2018 (1) TMI 1329 - Tri - Insolvency and Bankruptcy

Corporate insolvency process - existence of eligible debt - Held that - Operational Creditor has filed the Insolvency case on account of services rendered by the Contractor regarding construction of a hotel and the amount is due relating to the said contract. Operational Creditor owes such debt which is due on the Corporate Debtor on account of services rendered by the Operational Creditor regarding the construction of a hotel. Thus, it is clear that all the ingredients of section 9 are satisfied, and Operational Creditor has proved that the Corporate Debtor has failed to clear off the dues of more than one lakh rupees, even after receiving the demand notice under section 8(1) of the Code. It is also clear that the Corporate Debtor has not raised any notice of dispute within ten days of receiving the demand notice, and for the first time, Corporate Debtor has raised dispute while submitting the reply and that too on flimsy grounds, unsupported by any document. Thus, it is clear that petition filed by the petitioner under section 9 of the Insolvency & Bankruptcy Code, 2016 deserved to be admitted.

Summary

Issues Involved:
1. Whether the corporate debtor has committed default in making payment of ?2,19,92,896 to the applicant operational creditor.
2. Whether there was an existence of a pre-existing 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.
3. Whether the petition is incomplete for the non-compliance of the provision of Sections 9(3)(b) and 9(3)(c) of the Code.
4. Whether the alleged claim of the operational creditor comes within the definition of operational debt as defined under Section 5(20) and 5(21) of the Code.

Issue-Wise Detailed Analysis:

1. Default in Payment:
The petitioner, Techno Fab Contracts (P) Ltd., claimed that Yatri Vihar Hospitality (P) Ltd. defaulted on a payment of ?2,19,92,896 plus interest and service tax. The operational creditor had mobilized resources and commenced construction work at Bodh Gaya, Bihar, under a contract dated 10/6/2012. Despite raising invoices amounting to ?9,62,29,567, the corporate debtor paid only ?7,42,36,671, leaving a balance of ?2,19,92,896. The corporate debtor did not make the payment even after receiving a demand notice dated 23/5/2017.

2. Existence of Pre-Existing Dispute:
The corporate debtor contended that there was a pre-existing dispute regarding the quality and completion of work, which was communicated through a series of emails. However, the adjudicating authority found that the corporate debtor's claims were unsupported by evidence. The operational creditor provided a completion certificate issued by the architect, which confirmed that the construction work was completed satisfactorily. The corporate debtor failed to raise any notice of dispute within the statutory period of 10 days after receiving the demand notice.

3. Compliance with Sections 9(3)(b) and 9(3)(c):
The operational creditor submitted a bank certificate from the Bank of Baroda, confirming that no payment had been received from the corporate debtor. This satisfied the requirement under Section 9(3)(c) of the Insolvency & Bankruptcy Code. The operational creditor also filed an affidavit stating that no notice of dispute was received after issuing the demand notice, complying with Section 9(3)(b).

4. Definition of Operational Debt:
The corporate debtor argued that the alleged debt did not fall within the definition of operational debt under Sections 5(20) and 5(21) of the Code. However, the adjudicating authority found that the claim arose from services rendered by the operational creditor for the construction of a hotel, which qualifies as operational debt under Section 5(21).

Conclusion:
The adjudicating authority concluded that the corporate debtor failed to make the payment of operational dues amounting to ?2,19,92,896 despite receiving the demand notice. The corporate debtor did not raise any valid dispute within the statutory period, and the objections raised were unsupported by evidence. The operational creditor complied with the provisions of Sections 9(3)(b) and 9(3)(c) of the Code, and the claim fell within the definition of operational debt. Therefore, the application for initiation of Corporate Insolvency Resolution Process (CIRP) was admitted, and a moratorium under Section 14 of the Insolvency & Bankruptcy Code was applied. The adjudicating authority ordered the appointment of an Interim Resolution Professional (IRP) from the state of Bihar and directed necessary public announcements as per Section 15 of the IBC, 2016.