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2023 SCC OnLine NCLAT 82

In the National Company Law Appellate Tribunal†

(BEFORE ASHOK BHUSHAN, CHAIRPERSON AND SHREESHA MERLA, MEMBER
(TECHNICAL))

Greymatter Entertainment Pvt. Ltd. Through its

Authorised Representative Chandradev Bhagat …
Appellant;
Versus
Pro Sportify Pvt. Ltd. … Respondent.
Company Appeal (AT) (Insolvency) No. 1043 of 2021‡
Decided on February 9, 2023
Advocates who appeared in this case:
Mr. Kuriakose Varghese, Ms. Aishwarya Hariharan & Mr. Akshat
Gogna, Advocates for Appellant;
Mr. Arvind Nayar, Sr. Advocate with Mr. Varun Tankha, Mr. Akshay
Joshi and Mr. Prannoy Joe Sebastian, Advocates for Respondent.
JUDGMENT
SHREESHA MERLA, MEMBER (TECHNICAL):— Challenge in this Appeal
is to the Impugned Order dated 27.07.2021 passed by the Learned
Adjudicating Authority (National Company Law Tribunal, Chandigarh
Bench, Chandigarh) in C.P. (IB) No. 9/CHD/HRY/2019, by which Order,
the Adjudicating Authority dismissed the Application filed under
Section 9 of the Insolvency and Bankruptcy Code, 2016, (hereinafter
referred to as ‘The Code’) by ‘Operational Creditor’/‘M/s. Greymatter
Entertainment Private Limited’, observing as follows:
“9. The second issue to be decided is whether the petitioner
proved get, the debt and the liability of the respondent-corporate
debtor to pay the same per the demand notice (Annexure-l) dated
20.09.2018 of the petitioner an amount of 830,05,590/- pertaining
to Season 2 was due and an amount of ¢34.46.000/- in respect of
Season 3 was due totalling an amount of 265.41.590/was due from
the respondent-corporate debtor. In reply to the said contention. the
respondent-corporate debtor in its reply stated that it has paid an
amount of 21.25 crores as against the agreement requirement of
21.20 crores in respect of Season 2 and has aid 21 crore in full and
final settlement in respect of Season 3 for which no agreement was
entered into. The petitioner, in spite of the specific averments made
by the respondent-corporate debtor in its reply, has not chosen to
dispute the same by filing any rejoinder to the said reply. The
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petitioner has also not denied the contention of the corporate debtor
that the invoices raised in respect of Season 3 were not in
accordance with the work done and the amount. for the service was
over charged and accordingly an amount of 21 crore has been paid in
full and final settlement of all the claims in respect of Season 3 In
the absence of specific denial of the averments made by the
corporate debtor and since the petitioner failed to prove the debt and
the liability to pay the same by the corporate debtor, this issue is
held against the petitioner.”
2. Succinctly put, the facts in brief are that the ‘Operational Creditor’
is a Limited Liability Company which has provided services of Live TV
Production of Season-1, Season-2 and Season-3 of the Pro Wrestling
League (‘PWL’) held in India in 2015 to the ‘Corporate Debtor’. It is
averred that it is only for the TV Services of Season-2 of PWL, that the
‘Operational Creditor’ had entered into a Live Production Agreement
dated 29.01.2016. It is stated that the entire consideration for the
three Seasons was not paid and there is a ‘debt’ and ‘default’ and
hence the ‘Operational Creditor’ preferred an Application under Section
9 of the Code.
3. Learned Counsel Mr. Kuriakose Varghese appearing for the
Appellant/‘Operational Creditor’ submitted that Live TV Production
Services for Seasons-1, 2 & 3 were provided to the ‘Corporate Debtor’
for a total consideration of Rs. 2,23,29,790/- for Season-1, Rs.
1,20,00,000/- for Season-2 and Rs. 1,24,50,000/- for Season-3. It is
submitted that out of the total invoices issued by the Appellant for all
three Seasons of PWL, despite several emails and even a Legal Notice
dated 24.01.2017, the ‘Corporate Debtor’ had defaulted in payment of
Rs. 65,41,590/- in addition to interest @12% p.a., the ‘date of default’
being 10.01.2017. A Demand Notice dated 20.09.2018, as required
under Section 8 of the Code was sent to the ‘Corporate Debtor’,
claiming the outstanding amount of Rs. 65,41,590/- together with the
interest component of 12% p.a.
4. It is contended by the Learned Counsel that sub-Section (1) of
Section 9 of the Code makes it abundantly clear that a Demand Notice
under Section 8 of the Code is a condition precedent for filing an
Application under Section 9 and the Application can be filed only after
the expiry of a period of 10 days from the date of delivery of the said
Demand Notice. Once the ‘Corporate Debtor’ receives the Demand
Notice, he shall within a period of 10 days of the receipt, bring to the
notice of the ‘Operational Creditor’, either the ‘Existence of Dispute’ or
the payment of unpaid ‘Operational Debt’. Section 8 mandates the
complete procedure for the initiation of Corporate Insolvency Resolution
Process, (‘CIRP’) and once 10 days has passed and no payment is
received or no Notice of dispute is raised under Section 8(2), then the
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Application enters the jurisdiction realm of the Adjudicating Authority

and the wheels of CIRP process will start to roll. It is contended that
the Adjudicating Authority should not seek to go beyond what is an
express mandate of the Statute particularly when the Statute is clear in
its interdict.
5. Learned Counsel, placed reliance on paragraphs 35 and 38 of
‘Mobilox Innovations Private Limited v. Kirusa Software Private
Limited’1 , in support of his submissions. The relevant paras read as
follows:
“35. …The corporate debtor is given 10 days from the date of
receipt of demand notice or copy of invoice to either point out that a
dispute exists between the parties or that he has since repaid the
unpaid operational debt. If neither exists, then an application once
filed has to be disposed of by the adjudicating authority within 14
days of its receipt, either by admitting it or rejecting it….”
“38. It is, thus, clear that so far as an operational creditor is
concerned, a demand notice of an unpaid operational debt or copy of
an invoice demanding payment of the amount involved must be
delivered in the prescribed form. The corporate debtor is then given
a period of 10 days from the receipt of the demand notice or copy of
the invoice to bring to the notice of the operational creditor the
existence of a dispute, if any….”
6. It is submitted by the Learned Counsel for the Appellant that in
Section 9(3)(a) an ‘Operational Creditor’ shall furnish a copy of the
invoice demanding payment, or a ‘Demand Notice’ delivered by Creditor
to Debtor. In Section 9(3)(b) an Affidavit is to be filed to the effect that
there is no Notice given by the ‘Corporate Debtor’ relating to a dispute
of an unpaid ‘Operational Debt’. It is the case of the ‘Operational
Creditor’, that as the ‘Corporate Debtor’ had not replied to the Notice
issued under Section 8, both ‘debt’ and ‘default’ and the question of no
‘Pre-Existing Dispute’, is already crystallised prior to the Admission of
the Section 9 Application.
7. It is the further case of the Appellant that though under Rule 42
of the NCLT Rules, 2016, the Applicant/Appellant can file a Rejoinder to
the Reply filed by the ‘Corporate Debtor’, the law does not compel the
Applicant to file a Rejoinder and any non-filing of the same cannot be
held against the Applicant. Learned Counsel placed reliance on the
Judgment of a Division Bench of the Madras High Court in
‘Veerasekhara Varmarayar v. Amirthavalliammal’2 in which it is
categorically held that ‘the law does not compel the plaintiff to file a
Rejoinder challenging the allegations made in the written statement
and the failure to file a Rejoinder cannot be treated as an admission of
the plea in the Written Statement'’.
8. It is the case of the Appellant that the payment of the
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outstanding dues was never made in full and final satisfaction and
rather it was a part payment of the services rendered during Season-3
of PWL that there was no amicable discussion so as to render the
payment of Rs. 1,00,00,000/- in full and final settlement that there is
no evidence on record filed by the Respondent regarding this full and
final settlement; payment of Rs. 1,00,00,000/- was admittedly made
on 04.01.2018, while invoices for Season-3 are dated 09.01.2018 and
16.01.2018, which has not been disputed; that the Respondent has
paid the TDS for the years 2015-16 and has also paid for the year 2016
-17 and 2017-18 and has never disputed the invoices sent to it by
email. It is further the case of the Appellant Counsel that the Appellant
had issued a Legal Notice to the Respondent on 24.10.2017 for which
there was no response and therefore the Adjudicating Authority was not
justified in dismissing the Application filed under Section 9 of the Code.
9. Learned Sr. Counsel Mr. Arvind Nayar appearing for the
Respondent contended that some of the documents filed by the
Appellant herein (I.A.78/2022) were not part of the record before the
Adjudicating Authority; that the Appellant did not choose to rebut the
submissions made by the Respondent/‘Corporate Debtor’ before the
Adjudicating Authority by filing a Rejoinder. The same was recorded by
the Adjudicating Authority in their Order dated 04.09.2019. It is
submitted that no Agreement was entered into for Seasons-1 & 3; that
as per ‘Settled Terms’, total consideration for the services for PWL for
Season-1 was Rs. 1.75Crs./- and not Rs. 2,23,29,790/- as claimed by
the Appellant; after proper negotiations an Agreement dated
29.12.2016, was entered into for Season-2 for a total consideration of
Rs. 1.20Crs/- and it is an admitted fact that the ‘Corporate Debtor’ had
paid Rs. 1.25Crs./- after signing this Agreement; there was no
agreement for Season-3 and admittedly an amount of Rs. 1Cr./- was
paid for the services rendered by the Appellant and there is no
document on record to substantiate that this amount was paid only
towards part payment; that the cheque of Rs. 34,46,000/- was
erroneously issued by the Accounts Department and this factor cannot
be taken as Admission on the part of the ‘Corporate Debtor’ with
respect to issues; that the Appellant had never chosen to avail the
remedy available to them under Section 138 of the Negotiable
Instruments Act, 1881; the Appellant had never raised any dispute
with regard to any shortfall of payment received by them with respect
to Season-1; there is no reference to any shortfall in the payment
despite Written Agreement entered into for Season-2 on 29.12.2016; at
this stage also no dispute was raised by the Appellant and it was
specifically pleaded by the ‘Corporate Debtor’ that a payment of Rs.
1Cr./- was made to words Season-3 in full and final satisfaction.
10. It is denied that there was any shortfall or that there was any
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adjustment of Rs. 29,95,590/- and the same was pleaded specifically in

the Written Statement. But the Appellant did not choose to file a
Rejoinder and therefore it has to be inferred that there is no dispute
regarding the amounts paid in full and final satisfaction. Clause 30 of
the Agreement dated 29.12.2016 provides for Arbitration for settlement
of any disputes and the Appellant ought to have resorted for the same.
11. It is also contended that merely because there was no Reply to
the Section 8 Notice, there is no estoppel for the ‘Corporate Debtor’ to
raise all the relevant issues in their Reply to the Section 9 Notice.
Assessment:
12. The main point for consideration in this Appeal is whether if
Section 8 Notice is not replied to, does any provision under the Code
prevent the ‘Corporate Debtor’ from pleading issues of ‘Pre-Existing
Dispute’ or that the ‘debt’ has been paid, in their Reply to the Petition
filed under Section 9 of the Code and whether the Adjudicating
Authority was justified in dismissing the Section 9 Application filed by
the Appellant herein.
13. At this juncture, it is relevant to reproduce Sections 8 & 9 of the
Code which reads as hereunder:
“8. Insolvency resolution by operational creditor
(1) An operational creditor may, on the occurrence of a default,
deliver a demand notice of unpaid operational debtor copy of
an invoice demanding payment of the amount involved in the
default to the corporate debtor in such form and manner as
may be prescribed.
(2) The corporate debtor shall, within a period of ten days of the
receipt of the demand notice or copy of the invoice mentioned
in sub-section (1) bring to the notice of the operational creditor
-
(a) existence of a dispute, if any, or record of the pendency of
the suit or arbitration proceedings filed before the receipt of
such notice or invoice in relation to such dispute;
(b) the payment of unpaid operational debt-
(i) by sending an attested copy of the record of electronic
transfer of the unpaid amount from the bank account of
the corporate debtor; or
(ii) by sending an attested copy of record that the
operational creditor has encashed a cheque issued by the
corporate debtor.
Explanation. - For the purposes of this section, a “demand notice”
means a notice served by an operational creditor to the corporate
debtor demanding 3[payment] of the operational debt in respect of
which the default has occurred.
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9. Application for initiation of corporate insolvency

resolution process by operational creditor. -
(1) After the expiry of the period of ten days from the date of
delivery of the notice or invoice demanding payment under sub
-section (1) of section 8, if the operational creditor does not
receive payment from the corporate debtor or notice of the
dispute under subsection (2) of section 8, the operational
creditor may file an application before the Adjudicating
Authority for initiating a corporate insolvency resolution
process.
(2) The application under sub-section (1) shall be filed in such
form and manner and accompanied with such fee as may be
prescribed.
(3) The operational creditor shall, along with the application
furnish-
(a) a copy of the invoice demanding payment or demand notice
delivered by the operational creditor to the corporate debtor;
(b) an affidavit to the effect that there is no notice given by the
corporate debtor relating to a dispute of the unpaid
operational debt;
(c) a copy of the certificate from the financial institutions
maintaining accounts of the operational creditor confirming
that there is no payment of an unpaid operational debt by
the corporate debtor, if available;
(d) a copy of any record with information utility confirming that
there is no payment of an unpaid operational debt by the
corporate debtor, if available; and
(e) any other proof confirming that there is no payment of any
unpaid operational debt by the corporate debtor or such
other information, as may be prescribed.
(4) An operational creditor initiating a corporate insolvency
resolution process under this section, may propose a resolution
professional to act as an interim resolution professional.
(5) The Adjudicating Authority shall, within fourteen days of the
receipt of the application under sub-section (2), by an order-
(i) admit the application and communicate such decision to the
operational creditor and the corporate debtor if, -
(a) the application made under sub-section (2) is complete;
(b) there is no payment of the unpaid operational debt;
(c) the invoice or notice for payment to the corporate debtor
has been delivered by the operational creditor;
(d) no notice of dispute has been received by the operational
creditor or there is no record of dispute in the information
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utility; and
(e) there is no disciplinary proceeding pending against any
resolution professional proposed under sub-section (4), if
any.
(ii) reject the application and communicate such decision to
the operational creditor and the corporate debtor, if -
(a) the application made under sub-section (2) is
incomplete;
(b) there has been payment of the unpaid operational debt;
(c) the creditor has not delivered the invoice or notice for
payment to the corporate debtor;
(d) notice of dispute has been received by the operational
creditor or there is a record of dispute in the information
utility; or
(e) any disciplinary proceeding is pending against any
proposed resolution professional:
Provided that Adjudicating Authority, shall before rejecting an
application under subclause (a) of clause (ii) give a notice to the
applicant to rectify the defect in his application within seven days
of the date of receipt of such notice from the Adjudicating
Authority.
(6) The corporate insolvency resolution process shall commence from
the date of admission of the application under sub-section (5) of
this section.”
14. It is observed from the aforenoted Sections that neither Section
8 nor Section 9 of the Code indicate that in event Reply to Notice was
not filed within 10 days, the ‘Corporate Debtor’ is precluded from
raising the question of dispute or pleading that there or no amount ‘due
and payable’, the ‘Corporate Debtor’ is not prevented from establishing
by way of a Reply and relevant documents, any ‘Pre-Existing Dispute’
or paid ‘Operational Debt’. We place reliance of the Judgment of this
Tribunal in ‘Brandy Realty Services Ltd. v. Sir John Bakeries India Pvt.
Ltd.’3 , where this has been considered in detail:
“12. … Section 8(2) of the Code provides that the corporate
debtor shall, within a period of ten days of the receipt of the demand
notice or copy of the invoice mentioned in sub-section (1) bring to
the notice of the operational creditor- (a) existence of a dispute.
Section 9(1) of the Code provides that After the expiry of the period
of ten days from the date of delivery of the notice or invoice
demanding payment under sub-section (1) of section 8, if the
operational creditor does not receive payment from the corporate
debtor or notice of the dispute under sub-section (2) of section 8,
the operational creditor may file an application before the
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Adjudicating Authority for initiating a corporate insolvency resolution

process. Section 8(2) when read with Section 9(1), it is clear that
Section 9(1) enables the Operational Creditor to file Section 9
application if no payment has been received by the Operational
Creditor form Corporate Debtor or no notice of the dispute under sub
-section (2) of section 8 has been received. The statutory scheme
under Section 8 and 9 does not indicate that in an event Reply to
Notice is not filed within 10 days by Corporate Debtor or no Reply to
Notice under Section 8(1) have been given, the Corporate Debtor is
precluded from raising the question of dispute.
13. Our above conclusion is further fortified then we look into the
scheme of Section 9(5)(ii) which provides that the Adjudicating
Authority can reject the Application if-“notice of dispute has been
received by the Operational Creditor or there is a record of dispute in
the information utility”. The above provision indicates that even if no
notice of dispute has been received, and there is record of dispute in
the Information Utility the Application under Section 9 is to be
rejected by the Adjudicating Authority. The above provision clearly
indicates that even in absence of notice of dispute, Adjudicating
Authority can reject the Application if there is record of dispute in
the Information Utility. It goes without saying that record of dispute
in the Information Utility can very well be pointed out by the
Corporate Debtor before the Adjudicating Authority when notice is
issued under Section 9. Further in Reply to Section 9 Corporate
Debtor can bring the material to indicate that there are pre-existing
disputes in existence prior to issuance of demand notice under
Section 8. We thus are of the considered opinion that mere fact that
Reply to notice under Section 8 (1) having not been given within 10
days or no reply to demand notice having been filed by the
Corporate Debtor does not preclude the Corporate Debtor to bring
relevant materials before the Adjudicating Authority to establish that
there are preexisting dispute which may lead to the rejection of
Section 9 application. In the above context, we may refer to
Judgment of this Tribunal in “Neeraj Jain v. Cloudwalker Streaming
Technologies Private Limited” (Company Appeal (AT) Ins. No. 1354
of 2019) decided on 24th February, 2020 in paragraph 50 following
observations have been made by this Tribunal:
“…Even otherwise, mere failure to reply to the demand notice
does not extinguish the rights of the Operational Creditor to show
the existence of a preexisting dispute…”
(Emphasis Supplied)
15. We find force in the contention of the Learned Counsel for the
Appellant that though a Rejoinder has not been filed, it cannot be
construed that the pleadings in the Reply have been admitted to by the
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Appellant. The failure to file Rejoinder cannot be treated as Admission

of the pleadings in the Written Statement. Be that as it may, now we
address to the merits of the case on hand.
16. A perusal of the material on record shows that a cheque of Rs.
34,46,00,000/- was issued on 01.02.2018, which was subsequently
returned on account of ‘Stop Payment’ instructions given by the
‘Corporate Debtor’. It is the case of the Appellant that this amount is
the exact balance amount which was ought to be paid and is still ‘due
and payable’. It is the case of the Appellant that despite several emails
and phone calls in the year 2018, the ‘Corporate Debtor’ failed to pay
the balance amounts and that there is absolutely no evidence on record
brought forth by the ‘Corporate Debtor’ in support of their contention
that the amount of Rs. 1Cr./- was paid in full and final satisfaction.
17. It is seen from Item 33 of Part IV of the Application that the
sum which the Appellant states is payable by the ‘Corporate Debtor’ is
Rs. 65,41,590/- i.e., Rs. 30,95,590/- set to be the balance of PWL
Season-2 and Rs. 34,46,000/- which is said to be the balance of PWL
Season-3. It is an admitted fact that there was an Agreement entered
into for Season-2 dated 29.12.2016 whereby the total consideration
was agreed at Rs. 1.20Crs/-. A perusal of the record evidences that
there are ‘Claims’ and ‘Counter Claims’ regarding the amount which
was agreed upon. The email dated 22.11.2015 seen by the Appellant
themselves shows the agreed value of the contract for the first Season
as Rs. 1.75Crs./-, whereas it is the contention of the Learned Counsel
for the Respondent that the amount is not Rs. 1.75Crs./- but is Rs.
2,23,29,790/-. It is also the case of the Respondent that because of the
deficient services rendered in Season-3, the cheque which was wrongly
issued for Rs. 34,46,000/-, was later instructed to the Bank to stop
‘payment’. Admittedly, no action has been initiated under Section 138
of the Negotiable Instrument Act, 1881. As there was no Agreement
entered into for Season-3, there is no documentary evidence on record
to establish that any amount was ‘due and payable’ by the Respondent
herein. There is no communication on record to establish that the
Appellant was entitled by some provisions/promise that this particular
amount was liable to be paid.
18. The Hon'ble Apex court in ‘Mobilox Innovations Private Limited v.
Kirusa Software Pvt. Ltd.’ while discussing the ‘Pre-Existing Disputes’
has observed as follows:
“51. It is clear, therefore, that once the operational creditor has
filed an application, which is otherwise complete, the adjudicating
authority must reject the application under Section 9(5)(2)(d) if
notice of dispute has been received by the operational creditor or
there is a record of dispute in the information utility. It is clear that
such notice must bring to the notice of the operational creditor the
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“existence” of a dispute or the fact that a suit or arbitration

proceeding relating to a dispute is pending between the parties.
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 defence which is mere bluster. However, in doing so, the
Court does not need to be satisfied that the defence 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.”
…………………
56. Going by the aforesaid test of “existence of a dispute”, it is
clear that without going into the merits of the dispute, the appellant
has raised a plausible contention requiring further investigation
which is not a patently feeble legal argument or an assertion of facts
unsupported by evidence. The defense is not spurious, mere bluster,
plainly frivolous or vexatious. A dispute does truly exist in fact
between the parties, which may or may not ultimately succeed, and
the Appellate Tribunal was wholly incorrect in characterizing the
defense as vague, got-up and motivated to evade liability.”
19. The ratio of ‘Mobilox Innovations Pvt. Ltd.’ (Supra) is applicable
to the facts of this case as it is clear from the material on record that
there are ‘Claims’ and ‘Counter Claims’ with respect to the amounts to
be paid and the defense is not ‘spurious’ or ‘mere bluster’. To reiterate,
an Agreement has been entered into only for Season-2 and in the
absence of any such Agreement for the other seasons, we are of the
considered opinion that the Appellant/‘Operational Creditor’ has failed
to discharge its burden that there was indeed an ‘Operational Debt’
which was ‘due and payable’.
20. For all the aforenoted reasons, this Appeal is dismissed
accordingly. No order as to costs.
———
† Principal Bench New Delhi

‡
Arising out of the Order dated 27th July, 2021 passed by the Learned Adjudicating Authority
(National Company Law Tribunal, Chandigarh Bench, Chandigarh, in C.P. (IB) No.-
9/CHD/HRY/2019

1 (2018) 1 SCC 353

2 AIR 1975 Mad 51

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3
Comp. App. (AT) (Ins.) No. 958/2020

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