2020 (1) TMI 1411 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - delay in arranging the funds - both the parties agreed to settle the issue amicably - existence of debt or not - HELD THAT - The petitioner has already paid 50 per cent. of the amount due in respect of the first proforma invoice and submitted that they are ready to settle the remaining 50 per cent. on submission of the full and final bill by the petitioner. In view of this, the claim in this petition to the extent of ₹ 2.80 crores (excluding taxes) is not correct and the liability is only to the extent of ₹ 1.50 crores out of which a sum of ₹ 75 lakhs were already paid and the corporate debtor is ready and willing to settle the balance ₹ 75 lakhs on raising of a final invoice by the petitioner. Hence, there is no debt as claimed by the petitioner and the same is hit by section 5(6)(a) of the Code. The contention of the corporate debtor that there is a delay in arranging the funds is right in view of the fact that the funds were not arranged, as agreed within 6 months of signing of the engagement letter. Hence, there is a clear deficiency in the service provided by the petitioner, which will squarely fall under the ambit of section 5(6)(b) of the Code, as held by the hon'ble Supreme Court in MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED 2017 (9) TMI 1270 - SUPREME COURT .

Summary

Issues:
1. Alleged default in payment invoking sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016.
2. Dispute over the amount owed for financial and advisory services provided by the petitioner to the corporate debtor.
3. Interpretation of engagement letter terms and conditions regarding payment timelines.
4. Delay in arranging funds and its impact on the services provided.
5. Legal implications of the proforma invoices raised by the petitioner.
6. Applicability of sections 5(6)(a) and 5(6)(b) of the Insolvency and Bankruptcy Code.

Issue 1: Alleged default in payment invoking sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016.
The petitioner filed a company petition seeking to initiate the corporate insolvency resolution process against the corporate debtor for defaulting on a payment of ?2,41,90,000. The petitioner invoked sections 8 and 9 of the Insolvency and Bankruptcy Code, 2016, alleging non-payment.

Issue 2: Dispute over the amount owed for financial and advisory services.
The dispute arose from the amount owed by the corporate debtor to the petitioner for financial and advisory services provided. The corporate debtor contended that they had amicably settled the fees at ?1.50 crores, while the petitioner claimed a higher amount based on proforma invoices issued.

Issue 3: Interpretation of engagement letter terms regarding payment timelines.
The engagement letter between the parties outlined the payment terms and conditions. The corporate debtor argued that the delay in arranging funds impacted the payment timelines specified in the engagement letter, leading to a disagreement over the amount owed.

Issue 4: Delay in arranging funds and its impact on services provided.
The delay in arranging funds, as per the engagement letter, was a point of contention. The corporate debtor asserted that the delay affected the services provided, resulting in additional costs and project delays, which influenced the agreed-upon fee structure.

Issue 5: Legal implications of proforma invoices raised by the petitioner.
The proforma invoices raised by the petitioner reflected varying amounts for services rendered. The Tribunal analyzed the invoices to determine the correct amount owed, considering the narrative and payment details specified in each invoice.

Issue 6: Applicability of sections 5(6)(a) and 5(6)(b) of the Insolvency and Bankruptcy Code.
The Tribunal dismissed the petition based on its observations. It found that the amount claimed by the petitioner was not accurate, as the corporate debtor had already paid a portion of the fees. Additionally, the delay in arranging funds was deemed a deficiency in service falling under section 5(6)(b) of the Code, leading to the dismissal of the petition.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's decision based on the interpretation of legal provisions and contractual terms.