P V Media Vision Private Limited Vs Saikrupa Photo Offset Private Limited (NCLT Mumbai)
Summary: P V Media Vision Private Limited filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the corporate insolvency resolution process against Saikrupa Photo Offset Private Limited for an alleged operational debt of Rs. 1,45,36,641. The dispute arose from supplies of goods, dishonoured cheques and a Memorandum of Understanding dated 24 April 2017. Under the settlement, the corporate debtor agreed to pay Rs. 1,67,90,740 against stated original dues of Rs. 2,42,27,381, with a clause reviving the original amount upon specified defaults.
The operational creditor contended that cheques dated 12 and 22 July 2019 were dishonoured, triggering the clause that entitled it to claim the original dues after adjusting payments received. It argued that the settlement did not change the character of the underlying supply-related operational debt and relied on NCLAT decisions involving Ahluwalia Contracts. The corporate debtor disputed the calculation and asserted that it had paid Rs. 82,50,000 after the settlement, leaving only Rs. 67,50,000 payable, below the Rs. 1 crore threshold. It also referred to earlier disputes over quality, cost and delivery of goods.
The NCLT examined whether the petition was founded on the original invoices or on the settlement obligations. It noted that the invoices annexed to the petition related to 2014, whereas the claim in Part IV was based on the 2017 MoU and its alleged breach. The Tribunal held that, in these circumstances, the claim under the settlement could not be equated with operational debt within Section 5(21). It relied on Trafigura India Pvt. Ltd. v. TDT Copper Limited and distinguished the Ahluwalia Contracts decisions on their facts. It also observed that a petition based on the 2014 invoices would not withstand limitation. The Section 9 petition was dismissed without an order as to costs.
Cases Discussed
- Trafigura India Pvt. Ltd. v. TDT Copper Limited, Company Appeal (AT) (Insolvency) No. 742 of 2020, decided 15.09.2022 (NCLAT) — Relied upon to hold that default of instalments under a settlement agreement did not constitute operational debt in the circumstances.
- Ahluwalia Contracts (India) Ltd. v. Logix Infratech Pvt. Ltd. (NCLAT) — Relied on by the creditor but distinguished because the settlement in that case did not alter the amount due for the underlying work.
- Ahluwalia Contracts (India) Ltd. v. Jasmine Buildmart Pvt. Ltd. (NCLAT) — Relied on by the creditor but distinguished because settlement was entered into during an existing Section 9 proceeding.
FULL TEXT OF THE JUDGMENT/ORDER OF NCLT MUMBAI
1. The present petition has been filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) by P V Media Vision Private Limited. (hereinafter called as “Operational Creditor”) praying inter-alia for initiation of Corporate Insolvency Resolution Process (CIRP) against Saikrupa Photo Offset Private Limited (hereinafter called as “Corporate Debtor”) by invoking the provisions of Section 9 of the Insolvency and Bankruptcy Code (hereinafter called “the Code”) for resolution of an unresolved Operational Debt of Rs. 1,45,36,641/-. The submissions of the Operational Creditor are as follows:
2. The present Company Application is filed by the Applicant under section 9 of the Code for admitting Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor for the default of 1,45,36,641/- committed by the Corporate Debtor.
3. The brief facts are the Corporate Debtor had purchased certain goods from the Applicant. On seeking payments, the Corporate Debtor had issued certain cheques to the Applicant which were dishonoured and the payment could not be realized. The Applicant filed the proceedings under Section 138 of the Negotiable Instrument Act, 1881. Pending the adjudication of the complaints, the Corporate Debtor approached the Applicant for settlement of outstanding dues upon certain terms and conditions agreed and more particularly set out in the Memorandum of Understanding dated 24th April 2017 (“MOU”) executed by and between the Corporate Debtor and the Applicant.
4. Under the said MoU- (a) the Corporate Debtor once again admitted and acknowledged the debt of Rs. 2,42,27,381/-. However, as a part of settlement under MOU –
i. The Corporate Debtor agreed to pay a sum of Rs. 1,67,90,740/- towards full and final settlement out of which a sum of Rs. 17,90,740/- was paid on the date of execution of the MOU and for the balance sum of Rs. 1,50,00,000/-, the Corporate Debtor issued certain the post-dated cheques drawn in favour of the Applicant;
ii. It was further agreed that in case the Corporate Debtor committed more than one default in one financial year in making payment of the agreed amount as aforesaid, the Applicant would be entitled to receive original legal dues of Rs. 2,42,27,381/- from the Corporate Debtor (Clause 8 of MOU);
iii. the Applicant agreed to withdraw all the 138 proceedings filed against the Corporate Debtor as on the date of MOU.
5. It is further submitted that initially, the post-dated cheques issued by the Corporate Debtor pursuant to the said MOU were realized. However, the cheques dated 12th July 2019 and 22nd July 2019 bounced (i.e. two defaults were made in the same financial year). Accordingly, the Clause 8 of the MOU was triggered and the Applicant is entitled to receive the original legal dues of Rs. 2,42,27,381/- from the Corporate Debtor. After adjusting the payments already received from the Corporate Debtor, now a sum of Rs. 1,45,36,641/- is still outstanding and payable by the Corporate Debtor to the Applicant, which has remained under default till date. Therefore, this company application has been filed for commencement of CIRP against the Corporate Debtor. Hence the Petition. Reply filed on behalf of the Corporate Debtor:-
6. In reply, the Corporate Debtor has denied all allegations and/ or contentions and/or submissions made by the Petitioner in the Petition which are inconsistent with and/or contrary to what has been stated herein. Further, nothing shall be deemed to have been admitted for the reasons of non- traverse.
7. It is submitted that in the MoU dated 24.04.2017, it is clearly stated that the dispute between the Applicant /Operational Creditor and the Respondent/Corporate Debtor was settled for Rs.1,67,90,740/- and on the date of the execution of the said MOU, the Respondent/Corporate Debtor had paid to the Applicant /Operational Creditor Rs.17,90,740/- and had issued postdated cheques for the balance of Rs. 1,50,00000/- and out of the balance amount of Rs.1,50,00000/- , the Respondent/Corporate Debtor has paid till date Rs.82,50,000/- to the Applicant/Operational Creditor and accordingly, the Respondent/Corporate Debtor as on today only needs to pay Rs.67,50,000/- to the Applicant/Operational Creditor. So it is crystal clear that as on today the legal due to be paid by the Respondent/Corporate Debtor is Rs.67,50,000/- only and, therefore, this Tribunal has no jurisdiction to try and entertain this present Petition filed by the Applicant/Operational Creditor and the same has been filed just to extort easy money from the Respondent/Corporate Debtor with ulterior motive and hence this petition should not be admitted and the same needs to be dismissed.
8. It is further submitted that it is to be noted here that even after the execution of this MOU, the Applicant/Operational Creditor and the Respondent/Corporate Debtor have done business of crores of Rupees from the period September 2017 till the period December 2021 for the tune of Rs. 3,96,15,992/- and the said payments of Rs.3,96,15,992/- stands fully paid by Respondent/Corporate Debtor to the Applicant/Operational Creditor.
9. It is submitted that the Respondent categorically states that the contents of Part-IV of the petition are highly disputed to the extent that the alleged claim amount mentioned by the Applicant is wrong, illegal bad in law and the Respondent/Corporate Debtor also disputes the supply of goods and also disputes the genuiness of the alleged invoices and the Respondent /Corporate Debtor hereinabove have made it very clear that at no point of time, the Respondent/Corporate Debtor is liable to pay to the Applicant/Operational Creditor the alleged amount of Rs.1,45,36,641/- and the same is highly disputed and denied by the Respondent/Corporate Debtor. It is further submitted that even when the said alleged transaction had taken place between the Applicant/Operational Creditor and the Respondent/Corporate Debtor, there was dispute with regard to quality, cost and delivery of certain goods and, therefore, the alleged cheques were dishonored and accordingly the Applicant/Operational Creditor had filed various cases u/Sec. 138 of the Negotiable Instruments Act, 1881 before the Hon’ble 33rd Court at Balllard Pier, Mumbai and after various talks, those matters were withdrawn on the execution of MOU Dated 24/04/2017 as mentioned above for the total settlement amount of Rs. 1,67,90,740/- against the alleged wrong and false claim of Rs.2,42,27,381/. It is further stated that the Applicant/Operational Creditor reduced the amount of Rs.74,36,641/- which goes to the root of this petition because the Applicant/Operational Creditor knew that the alleged amount of Rs.74,36,641/- was in dispute as mentioned by the Respondent /Corporate Debtor above and was also not legal and, therefore, could not be enforced legally against Respondent/Corporate Debtor.
10. It is further submitted that it is very strange and difficult to even digest that why a prudent man would leave Rs. 74,36,641/- when matters were already pending before the Hon’ble court at Ballard pier which clearly shows nothing but false and extortionist practise to grab easy money by the Applicant/Operational Creditor from the Respondent/Corporate Debtor. That the Respondent/Corporate Debtor highly disputes the allegations levelled by the Applicant/Operational Creditor against the Respondent/Corporate Debtor and calls upon the Applicant/Operational Creditor to strictly prove the same.
11. It is further submitted that he Applicant/Operational Creditor has mentioned false and wrong calculation with regard to the receipt of the amount, as it has been falsely mentioned in the petition by the Applicant/Operational Creditor that after the execution of the MOU, they have received only 79,00,000/- from the Respondent/Corporate Debtor which is false and incorrect and the Respondent/Corporate Debtor calls upon the Applicant/Operational Creditor to strictly prove the same, However the Respondent/Corporate Debtor states that after the execution of the MOU, till date, they have paid Rs. 82,50,000/- to the Applicant/Operational Creditor, The payment record is already submitted at Exhibit-A above. That the Respondent/Corporate Debtor states that till date, the total amount paid to the Applicant/Operational Creditor is Rs.17,90,740/-(Paid At the time of the Execution of the MOU) + Rs.82,50,000/-(after the execution of the MOU) i.e. Rs.1,00,40,740/-. The wrong calculation done by the Applicant/Operational Creditor itself shows his dishonest intention and further that it has not come before this Tribunal with clean hands.
12. In the end, the Corporate Debtor has prayed for the dismissal of the Petition.
13. In rejoinder, the Operational Creditor has denied all allegations made by the Corporate Debtor in the reply which are inconsistent with and/or contrary to what has been stated herein while the averments made in the Petition have been reiterated. Analysis and Findings:-
14. We have heard the Counsel for the parties and gone through the record.
15. During the course of arguments, it has been argued by the Counsel for the Operational Creditor that the Petitioner has been supplying goods to the Corporate Debtor on the basis of the invoices which are annexed with the Petition as Exhibit (III) which are also reflected in the ledger maintained by the Petitioner. Counsel for the Operational Creditor has further argued that the Corporate Debtor issued certain cheques to make payment of the outstanding dues and as many as 10 cheques were dishonored when presented by the Petitioner for encashment and in this regard, proceedings under Section 138 of the Negotiable Instrument Act,1881 were also filed against the Corporate Debtor and its Directors.
16. Counsel for the Petitioner has further pointed out that subsequently parties entered into a Memorandum of Understanding (MoU) dated 24.04.2017 whereby the Corporate Debtor admitted its liability to pay a sum of Rs. 2,42,27,381/- to the Petitioner. By way of the said settlement, the Corporate Debtor agreed to pay a sum of Rs. 1,67,90,740/- on or before 22.05.2022 as full and final settlement of the claim and also issued post dated cheques in favour of the Petitioner. However, the Corporate Debtor committed a default in payment of instalments settled in the Memorandum of Understanding as the post dated cheques issued by the Corporate Debtor were returned dishonored by Bank on 23.07.2019. According to the Counsel for the Operational Creditor, after the execution of the Memorandum of Understanding, the Corporate Debtor paid only an amount of Rs. 96,90,740/- out of the total agreed amount of Rs. 2,42,27,381/- and committed default in respect of the amount of Rs. 1,45,36,641/-.
17. Counsel for the Operational Creditor has further pointed that as per Clause 8 of the Memorandum of Understanding dated 24.04.2017, in the event of default, the Corporate Debtor was liable to pay the entire agreed amount of Rs. 2,42,27,381/-. Therefore, the existence of operational debt and its default is writ large in this case.
18. Counsel for the Operational Creditor has further argued that merely with the execution of the Memorandum of Understanding, the nature of the transaction does not get changed and the outstanding dues against supply of goods would continue to be treated as operational debt and the nature of the debt would not change with the execution of Memorandum of Understanding in any manner. In support of his contention, Counsel for the Operational Creditor has relied upon the Judgement of the Hon’ble NCLAT in the matter of M/s Ahluwalia Contracts (India) Ltd. vs. Logix Infratech Pvt. Ltd. whereby it has been held that with the execution of Memorandum of Understanding, the nature of the debt does not change with the breach of the terms of Memorandum of Understanding and the Operational Creditor was well within its right to invoke the provisions of Section 9 of IB Code, 2016 against the Corporate Debtor.
19. Counsel for the Operational Creditor has further relied upon the Judgment of the Hon’ble NCLAT in the matter of M/s. Ahluwalia Contracts (India) Ltd. vs. M/s. Jasmine Buildmart Pvt. Ltd. whereby it was also held that once it is satisfied that underlying transaction for which settlement agreement/Memorandum of Understanding was in the nature of operational debt, it does not change its character merely because Memorandum of Understanding/Settlement is executed regarding mode and manner of its payment.
20. On the other hand, Counsel for the Corporate Debtor has argued that in the Memorandum of Understanding dated 24.04.2017, it is clearly stated that the dispute was settled for a sum of Rs. 1,67,90,740/- out of which Rs. 17,90,740/- was paid at the time of execution of Memorandum of Understanding itself and for the remaining amount of Rs. 1,50,00,000/- posted dated cheques were issued by the Corporate Debtor. Some of the cheques were encashed and if those are taken into account, till date an amount of Rs. 82.50 lakhs has been paid and only a sum of Rs. 67.50 lakhs remains outstanding which falls below the threshold limit of Rs. 1 crore and the Petition is liable to be dismissed on this ground alone.
21. Counsel for the Corporate Debtor has further argued that there were various disputes between the parties with regard to the transactions of supply of goods which was settled by way of Memorandum of Understanding dated 24.04.2017. According to the Counsel for the Corporate Debtor, due to the several contentious issues between the parties, the Operational Creditor reduced an amount of Rs. 74,36,641/- out of the total dues. Counsel for the Corporate Debtor has further argued that after the settlement by way of Memorandum of Understanding dated 24.04.2017, the Operational Creditor has been doing business with the Corporate Debtor from September 2017 to December 2021 and goods worth Rs. 3.96 crores were supplied and against the said supply, entire payment has already been made. It has also been argued by the Counsel for the Corporate Debtor that the Petition is not maintainable as the debt in question is not an operational debt and further the actual claim is below the threshold limit. Counsel for the Corporate Debtor has prayed for dismissal of the Petition.
22. We have heard the Counsel for the parties and gone through the record.
23. The pivotal question which arises in this case is whether after the execution of Memorandum of Understanding dated 24.04.2017, whereby the parties allegedly settled between themselves the dispute with regard to payment of the outstanding invoices issued prior to 24.04.2017, the nature of the debt retains its identity as operational debt or not. A perusal of the Memorandum of Understanding dated 24.04.2017 reveals that as on the date of execution of the said MoU, a sum of Rs. 2,42,27,381/- was outstanding towards legal dues. By way of the Memorandum of Understanding, the Corporate Debtor agreed to pay a sum of Rs. 1,67,90,740/- towards full and final settlement of the claim of the Operational Creditor. It further stands recorded in the Memorandum of Understanding itself that a sum of Rs. 17,90,740/- was paid by the Corporate Debtor on the date of execution of Memorandum of Understanding itself. Therefore, only a sum of Rs. 1.50 crore remained to be paid qua which the Corporate Debtor issued a post-dated cheques detail of which has been given at page 671 of the Petition. As per the clause 8 of the Memorandum of Understanding dated 24.04.2017, if the Corporate Debtor commits default in the terms of payment of the remaining amount of Rs. 1.50 crore, the Operational Creditor will be entitled to receive the original legal dues of Rs. 2,42,27,381/-.
24. The present Petition has been filed by the Operational Creditor on the basis of Memorandum of Understanding dated 24.04.2017 claiming that out of the settled dues of Rs. 2,42,27,381/-, the Corporate Debtor has paid only a sum of Rs. 96,90,740/- and has committed a default in payment of Rs. 1,45,36,641/-. Therefore, primarily the claim is based on the Memorandum of Understanding and the default of non-payment of outstanding legal dues payable under the Memorandum of Understanding. No doubt, in part (IV) of the Petition under Section 9 of IB Code, 2016, the Operational Creditor has stated that goods were supplied to the Corporate Debtor against invoices referred to as Exhibit (III) which runs from page no. 109 to 662. Interestingly, all the invoices referred to in Exhibit (III) pertain to the year 2014. Therefore, even though there is reference to the invoices in part IV but the claim is definitely based upon on the non-payment of dues under the Memorandum of Understanding. It is, therefore, evident that the claim in the present case has not been filed on the basis of invoices or on account of supply of goods.
25. It is further evident from the Memorandum of Understanding itself that there was dispute between the parties with regard to the payment of legal dues of Rs. 2,42,27,381/- which was settled for a sum of Rs. 1,67,90,740/-. Therefore, under the facts and circumstances of the case, the instant case cannot be said to be the case of operational debt. It is admitted case of the Petitioner in the Petition itself that the Corporate Debtor made partial payment of Rs. 96,90,740/- out of the agreed amount of Rs. 1,67,90,740/-. Since the remaining amount has not been paid, according to the Operational Creditor, the Corporate Debtor has rendered itself liable to pay the entire amount of Rs. 2,42,27,381/-. However, in our considered view, the claim made in this Petition on the basis of Memorandum of Understanding cannot be equated with operational debt. In this regard a reference can be made to the law laid down by the Hon’ble NCLAT in Company Appeal (AT) ( Insolvency) No. 742 of 2020 in the matter of Trafigura India Pvt. Ltd. Vs. TDT Copper Limited decided on 15.09.2022 whereby it has been held that the default of instalment of settlement agreement does not come within the definition of operational debt as it does not fall within the definition of operational debt as per Section 5 (21) of the IB Code, 2016.
26. So far as the law laid down in the matter of M/s. Ahluwalia Contracts (India) Ltd. vs. M/s. Jasmine Buildmart Pvt. Ltd. as relied upon by the Operational Creditor is concerned, the same cannot be applied to the facts and circumstances of this case considering the fact that in the cited case, initially a Petition under Section 9 of the IB Code, 2016 was filed and the settlement had taken place during the pendency of the Petition which was subsequently violated by the Corporate Debtor and in that situation, it was held that the nature of the debt does not gets changed with the execution of settlement terms. However, in this case, the case at the first instance has been filed only on the basis of Memorandum of Understanding dated 24.04.2017. Counsel for the Operational Creditor has also relied upon M/s Ahluwalia Contracts (India) Ltd. vs. Logix Infratech Pvt. Ltd, which, in our considered view, is also distinguishable and cannot be applied to the facts and circumstances of the instant case. In this context, it is worth pointing out that in the cited case though the Petition under Section 9 of the IB Code, 2016 was filed basing the claim on settlement terms but the amount of the claim due on account of supply of goods was exactly the same regarding which the settlement terms were executed and in that context, it was held that the nature of the operational debt does not get changed. However, in the context of the present case, it would be worthwhile to mention that in part (IV) of the Petition, the claim has been made solely on the basis of Memorandum of Understanding dated 24.04.2017. Though there is a reference to the invoices in part (IV) itself but we have perused Exhibit (III) in which all the invoices have been attached which pertain to the year 2014. Since the claim of the Operational Creditor on the basis of the said invoices subsumed into the settlement terms, as admittedly the Operational Creditor agreed to receive a lesser amount than what was actually due. As clearly stated in the Memorandum of Understanding itself, it cannot be said that the claim of the Petition is based on the invoices. Even otherwise, had the Petition been filed on the basis of invoices, which pertain to the year 2014, the same would not have withstood the test of limitation. Therefore, we are of the considered view, the claim of the outstanding dues raised by the Operational Creditor does not fall within the definition of operational debt and on this ground alone, the Petition under Section 9 of the Code is liable to be dismissed.
27. As a result of the foregoing discussion, the Petition under Section 9 of the Insolvency and Bankruptcy Code is hereby dismissed with no order as to costs.
