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2022 (11) TMI 933 - AT - Insolvency and BankruptcyMaintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt which is due and payable and has not been paid? - Corporate Debtor is liable to pay for the debts or not? Whether there exists debt which is due and payable and has not been paid? - HELD THAT - The definitions make the distinction between Operational Debt and Financial Debt. As seen from above, financial debt is an inclusive and non-exhaustive definition given under Section 5(8) of the I B Code to mean a debt alongwith interest, if any, which is disbursed against the consideration for time value of money. Financial creditors have relationship with the entity as financial contract, like loan or security etc. Whereas, an operational debt as defined under section 5(21) of I B Code, 2016 signifies a claim in respect of the provisions of goods or services. This Appellate Tribunal notes that no concrete evidence has been brought out or documentation has been produced to establish that there existed any pre-existing disputes between the parties. The Arbitration proceedings that the 2nd Respondent is trying to portray as a pending dispute is infact not between the 2nd Respondent (Corporate Debtor) to 1st Respondent (Operational Creditor) and is rather between 2nd Respondent and his principal employer for the supply services i.e. TANGEDCO - this Appellate Tribunal, therefore, in the present appeal do not find any error in the impugned order passed by the Adjudicating Authority and notes that the Adjudicating Authority followed all the steps laid down in Mobilox while ascertaining the application under Section 9. Therefore, this Appellate Tribunal holds that the Adjudicating Authority has correctly examined the existence of debt which was not paid and there was no pre-existing dispute between the 2nd Respondent (Corporate Debtor) and the 1st Respondent (Operational Creditor). Whether the Corporate Debtor is liable to pay for the debts or not? - HELD THAT - It is seen that, though an NOC was issued by the 2nd Respondent however they did not seek prior approval from TANGEDCO that such payments would be made by TANGEDCO . Therefore, there does not exist any valid contract between 2nd Respondent (Corporate Debtor) and TANGEDCO stating that payment to 1st Respondent (Operational Creditor) would be made by TANGEDCO . Therefore, in such a scenario the onus/ liability comes back to the 2nd Respondent (Corporate Debtor) to ensure that amounts are paid to the 1st Respondent (Operational Creditor), and as such all the claims made against the 2nd Respondent (Corporate Debtor) are valid. This Appellate Tribunal is of the considered opinion that there is no error in the impugned order dated 16.09.2022 passed by the Adjudicating Authority . Appeal devoid of any merit is therefore is set aside and stand dismissed.
Issues Involved:
1. Existence of debt due and payable. 2. Liability of the Corporate Debtor to pay the debts. Issue-wise Detailed Analysis: Issue No. (I): Existence of Debt Due and Payable The definitions of 'creditor', 'debt', and 'default' under the Insolvency & Bankruptcy Code, 2016 (I & B Code, 2016) are crucial. Section 3(11) defines 'debt' as a liability or obligation in respect of a claim due from any person, including financial and operational debt. Section 3(6) defines 'claim' as a right to payment or remedy for breach of contract. The definitions of 'Financial Creditor' and 'Financial Debt' under Sections 5(7) and 5(8) respectively, and 'Operational Debt' and 'Operational Creditor' under Sections 5(20) and 5(21) are also pertinent. The Hon'ble Supreme Court in Mobilox Innovations Private Limited Vs. Kirusa Software Pvt. Ltd. (2018) and M/s Innoventive Industries Vs. ICICI Bank & Ors. (MANU/SC/1603/2017) provided guidance on determining the existence of operational debt and disputes. The tribunal observed that the Corporate Debtor (2nd Respondent) acknowledged the supply of 16,130 modems and installation of 2,945 modems, which were integrated with TANGEDCO's servers. The Corporate Debtor admitted to partial payments, confirming the existence of unpaid dues. The tribunal found no evidence of pre-existing disputes between the parties. The arbitration proceedings cited by the Corporate Debtor were between the Corporate Debtor and TANGEDCO, not the Operational Creditor (1st Respondent). The tribunal concluded that the Adjudicating Authority correctly identified the existence of debt and the absence of pre-existing disputes. Issue No. (II): Liability of the Corporate Debtor to Pay the Debts The Appellant's claim that the debt was assigned to TANGEDCO was found erroneous. The issuance of an NOC by the Corporate Debtor did not establish a valid contract obligating TANGEDCO to make payments. The tribunal noted that the Corporate Debtor did not seek TANGEDCO's prior approval for payment arrangements. Consequently, the liability to pay the Operational Creditor reverted to the Corporate Debtor. The tribunal affirmed that the claims against the Corporate Debtor were valid. Conclusion: The tribunal upheld the Adjudicating Authority's order dated 16.09.2022, dismissing the appeal and confirming the Corporate Debtor's liability to pay the debts. The appeal was found devoid of merit and dismissed without costs. The connected pending Interlocutory Applications were also closed.
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