NCLAT affirms NCLT’s dismissal of the Section 9 Application against Patanjali Paridhan over a pre-existing dispute over NOC and contractual obligations.
The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench led by Justice Yogesh Khanna (Judicial Member) and Technical Member Mr. Ajai Das Mehrotra reviewed an appeal and held that an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, must be dismissed if a pre-existing dispute, evidenced through prior correspondence, raises substantive questions about the fulfilment of contractual obligations, as reiterated in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., REEDLAW 2017 SC 09545. The unresolved dispute regarding the No Objection Certificate (NOC) and its impact on the contractual performance rendered the Operational Creditor's claim inadmissible under the IBC.
The National Company Law Appellate Tribunal (NCLAT) dismissed the appeal filed by Law & Kenneth Saatchi & Saatchi Private Limited, challenging the rejection of its application under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC), by the National Company Law Tribunal (NCLT), Allahabad. The appeal arose from a dispute over an unpaid invoice for services rendered to Patanjali Paridhan Private Limited, the Corporate Debtor. The Operational Creditor claimed it provided services, including the production of a Television Commercial (TVC), and raised a final invoice of ₹2,06,50,000/-, of which ₹87,50,000/- was paid as an advance, leaving a balance of ₹1,19,00,000/-. Despite repeated reminders and a demand notice under Section 8 of the IBC, the payment was not made.
The Corporate Debtor opposed the claim, arguing that the Operational Creditor failed to furnish a No Objection Certificate (NOC) as required under Clause 26 of the proforma invoice. The NOC was essential for registering the copyright of the TVC under Rule 70(3) of the Copyright Rules, 2013, and for the commercial exploitation of the TVC. Multiple communications from the Corporate Debtor, including emails and letters dated 07.05.2019, 05.06.2019, and 08.09.2020, highlighted this issue. The absence of the NOC was claimed to have caused revenue loss and hindered the completion of contractual obligations. The Operational Creditor, however, contended that the NOC was unnecessary under the terms of the invoice and IPR laws and dismissed the demand as an afterthought to evade payment.
The NCLAT found that the correspondence predating the demand notice evidenced a substantive pre-existing dispute regarding the NOC and the completion of obligations under the proforma invoice. Relying on judicial precedents, including Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., REEDLAW 2017 SC 09545, which underscores the importance of identifying genuine disputes before admitting Section 9 applications, the Tribunal upheld the NCLT’s findings. It was concluded that the unresolved dispute disentitled the Operational Creditor from invoking the insolvency process.
The appeal was dismissed, affirming the existence of a pre-existing dispute and incomplete performance of contractual obligations. The NCLAT reiterated that where such disputes exist, the insolvency process cannot be used as a tool for recovery. Consequently, the appeal was rejected, and all associated applications were disposed of, with no order as to costs.
Mr. Anirudh Krishan Gandhi and Ms. Anushree Poddar, Advocates represented the Appellant.
Mr. Rohit Gandhi and Ms. Smita Jain, Advocate appeared for the Respondent.
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