2020 (2) TMI 1347 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - Time limitation - HELD THAT - Considering the legal framework as a whole, i.e., provisions of section 3(23) along with other provisions of the IBC, 2016, in our considered view, in the present context, the term person , would include sole proprietorship firm as well being eligible to file petition under section 7 or 9 under IBC 2016. Pre-existing dispute - HELD THAT - All recoveries for non performance / default has been considered and therefore, amount of Performance Bank Guarantee minus recovery i.e., 610.23 lakhs at least becomes payable by Corporate Debtor to the Operational Creditor. As an adjudicating authority in the proceedings, we are not suppose to do this kind of working, but to find out the genuineness of the claim of pre-existing dispute, and amount of outstanding debt, it was necessary in the facts and circumstances of the case, hence, it has been so analysed on the basis of the provisional statement prepared and filed by the Corporate Debtor itself. At the cost of repetition, we again state that this statement takes into consideration all these disputes raised by the Corporate Debtor, hence, the amount payable by the Corporate Debtor remains in positive which is more than one lakh ultimately that too when we have considered the project as a whole against the claim of Operational Creditor of undisputed dues of supply portion only. We have also gone through the emails which have been taken into consideration while preparing this provisional statement. Hence, on the basis of material on record, it cannot be said that any other dispute remains to be considered. Apart from this, the fact which is crucial to note is that the Corporate Debtor has awarded new work orders to the Operational Creditor subsequently which means that all the disputes relating to this contract had been considered / resolved and this fact has remained undisputed. Further, Form C s have been issued as late as up to March 2018. We further make it clear that we have analysed the provisional statement with limited objective of admissibility of this application and this analysis cannot be considered as expression of opinion on the amount of claim in any manner which may be actually due and payable. The application is otherwise complete in all respects and stands admitted - moratorium declared.

Issues Involved:
1. Maintainability of the application filed by a Sole Proprietorship firm.
2. Whether the claim was barred by limitation.
3. Existence of pre-existing disputes.
4. Segregation of the contract into supply, works contract, and services portions.
5. Appointment of Interim Resolution Professional (IRP) and initiation of Corporate Insolvency Resolution Process (CIRP).

Issue-wise Detailed Analysis:

1. Maintainability of the Application Filed by a Sole Proprietorship Firm:
The Corporate Debtor argued that the petition was not maintainable as it was filed by a Sole Proprietorship firm, which is not a legal entity under section 3(23) of the IBC 2016. The Tribunal, however, held that the definition of "person" under section 3(23) is inclusive and not exhaustive. It was noted that the application was signed by an authorized advocate, and the invoices and purchase orders were in the name of the Sole Proprietorship firm. The Tribunal emphasized the economic and accounting concept of business entities and concluded that Sole Proprietorship firms are eligible to file petitions under sections 7 and 9 of the IBC 2016. Thus, the technical objection was rejected.

2. Whether the Claim was Barred by Limitation:
The Corporate Debtor contended that the claim was time-barred and that the issuance of Form "C" did not constitute an acknowledgment of debt. The Tribunal disagreed, referencing various judicial decisions, including Hari Om Transport vs MSP Metallics Ltd., which clarified that an acknowledgment of debt under section 18 of the Limitation Act can be inferred from documents like Form "C". The Tribunal concluded that the issuance of Form "C" by the Corporate Debtor acknowledged the debt, thus extending the limitation period.

3. Existence of Pre-existing Disputes:
The Corporate Debtor claimed there were disputes regarding the quality of supplies and completion of work, which were raised before the demand notice under section 8 of the IBC 2016. The Tribunal examined the provisional statement and correspondence between the parties and found that the disputes had been resolved or were not substantial enough to negate the claim. The fact that new work orders were awarded to the Operational Creditor indicated that previous disputes were not significant. Thus, the Tribunal found no merit in the Corporate Debtor's claim of pre-existing disputes.

4. Segregation of the Contract into Supply, Works Contract, and Services Portions:
The Tribunal reviewed the letter of intent and purchase orders, which clearly segregated the contract into supply, works contract, and services portions. The invoices were raised accordingly. The Tribunal rejected the Corporate Debtor's claim that it was a composite contract, affirming that the segregation was valid and supported by the documentation.

5. Appointment of Interim Resolution Professional (IRP) and Initiation of CIRP:
The Tribunal admitted the application for initiating CIRP against the Corporate Debtor. A moratorium was declared as per sections 13 and 15 of the IBC 2016, prohibiting certain actions against the Corporate Debtor, including the institution or continuation of suits, transferring assets, and recovery actions. Mr. Nitesh Kumar More was appointed as the Interim Resolution Professional (IRP) to manage the CIRP process. The Operational Creditor was directed to pay an advance fee to the IRP, and the Tribunal scheduled a follow-up for the progress report.

Order:
The application filed by the Operational Creditor under sections 8 and 9 of the IBC 2016 was admitted. A moratorium was declared, and Mr. Nitesh Kumar More was appointed as the IRP. The Tribunal directed necessary public announcements and scheduled the matter for further progress reporting.

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