2020 (1) TMI 1277 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - The Respondent is not denying the services rendered by the Petitioner and they have not raised any defective services at the time of taking service of Petitioner and the issue of alleged defective service raised during the process of settling the invoices in question. Mere issue of limitation cannot be a dispute as contended by the Respondent. On the other hand, it is the responsibility of the Respondent to settle the invoices in question rather than raising un-tenable grounds, that too after extracting services, after termination of the Agreements in question. Since the services of Petitioner was admittedly terminated from 31st January, 2015, the Petitioner, after protracted correspondence through various letters viz. 17.11.2017, 10.09.2018 etc., has finally resorted to issue Legal notice dated 25.12.2018 followed by earlier filing CP (IB) No. 107 of 2019 and further proceedings till date. So, the issue is continuous cause of action. Moreover, as per covenants made between the Parties, the nature of relationship between the Parties is stated to be of Principal-to-Principal basis. It is true that since proceedings initiated under the provisions of Code are summary in nature and Adjudicating Authority cannot exceed its authority in entertaining and deciding disputed questions of fact. The instant Petition is basically filed with an intention to recover the disputed amounts, and that too after receiving part payments. However, the Adjudicating Authority is empowered to initiate CIRP if it is satisfied that debt and default in question exceeds one lakh or more. The Petitioner is directed to submit its claim as mentioned in the Petition, with all supporting tenable evidence to the Respondent, within a period of two weeks from the date of receipt of a copy of this Order - the Respondent is directed to consider the representation made by them by duly taking it into consideration and decide the same, by keeping in mind its status in the market and to resolve the issue once for all and pass speaking order, and communicate the same to the Petitioner, within a period of three weeks thereafter - petition disposed off.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Existence of debt and default
3. Limitation period for filing the claim
4. Pre-existing disputes between the parties
5. Maintainability of the petition
6. Reconciliation of accounts and settlement of claims

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Petitioner, M/s. NWCC Supply Chain Solutions Pvt. Ltd., sought to initiate CIRP against the Respondent, M/s. Metro Cash & Carry India Pvt. Ltd., for a default amounting to ?1,49,96,006/-. The Respondent opposed the petition, contending that the claim was disputed, barred by limitation, and aimed at harassing the Respondent.

2. Existence of Debt and Default:
The Petitioner provided services such as re-packaging, loading, transportation, and delivery of goods to the Respondent under several agreements. The Petitioner raised regular invoices, which the Respondent failed to pay in full, resulting in an outstanding balance. Despite multiple reminders and legal notices, the Respondent did not clear the dues. The Respondent did not deny availing the services but disputed the invoices' validity and claimed that all dues were settled by 2014.

3. Limitation Period for Filing the Claim:
The Respondent argued that the claim was barred by limitation, citing the Supreme Court judgment in B.K. Educational Services Private Limited v. Parag Gupta and Associates, which states that the right to sue accrues when a default occurs and is barred if filed after three years. The Petitioner contended that the issue was a continuous cause of action due to ongoing correspondence and reminders.

4. Pre-existing Disputes Between the Parties:
The Respondent claimed that there were pre-existing disputes regarding the quality of services and false invoicing, which led to the termination of agreements in 2014. The Respondent provided evidence of email correspondences to support these disputes. The Petitioner denied these allegations and argued that the Respondent's failure to raise issues at the time of service implied acceptance of the debt.

5. Maintainability of the Petition:
The Petitioner had previously filed a similar petition, which was withdrawn due to a technical mistake. The current petition was filed following the prescribed format. The Respondent argued that the petition was filed with mala fide intentions and was not maintainable due to pre-existing disputes and lack of acknowledgment of debt.

6. Reconciliation of Accounts and Settlement of Claims:
Both parties expressed willingness to resolve the issue through reconciliation. The Tribunal noted that the Respondent, being a solvent and reputed company, should settle the undisputed invoices after reconciliation. The Tribunal directed the Petitioner to submit its claim with supporting evidence to the Respondent, who should then consider and decide on the claim within a specified period.

Conclusion:
The Tribunal acknowledged the existence of grounds to initiate CIRP but decided not to proceed with it immediately, considering the Respondent's financial stability and the potential impact on its employees. Instead, the Tribunal directed both parties to reconcile their accounts and resolve the dispute amicably. The Petitioner was given the liberty to file a fresh petition if aggrieved by the Respondent's decision. Both parties were advised to avoid precipitating the matter through civil or criminal cases. No order as to costs was made.