2017 (6) TMI 1360 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existing of debt and dispute or not - HELD THAT - The dispute must be pending in suit or arbitral proceedings which is instituted before the receipt of demand notice under section 8 of the code. In view of the decision of National Company Law Appellate Tribunal in Kirusa Software Pvt. Ltd. versus Mobilox Innovation P. Ltd. 2017 (6) TMI 984 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, MUMBAI , the dispute need not be in a suit or other proceedings and it could be even by way of reply to Demand notice but the Adjudicating Authority has to see whether the dispute raised by the corporate Debtor in the reply notice is a bona fide on substantial grounds or it is only raised to give a colour of dispute or it is illusory dispute. Bona fide dispute on substantial grounds or not? - HELD THAT - The two disputes goes to the very aspect of limitation regarding the enforceability of the claim of the petitioner. It is a mixed question of fact and law and it is triable issue. The dispute raised by respondent company is bona fide dispute on substantial grounds. The intention of the petitioner is obvious that he wants to compel respondent company's management to pay money claimed by him which according to him is due to him. The very fact that the previous management of the respondent company on the date of handing over of the company to the Reliance Defence Engineering Ltd. handed over copy of the ledger for the period 01.04.2015 to 18.01.2016 speaks volumes of the understanding between the petitioner and the previous management of the respondent company. Object of the code is to ensure reorganisation and insolvency resolution of corporate persons, individuals etc. and a time bound manner for maximisation of value of assets, persons, to promote entrepreneurship etc. If this petition is admitted it would negate the object for which Insolvency code was brought into force. The petitioner has got several other remedies to recover the amount due to him, if any, in other forums. But the remedy chosen by this petitioner in this forum is not at all in accordance with the object of the code. The intention of the petitioner is somehow to collect the amount allegedly due to him. In the case on hand respondent company raised bona fide dispute on substantial grounds on the claim made by the petitioner. Petition dismissed.

Summary

Issues Involved:
1. Validity of the debt claim under the Insolvency and Bankruptcy Code, 2016.
2. Bona fide dispute regarding the debt claim.
3. Limitation period for the debt claim.
4. Successful completion of the Boston Consulting Group (BCG) assignment.
5. Allegations of misuse of company property and personal expenses.
6. Appropriateness of initiating insolvency proceedings.

Detailed Analysis:

1. Validity of the Debt Claim:
M/s. Capital Partners filed a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking reliefs under Sections 9 and 13 of the Code. The petitioner claimed that the respondent company was obligated to pay an amount of ?2.00 crores plus applicable service tax upon successful completion of the BCG assignment. The petitioner sent an invoice on 31.03.2015, which was received without protest by the respondent company.

2. Bona Fide Dispute:
The respondent contended that the claim was based on a stipulation in the letter dated 01.05.2012, which required successful completion of the BCG assignment. The respondent argued that this condition was not met, and thus the claim was untenable. The respondent also raised issues regarding the misuse of company property and personal expenses incurred by the petitioner. The Tribunal found these disputes to be bona fide and on substantial grounds, indicating that the disputes were not merely raised to avoid payment.

3. Limitation Period:
The respondent argued that the claim was time-barred, as the amount became due in 2012 and remained unpaid for more than three years. The petitioner countered this by presenting an email dated 29.06.2015 from the respondent's Sr. Manager acknowledging the debt. The Tribunal noted that the issue of whether the debt was barred by limitation was a mixed question of fact and law, making it a triable issue.

4. Successful Completion of BCG Assignment:
The petitioner claimed that the BCG assignment was successfully completed in June 2012, entitling them to the payment. However, the respondent disputed this, stating that the expected results were not achieved, and thus the petitioner was not entitled to the payment. The Tribunal found this dispute to be bona fide and substantial, falling under clause (b) of sub-section 6 of Section 5 of the Code.

5. Allegations of Misuse of Company Property:
The respondent alleged that the petitioner was illegally withholding company property, including a Skoda Superb Elegance car and an air conditioner, and had incurred personal expenses on the corporate credit card. The Tribunal considered these allegations as part of the bona fide dispute.

6. Appropriateness of Initiating Insolvency Proceedings:
The Tribunal noted that the respondent company had a substantial paid-up share capital and reserves, indicating financial viability. The Tribunal emphasized that the object of the Insolvency and Bankruptcy Code is to ensure reorganization and insolvency resolution in a time-bound manner for maximization of asset value. The Tribunal concluded that the petitioner's intention was to pressurize the respondent company into paying the disputed amount, which was not in line with the Code's objectives.

Conclusion:
The Tribunal rejected the petition, stating that the disputes raised by the respondent were bona fide and substantial. The Tribunal also noted that the petitioner has other remedies to recover the amount, if any, due to them through appropriate forums, provided it is not barred by limitation. The findings and observations made in this order are not binding on the parties if the dispute is raised in any other forum. There was no order as to costs, and a copy of the order was to be communicated to both parties.