The Mumbai bench of the National Company Law Tribunal (NCLT) has also directed the company to continue providing its services to the bankrupt travel company as per the agreement.
The travel company’s RP had approached the tribunal with the complaint that Writer Business Services had blocked access to the record management service by refusing to provide the list of businesses and information of the Cox & Kings that are stored by it. The RP had also claimed in its plea that the service provider had refused to provide record retrieval services until the company makes payment as 100% advance.
“The bench notes that in the month of February 2020, all the invoices of the respondent up to January 2020 were fully paid,” observed bench led by judicial member HV Subba Rao and technical member CB Singh in its order of October 29. “Therefore, the respondent’s (Writer’s) refusal to provide its record retrieval services to the RP when the payment has been fully made as per the terms of the agreement is totally violation of Section 14 of the (IBC) Code.”
Under Section 14 (2A) of IBC, when a company is undergoing corporate insolvency resolution process (CIRP), the supply of goods or services critical to protect and preserve the value of the corporate debtor as a going concern shall not be terminated, suspended or interrupted during the period of moratorium.
Ashutosh Agarwala, the RP, argued through his lawyer that since February 2020, Writer Business Services had not provided access to the business record of the company even though payment of about Rs 12.29 lakh had been made for the period from the time of commencement of CIRP to January 2020.
The tribunal imposed a Rs 20-lakh fine on Writer Business Services and directed it to continue the services to Cox & Kings as per its 2007 agreement with the company.
Email queries to Writer Corporation and Ashutosh Agarwala remained unanswered till as of press time.
“This judgment reinforces the legislative intent in the insolvency code that during the moratorium, the essential services and supply of goods must be supplied which are critical to protecting the value of the corporate debtor,” said Ashish Pyasi, associate partner at law firm Dhir & Dhir Associates. “It is unprecedented that such a big cost is imposed by the tribunal upon the service provider for committing the breach of the provisions of the code.”
In October 2019, NCLT had admitted a plea filed by Rattan India Finance to initiate insolvency proceedings against Cox & Kings for defaulting on a loan of Rs 30 crore. The company owes over Rs 7,422 crore to its financial and operational creditors.
