IN THE NATIONAL COMPANY LAW TRIBUNAL

MUMBAI BENCH

C.P. No. 2502/I&BP/2019

Under section 8 & 9 of the IBC, 2016
In the matter of
HP Teleservices
D65 Corner, Pankha Road, Near Durga
Mandir, Sawroop Nagar, North West
Delhi-110085
.... Petitioner
V/s.
Mswipe Technologies Pvt. Ltd.
Astral Centre 9th Floor, N.M Joshi Marg,
Mumbai-400011
…. Corporate Debtor

Order delivered on: 07.11.2019

Coram: Hon’ble Smt. Suchitra Kanuparthi, Member (Judicial)

Hon’ble Shri V. Nallasenapathy, Member (Technical)

For the Petitioner: Adv. Vijay Sharma

For the Corporate Debtor: Adv. Chitrangada Singh i/b Clove Legal

Per: V. Nallasenapathy, Member (Technical)

ORDER
Order pronounced on 22.10.2019
1. This company Petition is filed by HP Teleservices (hereinafter called
"Petitioner") seeking to set in motion the Corporate Insolvency Resolution
Process (CIRP) against Mswipe Technologies Private Limited (hereinafter called
"Corporate Debtor") alleging that Corporate Debtor committed default on
26.09.2018 in making payment of Rs. 19,06,191/-, by invoking the provisions of

1
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

Section 8 and 9 of the Insolvency & Bankruptcy Code (hereinafter called "Code")
read with Rule 4 of Insolvency & Bankruptcy (Application to Adjudicating
Authority) Rules, 2016.

2. The Petitioner who was running his business in the name of HP

Teleservices as proprietor, availed the services of the Corporate Debtor who
provided the Point of Sales Swipe Machines for facilitating credit card, debit card
and other digital payments for its business. The Petitioner in consideration of the
services provided by the Corporate Debtor agreed to pay fees in accordance with
the terms of the agreement entered into by the Petitioner and the Corporate
Debtor.

3. As per the terms and conditions of the agreement, the Corporate Debtor
would send statement of account to the Petitioner, wherein after deducting the
charges payable for the services availed by the Petitioner, the Corporate Debtor
will pay the amount collected through the swipe machines to the Petitioner.
Accordingly, the Petitioner kept on swiping the swipe machine given by the
Corporate Debtor and the Petitioner has been getting back the amount from the
Corporate Debtor after deduction of fees levied by the Corporate Debtor.

4. The Petitioner submits that the Corporate Debtor was not deducting
Merchant Discount Rate (MDR) from the amount collected through swipe
transactions from the beginning till 23.09.2018 but all of sudden on 26.09.2018
the Corporate Debtor deducted an amount of Rs. 19,06,191/-.

5. The Petitioner sent the statutory demand notice under Section 8 of Code
on 19.12.2018 to the Corporate Debtor demanding payment of Rs. 19,06,191/-.

6. The Corporate Debtor by reply through an advocate dated 28.01.2019

denied the liability and inter-alia among other things contended as below:
“Prior to dealing with your allegations made in the notice paragraph wise, we
wish to apprise you of the fact and place the same on record as under:
(a) Our client is inter alia engaged in the business of providing transaction
processing services through its point of sale (POS) machines, mobile

2
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

applications or payment gateways used to facilitate credit card, debit

card and other digital payments to its merchants.
(b) Our client states that H. P. Teleservices, sole proprietorship of Mr.
Himanshu Aggarwal, having address at D-65 corner, Pankha roand,
near Durga Mandir, Swaroop Nagar, North West Delhi, Delhi – 110
042, India (hereinafter referred to as “your client”) has agreed to avail
our client’s POS machine and transaction processing services by
signing the merchant terms and conditions on June 29, 2018
(“Agreement”). As per the terms of the Agreement, in consideration of
the transaction processing services by our client, your client had
agreed to pay fees and merchant discount rate (“MDR”) with respect to
each transaction processed through the POS machine in accordance
with the terms of the Agreement.
(c) Our client states that inter alia your client has agreed to certain
provisions as are provided in the agreement which are reproduced
herein below:
“In consideration of the transaction processing services the merchant
agrees to pay to Mswipe, the Merchant Discount Rate as mentioned in
the application and any further charges as detailed in the application
and or these terms and conditions, which shall be deducted by Mswipe
from the amounts payable to the merchant in respect of a transaction
amount.”
“Mswipe will be entitled at any time to set-off and adjust outstanding
of the merchant, against all payments due to the merchant and such
set-off and/or adjustments shall be final and binding on the merchant.”
“Neither the receipt by Mswipe of any transaction information nor any
payment by or any act of omission by Mswipe (other than an express
written acknowledgement or waiver thereof by Mswipe) shall constitute
or be deemed to constitute any acknowledgement or waiver of
compliance by the merchant with any of the warranties specified in this
application.”
(d) It is pertinent to state and clarify that by virtue of the terms of the
Agreement and pursuant to the understanding hereinabove that your
client has authorized our client to deduct such MDR due and payable,

3
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

from the transaction amounts to be remitted to your client, without

any further notification or intimation. Our client further states that, due
to a technical error in its system, our client was unable to recover the
entire amounts of MDR due to it from your client for a period between
July 2018 to September 2018. Upon discovery of the glitch in the
system, our client had deducted an amount of Rs. 19,05,679/- (Rupees
Nineteen Lakhs Five Thousand Six Hundred and Seventy-Nine only)
(“Deducted Amount”) from the transaction amounts remitted to your
client being MDR payable by your client.
(e) However, to our client’s utter shock and surprise, your client has
denied the legitimacy of our client’s claims as per the terms of the
agreement, and denied any payment to be made to our client on a
false, frivolous and baseless pretext that amounts were due to be paid
by our client to your client. Our client states that MDR is applicable on
all transactions made through our client’s point of sale machines. All
transactions have been managed and facilitated in accordance with our
client’s standard terms and conditions to which all the merchants of
our client agrees to be bound with including your client as evidenced
from paragraph 3 of the notice. Therefore, the monies deducted from
the transaction amount are towards legitimate fee in accordance with
terms of the agreement.”

7. The Corporate Debtor filed reply to the Petition and the following are the
contentions:
a. The Petitioner agreed to pay fees and MDR in consideration of the
transactions processed through the POS machines provided by the
Corporate Debtor in accordance with the terms of the agreement. Further
the amount of MDR chargeable on a particular valid card has been stated
under the application made by the Petitioner to the Corporate Debtor read
along with the merchant terms and conditions.

b. The Petitioner is bound by the provisions of the agreement regarding

payment and the same are as below:

4
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

“16.1 In consideration of the transaction processing services the

Merchant agrees to pay to Mswipe, the Merchant Discount Rate as
mentioned in the Application and any further charges as detailed in
the Application and or these terms and conditions, which shall be
deducted by Mswipe from the amounts payable to the Merchant in
respect of a transaction amount.

17.8 Neither the receipt by Mswipe of any transaction information nor

any payment by or any act of omission by Mswipe (other than an
express written acknowledgment or waiver there if by Mswipe) shall
constitute or be deemed to constitute any acknowledgment or waiver
of compliance by the Merchant with any of the warranties specified in
this Application.

18.1 Mswipe will be entitled, at any time to set-off and adjust

outstanding of the Merchant, against all payments due to the
Merchant and such set-off and/or adjustments shall be final and
binding on the Merchant.”

c. By virtue of the terms of the agreement stated supra, the Petitioner

has authorized the Corporate Debtor to deduct such MDR due and
payable from the transaction amounts to be remitted to the petitioner
in due course without any prior intimation or notification.

d. Due to a technical error in the system, the Corporate Debtor had not
recovered the entire amount of MDR from the Petitioner for the period
between July, 2018 to September, 2018 and upon discovery of the
glitch in the system a sum of Rs. 19,05,679/- was deducted from the
transaction amount payable to the Petitioner and the same was
informed to the Petitioner vide emails dated 26.09.2018 and
29.09.2018 and submitted that the Petitioner had enclosed these said
emails in the Petition at page number 20.

e. The MDR is applicable on all transactions made through the Corporate

Debtor’s POS machines, all transactions were managed and facilitated

5
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

in accordance with Corporate Debtor’s standard terms and conditions

to which all merchants agreed to be bound by including the Petitioner,
therefore the amount deducted from the transaction amount are
towards legitimate fees arising out of contractual obligations.

f. The Corporate Debtor submits that the MDR deducted by the

Corporate Debtor from the amount payable to the Petitioner is not a
claim as defined under the Code, since there is no liability or
obligation on the part of the Corporate Debtor to pay such amount to
the Petitioner. It is further submitted that the Petitioner is a merchant
who is recipient of service provided by the Corporate Debtor for which
he is liable to pay and hence the amount deducted cannot be
categorized as an operational debt.

g. The amount deducted is in terms of agreement entered into between

the parties and the Corporate Debtor is well within its rights under the
terms of the agreement to deduct the un-deducted MDR and
authorized to deduct such MDR amount from the transaction amount
to be remitted to the Petitioner.

h. The Corporate Debtor submits that there is a pre-existing dispute in

respect of claims made by the petitioner and the Corporate Debtor has
made its claim prior to the issue of the demand notice and in fact the
amount has already been deducted and hence the Petition is not
maintainable.

8. The counsel for the Petitioner vehemently argued that the Corporate
Debtor is not entitled to deduct MDR charges and accordingly was not deducting
the MDR charges from the very beginning till 23.09.2018 but all on a sudden
deducted an amount of Rs. 19,06,191/- in violation of the terms and conditions
without any prior notice to the Petitioner. It is further submitted that, even
otherwise, the Corporate Debtor could not have deducted MDR after two days of
settlement, in view of the fact that the Corporate Debtor imposed a disclaimer
on the Petitioner while sending the statement of accounts that the Petitioner has
to inform the discrepancy in the accounts within two days of receipt of statement

6
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

sent by the Corporate Debtor to the Petitioner. Hence the two days time limit
will ipso facto apply to the Corporate Debtor also and the deduction made herein
after a long period of settlement is not in order and the Petitioner is entitled to
get back the amount wrongly deducted from the receivable by the Petitioner.

9. The above submissions of the counsel for the Petitioner is diagonally

opposite to the terms and conditions of the agreement wherein it is specifically
stated that the Corporate Debtor is entitled to charge MDR charges.

10. The counsel for the Petitioner further submitted that the Corporate Debtor
has neither provided the copy of the agreement nor the Petitioner has signed the
agreement. To counter this submission the counsel for the Corporate Debtor
submits that the terms and conditions of the agreement are executed through
an online platform by clicking “YES” in the computer network and in fact only
when the terms and conditions are agreed by the Petitioner the next step will
happen and accordingly the parties entered into the terms and started doing
business, hence the submissions of the Petitioner are false and misleading.

11. It is beneficial to refer the email sent by the Petitioner on 29.09.2018

wherein it was stated as below:
“Dear team
Pls provide the copy of the agreement which is signed by us with
these terms & conditions that’s are telling by you. Secondary
whatever are you paid about that are not our problem. Due to
your system fault why we have to paying these MDR and where
we covered. As per RBI guideline if any type of MDR you have to
charge. You have give the information to the merchant firstly
them merchant is agreed so you have to right to apply any kind
of MDR. On this why you are not telling in the start of business.
Now you are saying we have charge the MDR @1.90% + GST.
Note: please tell us which bank platform you are used to accept
the money
Thank you.”

7
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

The above email confirms the fact that the Petitioner has signed
the agreement, hence the argument of the counsel for the
Petitioner that there is no agreement cannot be accepted.

12. Admittedly the Petitioner sent the demand notice to the Corporate debtor
on 19.12.2018 but the Corporate Debtor submits that there is a pre-existing
dispute in terms of Section 5(6)(a) of the Code and in support of this the counsel
for the Corporate Debtor relied on the following email communications between
the parties.
a. Email sent by the Petitioner to the Corporate Debtor on 26.09.2018 at 1.26
pm.
“Dear Sir
registered Id: 1000038823
24/09/2018-4435274
25/09/2018-20300
Pls update the status of these payments are not received till time
I have suffering from my business because of this and the
situation is very critical between me and my company (Parle G &
Haldiram) situation is created to missing my monthly targets. Pls
help me out.”

b. For the above email the Corporate Debtor replied on 29.09.2018 at 7.17.
pm. by email stating:
“Greetings from Mswipe
Inconvenience caused to you is highly regrettable.
As per RBI mandate from 1st Jan 18 for not levying MDR for Debit
card transactions equal to or below INR 2000/-, due to some
technical issue certain type of prepaid card were also include due
to which MDR was not leveled on Prepaid Card transactions from
January to September 18.
We would like to inform you that we have recovered the
outstanding MDR charges including GST which was not levied for
those transactions previously.

8
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

In case of any query on this matter please drop your query at

payment@mswipe.com for clarification.”

The above emails which are prior to the issue of demand notice clearly shows
that there is a dispute with regard to the amount claimed and the same is
covered under Section 5(6) of the code which reads as below:
“5(6) "dispute" includes a suit or arbitration proceedings relating
to— (a) the existence of the amount of debt; (b) the quality of
goods or service; or (c) the breach of a representation or
warranty;”

13. In the light of the above narration and in view of the fact that the
Corporate Debtor had deducted MDR charges which the Petitioner is liable to pay
as per the agreement, there is no debt payable by the Corporate Debtor and the
same being a dispute covered under Section 5(6)(a) of the code, this bench is of
the view that there is a plausible dispute raised by the Corporate Debtor and the
petition is liable to be dismissed.

14. It is appropriate to cite the decision of the Hon’ble Supreme Court in the
case of Mobilox Innovations Pvt. Ltd. V/s Kirusa Software (P) Limited 2017 (SCC
Online SC 1154) held as below: -
“40…… Therefore, all the adjudicating authority is to see at this
stage is whether there is a plausible contention which requires
further investigation and that the “dispute” is not a patently
feeble legal argument or an assertion of fact unsupported by
evidence. It is important to separate the grain from the chaff and
to reject a spurious defense which is mere bluster. However, in
doing so, the Court does not need to be satisfied that the defense
is likely to succeed. The court does not at this stage examine the
merits of the dispute except to the extent indicated above. So
long as a dispute truly exists in fact and is not spurious,
hypothetical or illusory, the adjudicating authority has to reject
the application”

9
 THE NATIONAL COMPANY LAW TRIBUNAL
MUMBAI BENCH

CP No. 2502/I&BP/2019

15. When the law laid down by the Hon’ble Supreme Court in the above case
is applied to the facts of the present case it is established that there is a clear
dispute as to the amount claimed by the Corporate Debtor as provided u/s
5(6)(a) of the Code.

16. In the case on hand the contentions raised by the Corporate Debtor are
neither spurious nor hypothetical nor illusory and in fact there is a dispute as to
existence of the debt payable by the Corporate Debtor.

17. In the light of the above discussions, the petition is dismissed with liberty
to the Petitioner to proceed accordance with law. No cost. If the Petitioner
approaches an appropriate forum for the redressal of its grievance the same
may be decided uninfluenced by our observations herein.

Sd/- Sd/-
V. Nallasenapathy Suchitra Kanuparthi
Member (Technical) Member (Judicial)

10