2019 (8) TMI 1588 - 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 - HELD THAT - On perusal of record by this Adjudicating Authority, it is observed that the Petitioner themselves in the petition has stated that the subject matter has already been taken to the MSME facilitation council for redressal in terms of MSME Development Act, 2016 and Arbitration proceedings between the Operational Creditor and Corporate Debtor have been commenced with the failure of conciliation between the parties as per section 18(3) of the MSME Development Act, 2006. Furthermore, the Corporate Debtor has also sent a reply on 07.02.2019, to the demand notice dated 21.01.2019, sent by the Operational Creditor raising the pre-existing dispute with regards to the amount claimed to the demand notice. This Adjudicating Authority has already held that the pendency of the Application before MSME establishes pre-existing dispute as long as the dispute is not spurious, hypothetical or illusory but an admitted fact on record. In the case in hand, the Petitioner Company itself had admitted to the fact that the matter is seized of by MSME council and the adjudication by the said council is pending Arbitration proceedings between the parties have been commenced which clearly establishes that there is a pre-existing dispute between the parties. This Adjudicating Authority deems it fit, not to admit the present petition holding that there exist a pre-existing dispute between the parties - Petition dismissed.

Summary

Issues:
- Filing of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 against a Corporate Debtor for unpaid operational debt.
- Dispute regarding the claimed amount due to delay in payment and subsequent legal actions taken by both parties.

Analysis:
1. Filing of Petition under Section 9 of the IB Code:
The petition was filed by 'iValue Advisors Private Limited' as the Operational Creditor against 'M/s. Srinagar Banihal Expressway Limited' as the Corporate Debtor for an unpaid operational debt amounting to ?73,52,122.92. The Operational Creditor had provided project monitoring services to the Corporate Debtor as per an engagement letter dated 21.11.2014, with invoices raised until 16.02.2017. Despite part payments made by the Corporate Debtor, there was a substantial delay in full payment, leading to the operational debt accrual.

2. Pre-existing Dispute and Legal Actions:
The Respondent, Corporate Debtor, raised a counterclaim stating that the matter was already pending adjudication before the MSME council and arbitration proceedings had commenced due to a dispute over the claimed amount. The Corporate Debtor disputed the claim raised by the Operational Creditor and argued that the petition should be dismissed under Section 8(2)(a) of the IB Code due to the pre-existing dispute. The Corporate Debtor also disputed the claim in response to the demand notice, further solidifying the existence of a dispute.

3. Judgment and Decision:
After hearing both parties and reviewing the submissions, the Adjudicating Authority observed that the matter was already under consideration by the MSME facilitation council and arbitration proceedings had started due to the failure of conciliation. The Authority noted that the Corporate Debtor had responded to the demand notice by disputing the claim, indicating a pre-existing dispute. Citing previous judgments, the Authority concluded that a pre-existing dispute existed between the parties, leading to the decision not to admit the petition. Consequently, the petition (CP (IB) No.124/9/HDB/2019) was rejected, and no costs were awarded.

In summary, the judgment highlighted the importance of addressing pre-existing disputes before admitting insolvency petitions under the IB Code. The legal proceedings and actions taken by both parties were thoroughly analyzed to determine the existence of a dispute, ultimately resulting in the rejection of the petition due to the acknowledged pre-existing dispute between the Operational Creditor and the Corporate Debtor.