2020 (2) TMI 1622 - 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 before issuance of SCN or not - HELD THAT - There is a delay in execution of the work. Various correspondences have been exchanged between the parties before the issue of Demand Notice on 09.04.2016 18.04.2016 19.10.2016 22.11.2016 etc. and also after issuance of notice regarding slow progress of work delay in clearance of calculations delay in releasing payments etc. The Respondent has replied to the Demand Notice dated 26.04.2018 on 04.05.2018 disputed the claim. The Respondent vide his letter dated 29.06.2018 intimated to the Petitioner that the various deductions with reasons and claimed that only Rs. 6, 007/- is payable. There is some dispute in quality of work also. There are issues in submission of PBG and levy of liquidated damages as per contract terms. Thus in case of dispute this is not the forum to examine and adjudicate as to what extent the claim of the Petitioner is admissible as due and recoverable. Neither the Tribunal in the present proceedings will examine the merits of the respective claims. Moreover even the adequacy of the dispute has not been seen. It is only to be seen whether the dispute raised by the Corporate Debtor qualified as dispute as defined under sub-Section 6 of Section-5 of the IB Code - Infact there is a dispute with respect to delay in execution of work quality of work like incomplete foundation submission of PBG etc. This is not the forum to examine the claim of each party. The existence of non-disputed debt is sine-qua-non nor for initiation of CIRP under Section 9 of the IB Code the IB Code is intended to be a substitute to a recovery forum. In the present case the dispute was raised before the issuance of notice under Section 8 besides the correspondence placed on record shows that the liability has been disputed and there is a plausible dispute pre-exist between the parties - it is reiterated that the claim of the operational debt in question is not free from dispute. Records show that the dispute was raised prior to issuance of notice under Section 8 of the IB Code. This Adjudicating Authority is of the view that the petition does not qualify for admission under Section 9 of the IB Code and therefore the same is rejected.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 for recovery of unpaid Operational Debt.

Analysis:
The petition was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Petitioner on behalf of M/s. ABC India Limited against the Corporate Debtor, M/s. Oriental Nicco Projects Private Ltd., seeking recovery of an unpaid Operational Debt amounting to Rs. 78,22,421. The Petitioner had engaged the Respondent company for Civil Construction Work and had submitted several invoices totaling Rs. 6,39,55,775, out of which the Corporate Debtor had paid Rs. 5,31,34,343. Despite repeated requests for the balance payment, the Corporate Debtor failed to make the payment, leading to the filing of the petition on 02.11.2018.

The Respondent argued that there were pre-existing disputes between the parties, and a Money Suit was pending in the City Civil Court, Kolkata. The Respondent claimed that the Petitioner had failed to complete and deliver the contracted civil works within the stipulated time, resulting in delays ranging from 27 to 191 days for different work orders. The Respondent also highlighted issues of slow progress, quality of work, and disputes regarding Performance Bank Guarantee (PBG) and liquidated damages as per contract terms.

The Tribunal noted that there were delays in the execution of work, and various correspondences had been exchanged between the parties regarding the progress and payments. The Respondent disputed the claim in response to the Demand Notice and claimed that only Rs. 6,007 was payable, citing deductions and quality issues. The Tribunal referred to a Supreme Court case emphasizing that the Adjudicating Authority must reject the application if there is a plausible contention requiring further investigation and the dispute is not spurious.

The Tribunal concluded that the dispute raised by the Corporate Debtor was not spurious, hypothetical, or illusory, as there were genuine issues regarding the delay in work execution, quality of work, and other contractual matters. The Tribunal highlighted that the existence of a non-disputed debt is essential for initiating Corporate Insolvency Resolution Process under Section 9 of the IB Code. Since the dispute was raised before the notice under Section 8 and there was a plausible dispute existing between the parties, the petition was rejected, emphasizing that the forum was not to adjudicate the merits of the respective claims.

The Tribunal clarified that the dismissal of the petition did not prejudice the rights of the Petitioner before any other forum and directed the Registry to communicate the order to both parties, concluding that the petition did not qualify for admission under Section 9 of the Insolvency and Bankruptcy Code.