Lyka Labs Ltd. Vs Modi Lifecare Industries Ltd. (NCLAT Delhi)
The NCLAT Delhi allowed the appeal filed by Lyka Labs Ltd. against rejection of its Section 9 insolvency application and held that invoices were not mandatory for establishing operational debt under the Technical Guidance Agreement (TG Agreement).
The dispute arose from a TG Agreement dated 14.09.2012 between Lyka Labs Ltd. and Modi Lifecare Industries Ltd. Under the agreement, Modi Lifecare was required to pay minimum royalty fees or 5% of total sales value, whichever was higher, for specified periods. Due to financial difficulties faced by the respondent, revised payment arrangements were later agreed upon. The appellant claimed that minimum guaranteed royalty payments were payable irrespective of actual sales and were not dependent on issuance of invoices.
The appellant issued several letters seeking payment of outstanding royalty dues. In a letter dated 31.07.2017, the respondent acknowledged liability of approximately ₹63 lakh for the first year of business dealings. The appellant later issued a demand notice under Section 8 of the Insolvency and Bankruptcy Code in Form-3 without annexing invoices, contending that the TG Agreement itself created the liability.
The NCLT had rejected the Section 9 application on the ground that invoices were not enclosed with the demand notice. Before the NCLAT, the appellant argued that the TG Agreement did not require invoices for payment of minimum royalty fees and that the respondent had already admitted liability exceeding the statutory threshold. The respondent argued that royalty was payable only on actual sales basis, disputes existed regarding calculations, and the absence of invoices rendered the demand notice defective.
