Case Overview

The National Company Law Tribunal (NCLT) Principal Bench admitted an application filed by Allegis Services (India) Pvt. Ltd. (Operational Creditor) under Section 9 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of Corporate Insolvency Resolution Process (CIRP) against Olive Telecommunication Pvt. Ltd. (Corporate Debtor).

The dispute originated from a Master Services Agreement dated 01.12.2010 under which Allegis provided sales and marketing services to Olive Telecom. The Operational Creditor raised six invoices totaling ₹60,38,613/, of which Olive paid only the first invoice, leaving five unpaid invoices aggregating ₹50,43,071/.

The matter was referred to arbitration, and an Arbitral Tribunal comprising Hon'ble Mr. Justice (Retd.) R. Gururajan passed an Award dated 30.04.2014 directing Olive to pay ₹50,43,071/ along with interest at 15% per annum from invoice dates until payment, plus costs. Olive challenged this Award under Section 34 of the Arbitration Act before the Principal City Civil Judge, Bengaluru (A.S. No. 76/2014), but the challenge was dismissed on 19.04.2021. No further appeal under Section 37 was filed.

Allegis initially filed a winding-up petition (Company Petition No. 594/2015) before the Delhi High Court on 14.08.2015, which was transferred to NCLT on 07.05.2024 under the Companies (Transfer of Pending Proceedings) Rules, 2016. The Operational Creditor subsequently filed Form-5 to convert the proceeding into a Section 9 application.

Key Submissions and Tribunal Analysis

The Corporate Debtor raised multiple objections: (1) the Master Agreement expired on 28.02.2011 without valid extension; (2) invoices were invalid and not approved; (3) Allegis failed to meet sales targets; (4) the principal debt of ₹50.43 lakh was below the ₹1 crore threshold under Section 4; (5) interest couldn't be added to cross threshold; (6) the Arbitral Award was unstamped; and (7) insolvency shouldn't substitute execution proceedings.

The Tribunal rejected all objections, noting that:

  • The disputes were already adjudicated in arbitration and Section 34 challenge was dismissed
  • The total default amount of ₹1,52,59,418/ (including adjudicated interest at 15%) exceeded the ₹1 crore threshold
  • Interest formed part of the crystallized debt under the Award and was not unilateral
  • Balance sheet entries showing ₹24,73,438/ payable to Allegis provided additional corroboration
  • The unstamped Award objection was irrelevant for Section 9 proceedings
  • The availability of execution proceedings doesn't bar insolvency when statutory conditions are met

Final Outcome

The NCLT admitted the application and initiated CIRP against Olive Telecommunication Pvt. Ltd. The Tribunal:

  • Declared moratorium under Section 14 effective immediately
  • Appointed Ms. Harmeet Kaur (IBBI Registration No. IBBI/IPA-002/IP-N00948/2020-2021/13076) as Interim Resolution Professional
  • Directed Allegis to deposit ₹2,00,000/ with the IRP for initial CIRP expenses
  • Ordered the IRP to make public announcement of CIRP initiation
  • Directed registry to communicate the order to all relevant parties including ROC, IBBI, and tax authorities

The moratorium will remain effective until completion of CIRP, approval of resolution plan, or liquidation order.

Topics: Insolvency Proceedings, Operational Debt Recovery, Arbitration Award Enforcement