In Style Fashion vs Aditya Birla Fashion and Retail Limited
CA (AT) 1679 of 2023
Facts:
1.Appeal is filed against the order of the AA dated 11.10.2023 where the application filed by the appellant under Section 9 of the Code was dismissed.
Issue: Whether the appeal is liable to be admitted?
Arguments:
Appellant:
1.Counsel submitted that Operational Creditor was acting as franchisee and commission agent for running the show room of the Corporate Debtor in terms of Agency Agreements dated 08.07.2011. In pursuance of these Agency Agreements signed and executed between the Appellant/Operational Creditor and Respondent/ Corporate Debtor, showrooms had been opened, which however closed on 02.02.2016, which date was before the tenure specified in the Agency Agreements. It is submitted that following the closure of the showroom, the stock in trade was sent back to the Corporate Debtor by the Operational Creditor
2.Invoice was issued but the Corporate Debtor made only part payment of Rs.51,283.28 on 28.04.2017. Aggrieved with the meagre, part-payment amount paid by the Corporate Debtor, the Operational Creditor sent a detailed computation sheet showing a total outstanding commission amount of Rs.86.34 lakh and invoices amounting Rs.15.26 lakhs and Rs.4.28 lakhs towards salvageable and non-salvageable assets respectively.
3.Counsel for the Appellant further submitted that the Adjudicating Authority erroneously held the Section 9 application to be nonmaintainable on grounds of limitation. While admitting that the date of default had initially been inadvertently entered as 27.08.2016 in the Section 8 demand notice, the same was subsequently rectified by them in the Section 9 application and shown as 28.04.2017
4.Counsel for the Appellant further stated that the Corporate Debtor has raised a spurious defence of pre-existing dispute by referring to a meeting supposedly held on 28.08.2012 between the Operational Creditor and the Corporate Debtor regarding payment of revised/reduced commission. It was vehemently contended that there was neither any meeting held on 28.08.2012 nor any such agreement entered into between the two parties on that date with respect to commission payment arrangement
Respondent:
1.Counsel submitted that whereas the date of default mentioned in the demand notice of the Operational Creditor was 27.08.2016, the Section 9 application was filed on 01.10.2019 which was beyond the prescribed three years period of limitation and hence time-barred.
2.It was also pointed out that the Allen Solly Agency Agreement had already been validly terminated by the Corporate Debtor on 02.02.2016. This agreement provided for reconciliation of accounts within 15 days from the date of termination of the agreements. However, the Operational Creditor failed to demonstrate attempts made by it to reconcile its claims/accounts with the Corporate Debtor and is now agitating their time-barred claims.
3.Counsel submitted that the exaggerated and disputed claims were raised by the Operational Creditor with the sole intent to harass the Corporate Debtor. This false and fabricated claim in respect of outstanding commission clearly points out the existence of a pre-existing dispute and hence the Adjudicating Authority had rightly rejected the Section 9 application.
Decision: NCLAT dismissed the appeal.
Rationale:
1.NCLAT held that notice that part payment of Rs. 51,823 made on 28.04.2017 by the Corporate Debtor has also been brought on record and the relevant bank statement has been placed at pages 125-126 of the APB. In view of the last payment having been made on 28.04.2017 as noted above, the fresh period of limitation would start from that date and the Operational Creditor was entitled for taking benefit of 3 years period of limitation from the date of last payment. Therefore, the Section 9 application was filed well within time.
2.It held that When the Allen Solly Agreement at Clause 10.3 (iv) clearly provided for reconciliation of accounts to be conducted within 15 days of termination of the agreement, it is clear that any information sought for reconciliation of accounts on termination cannot be ipso facto treated as admission of debt and liabilities.
3.It noted that Where Operational Creditor seeks to initiate insolvency process against a Corporate Debtor, it can only be done in clear cases where no real dispute exists between the two which is not so borne out given the facts of the present case.
Order:
