NCLT Delhi Dismisses Insolvency Plea Against Hindustan Times; “Not A Dispute Redressal Forum”

Background Facts

HT Media Ltd. (“Corporate Debtor”) is a mass media company engaged in the business of print, electronic and digital media. HT media’s flagship newspaper is Hindustan Times.

M/s JHS Svendgaard Ltd. (“Operational Creditor”) entered into an Advertising Agreement with the Corporate Debtor on 25.01.2017 and made a security deposit of Rs. 80 Crores in view of the same. The security deposit was to be utilized towards supply of advertisement services by the Corporate Debtor. The Corporate Debtor terminated the Agreement on 25.01.2022. Operational Creditor contended that Rs. 5,39,39,475/- remained unutilized from the security deposit and was liable to be returned.

On 21.02.2022, the Operational Creditor issued a demand notice under Section 8 of the Insolvency and Bankruptcy Act, 2016 (“IBC”) to the Corporate Debtor, demanding the balance security amount. The Corporate Debtor did not respond to the notice.

Thereafter, the Operational Creditor filed a petition under Section 9 of IBC, seeking initiation of Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor, over a default of Rs. 5,38,88,866/- inclusive of interest.

The Corporate Debtor while opposing the petition argued that no operational debt was due and payable and there is a pre-existing dispute between the Parties. The security deposit amount stood forfeited and was non-refundable as per the Agreement.

NCLT Verdict

The Bench opined that there has been difference of interpretation between the Parties with regard to the tenure of Advertising Agreement. The Bench held that the petition was pursued for a disputed debt and the NCLT is not a dispute redressal forum.

Reliance was placed on the Supreme Court judgment in Mobilox Innovations Pvt. Ltd. v Kirusa Software Pvt. Ltd., Civil Appeal No. 9405 of 2017, wherein it was held that as long as a dispute truly exists in fact and is not spurious, hypothetical and illusory; the Adjudicating Authority must reject the petition under Section 9 of IBC.

The Bench dismissed the application.

Case Title: M/s JHS Svendgaard Ltd. v M/s HT Media Ltd.

Case No.: (IB) 400 ND/2022

Counsel for Petitioners: Mr. P Nagesh (Sr. Adv.), Adv. Anushree Malviya Adv. Akshay Sharma.

Counsel for Respondent: Mr. Abhinav Vasisht (Sr. Adv.), Ms. Vanita Bhargava, Ms. Wamika Trehan, Mr. Siddhant Kumar, Advocates.

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