NCLT Delhi Rejects CIRP Application Over Non-Payment Of Legal Fees

NCLT Delhi Rejects CIRP Application Over Non-Payment Of Legal Fees

The National Company Law Tribunal (NCLT) New Delhi bench, comprising Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member), has rejected an application for initiating the Corporate Insolvency Resolution Process (CIRP) against The State Trading Corporation of India Limited (STC). The application was filed by a senior advocate seeking to recover Rs. 6.26 Crores in legal fees.

The NCLT noted that the invoices issued by the Senior Advocate did not conform to the agreed schedule of fees and contained discrepancies that had not been rectified despite previous communications. This indicated a substantial dispute between the parties regarding the legitimacy of the invoiced amounts.

The application, filed under Section 9 of the Insolvency and Bankruptcy Code (IBC), was made by Mr. Debabrata Ray Choudhuri (applicant or operational creditor) against STC (respondent or corporate debtor). The applicant sought to initiate CIRP for a defaulted payment of Rs. 6,26,90,985/-, which includes a principal amount of Rs. 3,93,55,110/- and interest of Rs. 2,33,35,875/- at 15% per annum.

The applicant, a Designated Senior Advocate, had provided professional services amounting to Rs. 4,84,70,481/- and submitted bills to STC. STC made a partial payment of Rs. 91,15,371/-, including TDS. The remaining amount payable was Rs. 3,93,55,110/-. Over 200 invoices were raised for services rendered from 2009 to 2018, with disputes concerning the bills being acknowledged in communications.

The NCLT observed that the discrepancies in the invoices indicated a pre-existing dispute between the operational creditor and the corporate debtor regarding the invoices and their alignment with the agreed fee schedule. It noted that the operational creditor had raised grievances about non-payment only after ceasing to provide legal services in 2018, despite continued representation up until then.

The Tribunal referred to the Supreme Court’s judgments in Mobilox Innovations Private Limited v. Kirusa Software Private Limited and Sabarmati Gas Limited v. Shah Alloys Limited, emphasizing that the existence of a pre-existing dispute must be credible and not merely an unsupported assertion.

Given the prolonged period over which the dispute remained unresolved and the substantial discrepancies in the invoices, the NCLT concluded that the applicant failed to make a case for initiating CIRP under Section 9 of the IBC.

As a result, the NCLT rejected the application, citing the presence of a pre-existing dispute and discrepancies in the invoiced amounts as reasons for its decision.