2020 (2) TMI 1592 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of its debt and dispute or not - HELD THAT - The Corporate Debtor has not succeeded in establishing any pre-existing disputes. It can be legitimately inferred that it is why the Ld. Counsel did not address any argument attempting to prove a pre existing dispute other than a challenge that the corporate debtor is not liable for the interest as claimed by the operational creditor for want of agreement to pay interest. The application is otherwise complete meeting all the requirement to be meted out under section 9 (2) of the Code. The affidavits under section 9(3)(b) of the Code and statement of bank account proving non-payment of unpaid Operational debt as required under Section 9(3)(c) of the Code seen produced on the side of the operational creditor. The application filed by the Operational Creditor under section 9 of the Insolvency Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process against the Corporate Debtor, West Bengal Biotech Development, Dept. is hereby admitted - moratorium declared.

Summary

Issues Involved:
1. Maintainability of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Alleged default in payment of operational debt.
3. Existence of pre-existing disputes.
4. Limitation period for filing the application.
5. Admissibility of interest on the claimed amount.
6. Appointment of Interim Resolution Professional (IRP).
7. Declaration of moratorium.

Issue-Wise Detailed Analysis:

1. Maintainability of the Application:
The application was filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, seeking initiation of the corporate insolvency resolution process against the Corporate Debtor for default in payment of operational debt amounting to ?87,48,130.00, including interest. The Corporate Debtor contested the maintainability, arguing that the claim was barred by limitation and involved disputed issues that could not be resolved summarily.

2. Alleged Default in Payment of Operational Debt:
The Operational Creditor provided interior decoration services as per a work order dated 22/02/2011 and raised bills totaling ?35,44,776.00 on 11/02/2012. Despite several reminders and partial payment of ?6,34,886.00, the outstanding amount remained unpaid. The Corporate Debtor admitted to receiving the services but disputed the completion and quality of the work, alleging that it was contrary to the plan and incomplete.

3. Existence of Pre-Existing Disputes:
The Corporate Debtor claimed that there were pre-existing disputes regarding the completion and quality of the work. However, the tribunal found no substantial evidence of such disputes. The Operational Creditor's induction for the work was admitted, and the tribunal inferred that the Corporate Debtor's objections were an attempt to evade payment.

4. Limitation Period for Filing the Application:
The Corporate Debtor argued that the application was barred by limitation, as the bills were dated 11/02/2012, and the application was filed on 26/10/2018. The tribunal examined the demand notices and communication between the parties, particularly a letter dated 14/12/2017 from the Corporate Debtor, which was interpreted as a promise to pay the debt after discussions, thus extending the limitation period under Section 25(3) of the Indian Contract Act.

5. Admissibility of Interest on the Claimed Amount:
The Operational Creditor claimed interest at 18% on the outstanding amount. However, the tribunal found no agreement between the parties regarding the payment of interest for delayed payments. Consequently, the claim for interest was not sustained, and only the principal amount of ?29,09,890.00 was deemed payable.

6. Appointment of Interim Resolution Professional (IRP):
The tribunal appointed Mr. Shashi Agarwal as the Interim Resolution Professional (IRP) to ascertain the particulars of creditors and convene a Committee of Creditors for evolving a resolution plan. The Operational Creditor was directed to deposit ?2,00,000/- for preliminary expenses.

7. Declaration of Moratorium:
The tribunal declared a moratorium in accordance with Sections 13 and 15 of the Insolvency and Bankruptcy Code, 2016, prohibiting the institution or continuation of suits, transferring of assets, and recovery actions against the Corporate Debtor. The moratorium would remain in effect until the completion of the corporate insolvency resolution process or until an order for liquidation is passed.

Conclusion:
The tribunal admitted the application filed by the Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016, and initiated the corporate insolvency resolution process against the Corporate Debtor. The tribunal declared a moratorium and appointed an IRP to oversee the process. The claim for interest was not upheld due to the absence of an agreement on interest payments. The application was found to be within the limitation period, considering the promise to pay made by the Corporate Debtor in its communication.