2019 (11) TMI 770 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor defaulted in making payment - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT - It is evident that the issues in respect to break downs cropped up subsequent to the letter dated 05.01.2018 and the same was brought to the notice of the Operational Creditor long before issual of Section 8 notice i.e., on 26.02.2018 itself. Thereafter, since there is no material from the side of the operational creditor disclosing that the Operational Creditor already resolved those issues, except filing this case basing on the section 8 notice sent by the Operational Creditor, it is to be construed that dispute in respect to the break downs has remained in existence as on the date the Creditor issued Section 8 notice. When there is material disclosing existence of dispute even before section 8 notice is issued, it does not make any difference as to whether reply to section 8 notice has been given within 10 days or after 10 days. This Bench having come to a conclusion that dispute has been in existence as on the date section 8 notice was issued by the Operational Creditor, we hereby dismissed this Company Petition holding that dispute is in existence in between the parties as on 26.02.2018. Petition dismissed.

Summary

Issues:
1. Initiation of Corporate Insolvency and Resolution Process based on default in payment by Corporate Debtor.
2. Acknowledgment of debt by Corporate Debtor and subsequent dispute regarding payment.
3. Validity of Section 8 Notice issued by Operational Creditor.
4. Existence of dispute before the issuance of Section 8 Notice.
5. Interpretation of acknowledgments and disputes in letters exchanged between parties.

Analysis:
1. The judgment pertains to an Insolvency Bankruptcy Application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by an Operational Creditor against a Corporate Debtor for non-payment of a specified amount. The Operational Creditor claimed that the Corporate Debtor defaulted in paying ?49,22,839 as of a certain date.

2. The Operational Creditor had issued several invoices to the Corporate Debtor, totaling ?61,39,289, out of which partial payments were made by the Corporate Debtor. A letter dated 05.01.2018 from the Corporate Debtor acknowledged the debt and specified payment terms. Subsequently, a Section 8 Notice was sent by the Operational Creditor demanding payment, including interest, which the Corporate Debtor disputed.

3. The Corporate Debtor responded to the Section 8 Notice after the stipulated time, citing issues with equipment breakdowns affecting project progress. The Corporate Debtor expressed willingness to resolve the issues but disputed the claim raised by the Operational Creditor.

4. The Corporate Debtor argued that a dispute existed before the Section 8 Notice was issued, pointing to clauses in the Work Order regarding non-payment for breakdown days and unavailability of operators. The Corporate Debtor highlighted a letter dated 26.02.2018 detailing technical faults and breakdowns, indicating an ongoing dispute.

5. The Tribunal concluded that a dispute existed as of 26.02.2018, predating the Section 8 Notice, based on the Corporate Debtor's communication regarding equipment breakdowns and project hindrances. As the dispute was unresolved and acknowledged before the notice, the acknowledgment in the earlier letter did not apply to subsequent invoices. Consequently, the Company Petition was dismissed due to the existence of a dispute between the parties.

Conclusion:
The judgment emphasizes the importance of analyzing acknowledgments and disputes in insolvency cases, highlighting the significance of pre-existing disputes in determining the validity of claims and notices. The decision underscores the need for clarity in communication between parties to avoid misunderstandings and legal disputes in insolvency proceedings.