Karnataka High Court
M/S Wipro Ltd vs M/S Biomatiques Identification on 5 September, 2024
Author: M.G.S. Kamal
Bench: M.G.S. Kamal
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WP No.51156 of 2019
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 5TH DAY OF SEPTEMBER, 2024
BEFORE
THE HON'BLE MR. JUSTICE M.G.S. KAMAL
WRIT PETITION NO.51156 OF 2019 (GM-RES)
BETWEEN:
M/S. WIPRO LTD
A COMPANY REGISTERED UNDER THE
COMPANIES ACT 1956
HAVING ITS REGISTERED OFFICE
AT DODDAKANELLI
SARJAPURA ROAD
BENGALURU-560 035
Digitally REP. BY ITS AUTHORIZED SIGNATORY
signed by
SUMA B N MISS. ARPITHA R.
Location: High ...PETITIONER
Court of
Karnataka (BY SRI. MANMOHAN P.N. ADV.,)
AND:
1. M/S. BIOMATIQUES IDENTIFICATION
SOLUTIONS PRIVATE LTD.
HAVING ITS REGISTERED OFFICE AT
FIRST FLOOR, RISHI HOUSE
B/H SBI MAIN ROAD
PIPOLOD, SURATH
GUJARAT, INDIA.
2. THE NATIONAL COMPANY
LAW TRIBUNAL BENGALURU
BANGALORE BENCH, BANGALORE
RAHEJA TOWERS, M.G. ROAD
BENGALURU-560001
REP. BY REGISTRAR.
...RESPONDENTS
(BY SRI. CHANDAN G.K. ADV., AND
SRI. PRAVEEN K.B. ADV., FOR R1)
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WP No.51156 of 2019
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND
227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE
WRIT OF PROHIBITION AND PROHIBIT THE NATIONAL
COMPANY LAW TRIBUNAL, BENGALURU BENCH FROM
CONTINUING THE PROCEEDINGS PENDING BEFORE IT
(PRODUCED AS ANNEXURE-H AND R) OF IN THE ALTERNATIVE.
QUASH THE ENTIRE PROCEEDINGS PENDING BEFORE THE
NATIONAL COMPANY LAW TRIBUNAL BENGALURU BENCH
(PRODUCED AS ANNEXURE-R & ETC.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE M.G.S. KAMAL
ORAL ORDER
Petitioner is before this Court seeking following
reliefs:
a) Issue writ of prohibition and prohibit the National
Company Law Tribunal, Bengaluru Bench from continuing
the proceedings pending before it in CP (IB)
No.210/BB/2019 (produced as Annexure-H and R) or in
the alternative.
b) Issue writ of certiorari and quash the entire
proceedings in CP (IB) No.210/BB/2019 pending before
the National Company Law Tribunal, Bengaluru Bench
(produced as Annexure-R) and.
c) Issue writ of certiorari and quash the order dated
12.07.2019 passed in CP (IB) No.210/BB/2019 by the
National Company Law Tribunal, Bengaluru Bench
(produced as Annexure-J) and.
d) Issue writ of certiorari and quash the order dated
15.10.2019 passed on I.A.No.531/2019 in CP (IB)
No.210/BB/2019 passed by the National Company Law
Tribunal, Bengaluru Bench (produced as Annexure-R)
and.
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e) Pass any order of consequential relief or any other
appropriate order or direction as this Hon'ble Court deems
fit in the facts and circumstances of the case in the ends
of justice and equity.
2. Brief facts of the case leading up to filing of the
present petition as narrated in the writ petition are as
under:
(a) Petitioner is a Multi-National Company engaged
in the business of Software Development and
Services. Andhra Pradesh Technology Services Ltd.,
(APTS), which is a Government of Andhra Pradesh
undertaking, had issued tender notification dated
20.08.2015 for procurement of Irish Biometric
Devices ("Devices") for various departments of
Government of Andhra Pradesh. The said tender was
awarded to the petitioner - M/S.WIPRO LTD., vide
purchase order dated 22.09.2015 for Society for
Elimination of Rural Poverty ("SERP") and purchase
order dated 14.09.2015 for Civil Supplies
Department, Government of Andhra Pradesh. In
furtherance of the said notification, petitioner entered
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into contract with respondent No.1 vide purchase
order Nos.6000020650 and 6000020771. In terms of
which the respondent No.1 was required to supply
Iris Scanners to APTS and the petitioner was required
to make payment to the respondent No.1 only upon
the receipt and acceptance of the items/products
supplied by the respondent No.1 to APTS. The said
purchase order specifically provided that the
payment would be made to the respondent No.1 on
back-to-back basis. In other words, on petitioner
receiving the payments from APTS and respondent
No.1 as per the payment milestone mentioned in the
said purchase orders. Thereby, in the letters dated
20.08.2015 and 21.09.2015, respondent No.1 had
agreed to the terms that the payment would be
made on back-to-back basis including delivery,
payment conditions etc.
(b) That on 05.01.2016 APTS had issued a show-
cause notice pointing out, inter alia, certain quantity
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of the Devices supplied by the respondent No.1 were
defective. Consequently, APTS vide order dated
07.04.2016 had partially cancelled the purchase
order issued by it in respect of Kurnool,
Ananthpuram, Nellore and Prakasam Districts. APTS
had further called upon the petitioner to take back all
the Devices supplied to these four districts and the
amounts paid for the said Devices were ordered to be
recovered from the petitioner. It is pointed out that
the said letter of APTS also indicated that the
explanation offered by the respondent No.1 for
supply of defective Devices was not satisfactory.
Following the said letter, the Commissioner of Civil
Supplies, Government of Andhra Pradesh, vide letter
dated 03.06.2017 had instructed APTS not to release
the payments till the defective Devices were
replaced.
(c) Thus, when things stood thus, respondent issued
demand notice under Section 8 of the Insolvency and
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Bankruptcy Code, 2016 (for short, 'Code'), claiming
that the petitioner being an operational creditor had
failed to pay a sum of Rs.3,87,62,309.79 along with
interest at 19.5% aggregating in all
Rs.6,36,28,125.79. Petitioner by its reply dated
01.04.2019 had clarified that the terms of the
purchase orders clearly mention that the payments
would be made back-to-back and since the petitioner
had not received the balance payment from APTS as
the Devices supplied by the respondent No.1 were
defective, the end customers had cancelled the
orders in respect of four districts. Thus, it was
contended that there was a bonafide dispute
regarding the claim made by the respondent.
(d) However, despite the said reply, respondent
proceeded to file petition under Section 9 of the Code
which was registered before the National Company
Law Tribunal (NCLT) in No.CP(IB)No.210/BB/2019.
Petitioner, on learning about the same, appeared
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before the respondent No.2-NCLT on 12.07.2019 and
requested the Tribunal to grant time to file its reply.
However, without considering the said request,
respondent No.2-NCLT proceeded to pass order
dated 12.07.2019 on the premise of there being a
prima-facie case and the dispute that was raised by
the petitioner was feeble and untenable and without
any substance.
(e) Thereafter, petitioner filed vakalath though its
counsel and filed an application seeking recall of the
order dated 12.07.2019 in as much as the same had
been passed without affording opportunity to the
petitioner and same was in violation of principles of
natural justice. A detailed statement of objections
was also filed. A rejoinder to said statement of
objections was also filed by the respondent admitting
the nature of the contract to be back-to-back basis.
In addition, petitioner also filed applications under
Sections 65 and 76 of the Code alleging suppression
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of material facts by the respondent No.1 regarding
termination of contract by the APTS, to which the
respondent No.1 filed objections. However, by order
dated 15.10.2019 respondent No.2-NCLT rejected
the application filed by the petitioner seeking recall of
the order dated 12.07.2019 opining that the said
order was only an expression of prima-facie view
subject to the averments/contentions raised by the
respondent and consequently, dismissed the
application for recall as the same was misconceived
and posted the matter for admission on 13.11.2019
and thereafter on 29.11.2019. Aggrieved by the
aforesaid events resulting in the aforesaid orders
dated 12.07.2019 and 15.10.2019 passed by the
Respondent No.2-NCLT, petitioner is before this
Court seeking the reliefs extracted hereinabove.
3. Sri.P.N.Manmohan, learned counsel for the
petitioner, taking through the documents annexed to the
petition, submits that;
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(a) there was a bonafide dispute existed even
before the demand was made by the respondent
No.1 for the payment of amount and filing of petition
before the Respondent No.2-NCLT. In that he
submits that the nature of contract admittedly being
a back-to-back contract was interdependent and
contingent one. Existence of dispute therefore has to
be viewed taking holistic view of the facts and
circumstances.
(b) In that he submits that admittedly, APTS has
sought to partially cancel the contract that was
awarded to the petitioner on the allegation of
defective supply of Devices by the respondent No.1.
This factum of dispute is within the knowledge of the
respondent No.1 who has even addressed the
communication directly to the APTS. Thus, learned
counsel points out that the dispute that is existing
amongst the parties to the contract, has to be viewed
in the peculiar nature of the contract.
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(c) He submits Respondent No.2-NCLT has erred in
opining at the first instance even without hearing the
petitioner that the dispute raised by the petitioner
was feeble, untenable and without substance. It is
his submission that even before providing an
opportunity to the petitioner if the Respondent No.2-
NCLT has taken this view, the same would be a case
of pre-determination causing extreme hardship and
prejudice to the petitioner running contrary to very
scheme, object and purpose of the Code.
(d) Learned counsel for the petitioner refers to the
judgment of the Apex Court in the case of MOBILOX
INNOVATIONS PRIVATE LIMITED VS. KIRUSA
SOFTWARE PRIVATE LIMITED reported in (2018) 1
SCC 353 to buttress his submission that the entire
process initiated by the respondent No.1 is to coerce
the petitioner to make the payment despite there
being an existence of a bonafide dispute and the
same cannot be permitted and that Respondent
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No.2- NCLT not having appreciated this aspect of the
matter, has proceeded to pass the order which is
completely without jurisdiction.
(e) He also submits that the contract between the
petitioner and the respondent No.1 provides for an
arbitration clause of the dispute inter-se and in the
light of existence of arbitration contract, it is best left
to the parties to adjudicate the dispute in the forum
chosen by them instead initiating the proceedings
under the Code without any substance therein.
Hence, he submits that Respondent No.2- NCLT has
no jurisdiction to proceed with the matter. Hence,
seeks for allowing of the petition.
4. Sri.Chandan G.K., learned counsel appearing on
behalf of respondent No.1, on instructions, submit that the
proceedings initiated by the respondent No.1 is well within
the provisions of the Code. As there was no dispute
between the petitioner and the respondent No.1,
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respondent No.1 had no other option but to have recourse
under the provisions of the Code and has rightly done so.
He further submits that the Respondent No.2- NCLT has
merely expressed its view and has not passed any order.
Therefore, interference at this juncture is uncalled for.
Hence, seeks for dismissal of the petition.
5. Heard. Perused the records.
6. Before adverting to the contentions urged it is
necessary to note that the petitioner in this writ petition
has sought for issuance of writ of prohibition prohibiting
the National Company Law Tribunal-respondent No.2 from
continuing the proceedings pending before it in
C.P.(IB)No.210/BB/2019 and for quash of entire
proceedings and the orders dated 12.07.2019 and
15.10.2019. Such prayers are essentially on the premise
that when the petitioner is neither insolvent nor bankrupt
and when it is a profit making entity, the provisions of the
Code, cannot be invoked as a weapon to threaten the
petitioner with initiation of proceedings thereunder for
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recovery of money. The Respondent No.2- NCLT therefore
has no jurisdiction to invoke the provisions of the Code
and to proceed further in the matter.
7. Learned counsel heavily relies upon the
paragraphs 32, 33, 34, 38, 42 to 44, 51 and 56 of the
judgment of the Apex Court in the case of MOBILOX
INNOVATIONS PRIVATE LIMITED (supra) which are as
under;
"32. In the passage of the Bills which ultimately became the Code,
various important changes have taken place. The original definition of
"dispute" has now become an inclusive definition, the words "bona
fide" before "suit or arbitration proceedings" being deleted. In Section
8(1), the words "through an information utility, wherever applicable, or
by registered post or courier or by any electronic communication" have
been deleted. Likewise, in Section 8(2), the period of "at least 60 days
... through an information utility or by registered post or courier or by
any electronic communication" has also been deleted. In Section 9(5),
the absence of a proviso similar to the proviso occurring in Section
7(5) was also rectified. Further, the time periods of 2 and 3 days were
uniformly substituted, as has been seen above, by 7 days, so that a
sufficiently long period is given to do the needful.
33. xxxx It may also reject the application if the notice of dispute
has been received by the operational creditor or there is a record of
dispute in the information utility [Section 9(5)(ii)(d)]. Section
9(5)(ii)(d) refers to the notice of an existing dispute that has so been
received, as it must be read with Section 8(2)(a). Also, if any
disciplinary proceeding is pending against any proposed resolution
professional, the application may be rejected [Section 9(5)(ii)(e)].
34. Therefore, the adjudicating authority, when examining an
application under Section 9 of the Act will have to determine:
(i) Whether there is an "operational debt" as defined
exceeding Rs 1 lakh? (See Section 4 of the Act)
(ii) Whether the documentary evidence furnished with the
application shows that the aforesaid debt is due and
payable and has not yet been paid? And
(iii) Whether there is existence of a dispute between the
parties or the record of the pendency of a suit or arbitration
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proceeding filed before the receipt of the demand notice of
the unpaid operational debt in relation to such dispute?
If any one of the aforesaid conditions is lacking, the application would
have to be rejected. Apart from the above, the adjudicating authority
must follow the mandate of Section 9, as outlined above, and in
particular the mandate of Section 9(5) of the Act, and admit or reject
the application, as the case may be, depending upon the factors
mentioned in Section 9(5) of the Act.
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. We have also seen the notes on clauses annexed to the
Insolvency and Bankruptcy Bill of 2015, in which "the existence of a
dispute" alone is mentioned. Even otherwise, the word "and" occurring
in Section 8(2)(a) must be read as "or" keeping in mind the legislative
intent and the fact that an anomalous situation would arise if it is not
read as "or". If read as "and", disputes would only stave off the
bankruptcy process if they are already pending in a suit or arbitration
proceedings and not otherwise. This would lead to great hardship; in
that a dispute may arise a few days before triggering of the insolvency
process, in which case, though a dispute may exist, there is no time to
approach either an Arbitral Tribunal or a court. Further, given the fact
that long limitation periods are allowed, where disputes may arise and
do not reach an Arbitral Tribunal or a court for up to three years, such
persons would be outside the purview of Section 8(2) leading to
bankruptcy proceedings commencing against them. Such an anomaly
cannot possibly have been intended by the legislature nor has it so
been intended. We have also seen that one of the objects of the Code
qua operational debts is to ensure that the amount of such debts,
which is usually smaller than that of financial debts, does not enable
operational creditors to put the corporate debtor into the insolvency
resolution process prematurely or initiate the process for extraneous
considerations. It is for this reason that it is enough that a dispute
exists between the parties.
42. This being the case, is it not open to the adjudicating authority to
then go into whether a dispute does or does not exist?
43. It is important to notice that Section 255 read with the Eleventh
Schedule of the Code has amended Section 271 of the Companies Act,
2013 so that a company being unable to pay its debts is no longer a
ground for winding up a company. The old law contained in
Madhusudan [Madhusudan Gordhandas & Co. v. Madhu Woollen
Industries (P) Ltd., (1971) 3 SCC 632 : (1972) 2 SCR 201] has,
therefore, disappeared with the disappearance of this ground in
Section 271 of the Companies Act.
44. We have already noticed that in the first Insolvency and
Bankruptcy Bill, 2015 that was annexed to the Bankruptcy Law
Reforms Committee Report, Section 5(4) defined "dispute" as meaning
a "bona fide suit or arbitration proceedings...". In its present avatar,
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Section 5(6) excludes the expression "bona fide" which is of
significance. Therefore, it is difficult to import the expression "bona
fide" into Section 8(2)(a) in order to judge whether a dispute exists or
not.
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)(i)(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 "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 defence 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 characterising the defence as
vague, got up and motivated to evade liability."
8. While there cannot be any dispute with regard
to the aforesaid proposition of law, in the light of the
reliefs sought and the grounds supplied for the such reliefs
in the writ petition, what needs to be addressed is whether
Respondent No.2- NCLT has jurisdiction to adjudicate upon
the dispute between the parties to this petition involving
the contentions as urged.
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9. In the order dated 12.07.1990 produced at
Annexure-J the respondent No.2-NCLT has held as under;
"In the light of above circumstances of the case, we are of the
prima facie view that the dispute raised by the respondent is
feeble and untenable and same is without any substance.
However, before taking up admission of the case we are
inclined to give liberty to the respondent to file their statement
of objection as requested by learned counsel for the
respondent".
10. Further in the order dated 15.7.1990 produced
at Annexure -R the respondent No.2-NCLT has held as
under;
"The Adjudicating Authority vide order dated 12.07.1990 has only
expressed prima facie view subject to further
averments/contentions to be made by the respondents. Since the
respondents has already filed to the main company petition, they
can argue the case finally by placing their contentions. The
application is misconceived and thus liable to be dismissed."
11. It is also necessary to note that Section 7 of the
Code, enables a financial creditor to file an application for
initiating corporate insolvency resolution process against a
corporate debtor before the respondent No.2-NCLT when a
default has occurred in respect of a financial debt. Section
9 providing for an application for initiation of corporate
insolvency resolution, contemplate that after expiry of a
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period of 10 days from the date of delivery of notice or
invoice demanding payment under sub-section (1) of
Section 8 if the operational creditor did not receive the
payment from the corporate debtor or did not receive
notice of dispute under sub-section (2) of Section 8 only
then the operational creditor would get right to file
application before Adjudicating Authority. Sub-section (5)
of Section 9 contemplates even if such an application is
filed, the Adjudicating Authority shall within 14 days of
receipt of application, by an order reject the application
and the communicate of said decision to the operational
creditor if the notice of dispute has been received by the
operational creditor.
12. Appropriate at this juncture to refer to sub-
Section (5) of Section 60 of the Code, 2016 which lays
down the scope and ambit of the jurisdiction of the
respondent No.2-NCLT which reads as under;
''(5) Notwithstanding anything to the contrary contained in any other law for
the time being in force, the National Company Law Tribunal shall have
jurisdiction to entertain or dispose of--
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(a) any application or proceeding by or against the corporate debtor or
corporate person;
(b) any claim made by or against the corporate debtor or corporate person,
including claims by or against any of its subsidiaries situated in India; and
(c) any question of priorities or any question of law or facts, arising out of or
in relation to the insolvency resolution or liquidation proceedings of the
corporate debtor or corporate person under this Code.''
13. Thus, the reading of the aforesaid provision
would indicate that respondent No.2-NCLT is vested with
jurisdiction and authority to hear any applications or
proceedings brought by or against the corporate person or
corporate debtor and any claim, defense or disputes
notwithstanding anything contrary to any other law from
the time being course.
14. In the light of the law enunciated by the Apex
Court in the case of MOBILOX INNOVATIONS PRIVATE
LIMITED (supra) and the provisions of the Code
extracted hereinabove what emerges for the purpose of
this petition is whether the respondent No.2- NCLT could
have proceeded the proceedings initiated by the
respondent No.1?.
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15. In view of sub-Section (5) of Section 60 which
provides jurisdiction to the respondent No.2-NCLT to deal
with all questions relating to the proceedings initiated
under the provisions as noted above. As such, the
contentions that it has no jurisdiction to deal with the
matter cannot be accepted. Further, in view of the orders
dated 12.07.2019 and 15.10.2019 passed by the
respondent No.2-NCLT as extracted hereinabove it is clear
that respondent No.2-NCLT is yet to look into the
requirement of Section 9 of the Code.
16. Though, learned counsel for the petitioner
strenuously pointed out to the various correspondences
ensued between the petitioner and the respondent No.1 as
well as the correspondence ensued between the APTS,
petitioner and the respondent No.1, and the terms of the
contract, to point out the existence of the dispute which is
required to be appreciated for the purpose of the Code,
and also the arbitration agreement/clause provided under
the contract to contend the exclusion of the jurisdiction of
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respondent No.2-NCLT, this Court is of the view that even
as opined by the respondent No.2-NCLT in its order dated
15.10.2019 it has only expressed its prima-facie view
while passing the earlier order dated 12.07.2019 and has
kept the matter open to be heard on said contentions.
17. Since this Court has found that petitioner has
not made out case for issuance of writ of prohibition as
above, and since the respondent No.2-NCLT is yet to take
a view on the dispute raised by the petitioner, without
expressing any view on the merits and demerits of the
submissions made by the learned counsel for the
petitioner, this Court deem it appropriate to relegate the
matter to respondent No.2-NCLT, which shall, before
proceeding further into the matter, provide sufficient
opportunity of being heard to the petitioner with regard to
the nature and fabric of the dispute being canvassed by
the petitioner for rejection of the claim of the respondent
No.1 under the Code and pass appropriate order thereon.
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18. Accordingly the following:
ORDER
i. Petition is disposed of.
ii. Parties are relegated to the respondent
No.2-NCLT who after affording sufficient
opportunity to the parties concerned, shall first
adjudicate upon the contention raised by the
petitioner with regard to existence of the dispute
taking into consideration the terms of the
contract and the communications that were
exchanged between the parties, which are relied
upon by the petitioner and shall also examine
the maintainability of the petition in the light of
arbitration clause entered into between the
parties.
iii. Petitioner and the respondent No.1 are at
liberty to furnish such additional material for the
consideration of the respondent No.2-NCLT, if
required and if so advised.
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iv. Respondent No.2-NCLT shall undertake this
exercise and pass appropriate orders in
accordance with law as directed hereinabove as
expeditiously as possible.
Sd/-
(M.G.S. KAMAL)
JUDGE
