2020 (6) TMI 732 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor committed default in repayment of its dues - non-reponse of Corporate Debtor - ex-parte CIRP proceedings - existence of debt and default or not - HELD THAT - The original Agreement dated 14.12.2015 was effective for a period of one year from 04.01.2016. However, the main agreement was amended vide addendum dated 13.12.2016 by extending the terms of the agreement for the additional period of one year i.e. till 30.11.2017. Again it was extended by addendum dated 28.08.2017 extending till 30.06.2018. However, the Invoices against the claim made are dated 11.05.2018, 08.06.2018, 10.07.2018 and 02.08.2018. The period of invoice covers the period from April, 2018 to July, 2018, whereas the terms of Agreement was last extended till 30.06.2018 and services were stated to have stopped from 31.07.2018 due to non-payment. However, it is asserted that once the outstanding amount is agreed by the Respondent in unequivocally terms, other issues would not be much relevance to the issue in question. It is true that the Petitioner has also filed NeSL certificate issued in accordance with provisions of Section 65B (4) of Indian Evidence Act, 1872. However, before initiation of CIRP in respect of Application/ Petition filed U/ s 9 of Code, the Adjudicating Authority has to be satisfied that debt in question should be un-disputed. In the instant case, the Respondent has not responded to the notice issued by the Adjudicating Authority, except mere statement that they are going to settle the issue. Therefore, the Adjudicating Authority is handicapped by the non-response of the Corporate Debtor and it cannot initiate exparte CIRP proceedings like in Civil Suits. It is a settled position of law that the provisions of the Code cannot be invoked to settle the dispute(s) or to recover the alleged outstanding amount. Admittedly the Petitioner has not invoked other remedies available except the provisions of the code by issuing demand notice. The mere acceptance of the debt in question by the Respondent would not automatically entitle the Petitioner to invoke the provisions of the Code, unless the debt and default is undisputed and proved it to the satisfaction of the Adjudicating Authority. As per the copy of Annual Returns for the Financial year 2017-18, filed by the Petitioner in respect of the Respondent Company, its turnover and net worth are ₹ 103,322,162 and ₹ 1,325,365,853/ respectively. Therefore, the Respondent Company prima facie appears to be solvent Company so as to resolve the issue of outstanding amount in question. The Respondent, in the first instance, is directed to try to resolve the issue of outstanding, as it is stated to be not in dispute, failing which, the Petitioner is at liberty to invoke the Arbitration Clause No. 13 as contained in the Agreement dated 14.12.2015, and in such event, the Respondent is directed to co-operate with such arbitration proceedings to resolve the issue, instead of forcing the Petitioner to invoke legal remedy again - Petition disposed off.

Summary

Issues Involved:

1. Default in payment by the Corporate Debtor.
2. Validity and extension of the service agreement.
3. Non-response of the Corporate Debtor to the notice.
4. Availability of alternative remedies.
5. Admissibility of CIRP under IBC, 2016.

Detailed Analysis:

1. Default in Payment by the Corporate Debtor:

The Applicant, M/S. Sodexo Food Solutions India Private Limited, filed C.P.(IB) No.35/BB/2020 under Section 9 of the IBC, 2016, seeking to initiate the Corporate Insolvency Resolution Process (CIRP) against M/S. Chemizol Additives Private Limited for a default amount of ?27,46,473 as of 2nd April 2019. The Operational Creditor entered into an "Agreement for Providing Catering and Canteen Services" with the Corporate Debtor on 14th December 2015, which was extended by two addendums. The Corporate Debtor defaulted in making payments from April 2018 onwards. Despite multiple reminders and a statutory demand notice dated 18th December 2018, the Corporate Debtor failed to pay the outstanding amount.

2. Validity and Extension of the Service Agreement:

The original agreement was effective for one year from 4th January 2016, and it was extended twice, with the last extension valid until 30th June 2018. The invoices in question were dated 11th May 2018, 8th June 2018, 10th July 2018, and 2nd August 2018, covering the period from April to July 2018. The services were terminated on 31st July 2018 due to non-payment. Despite the expiry of the agreement, the Corporate Debtor acknowledged the outstanding amount.

3. Non-response of the Corporate Debtor to the Notice:

The Corporate Debtor did not respond to the notice issued by the Adjudicating Authority and failed to file any statement of objections. The Adjudicating Authority based its decision on the evidence presented by the Applicant. The non-response of the Corporate Debtor handicapped the Adjudicating Authority from initiating ex-parte CIRP proceedings, similar to civil suits.

4. Availability of Alternative Remedies:

Clause 13 of the agreement provides for the settlement of disputes through mutual negotiations and arbitration. The Petitioner did not exhaust this alternative remedy before approaching the Adjudicating Authority. The agreement's terms and conditions bind both parties, and the Petitioner cannot selectively insist on payment without invoking the arbitration clause.

5. Admissibility of CIRP under IBC, 2016:

The provisions of the IBC cannot be invoked to settle disputes or recover outstanding amounts unless the debt and default are undisputed and proven to the satisfaction of the Adjudicating Authority. The Respondent Company appeared solvent, with significant turnover and net worth. The NCLT has the power to refer matters to mediation and conciliation under Section 442 of the Companies Act, 2013, or to arbitration as per the agreement.

Conclusion:

The Adjudicating Authority directed the Respondent to resolve the outstanding issue, failing which the Petitioner could invoke the arbitration clause. The Petitioner is also granted liberty to pursue appropriate legal remedies if aggrieved by the arbitration proceedings. The petition was disposed of with no order as to costs.