IN THE NATIONAL COMPANY LAW TRIBUNAL

MUMBAI BENCH

C.P. (IB) 3038/2018

Under section 9 of the IBC, 2016
In the matter of:
Fortune Intech Pvt. Ltd.
Office No. 2A, 8th Floor, B – Wing,
Laxmi Towers, BKC, Bandra (East),
Mumbai – 400 051
.... Petitioner
v/s.
Work Store Ltd.
Knowledge House, Shyam Nagar,
Jogeshwari – Vikhroli Link Road,
Jogeshwari (East),
Mumbai – 400 060
…. Corporate Debtor

Order delivered on: 16.09.2019

Coram: Hon’ble Bhaskara Pantula Mohan, Member (Judicial)

Hon’ble Shyam Babu Gautam, Member (Technical)

For the Petitioner: Mr. Hamel R Patel and Mr. Akshay M. Gosavi
Advocates
For the Respondent: Mr. Shyam Kapadia, Mr. Deepak Deshmukh
and Mr. Aman Chaudhary, Advocates i/b Naik Naik & Co.

Per: Hon’ble Bhaskara Pantula Mohan, Member (Judicial)

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ORDER

1. This Company Petition is filed by Fortune Intech Pvt Ltd.

(hereinafter called “Petitioner”) seeking to set in motion the
Corporate Insolvency Resolution Process (CIRP) against Work
Store ltd. (hereinafter called “Corporate Debtor”) alleging that
the Corporate Debtor committed default in making payment to
the extent of Rs. 1,24,34,966/- including interest @21% p.a.
by invoking the provisions of Section 9 of Insolvency and
Bankruptcy Code (hereinafter called “Code”) read with Rule 6
of Insolvency & Bankruptcy (Application to Adjudicating
Authority) Rules, 2016.

2. It is the case of the Petitioner that they entered into a Leave

and License Agreement with the Corporate Debtor on
06.09.2014 for office premises situated at 6th Floor, D Wing,
Trade World, Kamla Mill Compound, Senapati Bapat Marg,
Lower Parel (West), Mumbai – 400 013.

3. The Petitioner relies on the Leave and License agreement and

the Bank Statement which reflect that the Corporate Debtor had
been paying License Fee from December 2014 till June 2017
regularly. However, the after this the Corporate Debtor started
defaulted in making payment, by not making monthly lease
payments in accordance with the Agreement.

4. Since the Corporate Debtor was not making any payments to

the Petitioner, he was thus constrained to issue a Demand
Notice on 28.02.2019 to the Corporate Debtor seeking payment
of Rs. 1,24,34,966/- with 21% interest p.a from date of breach
of Contract. The Corporate Debtor vide his reply dated

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04.09.2018 denied the claims made by the Petitioner in the

Demand Notice and placed certain outstanding issues based on
which it was Petitioner who was in breach of the Agreement
executed between the parties. The issues were:

(a) the Petitioner in breach of the leave and license

agreement has without the knowledge of the
Corporate Debtor has allowed mortgage of the land.
(b) These actions of the Petitioner have resulted in the
banks first obtaining the symbolic possession and
then physical possession of the land, due to which
the Corporate Debtor was forced to vacate the
licensed premises by terminating the Agreement on
10th March 2018.

5. The Petitioner therefore filed a petitioner under section 9 of the

Code on 10.08.2018.

6. The Corporate Debtor in his reply has unearthed various facts

that according to them were never mentioned by the Petitioner.
The Corporate Debtor submits that it is the fault of the
Corporate Debtor that the Petitioner had created charge in
respect of the Licensed Premises on 25.09.2014, which is soon
after entering into the leave and license agreement, therefore,
breaching the said agreement and deceiving the Corporate
Debtor.

7. The Corporate Debtor submits that the Petitioner never

informed him about the same and he was kept in dark about it.
It was only on 20.09.2016, when the Corporate Debtor got to
know about the Charge of the Licenses premises by a Letter

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dated 20.09.2016 from Syndicate Bank, which asked the

Petitioner (who was a guarantor in a transaction) to make
payment towards the loan advanced by the banks or the Banks
would exercise its powers under section of the SARFAESI Act.

8. Thereafter, on 07.11.2016 the Corporate Debtor addressed a

letter to the Petitioner to tender all the documents with regards
to loans availed by the principal borrower and every other
relevant document. Also, another letter was sent to Syndicate
Bank requesting not taken any adverse steps against the
licensed premises.

9. Wherein the Petitioner assured the Corporate Debtor that they

were in finals stages of negotiations with the bank and would
soon settle on the matter, on 29.03.2017 a Letter of
Understanding was also signed by the parties wherein the
Petitioner agreed to reduce the security deposit upto 2 months
and adjust the 4 months of outstanding rent from Nov’ 16 to
Feb’ 17.

10. The Corporate Debtor further reveals that on 28.06.2017

Dena Bank issued possession notice under Section 13 (4) of the
SARFAESI Act, 2002 on behalf of the consortium banks, wherein
it was told that the borrower and the Petitioner owed a total
amount of Rs. 347,63,87,296/- to them and the public at large
was requested not to deal with the licensed premises.

11. After observing the Corporate Debtor had no other option

but to issue a Legal Notice dated 14.07.2017, pointing out the
breaches committed on the part of the Petitioner herein. It was
said that the Corporate Debtor had incurred a cost of Rs.
1,66,00,000/- towards renovations, installation of furniture,

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fixtures and electrical fittings, therefore, they were constrained

to adjust this amount against the monthly fee payable with
effect from July 2017.

12. A letter was also issued to Dena Bank dated 27.07.2017

requesting them not to disrupt the peaceful possession of the
Corporate Debtor, while the Petitioner relied to the abovesaid
legal notice denying every claim of the Corporate Debtor.
However, all these attempts of the Corporate Debtor were of no
use, since on 28.02.2018 the Notice was issued by Court
Commissioner appointed with regards to the Licensed Premises
informing that the possession of the Licensed Premises will be
taken on 13.03.2017. Hence, the Corporate Debtor was
compelled to vacate the licensed premises.

13. Furthermore, it is also submitted by the Corporate Debtor

that on 19.03.2018, the Corporate Debtor vide his letter that
since he was forced vacate the licensed premises on 10.03.2018
due to misrepresentations made by the Applicant, the
Agreement was terminated. After this, on 05.04.2018, the
Corporate Debtor also issued a letter seeking refund of balance
security deposit and compensation of losses suffered by them
due to the Petitioner.

14. The Petitioner thereafter has filed a rejoinder wherein he

has relied on Letter dated 01.08.2017 and various emails dated
08.08.2017, 28.08.2017, 29.08.2018 with regards to payment
of outstanding dues to be paid by the Corporate Debtor.

15. This Bench has gone through the petition, reply and rejoinder
filed by the parties. We have heard the Counsel for both the

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sides and are of the view that based on the documents and the
reply filed by the Corporate Debtor it is clear that many disputes
have been raised by the Corporate Debtor with regards to
forceful eviction from the Leased premises due to the breaches
by the Petitioner. The disputes raised by the Corporate Debtor
squarely falls within the ambit of Section 5 (6) of the Code
which provides as below:

“"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;”

16. 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 that 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

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not spurious, hypothetical or illusory, the adjudicating

authority has to reject the application”.

17. 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 are clear disputes relating to
breach of agreement as provided u/s 5(6) of the Code. The
dispute regarding the breach of agreement was raised by
the Corporate Debtor long back prior to the issue of
demand notice. Hence this is a clear case of pre-existing
dispute between the Corporate Debtor and the Petitioner.

18. On listening to the arguments advanced by the counsels

appearing for both the sides and on perusal of the
submissions by both the parties, we are of the view that
there is a dispute, in relation to the unpaid operational
debt, between the parties which is supported by abundant
evidence. This dispute existed prior to the serving of
demand notice under section 8 and the Operational
Creditor had notice of existence of such dispute. Further,
this dispute truly exists in fact and is not spurious,
hypothetical or illusory, as has been stated in the judgment
of the Hon’ble Supreme Court in Mobliox case (supra).

19. For the reasons mentioned above, we hereby reject this

petition as under section 9(5)(2)(d), the notice of dispute
has been received by the Operational Creditor. No Cost.

Sd/- Sd/-
BHASKARA PANTULA MOHAN SHYAM BABU GAUTAM
Member (Judicial) Member (Technical)
(Prakhar Tandon)