CD is Solely Responsible for Repayment After Failed Barter Agreement, AA Rightly Admitted CIRP Plea | NCLAT

Case Details: Mukund Rajhans v. Rajasthan Patrika (P.) Ltd. - [2024] 161 taxmann.com 684 (NCLAT-New Delhi)

Judiciary and Counsel Details

• • Ashok Bhushan, Chairperson, Barun Mitra & Arun Baroka, Technical Member
  • Vipul Wadhwa, Ms Kashika Gera & Vishal Binod, Advs. for the Appellant.
  • Anand Shankar Jha, Abhishek Tiwari & Sachin Mintri for the Respondent.

Facts of the Case

In the instant case, the suspended director of the corporate debtor (i.e. TMPL) filed an appeal u/s 61 of the IBC against the order passed by the NCLT. The NCLT admitted the application u/s 9 of the IBC, initiating the CIRP proceedings against the appellant.

The corporate debtor provided advertising services for various clients, including ‘VIL’, acting as an agent. ‘VIL’ availed the said services and placed advertisements through the corporate debtor, who then coordinated with companies like the respondent (i.e. the operational creditor) to publish ads.

However, payment delays from ‘VIL’ resulted in an agreement for ‘VIL’ to settle debts directly with the respondent through barter, exchanging appliances for outstanding amounts.

Since the due amount was not paid, the respondent demanded payment from the corporate debtor and filed a petition under section 9 of the IBC. The Adjudicating Authority (NCLT) admitted the said application. Aggrieved by the said order, the appellant filed an instant appeal on the ground that the respondent did not serve demand notice.

It was noted that dues were pending for quite some time and the appellant offered to settle accounts through barter mode instead of upfront payment. Further, it was noted that the corporate debtor itself was regularly coordinating and facilitating payments to the respondent and later on, it could not be continued due to issues relating to the new regime of Goods and Service Tax (GST).

NCLAT Held

The NCLAT noted that when the arrangement could not proceed further, the responsibility for repayment lies solely with the corporate debtor. Further, during the course of business, the corporate debtor used to place purchase orders/release orders from time to time with the operational creditor for providing services of issue of advertisements of its products and this was done on letterheads of the corporate debtor.

The NCLAT held that since the corporate debtor failed to make a payment towards outstanding invoices, proceedings under section 9 of the IBC could be initiated against it.

Further, the NCLAT held that where there is a debt in terms of section 5(21) of the IBC and there was also a default in terms of section 3(12) of the IBC and debt was within the period of limitation and there was no dispute raised at any point of time, it would satisfy the requirement for admission under section 9 of the IBC for CIRP.

List of Cases Reviewed

• • Mukund Rajhans v. Rajasthan Patrika (P.) Ltd. [2024] 161 taxmann.com 683 (NCLT -New Delhi) (para 33) affirmed See Annex