BUSINESS LAW REPORT

ON

MOBILOX INNOVATIONS PVT. LTD.

V.

KIRUSA SOFTWARE PVT. LTD.

(C.A. no. 9405 of 2017)

Submitted by:-

Akshit Aggarwal
Business Law Report: Akshit Aggarwal
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. 2019PGP068

2019PGP068

Table of Contents

Brief Facts of the Case........................................................................3

Questions of Law Before the Hon’ble Supreme Court of India.....4

Findings by Justice R.F. Nariman.....................................................5

Criticism..............................................................................................8

Key takeaways and learnings............................................................8

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Business Law Report: Akshit Aggarwal
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. 2019PGP068

BRIEF FACTS OF THE CASE

 CORPORATE DEBTOR: Mobilox Innovations Pvt. Ltd.

 OPERATIONAL CREDITOR: Kirusa Software Pvt. Ltd.

 The Operational Creditor rendered certain services to the Corporate Debtor in

connection with the famous Star TV program “Nach Baliye.”

 As part of the contract, the Operational Creditor had also signed a Non-

disclosure agreement (NDA)

 The Corporate Debtor withheld payments to the Operational Creditor citing

breach of the NDA

 Operational Creditor sent notice u/s 8 of the Insolvency and Bankruptcy Code,

2016 (IBC) to which the Corporate Debtor replied disputing the claim

 NCLT rejected the Operational Creditor’s Application u/s 9 of the IBC on the

ground that it was hit by Section 9(5)(ii)(d) of the Code

 NCLAT opined that NCLT had mechanically rejected the matter, it should have

investigated into the merits.

 The matter was challenged before the Supreme Court by the Corporate Debtor

QUESTIONS OF LAW BEFORE THE HON’BLE SUPREME

COURT OF INDIA

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Business Law Report: Akshit Aggarwal
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. 2019PGP068

1. Whether the argument raised by the Corporate Debtor has

to be bonafide or not for the acceptance of the application

u/s 9 IBC

2. Whether the Adjudicating Authority (NCLT) had the power

to look into such genuineness?

FINDINGS BY JUSTICE R.F. NARIMAN

The adjudicating authority on receipt of the application when verifying an application

under Section 9 of the IBC Act will have to determine the following:1

 If there is an “operational debt,” as mentioned exceeding Rs.1 lakh? (See

Section 4 of the Act)

1
https://ibclaw.in/existence-of-the-dispute-and-or-the-suit-or-arbitration-proceeding-must-be-pre-existing-it-
must-exist-before-the-receipt-of-the-demand-notice-or-invoice-u-s-8-ahluwalia-contracts-india-limited-vs/

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Business Law Report: Akshit Aggarwal
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. 2019PGP068

 If there is any evidence given the application that shows the previously

mentioned obligation is expected and payable and has not yet been paid?

Also,

 If there is any existence of any previous dispute between the parties or

the record of the pendency of a suit or arbitration 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, 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.

WHETHER THE DISPUTE RAISED BY THE CORPORATE DEBTOR HAS TO BE

GENUINE OR NOT FOR THE PURPOSE ACCEPTANCE OF THE APPLICATION

U/S9 IBC 2

 The Apex Court while looking at the legislative intent in order to pronounce a

comprehensive answer to the same decided to look at the Insolvency and

Bankruptcy Bill, 2015 where the definition of dispute included the usage of the

term 'bona-fide’

 Thus the omission of the same in the final Act was interpreted by the Supreme

Court to be clear indication of the legislature's intent to make the final definition

2
Paras 37-39, page 78-79 discusses the above question of law

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Business Law Report: Akshit Aggarwal
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. 2019PGP068

an inclusive one rather than an exhaustive one i.e. to include dispute in any form

rather than only disputes that exhibited merit

 WHETHER THE ADJUDICATING AUTHORITY (NCLT) HAD THE

POWER TO LOOK INTO SUCH GENUINENESS?3

 In order to determine whether to accept or reject an application on the ground

that there is a dispute already in existence, the Adjudicating Authority cannot go

into the merit but must merely see whether such a dispute is actually present or

not. The dispute cannot be a figment of one's imagination which one has

concocted just to delay the proceedings concerned

 he Adjudicating Authority can only in certain instances examine the veracity of

the dispute. These instances include:-

 patently feeble arguments

 assertions unsupported by facts 

 and does not require a stricter test of plausibility of the defiance's success

i.e. instances where the existence of the dispute may be prima facie struck

down

3
Para 40, Page 85 of the Judgement discusses the above question of law

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Business Law Report: Akshit Aggarwal
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. 2019PGP068

CRITICISM

1. The verdict by the apex court in the case regarding the merit of the dispute

leaves ambiguity as it’s not clear as to how to determine the merit.

2. When given an option to either determine the bonafide of dispute or not, the

adjudicating authority may or may not look in the matter of the same.

KEY TAKEAWAYS

1. The process of filing an application under IBC

2. Whether NCLT can judge the genuineness of the dispute and whether it has

the power or to go into the merits of the case or not filed under IBC

3. The loopholes in IBC code and how there still remains some ambiguity in the

law

4. Evidence and proof required for the acceptance of the under IBC

5. Key insight into section 8 and section 9 under IBC which talks about

corporate insolvency procedure of operational creditors

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