NCLAT Set Asides Insolvency Process Against HCL

The National Company Law Appellate Tribunal (NCLAT) Principal Bench comprising of Justice Ashok Bhushan, Ms. Shreesha Merla and Mr. Naresh Salecha recently allowed the appeal filed by the suspended director of HCL Technologies (HCL) and set aside the Corporate Insolvency Resolution Process (CIRP) initiated against the HCL. NCLT Bench-II, New Delhi on 17.01.2022 admitted the insolvency petition filed by an operational under Section 9 of the Insolvency and Bankruptcy Code, 2016 against HCL for a debt of INR 3.54 Crores. Earlier, NCLAT on 19.01.2022 while issuing notice in the appeal filed by suspended director of HCL stayed admission order of NCLT, New Delhi. Brief Background HCL entered into an agreement dated 19.11.2015 with Sahaj Bharti Travels for provision of pick up and drop caps for its personnel. The agreement was further extended till 31.12.2018 by HCL. As per the terms of the agreement, invoices were required to be raised by Operational Creditor within 60 days of services delivered or billed. Schedule A of the Agreement provides that in case cabs do not run for a minimum of 7000 Kilometers, a minimum guarantee amount would be payable to Operational Creditor by HCL. Operational Creditor vide its email dated 25.05.2018 requested payment of minimum guarantee amount and a meeting dated 28.05.2018 was held between HCL and Operational Creditor concerning the same. HCL vide its email dated 29.11.2018 informed the Operational Creditor that no amount is due and payable on the account of Minimum Guarantee amount but considering the relationship between the parties, HCL proposed to pay an amount of INR 20.58 Lakhs in good faith for one full and final settlement of all issues. Operational Creditor replied to the same and requested HCL to make payment of INR 81.96 Lakhs which was denied by HCL. Subsequently, HCL sent a demand notice under Section 8 of the Code for an amount of INR 3.54 Crores and thereafter filed an application under Section 9 of the Code for the same amount which was admitted by NCLT vide its order dated 17.01.2022. Contentions Of HCL It was contended on behalf of the HCL before the NCLAT that; There is a pre-existing dispute between the parties regarding the minimum guarantee amount and all invoices regarding the actual services provided by Operational Creditor has been duly paid by HCL.As per agreement, Operational Creditor was required to raised invoices for the services rendered but no invoice was raised by the Operational Creditor regarding the Minimum Guarantee Amount.The proposal of payment of INR 20.58 Lakhs was in good faith and without pre judice to the rights and contentions of HCL regarding pre-existing dispute between the parties. The Application filed by the Operational Creditor was nothing but a proceeding for recovery of contractual amount even when there is an arbitration clause in the Agreement. Contentions Of Operational Creditor It was contended on behalf of the Operational Creditor before NCLAT that; Operational Creditor was entitled for the payment of Minimum Guarantee Amount and thus has the full right to initiate the proceedings under IBC.HCL itself admitted the debt of INR 20.58 Lakhs which is more than INR 1 lakh and therefore, the operational debt stands admitted by HCL. Issues framed by NCLAT Whether there was a pre-existing dispute between the parties prior to issuance of Demand Notice under Section 8 dated 08.05.2019? Whether there was a debt due of which default was committed by the Corporate Debtor entitling the Operational Creditor to file an Application under Section 9 of the IBC? Whether the correspondences between the parties beginning from e-mail dated 26.05.2018 to 03.12.2018 proved admission of debt by the Corporate Debtor of an amount of more than Rs. 1 Lakh which was sufficient to admit Section 9 Application?Whether the Application filed by the Operational Creditor was an application as a debt enforcement measures against the solvent company for recovery of a debt and not an Application for any Insolvency Resolution for Corporate Debtor? Decision/Analysis by NCLAT Issue I NCLAT referred to various terms of the agreement between the Operational Creditor and HCL and recorded that no invoice was raised by the Operational Creditor regarding the minimum guarantee amount and the issue regarding the payment of minimum guarantee was raised for the first time on 28.05.2019. NCLAT further noted that all the invoices raised by the Operational Creditor were duly paid by HCL and offer made by HCL was only in good faith and therefore, concluded that on the basis of the communications between the parties, there exists a pre-existing dispute the parties in terms of the judgement of Supreme Court in the Mobilox Innovations Private Limited v. Kirusa Software Private Limited and therefore, NCLT erred in rejecting the defence of ...

NCLAT Set Asides Insolvency Process Against HCL

Akshay Sharma

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