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2019 (3) TMI 1520 - Tri - Insolvency and BankruptcyCorporate Insolvency Resolution Process - Whether dispute of VAT do not come under the definition of Dispute under the Insolvency and Bankruptcy Code? - allegation made by the Corporate Debtor that the Operational Creditor has not paid the sales tax collected from the Corporate Debtor into the Government treasury - whether there is a default of the operational debt of ₹1,00,000/- or more to be paid? - HELD THAT - This Adjudication Authority is only required to ascertain whether there is a default of the operational debt of ₹1,00,000/- or more to be paid. It is evident from the fact that the default of the operational debt is more than ₹1,00,000/-. Therefore, the plea taken by the Corporate Debtor in respect of VAT is not sustainable. The dispute about non depositing of the VAT amount after its collection is a different issue,but this issue is not covered in the definition of existing dispute. However the issue of VAT has been raised only after receiving the demand notice, which shows that issue of VAT has been raised for creating the defence. The Demand notice demanding payment was served upon the Corporate Debtor, after that, the Corporate Debtor had filed reply to the Demand Notice wherein it had admitted that that it has to pay the Principal amount to the Operational Creditor. As appears from the record that the Corporate Debtor having defaulted in making payment to the operational creditor.As discussed above there being no dispute in respect of the quality of goods or service, the dispute which has been raised after receiving the demand notice is not covered under the meaning of existence of dispute given in the case law of Mobilox supra.Thus saying that dispute is in existence in respect to the services provided by the Operational Creditor is not sustainable. Petition filed by the operational creditor for initiation of Corporate Insolvency Resolution Process is admitted.
Issues involved:
1. Default in payment by Corporate Debtor leading to Company Petition under Section 9 of Insolvency & Bankruptcy Code. 2. Claim of Operational Creditor regarding outstanding payments against invoices. 3. Claim of Corporate Debtor regarding VAT set-off and dispute raised after receiving demand notice. 4. Legal interpretation of the existence of a dispute under Section 9 of the Code. 5. Appointment of Interim Resolution Professional and issuance of moratorium order. Issue 1: Default in payment by Corporate Debtor leading to Company Petition under Section 9 of Insolvency & Bankruptcy Code: The Operational Creditor filed a Company Petition under Section 9 of the Insolvency & Bankruptcy Code against the Corporate Debtor for defaulting in payment of a significant amount. The Operational Creditor claimed that the Corporate Debtor owed an outstanding amount of &8377;37,72,430 against invoices for goods supplied, with partial payments made by the Corporate Debtor. The Corporate Debtor did not dispute the amount claimed in the Demand Notice, indicating acknowledgment of the debt. Issue 2: Claim of Operational Creditor regarding outstanding payments against invoices: The Operational Creditor provided evidence of supplying goods to the Corporate Debtor, raising timely invoices, and acceptance of goods without any quality or quantity issues. The Corporate Debtor had claimed CENVAT credit and VAT set-off for the goods supplied, further supporting the Operational Creditor's claim for outstanding payments. The Operational Creditor's demand notice and subsequent reply from the Corporate Debtor confirmed the default in payment. Issue 3: Claim of Corporate Debtor regarding VAT set-off and dispute raised after receiving demand notice: The Corporate Debtor raised a dispute regarding VAT set-off after receiving the demand notice, arguing that the issue of VAT was not covered under the definition of an existing dispute under the Insolvency and Bankruptcy Code. However, the Adjudication Authority found the dispute about VAT collection not relevant to the default in operational debt exceeding &8377;1,00,000, as mandated by the Code. Issue 4: Legal interpretation of the existence of a dispute under Section 9 of the Code: The legal interpretation focused on the existence of a dispute under Section 9 of the Code, emphasizing the need for a plausible contention requiring further investigation. The judgment referred to the criteria outlined in the Mobilox case, highlighting the importance of separating genuine disputes from spurious defenses. The Adjudicating Authority rejected the Corporate Debtor's argument of dispute existence post-demand notice as unsustainable. Issue 5: Appointment of Interim Resolution Professional and issuance of moratorium order: The Tribunal admitted the petition for the initiation of Corporate Insolvency Resolution Process, appointing Mr. Hemanshu Kapadia as the Interim Resolution Professional. A moratorium order was issued under Section 14 of the Code, prohibiting legal actions against the Corporate Debtor, ensuring the continuity of essential services, and specifying the period of moratorium until the completion of the resolution process. The public announcement of the insolvency resolution process was mandated, and directions were issued for communication of the order to relevant parties. This detailed analysis of the judgment highlights the key legal aspects, factual findings, and procedural outcomes concerning the default in payment, dispute resolution, and appointment of an Interim Resolution Professional in the context of the Insolvency and Bankruptcy proceedings.
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