2021 (9) TMI 1344 - 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 has only listed out the details of 1110 Nos. of invoices along with the Application, however has failed to enclose the copy of those invoices per se and in the absence of those invoices which sets out the date, the seal of the Operational Creditor and other details, the Application which are filed by the Operational Creditor are required to be treated as incomplete. It is also required to be noted that the Applicant even though in his Application has averred in Part - IV of the Application that as per his Books of accounts that a sum o ₹ 14,41,728/- is balance outstanding, however has miserably failed to placed on record the copy of the said Ledger Account in the typed set filed along with the Application. AIl these documents are least required for this Adjudicating Authority to properly adjudicate the Application on hand and the present Application filed by the Operational Creditor is bereft of all these details and hence on the said count itself, the present Application is required to be dismissed. Further, the nature of transaction which transpired between the parties would show that at first the Operational Creditor will supply the materials to the Corporate Debtor and the Corporate Debtor would convert the said materials into finished products and in turn supply the same to the Operational Creditor. Thus, in the present case, it is seen that both the Operational Creditor and the Corporate Debtor have been supplying materials mutually exclusive with one and another and in the said circumstances, the Applicant alone cannot be treated as an Operational Creditor in respect of the Corporate Debtor. For a person to qualify as an Operational Creditor he must have supplied the goods or rendered service to the Corporate Debtor, which is not the proposition In the present case and on the other it is the Corporate Debtor who has supplied the service to the Operational Creditor of which it is claimed to be deficient. Thus, it is quite clear that only a supplier of goods or provider of services who has provided such goods or services can claim to be an Operational Creditor and not in the reverse (i.e.) a person who availed the services or received the goods from the Corporate Debtor and in relation to the said transaction a claim had arisen. The Application is bereft of particulars and also the Applicant is not an Operational Creditor in relation to the Corporate Debtor and as such this Application filed by the Operational Creditor is liable to be dismissed - Application dismissed.

Summary

Issues Involved:

1. Validity of the claim made by the Operational Creditor.
2. Admissibility of documents submitted by the Operational Creditor.
3. Qualification of the Applicant as an Operational Creditor under IBC, 2016.
4. Nature of the transaction between the Operational Creditor and Corporate Debtor.
5. Existence of any pre-existing dispute between the parties.

Issue-wise Detailed Analysis:

1. Validity of the claim made by the Operational Creditor:
The Operational Creditor, M/s. Mando Automotive India Private Limited, filed an application under Section 9 of the Insolvency & Bankruptcy Code 2016 (IBC, 2016) against M/s. Chennai Clamptech Designer Private Limited, seeking to initiate Corporate Insolvency Resolution Process (CIRP). The claim was for a sum of ?14,41,728/- as operational debt, with the date of default mentioned as 11.12.2017. Despite repeated requests, the Corporate Debtor did not pay the dues. The Operational Creditor issued a Demand Notice under Section 8 of IBC, 2016, which was served on the Managing Director of the Corporate Debtor.

2. Admissibility of documents submitted by the Operational Creditor:
The Operational Creditor listed several documents to prove the operational debt, including invoices, a demand notice, a reply notice, and the master data of the Corporate Debtor from the Ministry of Corporate Affairs (MCA). However, the tribunal noted that the Operational Creditor failed to enclose copies of the invoices and the ledger account, which are essential for adjudication. The absence of these documents rendered the application incomplete.

3. Qualification of the Applicant as an Operational Creditor under IBC, 2016:
The tribunal examined whether the Applicant qualifies as an Operational Creditor. According to Sections 3(6), 3(11), 3(12), 5(20), and 5(21) of IBC, 2016, an Operational Creditor is a person to whom an operational debt is owed. The tribunal found that the nature of transactions between the parties involved mutual supply of materials, where the Operational Creditor supplied materials to the Corporate Debtor, who then converted them into finished products and supplied them back. This mutual supply arrangement disqualified the Applicant from being considered an Operational Creditor.

4. Nature of the transaction between the Operational Creditor and Corporate Debtor:
The tribunal reviewed the Master Contract dated 11.11.2013, which outlined that the Operational Creditor (MAIL) engaged in manufacturing automotive components, while the Corporate Debtor (Supplier) manufactured and sold auto parts required for MAIL products. The tribunal concluded that the relationship involved mutual supply and conversion of materials, rather than a straightforward provision of goods or services by one party to the other.

5. Existence of any pre-existing dispute between the parties:
The Corporate Debtor contended that there was an understanding agreement requiring a six-month notice for termination of business, which the Operational Creditor did not provide. Additionally, the Corporate Debtor argued that issues regarding the quality and delay in delivery were raised for the first time in the application. The tribunal noted that the Operational Creditor did not raise any issues regarding pending payments until the demand notice was issued, suggesting a possible pre-existing dispute.

Conclusion:
The tribunal dismissed the application on the grounds that the Operational Creditor did not qualify as an Operational Creditor under IBC, 2016, and the application lacked essential documents. The mutual supply arrangement between the parties and the absence of a straightforward operational debt relationship were pivotal in the tribunal's decision. The application was deemed incomplete and dismissed without costs.