LOAN NETWORK TECHNOLOGIES PRIVATE LIMITED v. FACILITY LIFE SOLUTIONS PRIVATE LIMITED

'Corporate Debtor') for non-payment of total Operational Debt of Rs. 1,03,82,327/ (Rupees One Crore Three Lakhs Eighty-Two Thousand Three Hundred Twenty-Seven only).

2. The applicant submitted records of default on Information Utility (hereinafter referred to as "IU") and raised default 'on 04.05.2024. The Corporate Debtor has not raised any dispute to the debt on Information Utility within the statutory period of 10 days.

Submissions made by the Operational Creditor/Petitioner:

3. The Operational Creditor is a company incorporated under the provisions of the Companies Act, 2013. The Operational Creditor is a facilitator for disbursement of loan from leading financial providers which is scheduled commercial banks and non-banking financial companies/institutions. The Operational Creditor engages various direct selling agents ("DSA(s)"), inter alia engaged in the business of generating clients/ customers for various entities engaged in the business of facilitating financial assistance for such customers and through the assistance of DSAs, the Operational Creditor facilitates loan to its customers.

4. The Corporate Debtor is a company incorporated under the provisions of the Companies Act, 2013 and is a State Bank of India ("SBI") registered DSA. The Corporate Debtor is engaged into the business of home loan aggregation, counselling and assistance to individuals and entities through collaborative efforts with financial institutions, with the objective of expediting and facilitating the loan approval process.

5. On 28.12.2024, the Operational Creditor and Corporate Debtor entered into a Business Partnership Agreement whereby the Operational Creditor was to engage various DSA(s) to generate Customers desirous

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of availing Loan from various Financial Institution(s) and the Corporate Debtor was to assist the Operational Creditor in facilitating the disbursement of Loan from SBI and SBI was to pay 0.80%-1.00% of the Loan amount as compensation ("Compensation") to the Corporate Debtor for every successful Loan disbursement ("Transaction(s)") (Clause 1.1 & 1.2). Under the Agreement, the Operational was to pay as commission such amount to the concerned DSA(s) as maybe agreed between the Parties ("Commission"), however, in no event, the maximum amount of Commission to the concerned DSA(s) was to exceed 0.80% (zero point eight zero) of the sanctioned loan amount from SBI (Clause 1.3). It is further provided in the agreement that 95% (ninety-five percent) of the Compensation received against all the successful Transaction(s) in the SBI Account shall be paid to the Operational Creditor by the Corporate Debtor within 45 (forty-five) days of payment of the Commission made by the Operational Creditor to the concerned DSA(s) (Clause 5.1). Further, after deduction of to the Commission paid by the Operational Creditor to the concerned DSA(s), the remaining profit was to be shared equally between both the Parties (Clause 5.2).

6. The Agreement was amended on 17.01.2024 to appoint joint signatories for a common SBI bank account and to affirm that 95% of the commission received would be paid to the Operational Creditor within 45 days of payment to the connectors. It also contemplated that, in the event of any Loan application being filed by the Operational Creditor with SBI, the DSA code and the name of the Corporate Debtor will be mentioned on such Loan application(s) filed by the Operational Creditor either till 31^stMarch, 2024 or until the Operational Creditor has received the national HLC code from SBI, and subsequently, the DSA code of the Operational Creditor shall be mentioned on all application(s) undertaken by the Parties.

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7. During the period from 04.12.2023 to 30.04.2024 the Operational Creditor in different tranches has made payment tune of Rs. 2,00,58,863/- to the Connectors in the form of Commission, out which ₹1,20,56,617/- was pertaining to payments due from Corporate Debtor as reimbursement of amounts paid to their connectors and ₹80,02,247/- towards its own connectors. Out of this sum of Rs. 1,20,56,617/-, only 16,74,290/- has been paid by Corporate Debtor leaving a balance of Rs. 1,03,82,327/-. As per working sheet enclosed to the Petition, the outstanding payments were made to DSAs from 04.12.2023 to

15.02.2024.

8. It is stated that, after taking the services of the Operational Creditor by availing the customers and monetizing from facilitating the loan from SBI and gaining Commission without paying the same to the Operational Creditor, the Corporate Debtor is in default of the operational debt forming subject matter of the present petition. As per terms, the first due date for repayment fell on 18.01.2024. However, the Corporate Debtor failed to make payment for the tranche due on this date and for all subsequent tranches.

9. Partial payment was made against its own connectors: ₹77,74,747/- and against Corporate Debtor's connectors: ₹16,74,290/- . On 03.05.2024, a legal notice was served upon the Corporate Debtor demanding payment, which was neither replied to nor acted upon. On 08.06.2024, a post- dated cheque issued by the Corporate Debtor was dishonored with the remark "Payment Stopped by Drawer." A legal notice under Section 138 of the Negotiable Instruments Act, 1881 was served thereafter.

10. On 31.08.2024, a statutory demand notice under Section 8 of the IBC was issued, calling upon the Corporate Debtor to clear the dues within 10 days. The demand notice was delivered to the registered office of the

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Corporate Debtor. Despite delivery, no response or payment was received.

Submissions made by the Corporate Debtor:

11. The Corporate Debtor submits that on 28.12.2023 both the parties entered into a formal agreement to work jointly in facilitating loan disbursements via SBI. The agreement contained an arbitration clause (Clause 14.3.1), mandating any dispute to be first resolved amicably, and if unresolved, then one of the parties can invoke arbitration proceedings in Mumbai.

12. The Corporate Debtor submits that a new joint SBI account was to be opened and operated with one authorized signatory from each party. The Operational Creditor unilaterally took control of the said account, violating Clause 2.4 of the Addendum.

13. The Corporate Debtor submits that from 29.02.2024 to 20.04.2024, the Corporate Debtor made payments totaling ₹1,09,00,707/- to the Operational Creditor.

14. The Corporate Debtor submits that, while the Operational Creditor claims ₹1,03,82,327 as default, it has suppressed several communications and failed to disclose:

i. A reconciliation showing the actual outstanding is ₹19,55,910 only, calculated as- a) Claimed: ₹1,20,56,617; b) Add:

₹8,00,000 (for GST/salary);c) Less: ₹1,09,00,707 (paid)

ii. This amount is below the ₹1 crore threshold under Section 4 of IBC, rendering the petition not maintainable.

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15. Petitioner's own ledger shows a closing balance of ₹3.69 crores, which contradicts the claimed default amount of ₹1.03 crores, undermining credibility and raising questions about accounting accuracy.

16. Multiple contemporaneous emails and communications evidencing disputes were concealed by the Operational Creditor. The Corporate Debtor argues that there is a pre-existing dispute that predates the Application. The Following are the Disputes raised:

A. Regarding Control and Operation of SBI Account (Clause 2.4 Violation):

i. As per the Addendum dated 17.01.2024, a new SBI account was to be created and jointly operated by one representative of each party.

ii. However, the Operational Creditor unilaterally took control of the said account and did not permit the Corporate Debtor to access or operate it.

iii. This unilateral control and exclusion violated the contractual agreement (Clause 2.4), resulting in mistrust and mismanagement of funds.

B. The Corporate Debtor contends that detailed communications and email exchanges took place between the parties discussing disputes over:

i. The mode of calculation of dues,

ii. Misuse or mismanagement of funds,

iii. Control of the bank account,

iv. Non-disclosure of correct receivables, and

v. Disagreement over commission and reconciliation.

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C. Dispute Over Amount Due and Ledger Discrepancy:

i. The Operational Creditor claims ₹1,03,82,327 as due.

ii. The Corporate Debtor claims to have paid ₹1,09,00,707 from Feb 29 to Apr 20, 2024, which they state is evident from the bank statements (Exhibit B).

iii. Further, it points out that in the Operational Creditor's own ledger, the closing balance is ₹3.69 Cr+, not ₹1.03 Cr, creating a contradiction that suggests fabrication or inconsistency. D. Failure to Invoke Arbitration Clause (Clause 14.3.1):

i. The agreement provides that all disputes must be first attempted to be resolved amicably, and failing that, must be referred to arbitration under the Arbitration & Conciliation Act, 1996.

ii. The Operational Creditor did not invoke arbitration and directly approached NCLT.

17. The Corporate Debtor has relied upon the following case law to substantiate it stance in the present application :

1. Mobilox Innovations Private Limited v. Kirusa Software Private Limited . (2018) 1 SCC 353;

2. K. Kishan v.Vijay Nirman Company Pvt. Ltd. (2018) 17 SCC 662;

3. Anand Rathi Global Finance Ltd. v. Mack Soft-Tech Pvt. Ltd Company Appeal (AT) (Insolvency) No. 346 of 2018

Rejoinder On behalf Operational Creditor

18. The Operational Creditor in the Rejoinder submits that Corporate Debtor's entire defence hinges on a vague allegation of a pre-existing dispute. However, the Corporate Debtor failed to produce a single email, message, or document evidencing any such objection to the services rendered or amounts claimed. No dispute was raised before service of the demand notice dated 31.07.2024, which is a critical

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requirement under IBC jurisprudence to constitute a valid "pre-existing dispute."

19. The Corporate Debtor's assertion that ₹1,09,00,707 has been paid is already reflected in the ledger attached with the Petition (Exhibit E). The claimed amount of ₹1,03,82,327 is only the unpaid balance against payments made by the Operational Creditor on behalf of the Corporate Debtor's connectors. Dues relating to the Operational Creditor's own connectors (₹2.27 lakhs), salaries, GST, and revenue share have been consciously excluded from this Petition to avoid inflating the claim.

20. The Corporate Debtor alleges violation of Clause 2.4 (joint bank operation). However, Exhibit A in the Rejoinder clearly shows express written authorization by the Corporate Debtor appointing the Operational Creditor's representative as account signatory. The Corporate Debtor subsequently and unilaterally removed that authority without any prior intimation, which cannot now be used as a defence to deny legitimate dues.

21. The Operational Creditor submits that the existence of an arbitration clause under Clause 14.3.1 of the Business Partnership Agreement does not preclude IBC action. Supreme Court precedents (Indus Biotech

v. Kotak, Mobilox v. Kirusa) hold that the IBC is a special remedy and arbitration cannot oust its jurisdiction in cases of clear operational debt.

22. By admitting part payments and acknowledging that ₹1,20,56,617 was paid by the Operational Creditor on its behalf, the Corporate Debtor implicitly admits liability. Attempting to bring the claim under ₹1 crore by disputing ₹8 lakh worth of GST/salaries and misinterpreting ledgers is a malicious strategy to avoid default

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consequences. The claimed default is rightly calculated and crosses ₹1 crore, satisfying Section 4 of the Code.

23. At last, the Operational Creditor by way of Rejoinder confirms that the claim is clear, undisputed, and supported by valid documentation including invoices, bank records, and ledger statements. The Corporate Debtor has failed to demonstrate any pre-existing dispute or credible defence. The petition is fully maintainable under Section 9 of IBC, 2016 and must be admitted for initiation of the Corporate Insolvency Resolution Process (CIRP).

Findings:

24. Heard learned Counsel for both the parties and have duly perused the documents on record.

25. This is a petition filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (hereinafter "the Code") by the Operational Creditor seeking initiation of the Corporate Insolvency Resolution Process (CIRP) against Corporate Debtor for alleged default of ₹1,03,82,327/- (Rupees One Crore Three Lakhs Eighty-Two Thousand Three Hundred Twenty-Seven only).

26. The Corporate Debtor has placed on record statement of Bank Account in the name of Operational Creditor in SBI, which shows that an aggregate amount of Rs. 1,09,00,707/- has been paid to Operational Creditor from this account. The Operational Creditor in its reply has only stated that Rs. 77,74,747/- was received against the amounts receivable towards payments to the connectors of the Corporate Debtor and Rs. 16,74,290/- was received against the amounts receivable towards payments to the connectors engaged by the Corporate Debtor, thus, the Operational Creditor has only accounted

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for receipt of Rs. 94,49,037/-. There is no explanation in the Petition or Rejoinder in relation to the remaining amount of Rs. 14,51,670/-. Further, the ledger account of Corporate Debtor in the books of Operational Creditor reflects a balance of Rs. ₹3.69 crores receivable from the Corporate Debtor, however, there is no explanation as to how this balance is appearing in books of operational creditor, while its claim is for Rs. 1,03,82,327/-. The Operational Creditor has vaguely explained such difference stating that while the ledger shows dues of Rs. 3.69 crore, the Operational Creditor is only seeking reimbursement of what was paid directly to the Corporate Debtor's connectors, and also for FY 2022- 23 and 2023-24, an estimated Rs. S crores in commission was expected, out of which Rs. 2.5 crores would have been the Operational Creditor's share.

27. It is also relevant to note that the amounts paid to connectors by the Operational Creditor was receivable from Corporate Debtor out of commissions received from SBI. The Operational Creditor has not placed on record any statement reflecting receipt of commission amounts by Corporate Debtor from SBI. Further, the claim of payments made to connectors was in nature of reimbursements and was deductible as costs from total commissions to arrive at the net surplus for distribution between the parties hereto. The Bank account was to be opened in the name of Operational Creditor and was to operated by mutual consent of both the parties. It is pertinent to note clause 5.1 and 5.2 of the agreement (Operational Creditor is referred as

"Company" and Corporate Debtor is referred as 'Partner'), which reads as follows :

5.1 The Parties agree and undertake that 95% (ninety-five percent) of the Compensation received against all the successful Transaction(s) in the SBI Account shall be paid to the Company by the Partner within 45 (forty-five)

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days of payment of the Commission made by the Company to the concerned DSA(s).

5.2 The Parties hereby agree that after deduction of to the Commission paid by the Company to the concerned DSA(s), the remaining profit would be shared equally between both the Parties. Upon the Disclosures (as defined in Annexure-A) being made by the Partner to the Company, the Parties shall determine the percentage allocation of all the Compensation received from the Bank by the Parties for an initial period of 03(three) months (which may be mutually amended by the Parties) ("Initial Period"). Accordingly, after the Initial Period is completed, the percentage distribution of the Compensation will be changed in such a way that any shortfall in percentage received by the Company during the Initial Period is sufficiently made whole.

28. It is not case of the Operational Creditor that any payment received from SBI towards commission has been diverted by the Corporate Debtor thereby leaving connectors unpaid. In the absence of clarity as to how the amount of Rs. 1,03,82,327/- claimed outstanding and in default has been computed for the reasons explained in preceding para, this Petition can not be maintained as the Petitioner has failed to establish existence of undisputed debt of more than one Crore in case amount of Rs. 14,51,670/- is reduced from the amount claimed in default in the present petition.

29. Accordingly, we are of considered view that there exists a dispute in relation to the quantum of amount claimed in default in the present petition, hence, it deserves to be dismissed.

Sd/- Sd/-

PRABHAT KUMAR JUSTICE V.G BISHT

Member (Technical) Member (Judicial)

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