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2020 (1) TMI 1289 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - whether the corporate debtor is raising a plausible contention which requires further investigation and that the dispute is not a patently feeble legal argument or an assertion of fact unsupported by evidence, keeping in view the observations of the Hon'ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT that the Adjudicating Authority (AA) does not need to be satisfied that the defence is likely to succeed? - HELD THAT - A dispute truly exists in fact since the contention of the corporate debtor is that it terminated the LOI by letter of termination dated 07.10.2016 on the ground of undue delay in completion of the work and on the other hand, the plea of the operational creditor is that the termination of the LOI was made by it vide email dated 07.10.2016 on the ground of non-payment of dues. The plea on behalf of the corporate debtor is that Annexure P-6 of the petition being memorandum of payment showing due amount from the corporate debtor of ₹ 4,31,73,446/- is an unsigned/unverified document and that a copy of RA 04 (combine) for an amount of ₹ 4,31,73,446/- was never submitted to it. On the other hand, the claim of the operational creditor is that the letter of termination dated 07.10.2016 was not received by it. The learned authorized representative for the operational creditor has referred to the deduction of income tax of 2% made by the corporate debtor on work done of ₹ 8,59,81,227/- for the Financial Years 2012-2013 to 2016-2017 (Annexure CA/4 of CA No. 507/2018). However, simultaneously, the operational creditor has stated that it had executed work amounting to ₹ 9,47,21,459/- excluding taxes and cost of retained tools, plant and machinery. The claim of executed work being more, the details of work done as per the Form 26AS do not affect the finding that a dispute truly exists in fact. It is concluded that the claim of dispute raised by the corporate debtor is a plausible contention requiring further investigation and is not a patently feeble legal argument or an assertion of fact unsupported by evidence - Application rejected.
Issues Involved:
1. Validity of the Resolution Professional's authority to pursue the petition. 2. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 9 of the Insolvency and Bankruptcy Code, 2016. 3. Existence of a pre-existing dispute between the operational creditor and the corporate debtor. 4. Evaluation of evidence and determination of whether the dispute is genuine or spurious. Detailed Analysis: 1. Validity of the Resolution Professional's Authority to Pursue the Petition: The Resolution Professional (RP) of the petitioner company/operational creditor filed CA No. 939/2019, stating that CIRP proceedings were initiated in CP(IB) No. 198/Chd/CHD/2018. Consequently, the Board of Directors was suspended, and the RP became the authorized representative of the petitioner. The RP was permitted to pursue CP(IB) No. 295/Chd/Pb/2018 in place of the suspended Board of Directors. The amended Memo of Parties was filed, and CA No. 939/2019 was disposed of accordingly. 2. Initiation of CIRP under Section 9 of the Insolvency and Bankruptcy Code, 2016: The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016, by M/s. Ria Constructions Limited (Operational Creditor) against Blessing Resorts Private Limited (Corporate Debtor) for initiating CIRP. The operational creditor claimed an outstanding amount of ?4,31,73,446/- along with interest @ 18% per annum. The demand notice in Form No. 3 was issued on 21.02.2018, calling upon the corporate debtor to repay the unpaid operational debt within 10 days. The notice was sent through speed post but was returned with the remarks "refused to accept." 3. Existence of a Pre-existing Dispute: The Corporate Debtor filed a reply stating a pre-existing dispute between the parties, leading to the termination of the agreement/letter of intent. The corporate debtor alleged that the operational creditor defaulted in completing the project within the stipulated time frame and with the required standards, resulting in the termination of the contract on 07.10.2016. The operational creditor, however, contended that the termination was due to the corporate debtor's inability to pay dues and that the letter of termination was never received. 4. Evaluation of Evidence and Determination of Whether the Dispute is Genuine or Spurious: The Tribunal referred to the Supreme Court's judgment in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software Pvt. Ltd., which emphasized that the adjudicating authority must reject the application if there is a record of dispute. The Tribunal found that the corporate debtor's contention of a dispute was plausible and required further investigation. The operational creditor's claim of an outstanding amount of ?4,31,73,446/- was based on an unsigned/unverified document, and the corporate debtor had made payments up to certain RA bills, which were the last verified invoices. The Tribunal concluded that the dispute was not a patently feeble legal argument or an assertion of fact unsupported by evidence. Conclusion: The Tribunal concluded that the claim of dispute raised by the corporate debtor was a plausible contention requiring further investigation. Consequently, the application for initiation of CIRP was rejected under Section 9(5)(ii)(d) of the Code. The Tribunal clarified that the discussion was limited to the determination of the issue of admission under Section 9 of the Code and not on the merits of the claim by Ria Constructions Ltd. for debt due from Blessings Resorts Pvt. Ltd. As a result, CP(IB) No. 295/Chd/Pb/2018 was rejected.
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