2019 (6) TMI 832 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process (CIRP) - Section 9 of the IBC, 2016 read with Rule 6 of the I B (Application to Adjudicating Authority) Rules, 2016 - orporate Debtor failed to pay the outstanding amount of ₹ 3,29,415/- - HELD THAT - The petitioner has admittedly registered under the Micro, Small and Medium Enterprises Development Act, 2006 ( MSMED Act ) and thus services rendered by the Petitioner covers under the provisions of MSMED Act and remedy is available under the Act. In fact, the said legal notice issued under the provisions of MSMED Act and copy of the notice was forwarded to the Micro and Small Enterprises Facilitation Council of Bangalore in accordance with Section 18 of the MSMED Act, for appropriate action. Instead of prosecuting the remedy under the provisions MSMED Act , and the instant Company Petition is filed under the provisions of the Code. As per Section 8(1) of Code, an Operational creditor should deliver demand notice of unpaid operational Creditor, a copy of an invoices demanding payment of the amount in the default to the Corporate Debtor in such form and manner as may be prescribed. The petitioner is admittedly has not issued demand notice prescribed under the Code and they have issued legal notice under the Provisions of MSMED Act - The petitioner also failed to substantiate the service rendered to the Corporate Debtor so as to claim the alleged outstanding amount except demand notice and Engagement letter and it failed to furnish details of Corporate Debtor. Therefore, the instant petition is misconceived and it is liable to be dismissed by giving liberty to the petitioner to prosecute the remedy available under MSEME Act. Petition dismissed.

Summary

Issues:
1. Initiation of Corporate Insolvency Resolution Process under Section 9 of IBC, 2016.
2. Non-payment of outstanding amount by the Corporate Debtor.
3. Legal implications of the Engagement Letter and Tax Invoice.
4. Application of the Micro, Small and Medium Enterprises Development Act, 2006.
5. Compliance with the demand notice requirements under the Insolvency and Bankruptcy Code.

Analysis:
1. The petition was filed under Section 9 of the IBC, 2016 seeking to initiate Corporate Insolvency Resolution Process due to the Corporate Debtor's failure to pay the outstanding amount of ?3,29,415. However, the Petitioner did not provide sufficient evidence besides the Engagement Letter to substantiate the claim.

2. The Engagement Letter outlined the terms of service and payment, including the submission of the final internal audit report to the management. The Petitioner issued a Tax Invoice and a debit Note for additional expenses incurred during the audit period, followed by a legal notice invoking the provisions of the MSMED Act for non-payment.

3. The legal notice highlighted the MSMED Act's provisions regarding payment obligations and compound interest in case of default. The Petitioner, being registered under the MSMED Act, sought redress under its provisions, indicating a potential remedy available outside the IBC.

4. Despite the Petitioner's registration under the MSMED Act and the legal notice invoking its provisions, the Petitioner failed to follow the demand notice requirements prescribed under the IBC. The Tribunal noted the discrepancy and suggested that the Petitioner should pursue remedies under the MSMED Act instead of filing under the IBC.

5. The Tribunal dismissed the petition, emphasizing that the Petitioner should address the issue through the MSMED Act and comply with the demand notice requirements specified under the IBC. The decision did not preclude the Petitioner from pursuing remedies under the MSMED Act as indicated in the legal notice.

In conclusion, the judgment highlighted the importance of adhering to the specific legal procedures and requirements under different statutes while seeking redress for non-payment issues, emphasizing the need for clarity and compliance with relevant laws for effective resolution.