Ernst & Young LLP Vs Mobase Electronics India Private Limited (NCLT Chennai)
Summary: The National Company Law Tribunal, Chennai Bench, dismissed Ernst & Young LLP’s application under Section 9 of the IBC seeking initiation of Corporate Insolvency Resolution Process against Mobase Electronics India Private Limited.
The Applicant claimed an operational debt of Rs. 3,11,25,785.03/-, comprising principal of Rs. 2,78,07,136.60/- and interest of Rs. 33,18,648.43/-, arising from an alleged outcome-based professional fee under an Engagement Letter dated 16.12.2023. The arrangement provided for an initial fee of Rs. 25,00,000/- and thereafter a fee of 1% of the relief obtained in GST proceedings. Also Read: EY’s 1% Success Fee: NCLT Flags ICAI Ethics Issue
According to the Applicant, it rendered professional services in connection with GST proceedings for FY 2019-20, 2020-21 and 2021-22 and obtained aggregate relief of Rs. 2,35,65,67,028/- against GST demands aggregating to Rs. 4,59,37,39,869/-. Draft invoices dated 19.06.2024 and 23.08.2024 remained unpaid. A cumulative invoice dated 11.02.2025 was subsequently raised, followed by a statutory Demand Notice in Form-3 dated 06.06.2025.
The Corporate Debtor disputed the alleged success fee. It contended that the agreed professional fee was only Rs. 25,00,000/-, which had been paid in full and final settlement, and that the additional 1% success fee clause was obscure, concealed through an asterisk and footnote, and had never been negotiated or agreed. It relied upon contemporaneous correspondence, including emails dated 23.04.2024, 24.04.2024, 20.06.2024 and 22.02.2025, as well as rejection of the invoices through the GST Portal.
