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2021 (5) TMI 581 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - Petitioner has not provided any material to establish insolvency of the Respondent company. The master data details of the Respondent company available on the MCA website show that the company is active and compliant and has no pending charges on assets showing a good working condition of the company. In the absence of specific data regarding insolvency of Respondent, we are unable to determine that the company is insolvent, which is the main reason to push a company into the rigours of the CIRP. If the non-repayment of debt is not because of insolvency, but rather due non fulfilment of business commitment by the other side, then the Petition remains one only seeking recovery, treating this AA as a debt recovery forum, which is not permissible. Also, an undisputed debt is a sine qua non for initiating any process u/s. 9 of the Code. The impact of the present financial distress caused by the global novel corona virus pandemic necessitating a nationwide lockdown, cannot be ignored. Major decisions have been taken to protect Industry from its effects, to inject economic stimulus and to revive the economy. More specifically, on 24.03.2020 the Legislature increased the minimum threshold of default from ₹ 1 Lakh to ₹ 1 Crore so that the Code is not used merely for recovery of debt. Respondent has raised various reasons why the debt is not paid and at the same time admits liability and seeks more time to pay the same, and also that the Respondent is a going concern, thus in the totality of facts and circumstances including the bad economic scenario prevailing in the country, this is not a case fit for initiating CIRP and that it would be in the interest of justice to allow the Respondent some more time to negotiate with the Petitioner and settle the debt at the earliest. Application disposed of by directing the Respondent/Corporate Debtor to repay the debt or the amount as mutually settled with the Petitioner within a period of six months, failing which, the Petitioner would be at liberty to file a fresh petition for admission.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016. 2. Existence of a pre-existing dispute. 3. Bar of limitation. 4. Compliance with procedural requirements under IBC. 5. Financial health and solvency of the Respondent. 6. Impact of COVID-19 pandemic on the financial scenario. Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the IBC, 2016: The Petitioner, McNally Sayaji Engineering Limited, sought to initiate CIRP against Scorpio Engineering Private Limited for a default amount of ?2,51,66,080/- including interest. The Petitioner claimed that the Respondent had committed default by not paying the outstanding amount despite several invoices and statutory demand notices. 2. Existence of a pre-existing dispute: The Respondent argued that there was a pre-existing dispute regarding the quality of work, citing emails from 13.10.2015 to establish the existence of a dispute. The Respondent claimed that the Petitioner failed to supply supporting structures and other deliverables as per the purchase orders, leading to delays and additional costs. 3. Bar of limitation: The Respondent contended that the application was barred by limitation as the amounts were due on 30.06.2015, and the petition was filed after more than five years on 29.01.2020. The Petitioner, however, argued that the Respondent had acknowledged the debt within the limitation period through letters dated 10.05.2016, 18.10.2016, and 02.02.2017, which created a fresh limitation period. 4. Compliance with procedural requirements under IBC: The Respondent argued that the petition was incomplete as it did not include the 'record of default' from an Information Utility, which is a non-compliance under Section 9(3)(d) of the Code. The Petitioner refuted this, stating that the Respondent had acknowledged the debt multiple times, and there was no pre-existing dispute. 5. Financial health and solvency of the Respondent: The Tribunal noted that the Petitioner had not provided material evidence to establish the insolvency of the Respondent company. The master data details from the MCA website indicated that the Respondent company was active, compliant, and had no pending charges on assets, showing good financial health. 6. Impact of COVID-19 pandemic on the financial scenario: The Tribunal acknowledged the financial distress caused by the COVID-19 pandemic and the legislative measures to protect industries, including increasing the minimum threshold of default from ?1 Lakh to ?1 Crore. The Tribunal emphasized that the objective of the IBC is not to push companies into insolvency but to support them during financial stress. Conclusion: The Tribunal concluded that the Respondent should be given an opportunity to clear the outstanding debt, considering the economic scenario and the willingness of the parties to settle the claims. The Tribunal directed the Respondent to repay the debt or settle the amount with the Petitioner within six months, failing which the Petitioner could file a fresh petition. The petition was disposed of with no order as to costs.
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