2020 (2) TMI 1707 - AT - Insolvency and Bankruptcy

Maintainability of petition - Operational Creditors - termination of MoU before service of notice u/s 8 of IBC - existence of dispute or not - HELD THAT - It is not possible for the Adjudicating Authority to go into the questions whether the Respondent could or could not have unilaterally withdraw from the MoU and Indemnity Bond given; whether when the understanding has been reduced into writing, evidence other than what is stated in the document could or could not be admissible. There was a pre-existing contested dispute and the Adjudicating Authority rightly held that it could not quantify the liability, which would be matter of trial. Appellant calculated dues keeping in view MoU contents of which Respondent disputed before Notice under Section 8 of IBC was sent. There are no reason to interfere with the impugned order. There is no substance in the Appeal. The Appeal is dismissed.

Summary

Issues:
1. Dismissal of petitions under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority.
2. Dispute regarding outstanding amounts and reconciliation between parties.
3. Unilateral termination of Memorandum of Understanding (MoU) by the Respondent.
4. Adjudication of liability and quantification of dues under summary procedure.

Analysis:
1. The Appellant, an Operational Creditor, filed an application under Section 9 of the IBC against the Respondent, a Corporate Debtor, for operational dues amounting to Rs. 13,76,36,931. The Respondent also filed a similar application under Section 9 regarding a transaction with the Appellant. The Adjudicating Authority dismissed both petitions, leading to the Appellant appealing against the order.
2. The Appellant claimed a long-standing business relationship with the Respondent involving the sale and purchase of Aluminium Extrusions and Ingots. They alleged that the Respondent acknowledged a liability through Credit Notes and an Indemnity Bond, which the Respondent unilaterally terminated. The Appellant argued that the Respondent could not back out of the MoU and owed them Rs. 2,46,34,100 after adjusting the Credit Notes.
3. The Respondent contended that the Credit Notes were discounts for future purchases, not outstanding dues, and terminated the MoU due to the Appellant's failure to honor commitments. Both parties presented conflicting interpretations of the agreements, leading to a disputed liability that the Adjudicating Authority could not quantify under the summary procedure of Section 9 of the IBC.
4. The Adjudicating Authority noted the pre-existing contested dispute and the inability to adjudicate or quantify the liability without a trial. The Appellant's calculation of dues based on the MoU contents was disputed by the Respondent before the initiation of insolvency proceedings. Ultimately, the Appellate Tribunal upheld the dismissal of the appeal, stating that there was no reason to interfere with the impugned order, as there was no substance in the Appeal, and no costs were awarded.

Overall, the judgment highlights the complexities of reconciling accounts, interpreting agreements, and quantifying liabilities in insolvency proceedings, emphasizing the need for detailed trials to resolve disputed claims effectively.