forty-Nine Lakh Eighty-Three Thousand Six
Hundred and Thirty-Six) for the initial 3 years and Rs.
57,31,181/- (Rupees Fifty-Seven Lakhs Thirty-One Thousand
One Hundred and Eighty-One) for the remaining 2 years. The
possession of the unit in bare shell condition was handed over to

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the Respondent. The Respondent was not to pay any rent from
27.12.2019 to 27.03.2020 and was required to pay the rent as per
Lease Agreement from 28.03.2020 onwards.
3. In addition, the electricity charges, CAM Charges, etc. were to be
paid by the Respondent. The Agreement had a lock-in period of
33 months i.e. till 27.09.2022 the Respondent could not terminate
the agreement. The case of the Applicant is that right from the
beginning, the Respondent failed to pay the license fee. Having
been left with no option, on 20.04.2021 the Demand Notice was
issued under section 8 in Form 3 under Rule 5 of the Insolvency
and Bankruptcy (Application to Adjudicating Authority) Rules,
2016 of the Code for outstanding license fee from 28.03.2020 to
27.04.2021 amounting to Rs. 7,61,08,246/- (Rupees Seven Crore
Sixty-One Lakhs Eight Thousand Two Hundred and Forty-Six).
The Respondent failed to comply with the Demand Notice and
hence the above said Company Petition was filed by the Petitioner.
4. In its Reply to the Demand Notice vide letter dated 30.04.2021,
the Respondent claims that it lost its rightful opportunity to
negotiate the License Fees due to the impact of the on-going
Covid-19 Pandemic and confusion with regards to ownership of
the leased premises with the Petitioner or a third party named
Mangalam Vanijya Private Limited (Hereinafter referred to as
“MVPL”). Furthermore, the Respondent also received a copy of
the Provisional Attachment Order dated 27.11.2020 of the
Directorate of Enforcement in relation to the leased premises.
5. The Petitioner fairly admits the fact that pending amount falls
within the period stipulated under Section 10A of the Code
however this objection had not been taken by the Corporate
Debtor in its reply. Also, no amount has been paid by the
Corporate Debtor pursuant to the Demand Notice sent by the

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Operational Creditor and up to the time the premises were

vacated by it.
6. The Petitioner relies on the judgement of the Hon’ble NCLAT in
Jaipur Trade Expocentre Private Limited (Jaipur Trade) v.
Metro Jet Airways Training Private Limited Company Appeal
(AT) (Insolvency) No. 423 of 2021 in which it was held that
unpaid license fee would be considered as an operational debt
under section 5(21) of the Code. Thereby, justifying that the
Petitioner is an Operational Creditor and the Default amount is
an Operational Debt as per the provisions of the Code.

Submissions by the Corporate Debtor:

1. The Ld. Counsel for the Corporate Debtor had taken preliminary
objection of the debt falling within the period stipulated under
Section 10A leading to non-maintainability of the petition. It is the
case of the Respondent that the Petitioner had relied upon an
invoice dated 31.03.2020 and two other invoices both dated
01.04.2020 for License Fees for the period from 28.03.2020 to
24.03.2021. Furthermore, the Petitioner is not an Operational
Creditor and the alleged claim is not an Operational Debt as per
the provisions of the Code which further adds to grounds of
rejecting the present petition.
2. It is also the case of the Respondent that the petition is also not
maintainable on the ground that Mr. Naresh Jain, the erstwhile
Director of the petitioner and a shareholder of MVPL had filed a
Section 7 Application. MVPL is therefore, Financial Creditor and
the petitioner in the present case is made the Corporate Debtor in
CP. No. 1168 of 2020.
3. The Corporate Debtor also states that the present Petition is
nothing but an abuse of the process of law and as such, the

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appointment of the Insolvency Professional (IP) vide an Order dated

18.02.2021 in CP. No. 1168 of 2020 is collusive between the
Operational Creditor and MVPL. On this ground alone the
application deserves to be dismissed with cost.
4. It is also the case of the Respondent that the petition is also not
maintainable on the ground that Mr. Naresh Jain, the erstwhile
Director of the petitioner and a shareholder of MVPL had filed a
Section 7 Application. MVPL is therefore, Financial Creditor and
the petitioner is made a Corporate Debtor in CP. No. 1168 of 2020.
5. In addition to the above stated, the other argument is that there is
a genuine pre-existing dispute. In view of the same also, the present
petition is not maintainable. To substantiate his arguments,
reference was made to the following documents placed on record:-
 Email dated 29.05.2020 which is a communication from the
Operational Creditor to the Corporate Debtor stating that the
Operational Creditor had taken loan from MVPL. MVPL and
Operational Creditor intended to enter into a Tripartite
agreement with the Corporate Debtor to which the Corporate
Debtor objected on 15.06.2020. In its reply dated 15.06.2020
itself, the Operational Creditor submitted that MVPL has all
the rights over leased premises and had urged the Corporate
Debtor to honour the contractual commitment by paying to
MVPL. This communication had itself put MVPL in the place
of the Operational Creditor for the purpose of payment of rent
so far as the Corporate Debtor is concerned. MVPL had
written to Operational Creditor stating that the Corporate
Debtor is in breach of the license payment and stated that
the amount due should be paid to the MVPL’s bank account.
 On 18.06.2020 Corporate Debtor had written to Operational
Creditor seeking clarification with respect to the control of
the leased premises. MVPL also wrote to Corporate Debtor on

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19.06.2020 stating that if original amount due, i.e. the

license fee for the months of March and April 2020 is not
paid, they shall be constrained to initiate the process for
default as per the license agreement.
 On 07.09.2023, the Corporate Debtor vide a letter to MVPL
and the Operational Creditor, mentioned that it has come to
its knowledge from reliable sources that various enquiries
are being conducted by the investigating agencies in relation
to the nexus of Mr. Naresh Jain having been involved in the
fraud committed by Yes Bank and while these investigations
are going on there is a letter issued by Enforcement
Directorate directing that the premises should not be
transferred. The Corporate Debtor further mentioned that
the Advocates for the prospective buyer of the leased
premises had issued a Public Announcement on 14.03.2020
for confirming title of the said premises. There were various
objections received in relation to the title of the said property
to which clarifications were sought from Mr. Naresh Jain but
in vain. This made it amply clear to the Corporate Debtor that
there exists uncertainty over the title of the said premises.
There is also a possibility that MVPL is not an independent
entity and is acting at the behest of the Operational Creditor
and could be a benami holder of the leased premises.
 On 08.09.2020, both the Operational Creditor and MVPL vide
two separate emails to the Corporate Debtor requested the
Corporate Debtor to pay all the outstanding amount in the
Bank Account of the Operational Creditor within 7 days of
the receipt of their emails.
 A copy of the Provisional Attachment Order dated 27.11.2020
of the Directorate of Enforcement in relation to the leased

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premises as per which, the leased premises was attached by

the Enforcement Directorate being proceeds of crime.

This chain of correspondences clearly show that the Operational

Creditor and MVPL themselves directed the Corporate Debtor to make
the payment first to MVPL and then to the Operational Creditor thereby
continuously changing stance in the full course of events.

Findings

1. After having heard the Counsels of both the parties and perusing
the documents placed on record, it is evident that Mr. Naresh Jain
the erstwhile Director of the Operational Creditor is a Shareholder
of MVPL and also the fact that the address of the Operational
Creditor and MVPL is also the same. However, without making
any observations/comments on the above said fact, for the
purpose of admitting a Section 9 petition, we confine ourselves to
the necessary ingredients required to admit Section 9 petition.
What is primarily necessary is the existence of legally payable
“Debt” and corresponding “Default”.

2. On perusal of the submissions of both the parties and particularly

in light of the Lease and License Agreement dated 27.12.2019, we
are of the considered view that the Corporate Debtor had financial
obligations towards the Operational Creditor which it failed to
comply with. There is no dispute in relation to the same. In fact
the Financial liability stands admitted by the Corporate Debtor.

3. In view of the fact that the Corporate Debtor has already

acknowledged its liability, it cannot be permitted to take undue
advantage by withholding the License Payment purely on the
ground of whom it should have been paid to. Given the peculiar
facts of the case, the Corporate Debtor chose not to fulfil its

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financial obligations even after the issuance of the Demand Notice

dated 20.04.2021 by the Operational Creditor. The Corporate
Debtor, in exercise of its due diligence and reasonable prudence
should have made the payment then and logically saved itself
from the rigours of consequent CIRP.

4. This Hon’ble Tribunal in pursuance of its Summary Jurisdiction

is constrained to take into account only the existence of an
admitted debt and corresponding default which is clearly satisfied
by the facts of the present case. It is pertinent to note that emails
brought on record by the Corporate Debtor only show the
presence of dispute qua the payee of the debt. The existence of
debt is nowhere disputed. The above stated mandatory
ingredients, thus supersede the merits of the emails brought on
record by the Corporate Debtor.

5. Thus, in view of the above stated facts and the settled law, we are
of the considered opinion that the Respondent is very much a
Corporate Debtor and the Petitioner has successfully
demonstrated the existence of “operational debt” and “default”
committed by the Corporate Debtor along with absence of any pre-
existing dispute between the parties in consonance with the
relevant provisions of the Code. Thus, it is concluded that the
Company Petition satisfies all legal requirements for admission
including the pecuniary, territorial and subject matter
jurisdiction and the same is also filed well within the limitation
period of 3 years. Considering the above facts, we are of the
considered view that this Petition deserves to be admitted under
Section 9 of the Code.

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ORDER

a. In view of the aforesaid findings, the above Company Petition

No. 775/IBC/MB/2021 is hereby admitted and thereby
initiation of Corporate Insolvency Resolution Process (CIRP) is
ordered against Sporta Technologies Private Limited.

b. Since there is no proposal for the name of Interim Resolution

Professional by the Petitioner, Madan Bajrang Lal Vaishnawa
having Registration Number IBBI/IPA-001/IP-P-02011/2020-
2021/13052 is appointed as the Interim Resolution
Professional from this Tribunal’s Panel.

c. The Petitioner shall deposit an amount of Rs. 2 Lakhs towards

the initial CIRP costs by way of a Demand Draft drawn in favour
of the Interim Resolution Professional appointed herein,
immediately upon communication of this Order.

d. That this Bench hereby prohibits the institution of suits or

continuation of pending suits or proceedings against the
corporate debtor including execution of any judgment, decree
or order in any court of law, tribunal, arbitration panel or other
authority; transferring, encumbering, alienating or disposing of
by the corporate debtor any of its assets or any legal right or
beneficial interest therein; any action to foreclose, recover or
enforce any security interest created by the corporate debtor in
respect of its property including any action under the
Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002; the recovery of any
property by an owner or lessor where such property is occupied
by or in the possession of the Corporate Debtor.

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e. That the supply of essential goods or services to the Corporate

Debtor, if continuing, shall not be terminated or suspended or
interrupted during moratorium period.

f. That the provisions of sub-section (1) of Section 14 shall not

apply to such transactions as may be notified by the Central
Government in consultation with any financial sector regulator.

g. That the order of moratorium shall have effect from the date of
pronouncement of this order till the completion of the corporate
insolvency resolution process or until this Bench approves the
resolution plan under sub-section (1) of section 31 or passes
an order for liquidation of corporate debtor under section 33,
as the case may be.

h. That the public announcement of the corporate insolvency

resolution process shall be made immediately as specified
under section 13 of the Code.

i. During the CIRP period, the management of the corporate

debtor will vest in the IRP/RP. The suspended directors and
employees of the corporate debtor shall provide all documents
in their possession and furnish every information in their
knowledge to the IRP/RP.

j. Registry shall send a copy of this order to the Registrar of

Companies, Mumbai for updating the Master Data of the
Corporate Debtor.

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k. Accordingly, CP 775 of 2021 is admitted.

SD/- SD/-

MADHU SINHA REETA KOHLI

MEMBER (TECHNICAL) MEMBER (JUDICIAL)

//VLM//

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