Any subsequent dispute raised while replying to the demand notice under Sec 8(1) of IBC cannot be taken into consideration to hold that there is a pre-existing dispute: NCLT
M/s. Adecco India Pvt. Ltd. (Applicant/Operational Creditor), filed an application dated 11th December 2018, with the National Company Law Tribunal (NCLT) to initiate the Corporate Insolvency Resolution (CIRP) process against M/s. BSES Rajdhani Power Limited (Respondent/Corporate Debtor).Both the aforementioned parties entered into an agreement whereby, BSES Rajdhani was provided with...
M/s. Adecco India Pvt. Ltd. (Applicant/Operational Creditor), filed an application dated 11th December 2018, with the National Company Law Tribunal (NCLT) to initiate the Corporate Insolvency Resolution (CIRP) process against M/s. BSES Rajdhani Power Limited (Respondent/Corporate Debtor).
Both the aforementioned parties entered into an agreement whereby, BSES Rajdhani was provided with resource personnel for its staffing requirements by Adecco India. The agreement period was effective from 01st July 2017 to 30th June 2018.
It is pertinent to note here that the resource personnel as provided to BSES Rajdhani by Adecco India were not the employees of BSES Rajdhani as the remuneration and other statutory payments were made to the resource personnel by Adecco India. BSES was obliged to make payment of the first invoice for 60% of the total invoice amount for the particular month during the course of the said particular month; and the Corporate Debtor was obliged to make payment of the balance amount during the course of the ensuing month.
In the year 2018, BSES Rajdhani failed to make the timely payments to Adecco India despite repeated reminders by Adecco India. Adecco India then sent a demand notice dated 11th December 2018 under Section 8 of the Insolvency and Bankruptcy Code, 2016 (IBC) to BSES Rajdhani stating that total debt due and payable was Rs. 2,68,06,255/- (Rupees Two Crores Sixty Eight Lakhs Six Thousand Two Hundred Fifty Five), along with pendente lite and future interest @ 18% per annum following which an application was filed by the applicant to initiate Corporate Insolvency Resolution Process (CIRP) under section 9 of the IBC.
Even after the demand notice was sent under Section 8 of the IBC, BSES Rajdhani failed to pay the amount demanded neither raised any notice of dispute nor did it reply to the said notice.
Thus Adecco India moved the NCLT seeking to start the process of CIRP.
The Respondent – BSES Rajdhani stated that BRPL entered into Service Providers Agreement (‘SPA’) with Adecco in order to avail the services, skill & expertise of the skilled labour/manpower (‘Contractual Employees’), for its day to day functioning and its business requirements. The SPA was later amended according to which Adecco India was under obligation to comply with labour laws and to ensure timely payment of statutory dues of the contractual employees.
It was alleged that, as the date of expiry of the SPA approached, BRPL agreed to transfer the personnel currently in employment of Adecco assigned to its institutions to the new service provider. As a part of the process of such transfer, in accordance with the clauses of the SPA, Adecco was obliged to ensure that the accumulated Employees Provident Fund (EPF) with its Trust is handed over to the new Service Provider and the relevant documents qua RPFC, EPF and EPS facilities are provided. After Adecco India failed to do so, there was a dispute between Adecco India and BRPL.
In May 2018, BRPL informed that 20% of the service charges shall be retained, due to the lapses and failure to meet the contractual obligations on part of Adecco. Further, it was alleged that in order to protect the interests of the Contractual Employees, BRPL refrained from making payment of invoices in order to ensure that Adecco India performed its contractual obligations in respect of the Contractual Employees.
The NCLT held that the present Petition is liable to be dismissed as there is a pre-existing dispute between the parties in the present case. Adecco India filed a Rejoinder and stated in the Rejoinder that the so called pre-existing dispute as alleged by the Respondent pertains to determination of the Right to Payment of the Applicant in respect of the services as provided by the Applicant to the Respondent.
Adecco India contended that BSES Rajdhani has attempted to contend au cotraire by presenting that it is the former that holds the statutory payment and related benefits to the resources and by virtue thereof has attempted to justify the withholding of the payments for the services of Adecco India. It also stated that it was solely responsible to discharge its obligations towards the wages/salaries of the resources and towards making the statutory payments and related benefits in favour of the resource.
The applicant drew the attention of the Tribunal to the reply of the Respondent which stated that, “The ultimate liability for the afore-mentioned was of the Respondent, being the Principal Employer. In order to safeguard the Contractual Employees and the Respondent from any exposure to risk and liability accruing because of any illegal action of the Petitioner, Clause 5.3 of the SPA provided that in case the Respondent receives any complaint regarding non-payment of wages/ salary to Contractual Employees, the amount payable to them will be recovered from the Petitioner’s bill.”
The NCLT held that once the debt is shown as due, it is for the respondent to prove that there are no outstanding dues to be paid to the applicant. Therefore, without any specific details of material particulars or evidence the fact of existence of a dispute cannot be sustained.
The Tribunal held that any subsequent dispute raised while replying to the demand notice under Section 8(1) cannot be taken into consideration to hold that there is a pre-existing dispute. The NCLT also observed that in the present case, there is no such dispute as pre-existing, the dispute which was being claimed to be pre-existing by the corporate debtor did not survive. It directed the IRP to take all such steps as are required under the statute, more specifically in terms of Sections 15,17,18,20 and 21 of the IBC.
According to the NCLT, as the application has been admitted in terms of Section 9(5) of IBC, moratorium as envisaged under the provisions of Section 14(1) shall follow in relation to the Respondent, prohibiting the respondent as per proviso (a) to (d) of section 14(1) of the IBC. However, during the pendency of the moratorium period, terms of Section 14(2) to 14(3) of the IBC shall come into force.
The NCLT directed the Operational Creditor to deposit a sum of Rs. 2 lakhs with the Interim Resolution Professional (IRP) to meet the expenses to carry out the functions assigned to him in accordance with Regulation 6 of Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Person) Regulations, 2016 within three days from the date of receipt of this order by the Operational Creditor.
Hammurabi and Solomon Partners represented Adecco India in the NCLT.