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2019 (12) TMI 1396 - 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 - HELD THAT - The Corporate Debtor has stated that the claim of the Operational Creditor is not valid inter alia on the ground that there is a preexisting dispute. The Operational Creditor had filed Special Civil Suit No. 209/2013 against the Corporate Debtor and the same constitutes prior dispute as laid down by the Hon ble Supreme Court in Mobilox Innovations Private Limited vs. Kirusa Software 2017 (9) TMI 1270 - SUPREME COURT - This argument is untenable because the remedies under the IBC are in addition to and not in derogation of the remedies available to the Operational Creditor under any other law. In any case that suit has been filed by the Operational Creditor and not by the Corporate Debtor and hence cannot constitute a case of prior dispute. Differing stands of Corporate Debtor - HELD THAT - There is no explanation for the differing stands taken by the Corporate Debtor in the letter dated 24.05.2012 and in the reply to the Demand Notice dated 12.12.2018 and in the reply to the Petition dated 03.06.2019. If the material was custom-made then it could not have been diverted to any other customer. If it was then it could not have been sold as scrap - So the contradictory stands taken by the Corporate Debtor is not tenable and therefore deserves to be rejected. Refund of advance amounts paid - HELD THAT - The claim has to be in connection with the provision of goods or services including employment or a debt in respect of the payment of dues arising under any law for the time being in force. In the present case payment of advance by the Operational Creditor would not satisfy the definition of Operational Debt under the IBC - In the present case also the claim relates to non-payment of advance money and hence the same is not covered under the definition of Operational Debt . Time Limitation - HELD THAT - Since the date of default even according to the Operational Creditor is 22.09.2014 and applying the principles laid down by the Hon ble Supreme Court in B.K. Educational Services Private Limited 2018 (10) TMI 777 - SUPREME COURT the present petition under the IBC is barred by limitation. The application fails the twin tests of merit and limitation - application dismissed.
Issues Involved:
1. Jurisdiction of the Tribunal. 2. Validity of the claim under the Insolvency and Bankruptcy Code (IBC). 3. Existence of a prior dispute. 4. Contradictory stands of the Corporate Debtor. 5. Definition of "Operational Debt" and its applicability. 6. Limitation period for filing the petition. Detailed Analysis: Jurisdiction of the Tribunal: The Tribunal confirmed its jurisdiction to deal with the petition as the Corporate Debtor is registered in Mumbai, Maharashtra, and the petition was filed under section 9 of the Insolvency & Bankruptcy Code, 2016 (IBC). Validity of the Claim under IBC: The petition was filed by the Operational Creditor seeking to initiate Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to non-payment of a sum of ?25,42,328 as principal and ?30,83,014 as interest as of the date of default, 13.02.2012. The Operational Creditor had issued a tender notice for the purchase of stainless steel tubes, paid an advance, and later canceled the contract due to the Corporate Debtor's request for a price increase and failure to complete the supply. Existence of a Prior Dispute: The Corporate Debtor argued that there was a preexisting dispute, citing Special Civil Suit No. 209/2013 filed by the Operational Creditor. However, the Tribunal found this argument untenable, stating that remedies under the IBC are in addition to other legal remedies and that the suit filed by the Operational Creditor does not constitute a "prior dispute" as per the Hon'ble Supreme Court's ruling in Mobilox Innovations Private Limited vs. Kirusa Software. Contradictory Stands of the Corporate Debtor: The Tribunal noted the contradictory statements made by the Corporate Debtor. Initially, the Corporate Debtor claimed to have diverted the material to another customer due to the Operational Creditor's failure to inspect. Later, it argued that the material was custom-made and could not be sold to others, leading to its sale as scrap. The Tribunal found these contradictory stands untenable and rejected them. Definition of "Operational Debt" and its Applicability: The Tribunal examined whether the claim for the refund of the advance amount qualifies as "Operational Debt" under Section 5(21) of the IBC. It concluded that the payment of advance by the Operational Creditor does not satisfy the definition of "Operational Debt" as it is not in connection with the provision of goods or services. The Tribunal referred to previous judgments, including Tata Chemicals Limited vs. Raj Process Equipments and systems Private Limited and SHRM Biotechnologies Private Limited vs. VAB Commercial Private Limited, which held that refund of advance money is not covered under "Operational Debt." Limitation Period for Filing the Petition: The Tribunal addressed the issue of limitation, noting that the date of default was 13.02.2012. Even if considering the last invoice date of 22.09.2014, the petition was filed beyond the three-year limitation period prescribed under Article 137 of the Limitation Act, 1963. The Tribunal cited the Hon'ble Supreme Court's rulings in B.K. Educational Services Private Limited vs. Parag Gupta & Associates and Sagar Sharma & another vs. Phoenix ARC Private Limited & another, which clarified that the limitation period applies from the date of default. Conclusion: The Tribunal concluded that the petition failed both on merits and on the ground of limitation. Consequently, the petition was rejected. The Tribunal clarified that its observations should not prejudice the petitioner's rights in any other judicial forum. Order: The petition was dismissed, and a copy of the order was directed to be communicated to the parties as per section 9(5)(ii) of the IBC.
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