2020 (1) TMI 1545 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - On perusal of the records it is found that the operational creditor failed to complete the work within the stipulated period. On the basis of material available on record the Adjudicating Authority is of the considered view that the application is not maintainable on the ground that there is/was a pre-existing dispute prior to issuance of demand notice under section 8 of the I B Code. The instant application stands dismissed as not maintainable.

Summary

Issues:
- Maintainability of the petition under Section 9 of The Insolvency and Bankruptcy Code, 2016
- Disputed debt acknowledgment by the corporate debtor
- Failure to complete work within stipulated period and liquidated damages

Issue 1: Maintainability of the petition under Section 9 of The Insolvency and Bankruptcy Code, 2016

The operational creditor filed a petition under Section 9 of The Insolvency and Bankruptcy Code, 2016, claiming a due amount from the corporate debtor. The operational creditor alleged non-payment of invoices amounting to a balance of &8377; 1,32,69,057/-. The operational creditor provided evidence of demand notices, emails, and acknowledgments of debt. However, the corporate debtor raised objections, asserting that the operational creditor failed to fulfill contractual obligations within stipulated timeframes, leading to heavy damages and losses. The Adjudicating Authority examined the evidence and found that the operational creditor did not complete the work within the agreed period, as per the contract terms, rendering the application not maintainable due to a pre-existing dispute prior to the demand notice under the Code.

Issue 2: Disputed debt acknowledgment by the corporate debtor

The corporate debtor disputed the debt claimed by the operational creditor, highlighting delays and deficiencies in supply and services. Emails and communications between the parties revealed ongoing disputes regarding the quality and timeliness of the operational creditor's performance. The corporate debtor emphasized that the operational creditor did not fulfill obligations within prescribed time limits, resulting in damages and losses. The Adjudicating Authority considered these disputes and concluded that the existence of a dispute prior to the demand notice rendered the application not maintainable under the Code.

Issue 3: Failure to complete work within stipulated period and liquidated damages

The records indicated instances where the operational creditor failed to complete work within stipulated timeframes, leading to complaints from the client regarding delays and deficiencies in services. The contractual terms specified liquidated damages for delays, emphasizing the importance of timely completion of obligations. The corporate debtor pointed out various instances of incomplete or faulty deliveries by the operational creditor, impacting the project progress and incurring losses. These factors contributed to the Adjudicating Authority's decision to dismiss the application on grounds of a pre-existing dispute and lack of timely completion of contractual obligations.

In conclusion, the Adjudicating Authority dismissed the petition under Section 9 of The Insolvency and Bankruptcy Code, 2016, citing a pre-existing dispute between the parties and the operational creditor's failure to complete work within stipulated timeframes as reasons for the application's non-maintainability.