2019 (2) TMI 216 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - Corporate Debtor defaulted in making payment - Held that - It is a point to be decided by a trial court as to whether the corporate debtor asking the petitioner to remain on standby during the period of April 2016 to deploy staff only in the case existing service provider created any disruption during the notice period, amounts to obligation upon the corporate debtor to pay the creditor for that month. As to make this claim, that there shall be unpaid invoice for the services rendered, here the invoice was initially paid, subsequent thereto, since the corporate debtor having realised that payment for the month of April was mistakenly made to the petitioner, strictly speaking it will not become operational debt as defined under the code. To construe a claim as operational debt, that there shall be a claim in the form of invoice over the services or goods supplied, then there shall be default, here both are absent because invoice was earlier paid, therefore the result is default against invoice is also absent. Petition dismissed.

Issues:
1. Whether the Corporate Debtor defaulted in payment against the invoice raised by the Operational Creditor?
2. Whether the Operational Creditor is entitled to payment for the services rendered in April 2016?
3. Did the Corporate Debtor dispute the payment for the services rendered in April 2016 before the Section 8 notice was served by the Operational Creditor?

Analysis:

1. The Operational Creditor filed a Company Petition under Section 9 of the Insolvency and Bankruptcy Code against the Corporate Debtor for defaulting in payment of ?34,14,589 against the invoice raised on 02.05.2016. The Operational Creditor provided Ground Handling Services to the Corporate Debtor based on Letters Of Intent (LOI) signed between them and Go Airlines. The Corporate Debtor initially paid the invoice but later disputed the payment, claiming that the services were not provided in April 2016. The Corporate Debtor adjusted the payment against subsequent claims, leading to a dispute over the payment.

2. The Operational Creditor contended that the services were indeed provided in April 2016, as they had manpower ready and waiting for deployment in case of disruptions from the previous service provider. The invoice raised for April 2016 was cleared by the Corporate Debtor without objections initially. However, the Corporate Debtor later claimed that the payment was made in error and disputed the amount. The Operational Creditor argued that the Corporate Debtor's actions amounted to default in payment for the services rendered.

3. The Corporate Debtor maintained that the payment for April 2016 was mistakenly made and later disputed. They claimed that the Operational Creditor was not entitled to payment for services not provided. The Corporate Debtor argued that the dispute over the payment for April 2016 was raised long before the Section 8 notice was served by the Operational Creditor. They contended that the dispute over the invoice dated 02.05.2016 for April 2016 was already communicated to the Operational Creditor in September 2016, and therefore, the Company Petition under Section 9 was misconceived and should be dismissed.

In conclusion, the Tribunal dismissed the Company Petition, stating that the Corporate Debtor had disputed the claim for services rendered in April 2016 before the Section 8 notice was served. The Tribunal held that the dispute over the invoice amount, which was communicated by the Corporate Debtor in September 2016, meant that the Operational Creditor could not file a Section 9 petition over a claim that was already disputed before the notice was issued. The Tribunal found that the claim did not meet the criteria for an operational debt as defined under the Insolvency and Bankruptcy Code, as the invoice had been paid earlier and a dispute had been raised prior to the Section 8 notice.

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