The Delhi Bench of the National Company Law Appellate Tribunal ( NCLAT ) upheld the National Company Law Tribunal ( NCLT )’s order rejecting the Operational Creditor’s Section 9 Insolvency and Bankruptcy Code (IBC),2016 application against the Corporate Debtor, citing a pre-existing dispute over the non-delivery of a No Objection Certificate ( NOC ) required for the copyright registration of a Television Commercial (TVC).
The Operational Creditor-appellant, challenged the NCLT’s order dated 30.05.2023, which dismissed its Section 9 IBC application against the Patanjali Paridhan Private Limited-Corporate Debtor-respondent.
The appellant provided services for creating a TVC, print shoot, and digital content for the Corporate Debtor under a proforma invoice dated 17.10.2018. The invoice required 50% advance payment and the remaining 50% upon delivery of the TVC.
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The Operational Creditor claimed it delivered the services and raised a final invoice on 29.01.2019 for ₹2,06,50,000/-. An advance of ₹87,50,000/- was paid on 26.10.2018, leaving ₹1,19,00,000/- unpaid despite repeated reminders sent between April and May 2019. After issuing a demand notice under Section 8 of the IBC on 12.03.2021, the Operational Creditor filed a Section 9 application, which was dismissed by the NCLT on 30.05.2023.
The Corporate Debtor argued that the Operational Creditor failed to provide a NOC as required by Clause 26 of the invoice. Without the NOC, the Corporate Debtor was unable to register the TVC, rendering it unusable and causing financial losses, they cited multiple requests for the NOC, including emails and a legal notice dated 08.09.2020.
The Operational Creditor maintained that the NOC was unnecessary, asserting that the TVC was created by its employees and citing Section 17 of the Copyright Act, 1957, to support its ownership of the work. It argued that the NOC issue was raised only to delay payment.
The NCLT dismissed the application, ruling that the dispute over the NOC constituted a pre-existing dispute, disqualifying the claim under Section 9 of the IBC.
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The two member bench comprising Justice Yogesh Kumar (Judicial Member) and Ajai Das Mehrotra(Technical Member) noted that the Operational Creditor provided the TVC service, for which the Corporate Debtor had paid 50% of the amount upfront. However, despite several requests through emails and legal notices, the Operational Creditor failed to provide the necessary NOC to the Corporate Debtor, preventing the latter from registering the copyright for the TVC.
It was determined that the dispute over the NOC existed before the issuance of the demand notice under Section 8 of the IBC. The Corporate Debtor could not use the TVC because the NOC was not provided, confirming the existence of a genuine dispute.
In its decision, the tribunal referred to the Mobilox Innovations case, which clarified that a “pre-existing dispute” must be genuine and supported by evidence before the demand notice. The Sabarmati Gas Ltd. v. Shah Alloys Ltd. case reinforced the principle that a plausible dispute can prevent insolvency proceedings, even if the dispute’s resolution is uncertain.
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Given the factual dispute over the NOC raised by the Corporate Debtor before the demand notice, the tribunal upheld the NCLT’s decision to reject the Section 9 application. The appeal was dismissed, and all related interim applications were disposed of without costs.
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