2021 (4) TMI 1297 - 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 - whether the MOU is null and void? - HELD THAT - This forum is not for carrying out detailed investigation into the correctness of otherwise of any agreement. IBC envisages summary proceedings as are apparent o n the face of it. In the instant case and on a perusal of the Agreement dated 08.06.2015 it appears that the same is genuine and valid. The Respondent's plea that this Agreement is not genuine appears to be clearly untenable. Where there is a bonafide pre-existing dispute? - HELD THAT - The Petitioner issued Legal Notices dated 03.03.2017 under section 138 of NI Act against the 5 dishonoured cheques and calling up the Respondent to make payment of ₹ 6 Cr as per the MOA. To this, the Respondent has denied having entering into MOA and states that the cheques were given prior to the Sale Deed dated 08.06.2015, and were to be returned after receiving entire sale consideration, except 5 cheques. This stand of the Respondent also appears to be unacceptable - As per the MOU which is signed and agreed to by both sides, there is a clear liability to pay ₹ 6 crore, including the mode of payment, as referred to supra. There was, therefore, no pre-existing dispute, as has been made out by the Respondent, and a clear debt existed. From the examination of its accounts, it is quite visible that the Respondent has lost its ability to generate revenues, continue its business and pay its debts. It is only harping on its contention that it has not entered into Memorandum of Agreement dated 08.06.2015 and is in denial of the liability. However, as mentioned above, this claim does not appear to be correct and there does not appear to be any bonafide dispute. The dispute stated to be pre-existing is unrelated to the debt in question, and is subsequent to the MOA as per which the debt arose. Petition admitted - moratorium declared.

Summary

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Validity of Memorandum of Agreement (MoA)
3. Pre-existing Dispute
4. Financial Solvency of the Corporate Debtor
5. Appointment of Interim Resolution Professional (IRP)

Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, by the Operational Creditor to initiate CIRP against the Corporate Debtor for an outstanding amount of ?6 Crore along with interest. The petition was supported by a resolution authorizing the Managing Partner to file the application. The Tribunal examined the petition and supporting documents, including the legal notices and replies exchanged between the parties.

2. Validity of Memorandum of Agreement (MoA):
The Operational Creditor claimed that an MoA dated 08.06.2015 was entered into, wherein the Corporate Debtor agreed to pay ?6 Crore for development activities. The Corporate Debtor denied the existence of the MoA, alleging it was concocted. The Tribunal found the MoA to be genuine and valid, bearing the seal and signature of the Corporate Debtor’s Managing Director. The Tribunal emphasized that the MoA explicitly acknowledged the debt and outlined the payment terms, including the issuance of postdated cheques.

3. Pre-existing Dispute:
The Corporate Debtor argued the existence of a pre-existing dispute, citing legal notices related to indemnity issues and pending litigations. The Tribunal noted that these disputes were unrelated to the debt under the MoA. The Tribunal concluded that the dispute regarding the ?6 Crore arose only after the subsequent buyer withheld payments, and there was no genuine pre-existing dispute regarding the debt.

4. Financial Solvency of the Corporate Debtor:
The Tribunal reviewed the financial statements of the Corporate Debtor, noting significant losses, negative reserves, and reduced cash equivalents. The Corporate Debtor’s inability to generate revenue and pay debts was evident. The Tribunal concluded that the Corporate Debtor was not solvent and was unable to continue its business operations effectively.

5. Appointment of Interim Resolution Professional (IRP):
The Tribunal appointed Mr. Kanekal Chandrashekhar as the IRP, as the Petitioner did not suggest any name. The IRP’s consent and qualifications were verified, and he was directed to perform his duties as per the IBC and related regulations. The Tribunal declared a moratorium prohibiting suits, asset transfers, and recovery actions against the Corporate Debtor during the CIRP.

Conclusion:
The Tribunal admitted the petition for initiating CIRP against the Corporate Debtor, appointed an IRP, and declared a moratorium. The Tribunal directed the IRP to file progress reports and ensured cooperation from the Corporate Debtor’s Board of Directors and staff. The case was scheduled for a report on 18th May 2021.