2020 (1) TMI 1559 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor unable to liquidate its outstanding dues - Operational Creditors - existence of debt and dispute or not - HELD THAT - This Bench is satisfied that as the principal amount has already been paid by the Corporate Debtor, the claim of the petitioner for ₹ 71,18,908.04 as interest is unconscionable, irrational, unjustified and in the opinion of this Bench does not qualify as a operational claim, default of which would entitle the petitioner to seek resolution of the Corporate Debtor. The claim for interest on the delayed payment is a disputed fact by the Corporate Debtor and as such can only be adjudicated by a court of competent jurisdiction. Initiation of Corporate Insolvency Resolution Process is certainly not an answer in the facts and circumstances of the case. Recovery of interest alone can be initiated before a civil court for its due adjudication. Petition dismissed.

Summary

Issues:
1. Application filed under section 9 of Insolvency Bankruptcy Code for initiation of Corporate Insolvency Resolution Process against Corporate Debtor.
2. Claim by Operational Creditor for outstanding dues and interest on delayed payment.
3. Dispute regarding the amount due, adjustment made by Corporate Debtor, and subsequent failure to pay outstanding amount.
4. Corporate Debtor's defense on the claim, alleging interest amount as extortion and disputing the claim for interest.
5. Admittance of liability by Corporate Debtor but reliance on adjusting partial amount towards sale consideration.
6. Corporate Debtor's failure to liquidate admitted dues leading to demand notice and petition by Operational Creditor.
7. Argument by Corporate Debtor that interest claim is unjustified and should be adjudicated by a civil court.

Analysis:

1. The case involved an application under section 9 of the Insolvency Bankruptcy Code seeking initiation of Corporate Insolvency Resolution Process against the Corporate Debtor due to its inability to liquidate outstanding dues. The Operational Creditor, engaged in advertising services, claimed a principal outstanding amount along with interest on delayed payment.

2. The Operational Creditor asserted that the Corporate Debtor had not disputed the amount due under the invoices and had agreed to adjust 50% of the outstanding amount towards booking a flat. However, the balance 50% remained unpaid, causing operational difficulties for the creditor in meeting business obligations.

3. Despite demands and reminders, the Corporate Debtor failed to pay the outstanding amount, leading the Operational Creditor to issue a demand notice and file the petition. The Corporate Debtor, in response, admitted liability but argued that the interest claimed was excessive and the principal amount had already been paid.

4. The Corporate Debtor contended that the interest claim was unjustified, disputed the amount of interest, and argued that the claim was not an operational debt as defined in the Code. The Tribunal noted that the principal amount had been paid, and the claim for interest alone should be adjudicated by a civil court, not through the insolvency resolution process.

5. Consequently, the Tribunal rejected the petition, stating that the claim for interest was disputed and should be resolved through a civil court. The initiation of Corporate Insolvency Resolution Process was deemed inappropriate in the circumstances, and the case was concluded without any order as to costs.