2019 (8) TMI 1792 - 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 - The operational creditor is not entitled to raise any invoices for the period beyond os.oa.2o1s as the corporate debtor had already issued termination notice in advance i.e. on 22.02.20ts in accordance with the terms and conditions stipulated in the work order dated 17.03.2017. Further, during the course of argument, it has been brought to the notice of this bench that Invoice No. 133 dated 05.02.2018 annexed with the objections of the respondent said to be issued by the operational creditor, marked as Annexure R-3, placed at page No. 26 shows total amount after tax as ₹ 6,37,654.00, whereas, invoice of even number (i.e. invoice No. 133) placed at page No. 16 as Exhibit D of application reflects total amount after tax as ₹ 5,90,000.00. Further, description of the invoice No. 133 dated 05.02.2018 annexed by the applicant and the invoice No. 133 sent to Corporate Debtor are not the same. On perusal of the records it is found that operational creditor has wilfully or knowingly concealed the fact that the corporate debtor had already notified operational creditor about the termination of work way back on 22.02.2018, whereas, the demand notice was issued on 02.07.2018. It is found that the documents attached to the application are misleading. Mere allegation of non-payment of alleged disputed debt is no proof of insolvency. Since the very objective of the Code is re- organisation and insolvency resolution of corporate persons, no objective will be served by subjecting a solvent company to insolvency resolution process. Further, recovery is an individual effort by a creditor to recover its dues through a process that has debtor and creditor on opposite sides. When creditors recover their dues - one after another or simultaneously from the available assets of the firm, nothing may be left in due course. Thus, while recovery bleeds the corporate debtor to death, resolution endeavours to keep the corporate debtor alive - Further, IB Code provides that while admitting an application for initiation of corporate insolvency resolution process, in addition to fulfilling other requirements, it must be supported by documentary proof of undisputed debt. The Adjudicating Authority is of the considered view that the instant petition is not maintainable - Petition dismissed.

Summary

Issues Involved:
1. Validity of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016.
2. Existence of a dispute regarding the debt claimed by the operational creditor.
3. Authenticity and accuracy of the invoices and supporting documents provided by the operational creditor.
4. Authority and authorization of the individuals and entities involved in issuing the demand notice and filing the application.
5. Compliance with the termination clause in the work order.

Issue-wise Detailed Analysis:

1. Validity of the application under Section 9 of the Insolvency and Bankruptcy Code, 2016:
The application was filed by the operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 to trigger the Insolvency Resolution Process against the corporate debtor. The tribunal examined whether the application was maintainable based on the provided documents and compliance with the Code.

2. Existence of a dispute regarding the debt claimed by the operational creditor:
The respondent argued that there was a clear existence of a dispute as per Section 5(6) of the Code. The respondent contended that the invoices raised after February 2018 were disputed, as services were discontinued by the end of February 2018, supported by an email dated 22.02.2018. The tribunal found that the operational creditor was notified about the termination of services, and thus, invoices raised beyond the termination date were not valid.

3. Authenticity and accuracy of the invoices and supporting documents provided by the operational creditor:
The respondent highlighted discrepancies in the invoices, particularly Invoice No. 133 dated 05.02.2018, which showed different amounts and descriptions in the documents provided by the operational creditor and those served on the corporate debtor. The tribunal noted these discrepancies and found that the documents attached to the application were misleading. Additionally, the tribunal observed inconsistencies in the interest calculation on the invoices.

4. Authority and authorization of the individuals and entities involved in issuing the demand notice and filing the application:
The respondent challenged the authority of M/s. Pan India Legal Services LLP to issue the demand notice and the authorization of Mr. Satin Sachdeva to file the petition. The tribunal found that there was no specific power of attorney or authorization attached to the demand notice or the application, questioning the legitimacy of the actions taken by the operational creditor.

5. Compliance with the termination clause in the work order:
The tribunal reviewed the termination clause in the work order dated 17.03.2017, which required a 15-day prior notice for termination. The respondent provided evidence of an email dated 22.02.2018, notifying the operational creditor to demobilize the machinery, effectively terminating the services by the end of February 2018. The tribunal concluded that the termination notice was valid and complied with the terms of the work order, limiting the corporate debtor's liability to pay rent only up to 08.03.2018.

Conclusion:
The tribunal dismissed the application filed by the operational creditor, finding that the petition was not maintainable due to the existence of a dispute, discrepancies in the invoices, lack of proper authorization, and compliance with the termination clause. The tribunal emphasized that the Insolvency and Bankruptcy Code is not a tool for debt recovery but aims to resolve insolvency and keep the corporate debtor as a going concern. The tribunal's decision was made with caution to prevent misuse of the Code and protect the interests of employees and the economy.