2018 (1) TMI 1578 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor has defaulted in remitting the amounts under some invoices giving rise to an Operational Debt - existence of dispute or not - HELD THAT - It is noticed that the email relied upon by the Operational Creditor and the Corporate Debtor are addressed to Mr. Dhananjay Kumar of the sister company of the Corporate Debtor, supporting the contention of the Corporate Debtor that the transactions were interrelated. The agreement relied upon by the Operational Creditor was also with M/s SSMP. Both parties have relied upon the common agreement and common emails. From the various emails, it is apparent that disputes existed even prior to the issuance of notice under Section 8. Notwithstanding that the notice for arbitration may have been given around the same time as the notice u/s 8 of the Code by the Operational Creditor, but the copious emails on record are sufficient to show the dissatisfaction over the documentation, raising the element of deficiency in services rendered had been raised long back - it appears that the payments were withheld on account of a dispute, the prayer of initiating Insolvency Resolution Process cannot be granted. Petition dismissed.

Summary

Issues:
Prayer for initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 based on default in remitting amounts, acknowledgment of debt by Corporate Debtor, existence of dispute, negligence in service leading to financial losses, interrelation of transactions, and rejection of the petition.

Analysis:
The Operational Creditor, engaged in Freight Forwarding, sought initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016, due to default in remitting amounts by the Corporate Debtor, which led to an Operational Debt. The Operational Creditor claimed to have fulfilled their obligations without any dispute raised by the Corporate Debtor. The invoices specified a 7-day period for raising discrepancies, failing which the amount would be presumed correct, and interest would be charged on overdue invoices. The Corporate Debtor acknowledged the outstanding amount in an email but failed to take steps to settle the liability, prompting the Operational Creditor to issue a notice under Section 8 of the Code, which was disputed by the Corporate Debtor proposing arbitration.

The Operational Creditor, supported by postal records, argued that the Corporate Debtor's conduct was mala fide, raising baseless disputes to avoid legal processes. The Operational Creditor proposed an interim Resolution Professional, whose eligibility was confirmed. The Corporate Debtor contended that the Operational Creditor's negligence in service caused financial losses, as incorrect documentation led to duty drawbacks not received, demanding compensation. The Corporate Debtor disputed the acknowledgment of debt, citing emails addressed to a related company and ongoing dissatisfaction with services rendered, indicating pre-existing disputes. Given the withheld payments due to disputes, the Tribunal rejected the petition for initiating the Insolvency Resolution Process, emphasizing the existence of disputes and lack of grounds for insolvency proceedings.