2018 (2) TMI 884 - Tri - Insolvency and Bankruptcy

Corporate Insolvency Resolution Process - Held that - We have seen the primary document, Annexure-R/1 which is entered between M/s. Blue Star Alloys Pvt. Ltd. and the respondent company. The respondent company has also relied on Annexure-R/5, the power of attorney given by M/s. Blue Star Alloys Pvt. Ltd., in favour of Shri Mohammed Saleem Shaikh wherein he was only an authorised representative to lift the scrap material from the respondent company and that too on behalf of M/s. Blue Star Alloys Pvt. Ltd. The same Mr. Mohammed Saleem Shaikh is representing the petitioner company in this petition. So, it is only a power of attorney of M/s. Blue Star Alloys Pvt. Ltd. The petitioner has no locus standi to initiate Insolvency Resolution Process against the respondent. The petitioner is not the operational creditor of the respondent. Therefore, the present petition is liable to be rejected.

Issues Involved:

1. Whether the petitioner is an operational creditor.
2. Whether there is an operational debt due by the respondent to the petitioner.
3. Whether there is a privity of contract between the petitioner and the respondent.
4. Whether the petitioner's claim is maintainable under the Insolvency and Bankruptcy Code (I & B Code).
5. Whether any pre-existing dispute invalidates the petitioner's claim.

Issue-wise Detailed Analysis:

1. Whether the petitioner is an operational creditor:

The petitioner, M/s. Z-Tronics Infratel Pvt. Ltd., claimed to be an operational creditor of the respondent, M/s. Wipro Enterprises Pvt. Ltd., under the I & B Code. The petitioner argued that they had remitted a total of ?1.01 crores to the respondent for the purchase of industrial scrap but were allowed to lift scrap worth only ?62,63,845, leaving a balance of ?38,36,151. The respondent disputed this claim, asserting that there was no direct contract between the petitioner and the respondent, and therefore, the petitioner was not an operational creditor.

2. Whether there is an operational debt due by the respondent to the petitioner:

The petitioner contended that the remaining balance of ?38,36,151 constituted an operational debt, which the respondent failed to return or provide equivalent scrap for. The respondent countered that the remittances were related to a contract with M/s. Blue Star Alloys Pvt. Ltd., not the petitioner, and thus, no operational debt was due to the petitioner. The Tribunal found that the petitioner acted as an agent of M/s. Blue Star Alloys Pvt. Ltd., and there was no direct operational debt owed by the respondent to the petitioner.

3. Whether there is a privity of contract between the petitioner and the respondent:

The respondent argued that there was no privity of contract between them and the petitioner, as the contract was with M/s. Blue Star Alloys Pvt. Ltd. The Tribunal examined the documents and concluded that the petitioner was acting on behalf of M/s. Blue Star Alloys Pvt. Ltd. and there was no direct contract between the petitioner and the respondent. The remittances made by the petitioner were in relation to the contract between the respondent and M/s. Blue Star Alloys Pvt. Ltd.

4. Whether the petitioner's claim is maintainable under the Insolvency and Bankruptcy Code (I & B Code):

The petitioner issued a demand notice under Rule 5 of the I & B Rules, claiming an amount of ?65,15,325. The Tribunal noted that for a claim to be maintainable under the I & B Code, the petitioner must be an operational creditor with an operational debt. Given the lack of direct contractual relationship and the fact that the petitioner acted on behalf of M/s. Blue Star Alloys Pvt. Ltd., the Tribunal held that the petitioner was not an operational creditor and the claim was not maintainable under the I & B Code.

5. Whether any pre-existing dispute invalidates the petitioner's claim:

The respondent highlighted that there was a pre-existing dispute with M/s. Blue Star Alloys Pvt. Ltd. regarding the completion of the contract, which included a forfeiture notice due to non-compliance with the terms. The Tribunal found that the dispute existed before the petition was filed, which further invalidated the petitioner's claim. Section 5(6) of the I & B Code defines a dispute, including issues related to the quality of goods or services and breach of representation or warranty. The Tribunal concluded that the pre-existing dispute rendered the petition non-maintainable.

Conclusion:

The Tribunal rejected the petition, concluding that the petitioner was not an operational creditor, there was no operational debt due by the respondent to the petitioner, there was no privity of contract between the petitioner and the respondent, the claim was not maintainable under the I & B Code, and there was a pre-existing dispute that invalidated the petitioner's claim.

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